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An article relating to this blog post on Finextra:

Former Nasdaq chairman Bernard Madoff charged with securities fraud

Bernard L. Madoff, the founder of Bernard L. Madoff Investment Securities LLC, a registered investment adviser, and former Chairman of the Nasdaq Stock Market, was arrested today and charged with one...


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If it looks too good to be true, it probably is

Henry Blodget, the former star techstock analyst who knows a thing or two about investment fraud, posts an interesting insight to the Madoff affair on his Clusterstock blog.

"Specifically, we're hearing that the smart money KNEW Bernie had to be cheating, because the returns he was generating were impossibly good.  Many Wall Streeters suspected the wrong rigged game, though: They thought it was insider trading, not a Ponzi scheme. And here's the best part: That's why they invested with him."

With insider trading endemic, if not institutionalised, in the broking industry, the old adage, about thing looking too good to be true doesn't always apply. The regulators, bless 'em, have known this for years. A clean up is long overdue - and, please, no more industry bleating about regulatory overkill.

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Comments: (1)

A Finextra member
A Finextra member 19 December, 2008, 15:02Be the first to give this comment the thumbs up 0 likes

The key is what regulation will be implemented, and at what level.  I really think we need to see a return of the old lending controls (compulsory mortgage salary multipliers, minimum deposits for all types of loans), as this would stop people borrowing too much and would make sure that they had to save before buying things.

We also need a central body to sanction new products and how they are used, and to only do so when they have been thoroughly analysed.  I can't believe that CDOs and sub-prime loans would have happened if a central body had dissected them and their downsides first.