Bernard Madoff’s Sentencing Ends Period of Secrecy

Welcome to the era of sunlight

Most observers will argue that President Obama is ushering in this new “transparency.” But Obama  is merely a representation of the broader trend. At a time when most Americans have the Internet at their fingertips—on cellphones, handheld devices, and computers—information abounds. Consumers no longer take a local shoe vendor’s reasoning for high prices in stride. They research sales on Zappos.com or Shoebuy.com. Homebuyers aren’t forced to take a realtor’s word on the value of a given house. They can go to Zillow.com and get an impartial estimate. Obama is in the White House precisely because Internet Age Americans demand nothing less in politics. In Obama they see a similar ability to open up—about race, about the economy, and about American’s future—with a forthrightness and candor previously missing in public figures.

Now, after Madoff and the financial crisis of ’08 and ‘09, investors will hopefully demand similar transparency in matters of money. Back when the Madoff scheme was first uncovered, Black Enterprise gave investors tips on avoiding financial scams. The centerpiece of the advice is that you monitor your investments and ask probing questions. Never pour money into an investment your adviser can’t intelligibly explain. BE also recommends the following:

– Promises of high investment returns almost always mean high risk. Anything that sounds too good to be true probably is.

– Don’t mistake a smart appearance, smooth sales pitch, or flawless manners for integrity. “Con” is short of confidence. Swindlers gain trust by appearing to be paragons of professionalism.

– Before hiring a financial adviser ask to see licenses, and then double-check that information at www.finra.org/brokercheck or www.adviserinfo.sec.gov.

– Get a second opinion. Just like with medical advice, it helps to get another professional’s advise on a particular investment or strategy.

– Don’t let shame keep you from reporting a scam. If you feel you’ve been defrauded, file a complaint with the Financial Industry Regulatory Authority of the Securities and Exchange Commission, or your state’s securities regulator—which you can find at www.nasaa.org/about_nasaa/2062.cfm.

If the administration has its way, the federal government is about to begin imparting the same lessons that BE has been providing for decades. In June, the Obama administration proposed a major overhaul of the financial regulatory system, the biggest since the Great Depression. If “sunlight is the best disinfectant,” as Supreme Court Justice Louis Brandies once famously said, the administration wants to tear down the dark curtain that sits between consumers and those who manage their money. As part of the reform package, the White House wants to set up a Consumer Financial Protection Agency (CFPA) that will help to educate consumers about good personal finance practices in the same way the FDA offers public service education about maintaining a proper diet. The agency, as envisioned by the White House, would also force banking and financial firms to explain their products, like mortgages and credit card agreements, in easy-to-understand detail. In part, consumers have the Madoff scandal to thank for these sweeping proposals. Welcome to the Era of Sunlight.

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  • Flaco

    What’s interesting here is that Madoff ripped off his own people and a large number of Jewish organizations working to further cultural and political causes. This would be the equivalent of a black financier conning the United Negro College Fund and the NACCP out of millions. That’s the real reason for the maximum sentence.