MADOFF'S INVESTORS: VICTIMS? HOMEOWNERS CROOKS!!

Yeah, I don't call the homeowners crooks as much as foolish. Neither seemed to be informed about what they were doing - the ARM and the balloon payment they didn't fully understand, nor how exactly Madoff was investing their money.

People came to Madoff because of referrals, they trusted him because their friends trusted him. Bad business, but sort of understandable. Many people trust their investment agents without fully understanding the market. Those that bought a house didn't ask the right questions, and didn't understand their mortgage. That's something that's a little easier to understand, and something I think the mortgage brokers didn't explain, knowing full well that they were giving these people a sucker's bet. Those that DID understand how the ARM works took a risk that the rates would actually go down instead of up and that balloon payment wouldn't ever need to be paid. (ARM's are SO for suckers. You wait until the rates are low to buy, knuckeheads.)

Both were (in some cases) deliberately deceived. Neither are crooks, both are victims.

Never the less as a person who's planning on buying property as well as investing money, I'm going to make sure I understand exactly what I'm getting myself into.

The responsibility in the end is on the person who signs on the dotted line. If I don't understand how an investment is going to make money, I'm not going to risk my money. What happened in my book is that a lot of people just took the words of others without doing their own due diligence. When my life savings are at stake, you better believe that I know exactly what is going on with my money, just as I'm going to know the terms of my mortgage, or terms of my lease. It only takes a few hours to carefully pour over the different facets of a contract(and it's not like you're held at gunpoint to sign), but I know of far too many people who don't take that kind of stuff seriously. Hopefully after this nonsense, people will enact a bit more caution and actually read and understand the financial agreements they've signed onto.

Even now people who are in legitimate mutual funds have lost like half of the value of their 401ks, however that is a risk they took when they put their money on the open market instead of in something safer like bonds. They took a risk, and are feeling the burn. It's the drawback of going for higher returns. As far as I'm concerned I'm not all that worried, since I don't really have any money in the market yet, and at my age I can afford the big swings the market will take. However, for anyone who's over 40, and especially over 50, I don't understand why they'd keep their money in a place where it's at risk.

Don Allen said:

I find it sad that many have called these people who have lost their homes "Golddiggers" or in some cases crooks, for wanting a better life, but the Madoff investors or victims, though they pretty much wanted the same thing.

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Don, the reason why is because a lot of the folks that took mortgages - I don't the percentage but here in Florida, it's substantial - were speculators flipping properties. I had lunch with one a couple of years ago that was already in trouble, snickering about the fact that he had the bank between a rock and a hard place regarding his own house and the properties he could no longer afford. He said something like "They're in way to deep with me. They can't take everything. I'm gonna sink everything I got into my ocean place and pay that off, so they can't take that. Then it's worth a credit dive. It's a great place. Not bad for a few years work."

Well I doubt the banks could take everything, and for the guy referenced there were thousands of others, living high off the hog, full of their own importance and well rewarded for not having the slightest concern about the money they borrowed. This guy was around a million - maybe more - in debt.

Now I do have sympathy for homeowners who didn't understand, and thought they could eventually refinance or lost their jobs, but these are family people and for them, I'm fine with the taxpayer help. But they're not all that common methinks, or so it seems here in Florida. And sifting through the borrowers trying to determine motive is going to be near impossible.

The Madoff business is different only in the fact that the SEC IS supposed to sniff out rats like him, so his investors have a legit complaint. And for those charities that he bilked, I'm saddened. But his investors also included a fair share of schemers that didn't even want to mention his exalted name, as if they were members of an exclusive club that the commoners shouldn't be privy to, and a referral to Bernie Madoff was akin to a big political favor.

Anyway, it's pretty hard to reconcile it all and find any justice anywhere.

Don Allen said:

I don't see a difference between Madoff promising a bunch of rich people that life will be grand as long as they invest with him, and shoddy brokers who by the way, AVERAGED over 5000.00 in commissions per loan origination, and promised people the could refinance when their loans reset.

Someone said earlier that there is a fundamental trust issue that we have to get back in our society when dealing with banks and financial institutions, I agree...

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The only difference I see is that the brokers - in fairness now - were refinancing all the time so it's quite possible that they fully believed refinance was an option down the road. They weren't dealing with tough qualifications at the time. Madoff was an outright thief - agreed - but catered to the greedy. High flyers have generally been perceived as smarter and hard working, which is why they have money. That's been at the root of a capitalistic society's tolerance for them. Well, as we're learning, they're not necessarily either.

The issue of trust or moral hazard is to me the biggest impediment to a recovering economy. I - for example - will not be investing in the stock market again. To me, the possibility of investing in a company run by somebody unscrupulous, who will gladly take a bonus over paying a dividend, or worse, take a bonus while running the company into the ground, is just too great. I have always thought that investing the bulk of a 401K in the market was ill-advised, as the risk associated with the market is well known. Now, however, it's akin to a slot machine.