Madoff and his victims

Joe Nocera at the New York Times agrees with me that the credulity of Madoff's victims allowed the fraud to happen, and goes so far as to call them accomplices in the threat of their own assets.

I'm not sure that their failure to diversify among managers is really a fault; diversification is supposed to protect investors against fluctuations in a single sector, not against massive fraud on the part of money managers. I feel very bad for the individual investors who lost money to Madoff.

The real accomplices, though, were the institutional investors and the funds-of-funds who funneled money to him and did not figure out what was going on, or those who did, and pulled their money out.

I'm not support the Madoff investors' demands for a bailout though. No other investors who have been punished in this securities market are getting one. I'm sure there are some tragic autoworkers someplace who worked 30 years for GM and put all their savings in company stock, and they're wiped out too. Ownership of company stock was a cultural norm of investment banks, so those guys had their savings and their jobs wiped out at the same time.

Stuff is hard all around.