Media accounts immediately labeled the disappearance of $50 billion, masterminded by Bernard Madoff, as "the largest fraud in history." It is a greater wealth loss than having a household name company -- such as Walt Disney, Anheuser-Busch or Boeing -- vanish without a trace.
The loss is mind-boggling. But the figure does nothing to convey the damage this man has done.
One way to measure the extent of the damage is to compare the $50 billion to measures of loss in the FBI's Uniform Crime Reports. In 2007 there were 9.8 million crimes against property in the United States. This included about 2.2 million burglaries, 6.6 million larceny-thefts and 1.1 million car thefts.
I think you'll agree that 9.8 million crimes represent a veritable army of miscreants. In spite of that, our total losses to property crimes in 2007 were a mere $17.6 billion. To be sure, it didn't feel "mere" if you suffered a burglary. The average loss was $1,991. Nor was it "mere" if you were one of the 6.6 million people who suffered a larceny-theft. In those, the average loss was $886.
But when you add all the losses in 9.8 million common property crimes, it's just a fraction of the estimated $50 billion loss attributed to Bernard Madoff.
Perhaps 2007 was an "off" year for theft?
Well, there was a slight decline in the number of crimes, but not in the amount lost. In 2006 the report shows nearly 10 million crimes against property and losses of another $17.6 billion. Similarly, the 2005 report shows nearly 10.2 million crimes against property and a total loss of $16.5 billion.
Add the three years and you get $51.7 billion. Using that value, Bernard Madoff has caused losses equal to all the losses caused by all the conventional thieves in America for nearly three full years.
We get a different perspective by reading the annual report of the Securities and Exchange Commission. That's the federal agency charged with protecting investors. In the listing of "enforcement milestones," the 2008 report proudly notes that it had "obtained orders in SEC judicial and administrative proceedings requiring securities violators to disgorge illegal profits of approximately $774 million and to pay penalties of approximately $256 million."
In other words, the total recovery of the entire agency, in a full year, was about 2 percent of what Bernard Madoff -- the guy they didn't notice -- made disappear.
This leaves us with two really big questions.
First: What can be done to keep America from becoming a Coffee Can Economy?
I'm serious. Right now all we know is that nothing is trustworthy. Not our political leaders. Not our business leaders. Not the government or private institutions that are supposed to provide oversight and evaluation.
Can anyone, from any of these institutions, give us any reason not to keep what savings we have buried in a coffee can rather than entrusted to the institutions that have destroyed the most fundamental element of commerce -- trust?
The answer is a flat "No."
Second: In the matter of Bernard Madoff, how can the punishment possibly be fit to the crime?
To me, this begs for a punishment that is both cruel and unusual.
Does life without parole in a gentleman's federal prison cut it? I don't think so. Does life without parole in a facility devoted to violent petty criminals sound better? Yes, but the improvement is slight.
In medieval times a man who committed murder or treason could be declared an outlaw. This literally meant he was outside the law, no longer protected by the laws of his society. His property was forfeit. No one was allowed to provide him with food, shelter or aid. And anyone who found him could kill him.
When you look at the damage done, this wouldn't be a cruel or unusual punishment. It fits the crime. It's what we need for white collar financial criminals.
If you think I'm in a rage about this, you're right.
But I bet you are too.
On The WebNew York Times story, largest fraud in history:
2007 Uniform Crime Reports--- Property:
2006 Uniform Crime Reports--- Property:
2005 Uniform Crime Reports--- Property:
A new high in prison population, 2.3 million:
Department of Justice figures on prison population:
SEC enforcement milestones for 2008:
SEC budget request for 2008:
Definition of "outlaw" in medieval times: