Understanding the Decisions of Bernie Madoff

I have to confess. For about a month, I have been thinking of an angle to attack the topic of how George W. Bush will be viewed by history. In my mind, I feel he will eventually be viewed as a better president than right now. After all, that's what usually happens. Truman's positive rating went up from the 28% he faced as an outgoing president; Carter gained favorable reviews because of his work as writer and negotiator, and even Nixon, the disgraced crook, was seen later as a more popular elder statesman.

Here's the thing. I know that at least Carter and Nixon worked hard in their post-presidency years, Carter following his heart and Nixon his legacy. Bill Clinton is also doing a lot of work through his library and in person to build up his post-presidency resume. I have no problem with this.

How about G.W. Bush? Well, I saw him almost get hit by a foul ball two weeks ago. Actually, he seems to be at a lot of baseball games. Obama invited him to Ground Zero after the bin Laden killing, but he said 'No."

I have no problem with this either. It is the right of an ex-president to enjoy some time off. There will be time to work on the legacy.

However, this did not help me as I thought about the Bush that will be viewed in the history books. My point is, I have decided that this probably is not a topic that merits value at this time, mainly because the subject isn't too concerned about it, so why should anybody else be? Perhaps this should be filed under "2016 Topics." I'm shelving it for the time being.

For now, I want to look at another figure viewed with great disdain by many right now -- Bernie Madoff. I'm certainly not trying to distinguish a connection between the swindler and ex-president. But, as many families continue to suffer with financial woes, the Madoff story becomes more unbelievable and indicative of the kinds of lowlifes who helped to screw many other hard working Americans. I was interested with the fact that Madoff really wasn't born with a silver spoon and more fascinated to see the high regard his capabilities were held early in his career, perhaps a main reason why so many people were coerced into investing with him later.

The Madoff Story 

It is hard to fathom that one person could swindle thousands of investors out of tens of billions of dollars over a period believed to be in excess of twenty years. Presumably, in the regulated world of finance, conducting in illegal activities, such as Bernie Madoff’s Ponzi scheme, this would not be allowed to happen. But to understand how such a monetary tragedy took place, one must understand the thinking behind its mastermind, Madoff.

 Madoff’s Upbringing

Suffice it to say, Madoff was not the typically groomed, Ivy League, MBA-type. He was raised in Queens and attended college at Hofstra on Long Island. In an interview, the financier revealed to the Financial Times that he “started with $500 in capital, watched his father go bankrupt and felt very driven... he was always outside the club, the club being the New York Stock Exchange and white shoe firms."

Deep down, Madoff longed to be a major player on Wall Street. His drive to succeed was legendary. As explained by psychologist Alden Cass, “There’s a need to prove to the world that I am somebody powerful – I am so intelligent. Cass is the president of Competitive Streak Consulting and has studied and counseled many Wall Street personalities.

Early Wall Street Career

Starting in the early 1960’s, the firm of Bernard L. Madoff Investment Securities steadily grew into the major force that Madoff had longed for. Most of the credit went to its owner’s knowledge of how the market worked. Because of his knowledge of stocks, coupled with his ability to see the future of trading, Madoff was able to steal volume from the New York Stock Exchange by trading many of its listed stocks. Figuring that trading would soon be done online, he was able to offer competitive prices to clients and his network grew to include larger retail brokers such as Charles Schwab and Fidelity.

Playing the Part

During this robust period, Madoff also honed the persona which allowed him to swindle thousands of investors. Part of this character was developed by Madoff’s relationships with regulators. Although Madoff claims to have been legitimate until the stock market crash of 1987, his work with the SEC goes back before the crash, leading many to believe that he was working with one side to hide the other. Said one individual who remained anonymous because of pending litigation, “He was smart in understanding very early on that the more involved you were with regulators, you could shape regulation. But, if we find out that the Ponzi scheme goes back that far, then he was doing something much smarter. If you’re very close with regulators, they’re not going be looking over your shoulders that much.”

Madoff also became a philanthropist, joining the board of New York’s Yeshiva University, then becoming chairman of its business school. By crafting a public persona which overshadowed his illegal private dealings, Madoff was able to continue cultivating potential new clients in spite of SEC concerns.

Victim of His Greed

Like the Greek tragic figures he has been compared to, Madoff eventually wanted too much. His ego became too great and he began to act more as if he was above the law. Sam Antar, the former chief financial officer of Crazy Eddie in the 1980s, was later convicted of similar offenses and offered his opinion. Says Antar, “he just started the scam and then it built on itself and he couldn’t get out.”

In the end result, it is difficult to know exactly what made Bernie Madoff capable of performing his criminal Ponzi scheme. It could have been his need to accumulate an immense amount of wealth, while others feel it was a need to dominate people and overcome the inferiority complex Madoff felt by the lack of a “blue blood” upbringing.