PONZI

"He's offended the rich and powerful on a personal level. That kind of offense must be punished with excessive vindictiveness as a lesson to us all."

I have to echo the question that Dr Helen asks on her blog. She notes that Bernie Madoff got 150 years for his investment scheme and asks this:

"Why is it that someone who set up a Ponzi scheme gets more jail time than the majority of murderers?"

Glenn Reynolds at Instapundit (where I saw this first) says "I think it’s because he made powerful people look stupid," and I have to agree. Its the same thing with vigilantes, if you kill someone you are hunted down methodically and get punished. If you kill a murderer because justice wasn't done in a court trial, you often get hunted down feverishly and very publicly and strongly condemned, with more jail time. Because the killer was bad, but you just challenged the status quo and made the powers that be look bad.

A commenter named Francis W. Porretto at Dr Helen's site noted this as well:

It's not. But then, most murderers don't collude with the federal regulatory bureaucracy. Most murderers can't spill the beans on the corruption of high-ranking Treasury officials. And most murderers don't successfully steal from private persons and the Leviathan in Washington simultaneously.

Madoff is being silenced. There's no chance, at this point, that anything he has to say about his "public servant" collaborators will ever receive a hearing. He has nothing on his co-conspirators other than his own crimes, so they didn't have to bribe him; they could merely lock him away for life, under the strictest possible regime.

And with all that, I'll bet his collaborators are still jumpier than the mouse at the cat show. If I were Bernard Madoff, I'd be very careful going through doors and such for the next 150 years.

By the way a "Ponzi Scheme" is an investment trick first prosecuted when a guy named Charles Ponzi tried to help his friends make money. What he did was gather a bunch of investors together over time and guaranteed them a return on their money. He said it was for collection and trading of something called Postal Reply Coupons, and indeed he did trade in these. Postal Reply Coupons were a post office voucher that let people send one overseas so that they could reply for free.

How the scheme worked was like this: he didn't make much money on the Postal Reply Coupons, but he did have all that money investors were giving him. As long as new people kept investing, he'd have money to pay back to older investors. There wasn't any actual investment going on, all he did was take part of the money from Peter and Paul and give it to an earlier investor, Joe. As new guys would sign on and pay him, he'd take part of that money and give it to earlier investors.

Charles Ponzi guaranteed double the investment in 90 days. And he did it. It worked for a long time, in several months he was pulling in hundreds of thousands of dollars. The problem with such a scheme is that it constantly requires new capital, it only works as long as more people keep signing on. After a while, there's going to be a limit to how many new people will pay to be part of the project and the whole thing collapses. It did eventually start to collapse, and the Post won a pulitzer prize for their uncovering how the Ponzi investment scheme worked.

Ponzi was eventually busted for mail fraud because there was no law against what he was doing at the time.

To this day, people still fall for these "too good to be true" schemes. They're still out there, and some of them, such as Social Security, are legal.