Since I first heard of this scandal it's been obvious that quite a few people lived in the same fantasy land as the "real estate in American never declines" people. It seems extremely unlikely that any serious investment business (whether a large international bank or posh investment firm) could have run the numbers and believed them. Ten years ago at least one competing business analyzed the figures and found them to be false so it would be shocking to hear that the big players failed to see the same. This is an industry that lives and breathes due to math brainpower.
As much as the Wall Street analysts are unimaginative sheeple they still have teams dissect numbers and tend to know what is real and what is fake. What they say in public versus private appears to still be a problem despite numerous exposed problems a few years ago During the Bush/Clinton market collapse of 2001 Wall Street was exposed as stories came out about the public cheerleading for particular stocks and the private concern about those same stocks. Any investor that was encouraged to invest in the Madoff funds are surely already speaking with their attorney about gross negligence and they would be right to do so. There's so much more that will be exposed in this $50 billion scandal, including who else was involved in producing the numbers to those eager clients.
I can sort of understand how Raven could have been so deceived, because he was not involved in the investment business. But I don't understand how the brains at some of the world's biggest banks were taken in. Just what were the asset managers at Royal Bank of Scotland, Santander, HSBC and Nicola Horlick's Bramdean thinking? Or hedge fund star Arpad Busson or Ezra Merkin, chairman of General Motors' financing arm, for goodness sake? Did they ask to see the risk models? Did they question how Madoff and his investment team made 9 per cent a year?
One can only assume they didn't. It's a staggering admission of negligence. And, as with so many of the other terrible scams now emerging from the past decade, there were warnings. In 2001, an American journalist, Michael Ocrant, wrote a piece questioning Madoff's claims to greatness, but the bankers and investors chose to ignore the critics. Sadly, there are only three explanations – incompetence or greed, or both. The usual suspects these days.
