Two recent items have me wondering about overinvesting in victim claims: (1) Christine Hurt’s new article on the implications of the Madoff scandal, Evil has a new name, and (2) Janet Tavakoli’s claim (if the link doesn’t work, this is also squibbed in the margin) that financial institutions caused the mortgage mess, the “biggest fraud in history.” Both tell important—and perhaps accurate—stories about massive frauds that certainly produced victims. But both overlook an obvious point: Not all victims are created equal. As Pogo said, “we’ve seen the enemy, and he is us.”
When Madoff first hit, I heard two interesting things from (reasonably) reliable sources which complicate the victim calculus. First, one person who claimed to know a number of Madoff investors, said that many believed that Madoff was able to guarantee outsized returns because of his access to inside information. This, of course, is a kind of securities fraud. So, my friend said, “everyone knew Madoff was committing fraud—they just thought it was a different fraud.” You have to wonder how innocent investors were if, as Hurt reports, they were sworn to secrecy when they gave him their money.
I realize I will likely be flamed by holocaust survivors for insensitivity to their losses. To the extent they were innocent, of course, I have nothing but sympathy for them. The point, however, is that, as Madoff’s bankruptcy trustee is learning, there is little moral clarity in some of these claims.