Wall Street Execs Knew Madoff Was a Fraud Years Ago But Kept Silent

There is no way that the top execs on Wall Street did not know Bernie Madoff was running a scam. No way.

Why? Because once they heard he was pulling down those kinds of returns in all types of markets they would have had their own whiz kids climbing up his company's investment portfolio looking to see how he did it. They would want to do it too. It took Markopolos how many minutes to figure out it wasn't legitimate?

But now you know why so few Wall Street firms lost any money with Madoff despite his 'superior returns.'

Why did they keep quiet? Professional courtesy amongst scumbags is not likely, because there isn't any. More likely Bernie knew about some of their frauds, and that made him untouchable.

If they dig deeply enough they might find the real truth behind the Madoff scam, and it won't be pretty. This is no lone trader operation.

We may never hear the details behind this scam. It might shake our confidence in the system.


NY Post
Madoff Wall of Silence
By James Doran
February 16, 2009

Senior executives at some of Wall Street's biggest firms were convinced Bernard Madoff was a fraud as early as 2005 - yet none alerted authorities, documents filed with the Securities and Exchange Commission reveal.

Leon Gross, the former managing director in charge of worldwide equity derivatives research for Citigroup, told friends and colleagues on Wall Street in 2005 that he thought Madoff was being less than honest about the returns he could make for investors but did nothing to prevent the fraud.

Likewise, Joanne Hill, Goldman Sachs' global head of equity derivatives research, believed there was something wrong with Madoff's investment scheme because the returns he boasted in marketing materials seemed too good to be true.

Like Gross, Hill did not alert her superiors or regulatory authorities. She did, however, tell friends and colleagues about her suspicions.

Bud Haslett, of Write Capital Management, an investment firm, also suspected something fishy. But he told no one of his concerns.

The actions - or inaction - of the bankers is unveiled in a 700-plus-page dossier of e-mails, letters and analysis filed with the SEC by Harry Markopolos, the fraud investigator who tried to blow the whistle on Madoff for eight years.

The silence by the executives is disturbing to some, who claim a second alarm bell could have forced the SEC's hand and brought Madoff's alleged scam to an end sooner.

Markopolos told the SEC, according to the documents in the file, that he had been in contact with Gross, Hill and Haslett and that they would give evidence to the SEC so long as they were never required to speak in an official capacity.

Citigroup confirmed that Gross had been an employee but had left the bank some months ago. The company declined to comment about his views on Madoff.

A source close to Citi said Gross should not be singled out, as his views about Madoff were commonplace on Wall Street, adding that Gross did not spend much time analyzing Madoff's investment strategies.

Goldman Sachs did not return calls seeking comment. Write Capital Management, meanwhile, has not filed records with the SEC since 2006.

Whistleblower: Gordon Brown is Culpable and Should Resign

The UK would do well to force Gordon Brown to resign, and for a new government to be created. Who would take his place? Surely no one among the Tories, as they planted the seeds for this debacle and remain unreformed and unrepentant.

In the US, we have done something emulating this already, using our process of regularly scheduled elections and the repudiation of the Republican party principles (or lack thereof).

However, it remains most unsatisfying and discouraging that Obama continues to put pressure on the Congress to 'just move on' and not investigate any of the abuses of the past eight years, and points of Constitutional excess that led us to this point, or engage in meaningful investigation and reform of the monied interests who are such heavy contributors to the Democratic party.

He looks less like the Lincolnesque figure his admirers assume him to be, and more like a small time dealmaker from the Chicago machine.

He can do better than this. And we the voting public deserve better. Obama needs to grow a principled backbone worthy of his words.

UK Independent
Blame Brown: Revenge of the whistleblower
By Margareta Pagano and Jane Merrick
February 15, 2009

A former HBOS executive says he has documents that prove the Prime Minister must take responsibility for the mess in the markets

The HBOS whistleblower whose revelations led to the resignation of one of the Government's top regulators is about to release a tranche of documents which he says point a direct and accusatory finger at Gordon Brown's responsibility for the banking crisis, and has called on the Prime Minister to resign. In a further blow to Labour, an Independent on Sunday poll showed voter support for the party evaporating, leaving it only a few points ahead of the Lib Dems.

Paul Moore, the former head of risk at HBOS, told the IoS that he has more than 30 potentially incendiary documents which he will send to MPs on the Treasury Select Committee. He says they disprove Mr Brown's claim about the reasons for HBOS's catastrophic losses – now estimated to be nearly £11bn – and show that it was the reckless lending culture, easy credit and failed regulation of the Brown years that led directly to the implosion of British banks.

After Mr Moore's explosive testimony at the MPs' banking hearing, the Prime Minister had denied the former executive's central charges and said that HBOS's difficulties were due to its flawed business model. Mr Moore says his documents refute this and prove the cause of the crisis can be laid at Gordon Brown's feet. He believes Mr Brown's failure to intervene over the reckless lending undertaken by all the banks over the past decade means he should go. "The failure goes right to the heart of the system – to the internal supervisory system and right to the top of government."

Mr Moore told the IoS yesterday: "Brown must go. He cannot remain in office. He has presided over the biggest boom in the history of the country as well as one of the biggest busts. But he promised no more boom and bust. He must be held accountable for his failure to oversee the stability of the country.

(Obama's blocking of congressional investigations of the abuses of prior administration is a kind of professional courtesy among politicians that is not warranted nor serving of the public interest, only of the concept of a class of ruling elite. And his appointment of Larry Summers and other appointments that fail the integrity test is a disgrace. - Jesse)

"Brown presided over a policy based on excessive consumer spending based on excessive consumer credit based on massively increasing property prices, which were caused by excessively easy credit which could only ultimately lead to disaster. But no, in Gordon's mind it was all caused by global events beyond his and anyone else's control...."

(Gordon Brown pales by comparison to the enormity of Alan Greenspan's serial malfeasance and advocacy for ruinous policy errors. - Jesse)

He says the papers – which he has kept from his time in his post as head of risk, from 2002 to 2005 – show that HBOS was involved in a huge sales drive to win market share which ultimately led to its collapse. Mr Moore claims that the "driven sales culture" was led by Sir James, and this, plus the "staggering failure" of the Government to manage the economy, had forced him to speak out. "Brown swaggers around holding himself out as the economic saviour of the world with a level of hubris that defies belief. But does he ever acknowledge that it was he, as Chancellor of the Exchequer, who presided functionally over the economic strategy that got us into this mess in the first place?"

As a trained barrister, Mr Moore stressed that his new evidence being sent to the committee will back up his claims. "I have compiled a meticulous record of my time at the bank. This will show that the version of events given by KPMG, which was brought in to carry out an audit of my claims, is inaccurate," he said. "Key witnesses were not included in the original audit and there are many factual errors. I will only be vindicated when all my allegations are proved by the evidence I have....."

America vs. the Oligarchs

Bill Moyers has an interview with former IMF Chief Economist and MIT professor Simon Johnson that is excerpted and linked below.

Simon Johnson's premise is that the big Wall Street banks represent an oligarchy that is exerting undue influence and control on our government and the economy. They are turning this crisis to their advantage, and circumventing the democratic process.

What we are seeing looks to Simon Johnson like a financial coup d'etat.

Now is the time to break up the big money center banks. Now is the time to reinstate Glass-Steagall. We must demand the reforms for which we elected the Obama Administration.

Watch this interview. Think about it. Let other people know. Write your congressmen.

And be prepared to act on a larger scale in a peaceful way to get the point across that we value our liberty and we will stand for justice. We are not optimistic that the government will do the right thing without more prodding and significant support from the public.

"I think I'm signaling something a little bit shocking to Americans, and to myself, actually. Which is the situation we find ourselves in at this moment, this week, is very strongly reminiscent of the situations we've seen many times in other places.

But they're places we don't like to think of ourselves as being similar to. They're emerging markets. It's Russia or Indonesia or a Thailand type situation, or Korea. That's not comfortable. America is different. America is special. America is rich. And, yet, we've somehow find ourselves in the grip of the same sort of crisis and the same sort of oligarchs...

But, exactly what you said, it's a small group with a lot of power. A lot of wealth. They don't necessarily - they're not necessarily always the names, the household names that spring to mind, in this kind of context. But they are the people who could pull the strings. Who have the influence. Who call the shots...

...the signs that I see this week, the body language, the words, the op-eds, the testimony, the way they're treated by certain Congressional committees, it makes me feel very worried.

I have this feeling in my stomach that I felt in other countries, much poorer countries, countries that were headed into really difficult economic situation. When there's a small group of people who got you into a disaster, and who were still powerful. Disaster even made them more powerful. And you know you need to come in and break that power. And you can't. You're stuck....

The powerful people are the insiders. They're the CEOs of these banks. They're the people who run these banks. They're the people who pay themselves the massive bonuses at the end of the last year. Now, those bonuses are not the essence of the problem, but they are a symptom of an arrogance, and a feeling of invincibility, that tells you a lot about the culture of those organizations, and the attitudes of the people who lead them...

But it really shows you the arrogance, and I think these people think that they've won. They think it's over. They think it's won. They think that we're going to pay out ten or 20 percent of GDP to basically make them whole. It's astonishing....

...these people are throughout the system of government. They are very much at the forefront of the Treasury. The Treasury is apparently calling the shots on their economic policies. This is a decisive moment. Either you break the power or we're stuck for a long time with this arrangement."

Bill Moyer's Journal - Interview with Simon Johnson

Simon Johnson's Web Site Baseline Scenario