Bernard Madoff was nothing less than the chairman of the NASDAQ stock exchange. Widely respected throughout his decades on Wall Street, Madoff was able to attract investors from far and wide; wealthy investors who were willing to put up substantial sums of their wealth or the wealth in their trusts and foundations in his hands. He was presumed to be a phenomenal investor, one with a steady but golden touch.

It appears that Madoff was lying to them all along. In a classic ponzi scheme, he was paying his substantial dividends by using funds from new investors not from the prodigious profits he claimed his investing firm was earning.

Mr. Madoff is Jewish. The man has had a long and illustrious career as a philanthropist and among his many endeavors were Jewish causes, such as Yeshiva University where he sat on the Board. Yeshiva University’s endowment, conveniently enough, also parked a substantial amount of money with Madoff, maybe as much as $100 million. Other charities, Jewish and not Jewish, had given him their entire portfolios to manage. Hundreds of millions of dollars; billions of dollars. So did many families and individuals of substantial means like Mortimer Zuckerman and Steven Spielberg. Madoff moved around in prominent circles, particularly Palm Beach, FL, where there’s a nice concentration of well-to-do Jewish families.

Some of those families may be wiped out now. Some of their foundations may be wiped out. Those that aren’t wiped out have suffered heavy losses, some probably too great for their families to recover their lost wealth.

I have seen this happen before. A charismatic man meets with some success. Soon he has the trust of the community. He moves in the right circles, maybe a rabbi or two fete him after he contributes handsomely to their congregation, he sits on the right boards and gets invited to the right parties. People start giving him some funds to manage. Returns are good, very good, so they entrust him with more as they watch their portfolio blossom on paper. They tell their closest friends, in confidence, about this wonder-investor. They tell their family. Soon others come to meet the man and give him their money.

But nobody can beat the market forever. The investor finds it hard to go to his trusting investors to acknowledge he lost their money. Besides, the market will turn in his favor, it always does! So he moves some of the new investment cash into the dividend side of things and hopes that next year will be better. And once behind, it’s hard to catch up. Then the market has a sustained drop and the game is up.

It happened to Madoff when he turned 70, so it’s safe to say that he’s had a good, prosperous life full of the respect and admiration of others. All the while, he was apparently destroying them, their wealth and their dreams.

The preponderance of Jewish names among Madoff’s many victims is scary. The Jewish community has just lost, thanks to Mr. Madoff, hundreds of millions, perhaps billions of dollars. This will affect our community harshly, with less money to go around especially in light of the state of the economy.

Mr. Madoff’s alleged crime is so great that whether he’s punished or not is immaterial at this point. He has caused severe harm to his family, to his business, to his investors, to the broader financial markets, and to the Jewish community as well as the philanthropic community in general.

I guess that just as we take pride in Jewish Nobel prize winners, we have to include thieves like Madoff in our recognition that Jewish life is multifaceted. Along with our successes, we have failures, people who disappoint and also those who commit crimes. Those who got fleeced by Madoff also have to look at themselves and wonder whether greed drove them to ruin. A desire to outperform the market and grow substantial assets substantially more has ended in tragedy for these investors and their families.

This is maybe the first recession in decades where it’s the upper middle and upper classes (in economic terms) who are suffering the severe brunt of the state of the economy. Whether it’s enterprises like Madoff’s or having your money saved in a pension fund that invests in losing stocks or other financial instruments, assets are being eliminated across the United States. These funds are vanishing into thin air as company valuations tumble, the real estate markets continue their freefall and there is nowhere to hide in your portfolio. The Jewish community, well established and with many members among the upper middle class and the wealthy, has already been hard hit by the economy and this will be yet another blow.

Read about the crime and its effects in the NY Times and the Jerusalem Post which has so far accounted for $600 million in losses by Jewish organizations and perhaps as much as $1.5 billion when all is said and done.

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themiddle

18 Comments

  • But he’ll be able to get kosher meals in Prison so if you combine that with all the mitzvah points he earned from his tzedakah, he’ll still have a pretty cushy spot in the World to Come, and isn’t what’s really important is what the Great Accountant of Mitzvah Points in the Sky says?

  • Eggs all in one basket much?
    I have little sympathy for the wealthy in our community that have lost money. Those of us that are smart enough to make large sums should be smart enough to invest those sums properly.

  • I guess that just as we take pride in Jewish Nobel prize winners, we have to include thieves like Madoff in our recognition that Jewish life is multifaceted.

    I would say that Jewish talents are multifaceted.

  • Don’t count on it, Chutzpah. If he’s guilty, what he did was a tremendous chillul Hashem. Don’t assume G-d will be OK with it.

    My guess is not so much.

  • Adam, do you not know how to read? TM is talking about losses incurred by Jewish organizations – as he clearly wrote and as reported by the sources he linked to. TM is also not a hippie nor does he do any drugs. But other than that, your comment is as reliable and astute as everything else you write.

    ๐Ÿ˜‰

  • Ephraim, Chutzpah was being sarcastic, probably mocking the not-so-unusual-as-should-be Rabbis who condone breaking the business laws as long as you keep an outside observance and support their community. i.e.: the Beit Chabad I can see from my window was built thanks to many years of donations by a respectable donor who kept strictly kosher and who’s dother marriage had a division between the partying men and the sitting and peeping women… and then the guy had to flee my country because the local IRS realized he wasn’t evading millions in taxes!!

    Again, this case is different ’cause many J-foundations (like YU where he was in the Board) trusted him with millions and now are crying desperately, so I assume that if the guy doesn’t get his ass sent into jail he’ll have to travel to Uganda to find a minyan willing to accept him!!

  • Madoff deserves to have a harsh light trained on him, but to me the most remarkable aspect of the financial meltdown involves the legions of really, really smart Jews and gentiles we’ve sent to business school who didn’t see this coming. These masters and mistresses of the universe, preening for years on CNBC, with their newly-glamorous MBAs…. They were where, exactly, as this foreclosure crisis writ large slowly grew?

  • gweitz, Ephraim knows exactly what God approves of and what he doesn’t and don’t even attempt to question that.

    Did you hear the one about my Kollelnick landlord who put my life in danger by violated zoning laws to receive rental income from an attic he converted into a apt. with a stove 3 inches from the sloping ceiling? How about the one about the frum girl who ran over an old lady and kept driving? Or the one about the Nursey School Administrator with 9 kids who spent government money meant for early childhood public education on Victoria’s Secrets lingerie? Welcome to my world.

  • Do you believe I think that G-d approves of such behavior, Chutzpah?

    Chillul Hashem straight down the line.

  • Is this site for real? I’ll proceed on the assumption that you all are serious. You all talk (as the Christians I once attended church with) like you know the mind, will and intent of God. OMG! It’s nice to verify for myself that spiritual cluelessness transcends religous boundaries. Don’t take this as an insult, but some of you wouldn’t know a clue if it swam up and bit you on the ass.

  • Here’s to hoping that Michael Milken was heavily invested with Bernie Madoff. Clearly it won’t make up for all the philanthropic cash that’s been lost, but it will let me taste a tiny bit of sweet, sweet irony. F$#k ’em both.

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