March 15, 2012 in Personal Finance
George Washington Plunkett of New York City’s notorious Tammany Hall gang coined the phrase “honest graft” to affirm his support for any government action that personally enriched him. More to the point, he acknowledged that “I seen my opportunities and took ‘em.”
This article focuses on the dishonor roll of scalawags, schemers and miscreants who bilk folks out of their money and cost taxpayers billions of dollars. This is a cautionary tale for those who believe nothing bad like this can happen to them.
Let’s begin with Bernard Madoff’s Ponzi scheme, where he stole as much as $50 billion from his investors over a 20-year period. Madoff was a well-respected and wealthy investment manager. Millionaires and large charities clamored to invest in his fund, which promised and delivered – sort of – amazing returns. His written reports showed his investors that they were prospering under his management. What he didn’t tell them was that he had either wasted their investment or used their money to pay investors who wanted to get out of his fund. Few bothered to verify his statements. The Securities and Exchange Commission opened and closed a file on him with no action taken. Ronald Reagan’s comment about the Russians, “trust but verify,” should be the motto for all investors.
“Too big to fail” was applied to the banks’ mortgage bailout. Clearly this aid was denied to the millions of Americans hit by mortgage foreclosures. Sadly, too many were enticed with zero down mortgages which they had no realistic means of paying. The mortgage brokers made money, the mortgage companies made money, the securities firms made money bundling mortgages into extremely risky investments, and the lawyers foreclosing on the mortgages made money. Everyone on the other side of each transaction and the federal government lost billions. The moral of this sad tale: If a deal looks too good to be true, walk.
Then there are the large pharmaceutical companies that have gouged Medicare and Medicaid out of billions, and admitted it. They paid several billion-dollar fines and promised in writing to the Feds that this wouldn’t happen again. They lied. Most companies likely passed on the cost of the fines to the consumers. Jailing the executives who commit the fraud on taxpayers or canceling drug patent rights and allowing the drugs to be sold generically should remedy this travesty. No chance that will happen.
A Federal Reserve official recently praised the Fed for keeping interest rates at nearly zero. She noted that mortgage rates were at an all-time low. She failed to acknowledge how difficult banks are making it to get a mortgage. If you reviewed the balance on your credit card and its obscenely high interest rate, you realize how little you benefit from the Fed’s interest policy. What she also failed to note was the effect the extremely low rate of return has on CDs. Retired folks depend on interest to supplement Social Security, so they are hurting.
“Person of Interest,” a new television show, involves a government computer system that records our every movement. Perhaps this is not so farfetched. Google, Facebook and other social network sites are busy gathering data about us every time we visit them. If you believe their commitment to keeping all this information private, then you are very gullible. How many times have companies reluctantly admitted that they have inadvertently disclosed your private information? Ask one of your computer-savvy kids about helping you put up a “firewall” to protect your information.
The best most of us can hope for is to know the scammer’s tricks and avoid them. Eternal vigilance is essential.