Afraid of fraud

The Securities and Exchange Commission now believes the “Ponzi” scheme that big-time financial advisor Bernard Madoff stands accused of spanned some three decades.

The SEC estimates the losses from this scheme could top $50 billion for some of the world’s leading financial firms, individual investors, and charitable foundations. If proven true, the crime Madoff stands accused of could turn out to be one of the biggest frauds ever perpetrated on Wall Street.

Given that we are currently deep in a recession and that many of the nation’s largest financial institutions are struggling just to stay afloat, it may come as no surprise that most Americans are not particularly optimistic about our economy. In fact, a new CNN/Opinion Research Corporation poll reflects just how disillusioned many Americans have become.

1- 74% of Americans polled said they believe Madoff’s behavior is par for the course on Wall Street. That means that 3 out of every 4 Americans think the deception and dishonesty surrounding the Madoff’s case are endemic in the financial system. Dear God let’s hope that’s not the case!

2- 59% of Americans polled think there is too little regulation of financial institutions. That’s a 9% increase from when this question was asked only three months back. No doubt that jump is fueled by the dismal economic headlines of late and the shock and scope of Madoff’s alleged scheme.

3- 29% of Americans polled would keep their money under the mattress, if they were handed a thousand dollars. Just under a third of those polled told CNN they would rather keep their money at home, instead of depositing it in a bank or investing it in stocks or bonds. With numbers like these, you got to wonder how much the Madoff case will cost financial advisors their business.

That last finding may be the most troubling of all, given that our financial system depends on investment and savings to finance loans for everything from building houses to buying cars. Remember It’s a Wonderful Life– the scene where George Bailey tries to stop a run on the bank by people scared witless about their personal finances? Those people aren’t that different from many of the Americans CNN polled. Here’s what George says trying to calm the townspeople:

“…You're thinking of this place all wrong: as if I had the money back in a safe. The money's not here. Your money's in Joe's house… and in the Kennedy house, and Mrs. Macklin's house, and a hundred others. Why, you're lending them the money to build, and then, they're going to pay it back to you as best they can. Now what are you going to do? Foreclose on them?”

In the movie, the people all see the point and agree to keep their money in the bank. If only today we had a George Bailey figure to counteract the scheming that Madoff and others stand accused of.