1 Boring Old Man

At dinner tonight, a friend said of Madoff, "I’d love to interview him. I want to know ‘what makes him tick?‘" We’re both psychoanalysts and naturally drawn to questions like his, what history would create a Bernie Madoff? I’ll admit to surfing around looking for a narrative, maybe somebody who grew up with him who might have a hint or two. That search hasn’t been very satisfying.

Swindler Bernard Madoff faces up to 150 years in jail for a $50 billion Ponzi scheme
BY Thomas Zambito and Corky Siemaszko
DAILY NEWS STAFF WRITERS
March 11th 2009

Madoff, 70, who was wearing a bulletproof vest under his dark gray suit, white shirt and black tie Tuesday, said nothing as the prosecutor laid out his bleak future. Earlier, he spread his fingers nervously along the defense table as Chin ruled he could retain lawyer, even though the lawyer’s sons claim Madoff stole $900,000 from a trust account set up by their grandfather. From time to time, Madoff’s seemingly bland mask was betrayed by a facial tic he has developed of late – an involuntary widening of the eyes…

Mom and Dad and Ruth and Bernie
Our friend the swindler
By John Maccabee
Feb 22, 2009

The best place to begin to find out about Bernie Madoff is inside his closet, in the apartment on East 64th Street. To the left are four rows of four drawers, each drawer only large enough to contain a single shirt—sixteen identical shirts, same cut, same color, a French blue that matches his eyes. Straight ahead is a row of a dozen identical suits, double-breasted, charcoal gray, English cut, pants and jackets on separate hangers, with the same amount of air on each side of each hanger. Below are two rows of handmade tie-shoes, at least a dozen of them, and again, each in the same style, the same color. There are no decisions to make, no possible deviations. Stepping into this closet was perhaps the one moment in his roiling days that had the appearance of calm.

Bernie wanted to be rich; he dedicated his life to it. He was loved and admired by many, but when his story finally runs its course, it may be that the adoration that inspired him had more to do with things rather than people. Ruth, Bernie’s wife, told my sister, who told me, that when they first moved into the apartment on East 64th Street, Ruth walked upstairs one night and found Bernie sitting alone in the dark, in the living room, weeping. He had made it, he told her. The apartment was impeccable—the last co-op in New York that Angelo Donghia designed, they bragged—with immaculate flourishes of color, deep-red Chinese lacquered cabinets that stood on opposite sides of a doorway, and the creamy color that extended down the curved staircase, and the jewel of a study next to the master bedroom, with its polished mahogany paneling, silver tea-paper ceiling, and sterling-silver sconces…

There was only one thing that made my mother nervous: Bernie’s twitch. Bernie’s twitch began in his right eye and spread to the left: There were also other facial tics, random body tics, elbow tucks, jacket-pocket tappings. Maybe the business was driving him crazy, Mom thought. But Bernie developed his tics as a diversion from his stammer. I noticed this once, when he began sputtering as I talked with him about my account…

Madoff Had Accomplices: His Victims
By JOE NOCERA
March 13, 2009

… As we passed through security, I asked him what role he thought the government should be playing. It was as if I had flipped a switch. Suddenly, his reticence fell away.

“The S.E.C.,” he said, referring to the Securities and Exchange Commission, which muffed multiple opportunities to catch Mr. Madoff, “they played a big role in this. They have a lot to answer for.” He said that the tax code should be changed so that Madoff victims can recoup taxes they paid on profits that turned out to be illusory — no matter how far in the past those taxes were paid. He thought the Securities Investor Protection Corporation, which tries to put at least a little money in the hands of investors whose firms have gone under, should give victims more than the current $500,000 maximum.

“I think there should be some legislation,” he said finally. What kind of legislation? What he was hoping for, he said, was that the government would set up a fund for Madoff victims — maybe give them 60 percent of their losses, he suggested…

“These were people with a fair amount of money, and most of them sought no professional advice,” said Bruce C. Greenwald, who teaches value investing at the Graduate School of Business at Columbia University. “It’s like trying to do your own dentistry.” Mr. Hedges said, “It is a real lesson that people cannot abdicate personal responsibility when it comes to their personal finances.”

And that’s the point. People did abdicate responsibility — and now, rather than face that fact, many of them are blaming the government for not, in effect, saving them from themselves. Indeed, what you discover when you talk to victims is that they harbor an anger toward the S.E.C. that is as deep or deeper than the anger they feel toward Mr. Madoff. There is a powerful sense that because the agency was asleep at the switch, they have been doubly victimized. And they want the government to do something about it…

“When you’re in that Hedge Fund mode,
it’s important not to do anything remotely truthful”

Pixie Dust and Cheney’s Assassination Squads
By: emptywheel
March 13, 2009

A number of people, in their discussion of Sy Hersh’s revelation that Dick Cheney directed assassination squads, look to EO 12333 for some guidance on whether such assassination squads are legal or not.

Here’s attytood:

^{By the way, in case there’s any ambiguity on the subject, President Gerald Ford in 1975 signed an executive order that said this: : "No employee of the United States Government shall engage in, or conspire to engage in, political assassination." It’s been upheld by every subsequent president. Apparently vice presidents are another matter.}

And here’s Scott Horton:

The practice of targeted killings is controlled by Executive Order 12333, issued by President Reagan in 1981, which provides “No person employed by or acting on behalf of the United States Government shall engage in, or conspire to engage in, assassination.” There are two exceptions to this rule. One is that as a basic principle of the law of armed combat, it is permitted to strike against the command-and-control apparatus [including both political and military leaders] of a hostile force in connection with armed conflict. The other is that the President may, by special action, authorize such an operation. The operation that Hersh describes almost certainly would have required a presidential finding which concluded that it was in the nation’s national security interest, and authorized the operation to go forward. Hersh suggests that the entire process was delegated to the Vice President, however, which may have required a more extensive modification of E.O. 12333. President Bush issued a complete revamping of EO 12333 on July 30, 2008—and he directed that the details of his revision be withheld from the public. The publicly disclosed text of Bush’s action in 2008 focus on a structural reorganization, bolstering the authority of the intelligence czar, largely at the expense of the director of central intelligence. There has been continuous speculation that Bush also made changes in the operational guidelines on this occasion, or perhaps in an earlier secret order or finding.

Of course, both these discussions assume Executive Orders mean what they say. But we know they don’t, necessarily. We know that the OLC told George Bush [almost certainly back in 2001 when he was first inventing excuses for his warrantless wiretap program] that:

^{An executive order cannot limit a President. There is no constitutional requirement for a President to issue a new executive order whenever he wishes to depart from the terms of a previous executive order. Rather than violate an executive order, the President has instead modified or waived it.}

In fact, we have reason to believe that EO 12333 – the EO that prohibits assassinations – is the EO that Bush and OLC had in mind when they first invented pixie dust [the practice of changing EOs without making any public record of the change] Here’s what Sheldon Whitehouse said when he first exposed Bush’s practice of pixie dust:

^{But what does this administration say about executive orders? "An executive order cannot limit a President. There is no constitutional requirement for a President to issue a new executive order whenever he wishes to depart from the terms of a previous executive order. Rather than violate an executive order, the President has instead modified or waived it." "Whenever [the President] wishes to depart from the terms of a previous executive order," he may do so because "an executive order cannot limit a President." And he doesn’t have to change the executive order, or give notice that he’s violating it, because by "departing from the executive order," the President "has instead modified or waived it."}

Though Whitehouse didn’t say as much when he first exposed Bush’s pixie dust in 2006, he strongly suggested that Bush had pixie dusted away the limitations on wiretapping Americans contained in EO 12333. Now, that doesn’t mean that Bush also pixie dusted the prohibitions on assassinations – "modified" the EO without telling us. But it also means there is no reason we should point to EO 12333 as if it means what it says – particularly not with the Bush Administration’s well-publicized practice of taking out alleged members of Al Qaeda with predator drone strikes for years. It’s all very nice that every President since Ford has upheld the prohibition on assassination in EO 12333. But in the era of pixie dust, that doesn’t mean Bush also upheld it, even if it looks like he did.

^{The Office of Legal Counsel assists the Attorney General of the United States in his function as legal adviser to the President and all the executive branch agencies… The OLC drafts legal opinions of the Attorney General and also provides its own written opinions and oral advice in response to requests from the Counsel to the President, the various agencies of the executive branch, and offices within the Department of Justice. Such requests typically deal with legal issues of particular complexity and importance or about which two or more agencies are in disagreement. The Office also is responsible for providing legal advice to the executive branch on all constitutional questions and reviewing pending legislation for constitutionality. The decisions of the Office are binding on all executive agencies. All executive orders and proclamations proposed to be issued by the President are reviewed by the OLC for form and legality, as are various other matters that require the President’s formal approval.}

 

Likewise, reading Bernie’s statement, he went out of his way to try to put a firewall between his Ponzi Investment Centrals and his trading business on the next floor run by his brother and his sons. He infused some Capital into their business from his and he makes some tortured arguments to explain that away. He’s obviously trying to protect his family’s ability to go on with their own lifestyles after his trip up the river. That, in itself, is infuriating in and of itself. Bernard Madoff ruined countless peoples’ ability to be comfortable [or even solvent] in their retirement, yet he wants to be sure that his own family’s assets aren’t decimated paying them back – the people he robbed. It makes the blood boil!

But that aside, I really wonder if there is any money left, hidden around somewhere, that can be retrieved. I doubt it for a couple of reasons. First, the way Bernie got started in the Ponzi business was to cover up his losses in the 1990 Recession. And over the next 18 or 19 years, he kept things going through thick and thin. He survived the last Recession [2002]. He survived the SEC. He even survived Harry Markopolos [no small feat]. I think if he could’ve laid his hands on any money, he would’ve used it to try to keep his scheme going. As much as he said that he anticipated "this day," he doesn’t seem to have planned for it very well. I suspect that his denial system allowed him to keep it out of his mind. He was still taking Investors up until the bitter end.

But the main reason I doubt that there’s any money around is the math. There’s no way for us to model it because we just have no idea what came in when, but I think one can make some educated guesses. Some people probably gave Bernie money to "grow it," so he didn’t have to pay anything out. But a lot of people gave him money and lived off of their yield – monthly checks from "Uncle Bernie." If you gave him $1M, that would give you an average monthly yield of $12,000 a month [or $144,000 a year] at an average of 12% Interest, but since he paid a "feeder" to get his business, he was needing to generate 16% [Markopolos’ estimate].

So [left graph] let’s assume that someone gave Bernie $1M back when he started and drew their monthly yield to live on. Since Bernie’s paying out of the Principle, that million is gone in seven years, but Bernie’s obligated to continuing to pay [it’s expensive to run a Ponzi Scheme]. So he has to take in more money to keep up with his obligations. But when he takes in more money, he’s obligated to pay out even more money. Just for kicks, if we consider only those pesky clients that withdraw their monthly yield, how much would Bernie have to take in just to stay even? $17M to cover the original $1M  over his 18 years [right graph]. And that doesn’t take in the cost of his overhead, or the amount he took out to keep up his lavish lifestyle. Those things multiply that graph geometrically.

So if you add in his overhead, his outrageous personal expenses, and the fact that he had to have a lot of Capital on hand to pay off those even peskier clients who made really big withdrawals or pulled out altogether, the cost of running a Ponzi Scheme is astronomical – a hungry beast demanding increasingly huge amounts from new clients. It’s hard work being a Ponzi Scheme Manager. It’s a bit like a "reverse Pyramid Scheme." The more you take in, the greater your costs. That he kept it going 18 years is remarkable. That he would have hidden assets would be even more remarkable, because of all those annoying retirees and charities constantly taking money out of his system.

In his 18 year Ponzi career, he obviously had expenses, commissions to feeders, his own take home pay – lots of money going out above the payments to his clients. Using the simple model above, how much would he have to have generated just to keep afloat on somebody’s million dollar investment. The graph on the right shows how much he’d have to take in to maintain that original $1M depending on the percentage he paid out [his 12% dividend plus his other expenses and his own take].

Parenthetically, much has been made about him being "selective" in accepting clients. I’m suspecting another explanation for that behavior. Were I running a Ponzi Scheme, I’d only want Investors who left their money  in the system to "grow it." Since I wouldn’t be sending them monthly checks, they wouldn’t deplete my reserves. Clients who took their dividends out to live on, or charities that used their dividends to build libraries and feed the poor would take actual money out of my system, so I’d have to go out and scare up other "suckers." So maybe his selectiveness had another motive.

Obviously my examples are vastly over-simplified, but I think they make the obvious point that the geometric escalation of the thievery needed to keep a Ponzi Scheme alive is staggering. It’s probably why your local Community Bank doesn’t have a Ponzi-based Money Market Account program. In spite of his opulent lifestyle, Bernie Madoff was hanging on by a thread as soon as the market tanked and people started wanting their money. Where did it go? He either spent it or paid it out in "interest" over the years.

I’m guessing that for Madoff’s clients, "what you see is what you get," and that most of what’s left is that bit that Ruth is trying to hold on to [Most of us would be happy for her to take up residence in the local federal detention facility, and let their victims split it up  – an average of a paltry $16,739 for each of his 4600 clients].

As long as we’re playing with the Madoff numbers, consider the case of Smith and Jones, neighbors who are both clients of Madoff Investments. Ten years ago, each of them put a million dollars into Bernie’s Fund. Smith has retired and is living off of the interest on his investment. Jones is still working and leaving his money in the fund to grow it for retirement. At Thanksgiving 2008, they compare notes. Smith has drawn $1,268,250 out of his retirement and still has $1,000,000 in the Fund. Jones has left his in place and sees himself as now worth $3,300,387. At Christmas [after finding out about Bernie’s Ponzi Scheme], Jones thinks he’s lost $3,300,387 and is distraught [even though his real loss is $1,000,000]. Smith is upset too, thinking his $1,000,000 is gone [even though he’s actually $268,250 ahead]. Jones gets to thinking this isn’t exactly fair. So the manager of the Madoff mess has to reconcile all of this. He suggests that maybe Smith could pay Jones $634,125 and everything would come out fair [so they’re both down $365,875]. That’s called "clawback," presumabely because they’d have to claw the money back from Smith who will probably say, "I spent it already". So Smith dumps his remaining assets in a protected Trust and hires a Lawyer. Jones doesn’t retire, hires a Lawyer, and considers buying a gun.

On the off-hand chance that you’ve just gotten back from Anarctica and have missed all television, here’s the Jon Stewart smackdown of CNBC/Cramer [the full service version].

But more than his getting away with running a massive Ponzi Scheme for almost two decades, the part that lingers is his willingness to do it- to play the big-shot and live the Life of Riley at the expense of his friends, his mentors, and his social network. None of us can get our minds around that. That he could do it by hiring a bunch of low-level employees and some bootleg storefront accountant under the nose of the SEC/CFTC says something terrible about our system. But that he would do it will make him an enigma hidden in a paradox for eternity. And his wife’s attempting to hold on to a $7M Manhattan penthouse and $70M in other assets, claiming that it didn’t come from his fraud indicates that she is part of the whole thing in some as yet unexplained way.

Pleading Guilty to All Charges
Madoff Awaits Ruling on Bail
By DIANA B. HENRIQUES and JACK HEALY
New York Times

March 12, 2009

Standing before Judge Denny Chin in United States District Court in Manhattan, Mr. Madoff was sworn in and reminded that he was under oath. Noting that he had waived indictment, Judge Chin asked, “How do you now plead,” guilty or not guilty?

“Guilty,” Mr. Madoff responded…

In answering questions about how he sustained a 20-year fraud whose collapse erased as much as $65 billion that his customers thought they had in their accounts, Mr. Madoff said, “I believed it would end shortly and I would be able to extricate myself and my clients from the scheme. As the years went by I realized that my arrest and this day would inevitably come,” Mr. Madoff said. “I cannot adequately express how sorry I am for what I have done.”

Although Mr. Madoff admitted to operating what he called “a Ponzi scheme through the investment advisory side of my business,” he said all other aspects of his enterprise, operated by his sons and brother, were legitimate, profitable and successful.

The court session marks the first time since his arrest by federal agents on Dec. 11 that Mr. Madoff has spoken publicly about how he ran what was perhaps the largest fraud in Wall Street history, a global scheme that ensnared hedge funds, nonprofit groups and celebrities, and devastated the life savings of thousands of people…

Judge Orders Madoff Jailed After Guilty Plea
Tomoeh Murakami Tse and Keith B. Richburg
Washington Post
March 12, 2009

An "ashamed" Bernard L. Madoff pleaded guilty Thursday morning to bilking investors out of billions of dollars in savings in the biggest fraud in Wall Street history, and a judge ordered him jailed immediately to await a June 16 sentencing date. The 70-year-old disgraced financier, who had been confined to his Upper East Side penthouse under a $10 million bail agreement since his Dec. 11 arrest, admitted running an extensive Ponzi scheme that wiped out charitable endowments and cost thousands of people their life savings.

The 11 felony charges carry a maximum sentence of 150 years in prison. The actual sentence is likely to be much shorter, but given Madoff’s age would likely still amount to a life sentence. Madoff pleaded guilty to securities fraud, investment advisory fraud, mail fraud, wire fraud, three counts of money laundering, false statements, perjury, false filings to the Securities and Exchange Commission and theft from an employee benefit plan.

"I am actually grateful for this opportunity to publicly comment about my crimes, for which I am deeply sorry and ashamed," Madoff told U.S. District Judge Denny Chin in a steady voice. He said he believed initially that the scheme would not last long and that he could extricate himself from it but realized as the years went by that he was in a risky situation and would eventually be caught. "I cannot adequately express how sorry I am for my crimes," Madoff told the court. He did not look at investors who spoke at the hearing…

Madoff sent directly to jail after guilty plea

This morning, Bernie Madoff pleaded guilty and admitted that he never invested any of the money that he took from clients as a part of his ponzi scheme. He was ordered directly to jail.

“I never invested the funds in securities as promised,” Madoff told Judge Denny Chin.

Over the past three decades, Madoff has collected millions and millions of dollars from 4,800 different people as a part of this ponzi scheme. Instead of investing the money for his clients, Bernie put the money into a savings account at Chase Manhattan. His clients never got their returns. Some of the people who trusted Madoff were rich and set for life, now they find themselves starting over with almost nothing.

Cheney’s Assassination Squads
By: emptywheel
March 11, 2009

emptywheel points us to this little bombshell…

Investigative reporter Seymour Hersh describes ‘executive assassination ring’

By Eric Black
March 11, 2009

At a “Great Conversations” event at the University of Minnesota last night, legendary investigative reporter Seymour Hersh may have made a little more news than he intended by talking about new alleged instances of domestic spying by the CIA, and about an ongoing covert military operation that he called an “executive assassination ring”…

In an email exchange afterward, Hersh said that his statements were “an honest response to a question” from the event’s moderator, U of M Political Scientist Larry Jacobs and “not something I wanted to dwell about in public.” Hersh didn’t take back the statements, which he said arise from reporting he is doing for a book, but that it might be a year or two before he has what he needs on the topic to be “effective…that is, empirical, for even the most skeptical”…

At the end of one answer by Hersh about how these things tend to happen, Jacobs asked: “And do they continue to happen to this day?”

“Yuh. After 9/11, I haven’t written about this yet, but the Central Intelligence Agency was very deeply involved in domestic activities against people they thought to be enemies of the state. Without any legal authority for it. They haven’t been called on it yet. That does happen.
"Right now, today, there was a story in the New York Times that if you read it carefully mentioned something known as the Joint Special Operations Command — JSOC it’s called. It is a special wing of our special operations community that is set up independently. They do not report to anybody, except in the Bush-Cheney days, they reported directly to the Cheney office. They did not report to the chairman of the joint chiefs of staff or to Mr. [Robert] Gates, the secretary of defense. They reported directly to him. …
"Congress has no oversight of it. It’s an executive assassination ring essentially, and it’s been going on and on and on. Just today in the Times there was a story that its leaders, a three star admiral named [William H.] McRaven, ordered a stop to it because there were so many collateral deaths.
"Under President Bush’s authority, they’ve been going into countries, not talking to the ambassador or the CIA station chief, and finding people on a list and executing them and leaving. That’s been going on, in the name of all of us.
"It’s complicated because the guys doing it are not murderers, and yet they are committing what we would normally call murder. It’s a very complicated issue. Because they are young men that went into the Special Forces. The Delta Forces you’ve heard about. Navy Seal teams. Highly specialized.
"In many cases, they were the best and the brightest. Really, no exaggerations. Really fine guys that went in to do the kind of necessary jobs that they think you need to do to protect America. And then they find themselves torturing people.
"I’ve had people say to me — five years ago, I had one say: ‘What do you call it when you interrogate somebody and you leave them bleeding and they don’t get any medical committee and two days later he dies. Is that murder? What happens if I get before a committee?’
"But they’re not gonna get before a committee.”

Throughout the last eight years, we’ve heard Dick Cheney, Donald Rumsfeld, Paul Wolfowitz, Douglas Feith, David Addington, John Yoo, John Bolton [it feels like a specific "group"] speak to us about the evil out there, and our need to take extreme measures in the face of it. They speak with conviction, and make fun of us for being naive if we react negatively. They remind us of how we felt on September 11th, 2001, as we watched our television sets in horror. They ask us to think about what we would have done had we been in their position – responsible for dealing with that monsterous attack. It’s not just a spurious argument they make. I do remember how I felt then. I do wonder how I would have reacted had I been in their shoes. I do watch Action Movies that depict such things, trying to put human faces on suicide bombers, or put Delta Force Types in impossible circumstances pitted against insane religious zealots or power crazy sadists.

I know that I feel sympathetic towards the Delta Force types, the Navy Seals, the Special Forces. We ask them to live in situations where the currency is life and death – a world where whatever the term "Civilization" means is suspended, and they enter that uniquely human space where killing is not part of the search for food, but something else that only humans do – kill each other. And while I don’t feel particularly close to the suicide bombers, I do have some vague understanding that they see themselves as patriots to their cause – caught up in the same world as the kid from some farm in Nebraska with a beret on his head who leads a charge across a battlefield to a sure death.

But I don’t feel sympathetic to Osama Bin Laden or the group mentioned above, the people at the top who play chess using living pieces and talk about evil. I wonder about that sometimes. Would I feel differently about "the group" had they "won?" In this case, I know the answer. In the early days after 9/11, I was all for going after Bin Laden, and later, the Taliban who supported him. I guess I still feel that way. It’s sort of like I feel about the death penalty. I don’t like it, but it’s the only solution for people who are driven to kill others and will do it again if given a chance. But the minute Bush began to talk about the Axis of Evil, I thought he’d gone insane and opposed everything he said after that. Still do. I know that whatever the outcome of the Iraq misadventure, I would have been just as negative about that group of people.

So when I read about an Executive Assassination Squad reporting only to Vice President Cheney, I know what I feel. I agree that our adversaries are incorrigible and need to be stopped, but I don’t see "the group" as defenders. And I don’t see Gitmo, Torture, Abu Ghraib, the Invasion of Iraq, or Executive Assassination Squads as the same thing as the Delta Force types, the Navy Seals, and the Special Forces. In my book, Dick Cheney, Donald Rumsfeld, Paul Wolfowitz, Douglas Feith, David Addington, John Yoo, and John Bolton are perpetrators who let our real soldiers down. They took the easy road at great expense to our country and the children we sent off to fight. Only one of them was in the Service himself, Donald Rumsfeld, and he served as a peacetime Flight Instructor.

In releasing these memos, the Obama administration may be attempting to appease its antiwar base – which won’t bother to read the memos in full – or trying to look good for the chattering classes.

In Letter to Bishops, Pope Admits Mistakes

By RACHEL DONADIO
March 11, 2009

Pope Benedict XVI has written an unusually personal letter to bishops worldwide explaining why he revoked the excommunication of a Holocaust-denying bishop and admitting mistakes in how the Vatican handled the case. The letter, which the Vatican will release Thursday, is a further attempt to calm the waters after Benedict pardoned four schismatic bishops, including Richard Williamson, who in a television interview aired in January said that there were no Nazi gas chambers. The revocation provoked worldwide outrage and caused Catholics and Jews alike to question Benedict’s commitment to ecumenism and the reforms of the Second Vatican Council.

In passages of the letter that appeared on Wednesday in the Italian newspaper Il Foglio, the Vatican admitted “mistakes” in handling the case, and said in the future it would pay more attention to how news spreads over the Internet. A YouTube video of Bishop Williamson’s television interview, in which he denies the Holocaust, was widely available online in the days before the pope lifted the excommunications in late January.

The four belong to the ultra-conservative Society of St. Pius X. They had been excommunicated by Pope John Paul II after being ordained without a papal mandate, causing the only formal schism in the church. In passages from the pope’s letter posted Wednesday on the blog of a veteran Vatican reporter, Andrea Tornielli, Benedict said he considered revoking the excommunication “a modest act of mercy” toward the bishops, whose ordinations were “valid but illicit.” “Instead,” Mr. Tornielli quotes the letter saying, “it suddenly appeared something completely different: as the denial of reconciliation between Christians and Jews.”

The blog posting said the pope wrote that he had been “saddened” that “even Catholics, who should have been better able to understand things,” instead seemed poised with “a hostility ready for the attack.” He added that he thanked “the Jewish friends who quickly helped remove the misunderstandings and to reestablish the atmosphere of friendship and trust”…

So I would say to my cousins, "Does that mean the Pope was always right, even before he got to be Pope? What if I get to be Pope, does that mean that everything I’ve ever said was right? What if the Pope as a kid said that he didn’t think the Pope was infallible?" I was pretty tough on my cousins about this Papal Infallibility business [I expect it was my way of countering the not so vague claim made by a parent of mine about his own infallibility].

^{that’s George Washington in the background, frowning}

The Fed Didn’t Cause the Housing Bubble
Any new regulations should help direct savings toward productive investments
By ALAN GREENSPAN

We are in the midst of a global crisis that will unquestionably rank as the most virulent since the 1930s. It will eventually subside and pass into history. But how the interacting and reinforcing causes and effects of this severe contraction are interpreted will shape the reconfiguration of our currently disabled global financial system.

… the growth path of highly competitive markets is cyclical. And on rare occasions it can break down, with consequences such as those we are currently experiencing. It is now very clear that the levels of complexity to which market practitioners at the height of their euphoria tried to push risk-management techniques and products were too much for even the most sophisticated market players to handle properly and prudently.

However, the appropriate policy response is not to bridle financial intermediation with heavy regulation. That would stifle important advances in finance that enhance standards of living. Remember, prior to the crisis, the U.S. economy exhibited an impressive degree of productivity advance. To achieve that with a modest level of combined domestic and borrowed foreign savings was a measure of our financial system’s precrisis success. The solutions for the financial-market failures revealed by the crisis are higher capital requirements and a wider prosecution of fraud – not increased micromanagement by government entities.

Any new regulations should improve the ability of financial institutions to effectively direct a nation’s savings into the most productive capital investments. Much regulation fails that test, and is often costly and counterproductive. Adequate capital and collateral requirements can address the weaknesses that the crisis has unearthed. Such requirements will not be overly intrusive, and thus will not interfere unduly in private-sector business decisions.

If we are to retain a dynamic world economy capable of producing prosperity and future sustainable growth, we cannot rely on governments to intermediate saving and investment flows. Our challenge in the months ahead will be to install a regulatory regime that will ensure responsible risk management on the part of financial institutions, while encouraging them to continue taking the risks necessary and inherent in any successful market economy.

This really isn’t a good time for Alan Greenspan to be suggesting anything, much less suggesting that we not micromanage the financial industry. It’s just not the right time for him to do much except go off into the desert with John Galt and leave us alone. His financial wizard days are over.

And as for the Wall Street Journal, I wonder if Bernard Madoff is writing an op-ed tomorrow to tell us about the importance of Hedge Funds?

Comrade Greenspan says that the Ministry of $$ didn’t do it…
at-largely
By Larisa Alexandrovna

Former Fed Chairman Alan Greenspan has a rather strange little column today in the Wall Street Murdoch. But instead of snipping parts of it for you to read, I think a better use of your time would be to read Mathew Yglesias’ take on this:

I’m not entirely sure what to make of what Alan Greenspan has to say on his own behalf. But I am quite sure that he’s dodging what I would think would be the main issue Alan Greenspan needs to address regarding Alan Greenspan and the housing bubble, namely the time Alan Greenspan fueled the bubble in 2004 by urging people to go get Adjustable Rate Mortgages. Now I don’t know how much impact that advice had. Or how much impact advice given in the other direction might have had. But I do know that it was weird for Greenspan to even be commenting on the issue. And that his advice was bad advice. In retrospect, it looks disastrous. Even at the time, many observers found it bizarre.

Or as John Cole nails it:

Why is this man not in hiding in Argentina or Uraguay? Why is he allowed to speak in public? And for the record – I want so much regulation of the financial sector that if someone at Goldman Sachs wants to take a piss, he has to get a hall pass from Dennis Kucinich. They don’t like it, they can move to Iceland and see how they feel about bankers.

I am so with Cole on this.