The audience applauded as the judge ordered Madoff to jail today. What he admitted doing was reprehensible, but the basis for his crime is the same foundation on which the entire free market economy is built. That foundation is the illusion of growth without end, and all you can build on it is a house of cards... a Ponzi scheme.
For years, Madoff was able to keep his investors happy, because he was able to bring in enough funds each year to keep his scheme alive. As long as there was growth ad infinitum, he had nothing to worry about, and no one was losing anything. The government was warned numerous times of the nature of his scheme, but they didn't care because they didn't see any victims complaining. Once investors wanted to cash out, his house of cards came crashing down.
Although the details are different, that is basically what happened with Wall Street. However, to protect themselves, the individuals who ran the banks and investment firms went public to relieve themselves of personal responsibility for the schemes they hatched. Then, they securitized the mortgage industry, so that your mortgage was no longer just an agreement between you and your neighborhood banker based on real value, ability to pay, and collateral. Instead, it became a part of a derivative to be dealt and insured over and over again based on aggregate risk determined with the artistry of a ouija board and the scientific integrity of alchemy.
The insuring of risk through totally unregulated credit default swaps on loans of all sorts became such a growth industry, that some analysts speculate that the size of that market alone could be as much as five trillion dollars greater than the gross domestic product of the entire world. Of course, we don't know, because there are no public records. That's one reason credit remains so tight. No one knows how much anyone is on the hook.
And the people who hid behind their public corporations as they devised these Ponzi schemes are the same people we are relying on for a happy ending. You can't really say that we're trying to fix this mess, because no one knows what that would entail.
It's as if the economy were an elevator that reached as high as it could go and then went into free fall. We are now attempting to slow the wheels and make the landing as soft as possible.
Why is it that corporations have the same rights as individuals in court, but not the same responsibilities? Why isn't each and every banker who participated in these charades guilty of being a co-conspirator? Why aren't we banning these swindlers from holding any form of financial services position and replacing them with honest people?
Maybe we should let the pot smokers out of jail and fill the cells with bankers. They have done more to destroy our country than Al Qaeda could ever have imagined.
As for me, I plead guilty of mixing a few metaphors, and expect to be excoriated in the comments.