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A Good Example Of How F***ed We Are

Investors (and pension funds) who cashed out of Bernie Madoff's pyramid scheme aren't as lucky as they think, Newsweek reports:

The lucky folks who cashed in and got out before Bernard Madoff's $50 billion investment empire came crashing down might not be as lucky as they think. Sources close to the Madoff case say that a recent court ruling in a similar collapse—a Ponzi scheme called the Bayou Group—is likely to provide the legal road map for recovering as much money as possible from the Madoff mess. And if so, those who profited stand to lose not only their gains but also, in some cases, the original principal they invested in the scheme.


...

In October 2008 a judge in the Bayou case, Adlai Hardin Jr., ruled that investors who cashed out their interests within two years of the scheme's exposure had to hand back their principal as well as their profits—even though they were innocent victims of the swindle—if there was evidence that they got out because they suspected, or had been warned, there was something amiss. (The court also ordered profits made within the last six years to be surrendered.) Legal experts say the Madoff litigation could follow the Bayou ruling's lead.


Ya got that?

If your pension fund invested assets in Madoff's scheme, as many did, it may be forced to hand back any money cashed out to the court... who will parcel it out to the other people scammed by the scheme. Which means more foundations, pension funds and retirement accounts could see a big piece of their value decimated by 80% or more.

That, on top of "money market funds" that have evaporated into thin air due to mortgage lending problems; the impending meltdown of Alt-A, ARM and prime mortgage resets; slashed consumer spending; and ongoing financial problems at AIG, Citigroup and others will make 2009 perhaps the most interesting year since 1929.

The irony, of course, is that no matter what happens, you will pay for it. You'll pay for it in retirement account collapse and evaporation, higher gas taxes (as announced recently), a decrease in the value of money as the Feds run the printing presses, higher income taxes to pay for huge bailouts, higher interest rates charged to everyone to mitigate risk, and big cuts in the Social Security Ponzi scheme payouts (which operates a lot like Madoff's scheme except that the government made it legal).

Pissed off yet?

Most people aren't, because they don't understand what's happened and what's coming. By the third quarter, they'll know what's happened, and they're going to be very, very unhappy.

Comments

Delaware Watch said…
We are in deep doodoo all right. And you're correct: we haven't seen yet how bad it will be. The 3rd quarter sounds about right.

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