This article has been corrected.
Charles Ponzi started it all back in the early 1900s. The idea was to get people to invest real funds on a speculative deal. The more people who bought into this idea, the richer the people at the top would get. But eventually the house of cards would necessarily fall. This has sort of become the template for Wall Street.
I became aware of Ponzi schemes in the late eighties when I was an undergraduate student. My roommate became involved in an ‘airplane’ or ‘pyramid’ ruse, which is similar to a Ponzi scheme. It relies upon more suckers paying into it than there are beneficiaries to profit from it. I came home from studying in the library one night to find a rather angry redneck and his friends from Red Bay, Alabama standing in my living room with a gun wanting to know where his money was. My roommate was able to convince him that he had been played as well, albeit higher up on the pyramid.
Bernie Madoff is the latest high profile predator to use the Ponzi ploy. He took a lot of people down with him because many of them took it upon good faith that the financial institution in America was solid and smart investments would result in a good ROI. But most people never expect someone will game the system.
Here are some stats:
- Charles Ponzi made off (no pun intended) with $15 million in the early part of the 20th century.
- Bernie Madoff made off with $65 billion in the early 21st century
- The TARP bailout was $700 Billion
- At 310 million people in the United States, that comes to about $2,258 per man., woman, and child.
- The AIG bailout cost $183 billion
- $1.2 billion* in bonuses were paid to AIG executives after the bailout
- Number of AIG employees receiving post-bailout bonuses: 73
- Goldman Sachs tax rate for 2007 = 34%
- Goldman Sachs tax rate for 2008 = 1%
- Average ratio CEO to employee salary:
- 1921 = 9:1
- 1970 = 39:1
- 1990 = 110:1
- 2000 = 171:1
- 2010 = 319:1
- Average Executive Salary:
- 2003 = 8.6 Million
- 2004 = 10.7 million
- 2005 = 11.8 million
- Average value of a 401K
- 2005 = $102,014
- 2007 = $69,200
- 2009 = $64,200
We’re being fleeced and we’re being told that we like it. But the numbers don’t lie.
*Note: An earlier version of this article incorrectly identified the AIG bonuses as being $1.2 trillion. It was $1.2 billion. We regret the error.
- Bernie Madoff’s Nemesis Back in Spotlight (blogs.wsj.com)
- Bernie Madoff’s Relationship With JPMorgan Should Shock No One (huffingtonpost.com)
- Here Is Your Chance to Buy One of Bernie Madoff’s Tiny Bulls (observer.com)
- Bernie Madoff trustee: The NY Mets knowingly took ill-gotten cash (shortformblog.com)