Though Sid was far from being an intellectual he had picked up the habit of reading The New York Times at Starbucks on Ocean Drive. He discovered it a useful indicator of the market temperature as the sub-prime and banking crisis unfolded. That sunny December morning, even he, a happy go lucky though hard-boiled conman, was taken aback to learn that a certain Bernie Madoff, a well known Wall Street trader, had been arrested on charges of defrauding investors on a staggering scale.
At first glance Sid was confused by the huge losses announced by the banks, but re-reading the article in detail he realized he had not misread the figures, figures that made Nick Leeson and Jérôme Kerviel look like schoolboy amateurs.
Sid was bowled over by Madoff’s stunning exploit. The former chairman of the NASDAQ stock exchange, much admired in the New York Jewish community, was accused of defrauding hedge funds of an unbelievable fifty billion dollar in a gigantic Ponzi scam, promising huge returns to investors in his asset management business. But why didn’t Madoff get out before the system collapsed. The trouble was Sid had to sadly admit all such systems invariably failed. The first-in were paid with the money of the next-in, and so on, until the system finally collapsed under its own weight.
The Times reported, investors, rivals and regulators had for years speculated over Madoff’s secret of success. The investment scam was housed in the same Manhattan building where his legitimate trading firm operated. The system collapsed when Madoff failed to find the funds to pay investors who tried to redeem seven billion dollars of their cash as the sub-prime crisis broke.
Sid’s admiration then turned to fear when he suddenly remembered Henry Turner had spoken of Madoff. A large part of Sid’s cash reserves was banked at Turner’s Albany Savings and Deposit Bank in Savannah. If there was trouble he would be on the hook, just like Turner’s Venezuelan friend Juan Ramón Jiménez had been in the Stanford scandal. Jiménez handled the funds of a number of his wealthy compatriots, who fearing for their wealth under the unpredictable Chavez regime had placed their money for safekeeping in the US.
Sid grabbed his cell phone and called Turner. There was no reply, just his voice message. Panic twisted Sid’s guts; he did not like the idea of being on the receiving end of a scam. Like many Palm Beach investors Sid would face considerable losses if Turner was caught up in Madoff’s scam, spelling bad news for his own personal plans. It seemed that the savings of families, charity funds and investment funds, had been totally wiped out, including a hedge fund advisory firm that said its clients had invested more than seven billion with Madoff.
It took three long days for Sid to discover that Turner had in effect invested his money in Madoff’s funds and disappeared leaving the Albany Savings and Deposit Bank high and dry. Sid was wiped out at least as far as the US was concerned. He was polo’d, skint, boracic, Larry Flynt, lamb and mint, whatever expression came to his mind it all boiled down to the same dramatic bottom line. To make matters worse the people who had loaned Sid money as bridging loans for his flipping game would be wanting it back, all of it, with interest. It was too bad for your average pigeon, he thought, but it was not the same story when it came to the strong arm boys and their Russian friends. It was time to scarper and quick.
Sid Judge’s ill-gotten gains, rumoured to be linked to dealings with drug cartels, had been spent on fast cars, fancy hotels and luxurious presents for his girlfriend, Holly. He had frequented the most fashionable spots on Palm Beach welcomed by the maîtres d’hotêl at the best restaurants with Holly on his arm dressed in the most exclusive fashions. Sid sported a diamond-encrusted watch and thought nothing of blowing a thousand dollars on a bottle of Cristal Champagne, clubbing it with his friends, or throwing extravagant parties at the two million dollar Coconut Grove home he had set himself up in.
When police raided Sid’s home, on a tip off he was somehow mixed in Turner’s Madoff dealings, he had already fled. A timely warning from one of his bent friends at the police headquarters had left him sufficient time to grab enough cash to see him through a good few years. In his hurry to get out he overlooked a safe box that still contained bundles of dollars, euros and Swiss francs. Around the abandoned house investigators found works of art worth a fortune and a trail of jewellery dropped in Sid’s panic.
As Sid violently swerved around a small capsized motor cruiser, he had miraculously spotted at the very last second; he knew his luck was in. Heading out of the inland waterway, his luxurious motor cruiser loaded with the loot he had managed to salvage, he pointed the bow out to sea and pushed the throttle forward once again saying a hasty goodbye to Florida and another failed business venture. As he headed towards the horizon he felt a great relief, not only because he had dodged the long arm of the law, but because he had also succeeded in ridding himself of Holly who had become a pain in the arse. Over the horizon a new adventure awaited him.
Some days later a boat believed to have belonged to him was found grounded on a sandbank a couple of hundred yards offshore leading police to believe he was still in the country. But it was like so many others boats found high and dry along the American coast, their names sanded off to make their owners untraceable. They were beached, scuttled or simple abandoned at their moorings in rivers and creeks along the coast when things went sour. It was a sign of the times, owners who had lost their shirts in property and could no longer keep up payments or pay maintenance charges simply declared their boat stolen.
Once out of US waters he relaxed; in a couple of hours he would anchor off Grand Bahama where he would get a little sleep before checking out Port Lucaya. As he turned in Sid grinned cynically; the only thing lacking in the sad pantomime had been a villain. It was as if Madoff, at the wave of a magic wand, had suddenly appeared on the stage. He was the perfect villain, and not just anyone, a Shylock, the founder and chairman of the Nasdaq, who had lied, cheated and swindled for twenty years, a scheming alchemist who had transformed individual life savings, charity funds and investments, into nothingness at the touch of a computer keyboard, evaporated, gone forever, in contradiction with all the well thought out laws of physics relating to the creation or destruction of matter.
Turner, just as in Rabelais’s story of Panurge who threw his ram into the sea and the whole flock followed, had rushed to put his depositors money into Madoff’s fund, an abyss of cupidity and naivety, that swallowed tens of billions of dollars.
During the boom years many like Madoff had lived royally using other peoples money, they were not necessarily traditional swindlers crooks and, there were also scheming CEOs and directors of banks and investment houses, who together with their traders and employees rewarded themselves, skimming off what were in effect the earnings and savings of countless millions of ordinary citizens, legalised in the form of lavish compensation and bonuses. In their wake appeared white-collar conmen in every shape and form, aiding and abetting Wall Street and the City of London in a decade long frenzy of speculation.
Certain had survived the first shock, pulling the chestnuts from the fire just in time, men like Tom Barton, who by chance found themselves sitting on a small but comfortable pile of cash, or Pat O’Connelly, the lucky owner of prime quality, mortgage free, homes in Paris, San Francisco and Dublin, with a steady revenue assured by the royalties from the sales of his best selling books ensuring him a comfortable life.
In retrospective 2008 had been an anything but an ordinary year, the Federal Reserve had loaned fifty five billion to JPMorgan to save Bear Stearns, then the US government seized private mortgage giants Fannie Mae and Freddie Mac, following up with an eighty five billion loan to AIG, then as if to round it all off Madoff appeared like Fagin, relieving the wealthy of their riches.
That the dollar and pound sterling were now on the slippery slope to hell as governments fired their last shots was of little concern to Sid. If the cavalry did not arrive to save them they would turn to the penultimate resort of all besieged governments — the printing presses, and if that did not work — the last resort was default.
He would have however been mistaken to think the cavalry would arrive on horseback as in the Hollywood Westerns he had seen as a boy in London, it would more likely be the airborne cavalry with helicopters dropping masses of freshly printed hundred dollar bills just as Milton Friedman and Ben Bernanke had once talked of tongue in cheek.
A Viking Feast