Over the last few days I’ve been chatting with various folks who did business in one form or another with Bernie Madoff’s firm. And it seems clear that there were numerous aspects of his operation — not just the weirdly consistent returns, but the mechanics of the operation — that gave ample reason to question what Madoff was up to. These inside views — or views on the margin — are very helpful in allowing us to piece all this together (of course, your confidentiality will be guaranteed). But for those who are keeping track, the oddest thing about the story so far is how the SEC was alerted repeatedly over the last decade of potential problems with the investment arm of Madoff’s operation. They actually did open a few looks into his firm. But they never seemed to look in the right places. They’d look at the non-problematic part of the operation and not the part on the 17th floor where all the weird stuff was going on. Or they’d push for changes that would give them greater access to his books and then never follow up on that greater access.
Astronomers can’t see black holes directly. They identify them by inferring their existence by their gravitational effect on nearby celestial bodies. And I’m similarly curious what’s the gravitational force that appears to have kept the SEC from giving Madoff a good hard look.
