These kinds of events feed off each other. From personal experience, I know that when you see a cockroach, you have cockroaches. There will be many more Bernie Madoffs. It was not his incredible arrogance or greed that allowed this to go on for so long. Rather it was the social atmosphere of neglect that led nobody to question it. Until now. Now people are starting to ask questions. Is my mutual fund invested in what they say it is? Are they invested in the real asset, or in a derivative of that asset? How else did they manage such great returns?
Like clockwork, we have learned of two additional scandals as social mood darkens, suspicions circle anything that smells bad and the lust for scapegoats to the financial crisis intensifies. Please consider:
Sir Allen Stanford served with legal papers
FBI agents tracked down billionaire R. Allen Stanford at the Virginia home of an acquaintance Thursday and served him with legal papers in a civil case accusing him of orchestrating an $8-billion investment scam.
The SEC announced its action against Stanford on Tuesday, alleging that the flamboyant billionaire and his two colleagues perpetrated "a fraud of shocking magnitude that has spread its tentacles throughout the world."
In Latin America and the Caribbean, where much of Stanford's operations are based, depositors have since besieged Stanford bank branches, demanding return of their money only to be turned away.
The Venezuelan government on Thursday seized a failed bank controlled by Stanford after a run on deposits.
Stanford's offshore financial services operations were subject to the regulatory authority of Antigua & Barbuda, the tiny two-island Caribbean nation that the 58-year-old Texan adopted as his second home and lavished with millions in sports promotions.
This latest scumbag was one of the many billionaires operating hedge funds out of the Caribbean tax havens. He attracted investors from all over the world, with significant contributions from Mexicans, Venezuelans, and Antiguans. Note that he was knighted. Antiguans didn't care if he was a fraudster years ago. All they knew was that he was rich. And thus, he was deserving of a title of nobility. Also note that he was a significant donor to the Obama presidential campaign.
Speaking of tax havens, another one has come under scrutiny. Switzerland.
UBS Agrees On Tax Fraud Settlement in US
Switzerland's largest bank, UBS, has agreed to pay $780 million (SFr915.8 million) and name some United States clients to resolve criminal fraud charges against it.
The deal is to settle the claim that UBS helped wealthy American clients evade taxes. It could expose some UBS customers to US Internal Revenue Service scrutiny and law enforcement action
Is this news to anyone? No. It has been widely understood for decades that the wealthy have used Switzerland as an offshore banking haven. Why the scrutiny now? We need look no further than the darkening social mood and general disdain toward the wealthy and the banking industry specifically.
People are angry. They are distrustful. That anger and distrust leads them to scrutinize aspects of society that they had previously ignored. This leads them to uncover frauds like the Madoff and Stanford schemes. This outrages people even further. It is a vicious cycle.
Anyone who became wealthy in the previous period of social nihilism will be persecuted. First it will be the big fish. Then the little guy who thought he could get away with some accounting shenanigans. Then anyone wealthy will be perceived as a criminal - guilty or not.
It will get to the point that people will go out of their way to appear worse off than they really are. No more yachts and garages full of toys to impress the neighbours. The neighbour lost his job. The culture of frugality will engulf all.
And so deflates our culture of consumerism. Good riddance.
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