1 Boring Old Man

• Joseph Cassano: Joseph Cassano came to AIG in 1987 and started the Financial Products division, a London based group that sold the Credit Default Swaps that are in the eye of the storm. This article in the New York Times from September 27, 2008 describes what he did and he got rich doing it – Behind Insurer’s Crisis, Blind Eye to a Web of Risk.
• Our Mission at AIG: Repairs, and Repayment: Edward Liddy is the CEO of AIG, hired in September 2008 when everything hit the fan. He’s testifying in Congress today. This article is an Op-Ed in today’s Washington Post that starts with:
  The government rescue of American International Group (AIG) and other financial firms has produced a palpable wave of anger on the part of Americans and a rising public demand for accountability from corporate and government leaders. The anger is understandable, and I share it.
  And ends with:
  We are pressing forward with our plan to return money to taxpayers, protect policyholders, and give employees a vision of success and a path for achieving it. With the understanding and patience of the American people and the continued support of the Federal Reserve and the Treasury, we can resolve AIG’s challenges and help its businesses contribute to a global economic recovery.
• Cassano’s Golden Parachute and the Retention Bonuses: emptywheel‘s take on the recent AIG Bonuses. In this post, she parses the AIG contract in her usual closely read fashion.
• A Closer Look, Please:
  2003 Lawsuit Suggests AIG Wasn’t Always So Careful To Honor Bonus Deals:
  And Still More:
  Josh Marshall at TPM summarizes the history and clarifies some of the issues involved in these bonuses.

Accounting Standards Eased Today!
by: Chris Bowers
March 17, 2009

Good news! Accounting standards on the financial services industry were eased today!

Financial stocks also gained support from news that the Financial Accounting Standards Board, which sets U.S. accounting rules, proposed to give more leeway on mark-to-market accounting rules. Mark-to-market accounting has forced financial institutions to write down billions of dollars in assets.

Larry Kudlow is thrilled!

Kudlow says that these changes will lift the "jackboot" of the Securities and Exchange Commission "off of the market":

Yes! The real problem is that the regulations on the financial services industry were too strict! We needed to ease the regulations, and make the economy even more bullshit based! That will surely get us out of the recession!

Mark-to-Market Rules May Get Adjusted
TheStreet.com
03/16/09
By Robert Holmes

The Financial Accounting Standards Board, under considerable pressure to alter the fair value accounting rules blamed for exacerbating the woes of the financial sector, has proposed more leeway for banks in determining the value of distressed assets.

FASB Chairman Robert Herz said that the agency may allow companies to use "significant judgment" in valuing assets as part of the revised fair value, or the so-called mark-to-market, accounting rules. The implementation of any change could come in time to allow financial companies to employ the new rules for their current-quarter financial statements.

Herz said the board is set to vote on the proposal April 2 after a 15-day public comment period, according to Bloomberg. Many financial institutions have long complained about the FASB’s statement 157, which was implemented in 2007 to change the definition of fair value — the measure of the worth of an asset on a company’s books – along with the methods used to determine fair value.

The mark-to-market rules have led to assets being priced well below their real valuation in some cases, making it impossible for banks to purge the toxic assets from their books at anything but fire-sale prices…

I think most of us believe that all of these accounting and regulatory tricks are the way the financial industry has turned our monetary system into a great big casino where they play with our money. So we just hate any sound of loosening anything. And when they do it, the Market goes up. When they tighten things, make them transparent, add a regulation or two, we feel good, and the Market goes down. 

Credit Default Swap Market Change Is Slow
TheStreet.com
03/17/09
By Debra Borchardt

A move intended to create more transparency in the market for credit default swaps kicked off this week, but so far the change is unnoticeable to buyers, says a trader of the derivatives.

IntercontinentalExchange on Monday began clearing CDS trades, after becoming the first entity to win the right to do so from the Securities and Exchange Commission in October. CME Group received approval on March 13 to clear the derivatives. CME spokesperson Allen Schoenberg said as soon as they come to terms with customers they can put them on the platform and begin trading.

One trader active on the buy side says that dealers prefer the IntercontinentalExchange model over the CME’s proposed system. IntercontinentalExchange, as part of its SEC application, purchased The Clearing Corp., which was run by 11 financial institutions that were heavily involved in the market and was the insider’s original mechanism for clearing CDS. The trader, who did not want to be named, also suggested that dealers like IntercontinentalExchange because the clients will have less visibility through its format than they would through the CME, once again giving the dealers a certain amount of desired opaqueness. But he concedes that the new rules will be tougher on the banks and better for the buy side.

"The banks had too much control," the trader said. "They could, on a whim, make it more or less attractive to buy more protection on a company by changing the amounts they charged for trading the CDS." The trader said the real change will be on April 8, when the move to standardize contracts takes place. He said that with standardization it will be easier to fully net his books out and keep things more balanced.

"Currently the contracts for the CDS are all over the place," the trader says. "You have 100-basis point coupons, 500-basis point coupons. The effective dates are all different."

CDS are insurance against default of debt, which can be bought, sold and traded by anyone. They traditionally have been traded in unregulated, over-the-counter markets, but their role in the economic meltdown has led to a push on Capitol Hill and elsewhere for more regulation.

After what we’ve been through [and are still going through], just the mention of Credit Default Swaps should make us all shudder. There’s a feud brewing even with all the horror of the sub-prime/housing-bubble/AIG/CDS debacle. In spite of the danger of these "complex instruments," the financial industry is in love with the idea of insuring risk. So getting rid of these horrible things is unlikely. So things have to change.

1. above has to go. It’s  absurd to have something like this financial instrument that’s capable of tanking the global economy traded by unregistered people. 2. and 3. are about using these CDS’s as collateral for a variety of leveraging techniques. That is a complex area that needs careful scrutiny, as it’s part of how the current crisis developed – putting up insurance as collateral. 4. is absolutely nuts – bucket shop, Las Vegas stuff. Buying insurance on something you don’t own is ridiculous.

and life would return to normal…

Even Republicans don’t like Republican leaders:
^{"The approval rating of GOP leaders among Republicans has plummeted 12 points in a month"}
AMERICAblog
By Joe Sudbay
03/16/2009

Greg Sargent took a look at the latest Pew Poll and found what two other recent polls, from Rasmussen and DailyKos, have also shown. Republicans don’t like their Republican leaders:

The approval rating of GOP leaders among Republicans has plummeted 12 points in a month, down from 55% in February to a minority of 43% now. That’s striking. Not only that, but approval of GOP leaders overall has dropped to 28% overall — the lowest rating for GOP leaders in 12 years of Pew polling. In fact, approval of Republican congressional leaders has fallen from 34% in February to 28% currently, the lowest rating for GOP leaders in nearly 14 years of Pew Research surveys.
Why is this happening? Is it general lack of morale among Republicans? Is it that GOP voters are frustrated that their leaders haven’t succeeded in blocking Obama’s agenda? Or could it be that the Dem strategy of using Rush Limbaugh to drive a wedge between die-hard partisan Republicans and those who want to see Obama succeed is working? Something is turning Republicans against their own leadership — in big numbers.

Maybe even Republicans think taking money for nothing but talk is wrong. And, probably a few of them know that if Obama fails, the nation fails.

While I think I finally somewhat understand the roots of the financial crisis, I don’t think most of us, really comprehend it’s magnitude or its complexity. But at least we know we’re having one. The things the Republicans and their leaders loudest people have been saying are not so aggregious in and of themselves. But they make absolutely no sense in the context of our current circumstances. Conservative should be an adjective – like a "conservative Congressman." But it has become a noun – a Conservative. They’ve forgotten "Congressman." Says House Minority Leader John Boehner: "‘As I told my colleagues, we don’t have enough votes to legislate,’ Boehner said, according to Saturday’s New York Times. ‘We are not in the majority. We are not kind-of in the minority; we are in a hole. They ought to get the idea out of their minds that they are legislators. But what they can be is communicators’" ["we" and "they" being Republican Congressmen].

Looking at the top figure, except for a couple of two year stints, the Republican Party has been the Minority Congressional Party since the Great Depression – until Newt Gingrich’s Contract with America in 1994. Then for twelve years, the Republicans controlled both Houses of Congress, and for six of those years, they controlled Congress and the Presidency [the recent history is shown in the lower figures].

When I read what John Boehner said, I waited to respond because I wanted to think about it. It’s an absurd premise from the outset. To equate Minority Status with not being able to "legislate" makes no sense to me at all. The only way it makes any sense is if the whole point of being in Congress is to vote as a Party Bloc – and then only if you’re in power and guaranteed to win. The actual meaning of being a "legislator" is to represent the people who elected you – all of them. It’s not to pout because your Political Party isn’t in the Majority. I guess after 60+ years, the Republicans forgot that during their twelve years controlling Congress. From what Boehner says, the only point is to get back in charge again.

Some of Madoff’s employees pursued by prosecutors
DailyFinance
By Lita Epstein
March 11, 2009

Now that Bernard Madoff pleaded guilty to 11 charges, prosecutors’ efforts turn to identifying those who helped him perpetuate the fraud. Investigators say Madoff told 4,800 investors in November that their accounts were worth $64.8 billion, even though he knew their holdings were a "small fraction" of that amount, according to the charges filed in Manhattan federal court Tuesday. What prosecutors still don’t know is whether the employees of the firm knew these numbers were fraudulent, though investigators believe that at least some employees were involved in the fraud…

… What has come out so far is that Madoff told his employees to create false account documents and trade confirmations that reflected phony returns so they could transfer funds and give the appearance of legitimate trades. They used this information to generate false financial statements for regulators, according to the U.S. prosecutor…

…Prosecutors alleged Tuesday that Madoff hired numerous employees with "little or no prior pertinent training or experience in the securities industry" and caused them to "communicate with clients and generate false and fraudulent documents."

So who are some prime targets for investigators to pursue? Here’s what is known about some key employees, but I want to make it clear that none have been accused of any wrongdoing:

• Frank DiPascali, director of options trading, is the one who Madoff says executed trades. But at this point the court-appointed trustee found no trading occurred for the past 13 years. Investigators have talked with at least three employees under DiPascali. Employees were given proffer agreements, which means the prosecutors agree not to use their statements against them as long as they tell the truth.
• Annette Bongiorno, who worked for Madoff for 40 years, instructed assistants to generate trading tickets that appear to be bogus. According to investigators, she would ask assistants to research daily share prices for blue chip stocks from the previous month or several months earlier. Using these researched numbers, Bongiorno would instruct assistants to generate the "trading" tickets, so they could show gains that were in line with Madoff’s steady annual returns. Investigators obtained this information from talking with Bongiorno’s assistants.
• Horowitz and Friehling, auditors for Madoff, so far have given no indication of knowledge of any fraud. Jerome Horowitz, who was Madoff’s auditor from the early 1960s until he retired in 1995, told investigators in a recent interview that he saw no indication of fraud. His son-in-law, David Friehling, has handled audits since Horowitz retired. Investigators indicate he has said nothing to implicate his son-in-law…
• Ruth Madoff, Madoff’s wife, reconciled the Madoff firm’s bank accounts. She recently announced that she will hire her own attorney separately from her husband. Two lawsuits have been filed against Ruth Madoff in New York State court.
• Peter Madoff, Madoff’s younger brother, had the title of compliance officer, which made him responsible for assuring the firm followed securities laws and regulations. Peter Madoff and Bernard Madoff are listed as officers of the firm on SEC filings.

… The issues related to forfeiture, restitution and sentencing in this matter are highly complex and will require extensive time to resolve." Obviously, since Ruth Madoff wants to keep $70 million dollars of her assets, the amount to be paid in restitution becomes a key sticking point in negotiations.

So, which of the above were involved? Frank DiPascali and Annette Bongiorno for sure. They were the ones who prepared the bogus statements- scoured the Stocks to make them fit Bernie’s fictitious returns [717,600 statements]. Horowitz and Friehling were auditing an Investment business that made no investments, that was purportedly managing billions that no longer existed [52 Quarterly Financial Reports]. Ruth Madoff was reconciling the bank accounts for a firm trafficking in billions that wasn’t moving any money at all and had relatively small Capital compared to the reported assets. Peter Madoff was the compliance officer making sure they followed security laws and rules in an investment firm that never bought a stock once in thirteen years [actually buying and selling the stocks seems like it should be one of the security rules].

Obama Orders Treasury Chief to Try to Block A.I.G. Bonuses

By HELENE COOPER
March 16, 2009

President Obama on Monday vowed to try to stop the faltering insurance giant American International Group from paying out hundreds of millions of dollars in bonuses to executives, as the administration scrambled to avert a populist backlash against banks and Wall Street that could complicate Mr. Obama’s economic recovery agenda.

“In the last six months, A.I.G. has received substantial sums from the U.S. Treasury,” Mr. Obama said. He added that he had asked Treasury Secretary Timothy F. Geithner “to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole.”

Later in the day, a White House official disclosed that the administration would use a pending $30 billion installment for A.I.G. to recoup the $165 million in retention payments to A.I.G. employees in the business unit that brought the company to the brink of collapse last year.

“Treasury will be using this facility to address the excessive retention payments made to the A.I.G. Financial Products employees, which Treasury found to be completely unacceptable given that A.I.G. is already surviving on taxpayer funds,” said the official, who spoke on the condition of anonymity. “Treasury will be adding provisions to its new facility aimed at making taxpayers whole for the amounts of the offensive payments”…

I think there must be such a thing as journalistic interpretive inertia [a term I just invented a few minutes ago]. This article gives, "… the administration scrambled to avert a populist backlash against banks and Wall Street that could complicate Mr. Obama’s economic recovery agenda" as the reason for Obama’s action. I’m sure he’d like to avert backlash, but there’s another reason for Obama to act that might more important. It’s the right thing to do as our President. Over the last eight years, we’ve gotten so used to political strategizing ["spin"] being the only motive on the table, we’ve lost sight of the fact that the President is the elected voice of the people – elected to represent our collective will – someone who is on our side.

^{Why is this man smiling?}

Cheney Asserts Obama Has Raised Security Risks
By A.G. SULZBERGER
March 15, 2009

Former Vice President Dick Cheney on Sunday again asserted that President Obama has made the country less safe, arguing that the new administration’s changes to detention and interrogation programs for suspected terrorists would hamper intelligence gathering. Mr. Cheney said these moves suggested that terrorism is now being treated as a law enforcement problem.

“He is making some choices that, in my mind, will, in fact, raise the risk to the American people of another attack,” Mr. Cheney, who was interviewed on CNN’s "State of the Union,” said about Mr. Obama.

Since taking office, President Obama has reversed many of the policies championed by Mr. Cheney during his eight years serving with George W. Bush. Mr. Obama has announced that the Guantánamo Bay detention camp in Cuba will close within the year, suspended military trials for suspected terrorists and prohibited the interrogation practice known as waterboarding. But on Sunday Mr. Cheney contended those very methods had produced intelligence — still classified — that helped uncover specific plots.

“I think those programs were absolutely essential to the success we enjoyed of being able to collect the intelligence that let us defeat all further attempts to launch attacks against the United States since 9/11,” Mr. Cheney said of Bush administration policies, echoing statements he had made in an interview last month with Web site Politico. “I think that’s a great success story. It was done legally. It was done in accordance with our constitutional practices and principles”…

Cheney, Bush Strongly Disagreed on Libby
By Scott Wilson
Washington Post
March 16, 2009

Former vice president Richard B. Cheney said yesterday that he strongly disagreed with President Bush’s decision not to pardon I. Lewis "Scooter" Libby, saying his former chief of staff had been left "hanging in the wind." "I think he’s an innocent man who deserves a pardon," Cheney said on CNN’s "State of the Union," in what the cable news program billed as his first television interview since leaving office in January…

…Bush commuted the prison sentence, leaving Libby, a prominent Washington lawyer for years, to face the fine and two years’ probation. In a statement at the time, Bush characterized Libby’s punishment as "harsh," calling his professional reputation "forever damaged." Cheney and other conservatives urged Bush to issue Libby a pardon, which amounts to a full exoneration. But Libby was not included in the more than two dozen that Bush handed out in December in a final round of pardons, an often controversial end-of-term tradition.

"It was one of the moments that occurred in the administration where we had fundamental difference of opinion," Cheney said in the CNN interview. "I believe firmly that Scooter was unjustly accused and prosecuted and deserved a pardon, and the president disagreed with that."

Cheney said he still speaks to Bush after having "traveled a long way together in eight years and two presidential campaigns. That built a very solid, lasting relationship." But he added: "I was clearly not happy that we, in effect, left Scooter sort of hanging in the wind, which I didn’t think was appropriate."

• "I think that’s a great success story. It was done legally. It was done in accordance with our constitutional practices and principles." Nothing about the Iraq misadventure was a success. Certainly the legality of any of this is in question, even from the Bush DoJ. And nobody, but nobody, believes it was done in accordance with our Constitution and Principles [unless you don’t include Moslems as human beings].
• "I think he’s an innocent man who deserves a pardon." That’s not what a duly constituted jury thought.
• "I believe firmly that Scooter was unjustly accused and prosecuted and deserved a pardon." He was accused and prosecuted by a Federal Prosecutor appointed by the Bush Administration in a court of law.
• "I was clearly not happy that we, in effect, left Scooter sort of hanging in the wind, which I didn’t think was appropriate." Cheney’s unhappiness is visible from 100 yards. But here we get to the essence of things. He was Cheney’s Chief of Staff doing Cheney’s bidding, and so he doesn’t want him punished. Cheney is as much as saying that Scooter should be pardoned because he was just doing what Cheney told him to do, and was covering up for Cheney.

The Peter Principle is the principle that "In a Hierarchy Every Employee Tends to Rise to His Level of Incompetence." While formulated by Dr. Laurence J. Peter and Raymond Hull in their 1968 book The Peter Principle, a humorous treatise which also introduced the "salutary science of Hierarchiology", "inadvertently founded" by Peter, the principle has real validity. It holds that in a hierarchy, members are promoted so long as they work competently. Sooner or later they are promoted to a position at which they are no longer competent [their "level of incompetence"], and there they remain. Peter’s Corollary states that "in time, every post tends to be occupied by an employee who is incompetent to carry out his duties" and adds that "work is accomplished by those employees who have not yet reached their level of incompetence".

"But on Sunday Mr. Cheney contended those very methods had produced intelligence — still classified — that helped uncover specific plots." Here, Cheney is trying to look at outcome, at least in an "ends justify the means" way – not what I meant by outcome. But even in his way of looking at things, what he says is highly suspect. If "those very methods had produced intelligence," they wouldn’t still be "still classified." Bush and Cheney were consistent with classification. They classified what they didn’t want us to know. And they declassified what they did want us to know. So, if it’s still classified, it didn’t produce intelligence.

Pardoning Scooter is the same deal. In the last example, Cheney claims "It was done legally. It was done in accordance with our constitutional practices and principles." Yet with Scooter who was protected by our Constitution maximally, Cheney’s not so hot on the legal system. How come, you ask? Because it didn’t reach the conclusion Cheney wanted it to reach. Cheney-think starts with the desired conclusion, and fits the logic in later. We all try to do that, but most of us don’t think we can get away with it…

• Watch this ABC 20/20 program. About 3+ minutes in, there’s a very telling segment interviewing a former employee named Nadir Ibrahim. Bernie wasn’t around much any more it seems – in the "semi-retirement mode."
• Then there’s this interview on Fox News, again with Nadir Ibrahim.
• Who is Frank DiPascali? Frank DiPascali Jr. was Madoff’s Chief Financial Officer.

Bonjour, Bongiorno: Other Names Emerging in Madoff Case
WSJ Blogs
By Ashby Jones
03/09/09

Ever since December, we’ve been waiting for other shoes to drop in the Bernie Madoff fraud case. Now, the wait may be coming to an end.

News has broken that a longtime aide to Madoff, Annette Bongiorno, instructed two assistants to generate trading tickets, now believed to be bogus, for Madoff’s investing clients, according to information the assistants gave the government in the investigation. Click here for the story, from the WSJ’s Amir Efrati.

The assistants, Semone Anderson and Winnie Jackson, told prosecutors that Bongiorno, a four-decade veteran of the Madoff firm, would ask them to research daily share prices for blue-chip stocks from the previous month or several months. Using the data of past share prices, Bongiorno would then instruct the assistants to generate “tickets” showing purported trades, which resulted in gains that were in line with Madoff’s steady annual returns, this person said.

Bongiorno wasn’t reached for comment. Such fact-gathering doesn’t mean that prosecutors will determine there was any criminal liability…

Prosecutors also have begun interviewing employees from a group that was separate from Ms. Bongiorno and oversaw accounts for many of Madoff’s institutional accounts. That group was headed by Frank DiPascali Jr., 52, who hasn’t yet been asked to speak with prosecutors, according to a person familiar with the matter. DiPascali’s lawyer declined to comment on his client’s behalf.

Madoff’s ‘Street-Smart’ Aide DiPascali Was Investors’ Go-To Guy
Bloomberg
January 15, 2009
By David Voreacos, David Glovin and Patricia Hurtado

Frank DiPascali Jr. joined Bernard Madoff’s firm a year after graduating from a Catholic high school in Queens, New York. Over a 33-year career, he rose through the ranks, eventually calling himself chief financial officer. For investors like Tim Murray of Minnesota, DiPascali was a “street-smart New Yorker” who fielded calls about the millions of dollars he entrusted to the firm.

“To a Madoff customer with a discretionary account, he is the guy,” said Murray, 57, a real-estate developer. “There is nobody else.”

Now, U.S. prosecutors and regulators are probing whether DiPascali, 52, played a role in an alleged $50 billion Ponzi scheme that led to Madoff’s arrest on Dec. 11, people familiar with the matter said… Madoff often told investors that options trading was a key to his success. DiPascali, who is not charged, became director of options in 1986 at the firm and CFO in 1996, according to a resume he prepared in 2002.

“Mr. DiPascali is a blue-collar guy, not a Wall Street master of the universe,” said his attorney Marc Mukasey, a former federal prosecutor now at Bracewell & Giuliani LLP in New York. “He is devastated by the losses to investors.” DiPascali, who grew up in the middle-class enclave of Howard Beach in Queens, now lives in suburban Bridgewater, New Jersey. He and his wife have raised four children. They live in a five-bedroom, five-bathroom house with a pool and cabana on seven wooded acres. They have two black Mercedes vehicles and a 61-foot boat built by Viking Yacht Co…

Prosecutors target assets of Madoff’s wife
15 March 2009

Federal prosecutors in New York and the US Securities and Exchange Commission are preparing to file a legal action against Ruth Madoff, wife of jailed fraudster Bernie, amid fears that she will try to flee the United States or move her $70m fortune beyond their reach. Department of Justice sources told the Observer that prosecutors were "working around the clock" to build a criminal complaint against Mrs. Madoff in an effort to ask a judge to freeze her bank accounts, which they believe are filled with the proceeds of her husband’s crimes.

The SEC, America’s top financial regulator, is understood to be liaising with the US Attorney’s Office for the Southern District of New York to help prepare the asset freezing order. "What will happen," one SEC source said, "is that the US attorneys will be in court in the next week or so to tell a judge that they believe Mrs Madoff’s assets are derived from ill-gotten gains and that they should be frozen for a certain period of time while the investigation is ongoing." The judge will then decide whether there is sufficient reason to believe Mrs Madoff’s assets were the proceeds of her husband’s $64bn Ponzi scheme…

Sconces and Scrapbooks: A Visit to the Madoffs
First Person
By Michael Skakun and Ken Libo
December 18, 2008

^{We arrived, two scribes-for-hire, at the Madoff residence on Manhattan’s Upper East Side. “Queens High Baroque,” we said sotto voce in unison as we stepped off the elevator and into the vestibule of the Madoffs’ apartment. It was a wet day, and we quietly removed our galoshes. We had been summoned by the lady of the house, Ruth Madoff, director of Bernard L. Madoff Investment Securities LLC and wife of the company’s owner, to help with a special project. We took no notes that day, about five years ago, but the scenes and quotes that follow have come to mind in recent days, and are told here as faithfully as memory allows.}

^{The ample Madoff foyer and living room burst with what appeared to us as classical knockoffs, the regal effect spoiled by overexertion. Gold sconces lined the stenciled wallpaper, a Napoleonic-style desk stood to the side, and the Greek and Egyptian statues vied with each other to set a mood of antique decorum. Arabesque – styled Central Asian rugs beguiled our vision with looping patterns and impressive symmetries, further softening our footfalls. Ruth Madoff, a petite blonde with a pert nose and quick movements, ushered us into a sunlit kitchen. We could see that the downpour outside had come to a halt. “We’ll be more comfortable here,” she told us. White cabinets swept from floor to ceiling. The Formica-topped oval table had an array of crystal-cut glasses brimming with cooled fruit juices.}

^{Ruth’s taut, well-tended skin made her look a good 10, if not 20, years younger than she was. She was thin, sylphlike, giving further economy to the word “trim.” Ruth shook out her curls as she sat herself down on a wicker chair. Her manicured fingers lay folded on her lap. “It’s heimisher in here,” she said. The spotless kitchen stood in warm contrast to the cold hauteur of the foyer. The Madoffs, we feared, had effectively exiled themselves from their well-appointed living room, reserved strictly for formality and occasion.}

^{On the tabletop lay her spiral-bound, hearth-toned cookbook, filled with recipes she had culled from the great Gallic and American chefs, many graduates of the French Culinary Institute. She had charmed the likes of Emeril Lagasse, Daniel Burke, Daniel Boulud and Bobby Flay to conjure up dishes that would pass the strictest dietary laws. Among its tinted pages, recipes for vegetable gumbo jostled against those for paupiettes of baked salmon; wok-seared duck breasts nestled side by side with braised and cooked goose, garnished with watercress aglio-olio.}

^{“Now we can get down to business,” she said, pouring herself a cup of hot tea. “Bernie is turning 65. Other men slow down; take it easy, not him. He’s got the whole world on his head.” Ruth smiled wanly and brushed her hand through her soft, layered hair.}

^{“I want to give him a birthday present he won’t forget,” she said.}

^{We asked her what she had in mind.}

^{“Maybe a surprise scrapbook, you know, pictures, photos, invitations, the works,” she said. We let the idea settle in, and she continued.}

^{“Oh, we’ll think of something, maybe interesting collage effects. What we’ll want is to bring out Bernie’s many facets,” she said.}

^{But no sooner had she spoken than she caught herself. Bernie, she said, was cautious, even circumspect, a man who liked the tried and true, things in their proper place. He never wanted to be caught off guard. But that is exactly what his wife was hoping to pull off, somehow to charm him without startling him.}

^{At first, Ruth thought she knew exactly where to begin. She brought out photos of a smiling, gap-toothed Queens boy, bat at hand, ready to hit a home run. He had quite a swing in those days. Boy, could he send those balls flying. But with each passing photo she hesitated, breathing more heavily. Bernie, she observed, was a secretive man. “He likes to keep things close to his vest,” she said. She looked wistfully at the photos lying on the table.}

^{Suddenly, she gathered the pictures into a heap. She looked wistfully out the window.}

^{“Let me mull this over,” she finally said and whisked us out the door.}

^{The next day we received a call from Ruth. We could hear the pause in her voice. It seemed touched with sadness. She had changed her mind. More time was needed, she said. She thought 65 was an age betwixt and between. Seventy, three score and ten, would give the fuller measure of a life, would be just the right moment to spring this happiest of surprises on Bernie. Now, we have learned, it is Bernie who has sprung the unhappiest of surprises on investors around the world.}