Is Gordon Gekko Right?

When is Wall Street's Gordon Gekko right? Is greed good?

Moreover, what happens when Gordon Gekko is wrong, when greed, in its myriad forms, be it for life, for health and for money is not good? What happens when greed does not clarify, cut through, or captures the essence of our evolutionary process?

These are certainly among the questions as Bernard Madoff was arrested last week for allegedly pulling off the greatest "Ponzi scheme" in history.

According to U.S. prosecutors, the former chairman of the Nasdaq Stock Market ran a hedge fund that racked up $50 billion of fraudulent losses. Whatever happened to the Reagan axiom, "Trust but verify?"

The Madoff affair becomes more befuddling to the casual observer when one considers the diversity of the victims, which includes banks, hedge funds, professional investors like Mortimer Zuckerman, writer and Nobel Laureate, Elie Wiesel, movie director Steven Spielberg, and numerous charitable organizations that may be forced to close their doors as a result.

We peruse a sampling of the aforementioned list and forget that some may have lost everything, overwhelmed by the shock that those who we may have ignorantly placed above the possibilities of deception and naiveté that we reserved for mere mortals such as ourselves are just as culpable.

Maybe, in tough economic times such as these, there is a certain approval associated with the Madoff scandal because misery does indeed love company.

The question that the Madoff matter raises is how does this differ from WorldCom, Enron, sub-prime lending, Fannie Mae or Freddie Mac? The obvious greed factor strongly suggests that it does not. And like the ramifications of the sub-prime lending, we don't know the long-term impact.

Given this was an estimated $50 billion scandal, how can the residue of this mess not bleed into the corridors of Main Street? And because this is still in the allegation stage, it will undoubtedly be years before the public fully realizes the totality of this malfeasance.

Though mere speculation on my part, it remains unfathomable that Madoff could have pulled off such feats for so long with a small band of co-conspirators under his employ. How was he able to fly below the radar of the SEC for so long? Can we simply dismiss this episode to greed run amok?

When it comes to greed, if we are the beneficiary, we quickly embrace a dubious "don't ask, don't tell" policy, where as in the case with Madoff, the financial bottom line becomes the exclusive demarcation between genius and unlawful and immoral acts.

Several former clients of Madoff stated this week that they could never understand the financial statements they received from him, but they were making money and that was enough to assuage any doubt. Greed can make the pragmatism of "its too good to be true" appear unreasonable.

Maybe in rare isolation, but Gordon Gekko is seldom right. He was wrong in 1929, he was wrong in the 1980s, and his is wrong in 2008.

But history also proves that Gordon Gekko will always have an audience because there is something about the key that he sings his song that titillates our impulses, creating self-justification in such a way that it knowingly brings out the worst in human behavior.

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Comments

[Name Not In Use]

Stop knocking the SEC!
They bagged Martha Stewart didn't they?
They still trumpet that fact on their web pages.
http://www.sec.gov/news/press/2003-69.htm
"Stewart avoided losses of $45,673"
$45,673 !!!!!!
$45,673 !!!!!!
$45,673 !!!!!!

[Greg54]

The comparison of the real life Madoff with the fictional Gekko is not particularly apt. The fictional Gekko was a cheater -- he traded on inside information -- but he was never portrayed as a thief (except of information). Moreover, his "greed is good" speech, while hypocritical, was not quite as morally reprehensible as the "greed is good" catch phrase makes it sound. He was arguing that shareholder "greed" should motivate more aggressive oversight of company management to prevent waste. He even complained about corporate jets (shades of the Big 3 hearings). In short, Gekko was a cheater and a hypocrite, but he did not destroy the lives and fortunes of everyone around him.

Madoff, on the other hand, was a thief who endlessly robbed Peter to pay Paul in order to play the role of Wall Street genius, while skimming off billions in commissions. In so doing, he has ruined thousands of lives and has again shaken our already weakened financial system.

The distinction may appear inconsequential, but as we enter into a new age of regulation,it is useful to be clear about what the real dangers are. It is difficult to regulate against "greed" as such, and attempting to do so would be folly at best, and at worst, destructive. Theft, or the tolerance of theft in exchange for a commission (as in the case of the mortgage industry), is another matter.

[mattjs85]

The greatest ponzi scheme of all time is Social Security.

[anneth]

All over the world people have developed a retirement system similar to social security. They make it work. We can make it work. We need it otherwise we have to invest in camps for seniors with an exit date.

[mattjs85]

They do make it work...temporarily. In fact, any socialized program can work temporarily. However, the long term always results in failure.

You can look at the predictions for Social Security in the coming decades and realize that one generation is going to be left out.

Furthermore, the real danger is that it makes people reliant on government. If I am going to be cared for in old age, why should I learn about finance? Why not just live it up now? Why should I support my parents in their old age, can't the government just pay for them to be in a home?

The only thing the government should mandate is personal responsibility.