http://www.bloomberg.com/apps/news?pid=20601039&sid=a4nU8QswIu28&refer=home It’s unclear why the SEC failed to stop Madoff, whether because of corruption, a lack of smarts, a dearth of interest, or some combination. We can say with confidence, though, that many other huge frauds are still operating freely today -- and that the government might not be inclined to intervene, even when it knows all about them.
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After all, Madoff’s scheme -- at least in spirit, if not in its nefarious intent -- wasn’t much different than the business models at some of the nation’s largest failed financial institutions.
Back in May, four months before it collapsed, American International Group Inc. increased its dividend at the same time it unveiled plans to raise $12.5 billion in capital. Later, when its cash ran out, AIG got a government bailout, the size of which has expanded to about $150 billion.
Whether you call that a Ponzi scheme or something less sinister, AIG was paying old investors with money raised from new investors. The same could be said of many banks that blew through billions of dollars in freshly raised capital the past couple of years, continuing to pay large dividends even as their balance sheets quietly imploded.
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