1. Off the Books: The Underground Economy of the Urban Poor
In this revealing study of a Southside Chicago neighborhood, sociologist Venkatesh opens a window on how the poor live. Focusing on domestics, entrepreneurs, hustlers, preachers and gangs linked in an underground economy that “manages to touch all households,” the book reveals how residents struggle between “their desires to live a just life and their needs to make ends meet as best they can.” In this milieu, African-American mechanics, painters, hairdressers, musicians and informal security guards are linked to prostitutes, drug dealers, gun dealers and car thieves in illegal enterprises that even police and politicians are involved in, though not all are criminals in the usual sense. Storefront clergy, often dependent “on the underground for their own livelihood,” serve as mediators and brokers between individuals and gang members, who have “insinuated themselves—and their drug money—into the deepest reaches of the community.” Although the book’s academic tenor is occasionally wearying, Venkatesh keeps his work vital and poignant by using the words of his subjects, who are as dependent on this intricate web as they are fearful of its dangers.
2. Freakonomics: A Rogue Economist Explores the Hidden Side of Everything
Economics is not widely considered to be one of the sexier sciences. The annual Nobel Prize winner in that field never receives as much publicity as his or her compatriots in peace, literature, or physics. But if such slights are based on the notion that economics is dull, or that economists are concerned only with finance itself, Steven D. Levitt will change some minds. In Freakonomics (written with Stephen J. Dubner), Levitt argues that many apparent mysteries of everyday life don’t need to be so mysterious: they could be illuminated and made even more fascinating by asking the right questions and drawing connections. For example, Levitt traces the drop in violent crime rates to a drop in violent criminals and, digging further, to the Roe v. Wade decision that preempted the existence of some people who would be born to poverty and hardship. Elsewhere, by analyzing data gathered from inner-city Chicago drug-dealing gangs, Levitt outlines a corporate structure much like McDonald’s, where the top bosses make great money while scores of underlings make something below minimum wage. And in a section that may alarm or relieve worried parents, Levitt argues that parenting methods don’t really matter much and that a backyard swimming pool is much more dangerous than a gun. These enlightening chapters are separated by effusive passages from Dubner’s 2003 profile of Levitt in The New York Times Magazine, which led to the book being written. In a book filled with bold logic, such back-patting veers Freakonomics, however briefly, away from what Levitt actually has to say. Although maybe there’s a good economic reason for that too, and we’re just not getting it yet.
3. Ragnar’s Guide to the Underground Economy
Through detailed case studies Ragnar shows you how carpenters, woodcutters, farmers, housecleaners, computer consultants, mechanics, lawyers, vendors, locksmiths and others are cashing in on today’s booming economy - and keeping what they earn by not paying taxes. From these undergrounders you’ll learn how to locate work, get paid without supplying identifying numbers, prepare a realistic budget, advertise your services or product and finance your project when you can’t go to the bank. You’ll also learn the pitfalls of working off the books and what you can do to prepare for them.
4. How to Survive Without a Salary: Learning How to Live the Conserver Lifestyle
I thought that this book was so funny in places that I haven’t laughed so hard, so much, for a long time. Charles is a skilled writer; the book is very readable, intelligent, thoughtful,and well organized. It contains a copious (even prodigious) amount of tips, for a 200-page book. Very practical, and at the same time touches on abtruse philosophical areas, especially at the end of the book.
Hey, I used to think I was cheap. This guy is CHEAP. His anecdotes include waiting for it to rain to take a shower instead of installing indoor plumbing. He had a big hole in the floor of his entryway, or somewhere in his house, into which the kids and a few guests fell. He refused to spend one cent covering the hole, until a neighbor told him about a steel grate they threw away years ago, so he went to the dump and found it.
The point is that you can learn from a top-notch “conserver”; an applied example I would give is to buy two gallons of milk when it’s on sale and freeze one for later use (works well!). This guy probably drinks powdered milk though.
I disagree with his economic analysis; prudence CAN be a vice, as any virtue most certainly is in its extreme, or even overdone. But Adam Smith’s Wealth of Nations is not just about “McPimple Burger” or keeping up with the Joneses. Any system on a mass scale is going to have gaping faults, and the weaker of us might succumb to our basest impulses. But perhaps Long goes a bit too far the other way…
At any rate, he sounds like an economic anarchist. Very well thought out book, great advice.
5. Gang Leader for a Day: A Rogue Sociologist Takes to the Streets
In Freakonomics, many people were fascinated by a section that described how most crack cocaine dealers lived at home with their mothers. Why? They make less money than minimum wage. The source of that factoid was research conducted on site by Sudhir Venkatesh, author of Gang Leader for a Day, who describes in this book how he did that research and came to make decisions one day for part of the Black Kings gang in Chicago.
In the process of reading this book, you’ll learn more than you ever expected to know about the ways that the poorest people support and protect themselves. You’ll also find how drug-dealing gangs are both a help and a hindrance to the poor.
More powerfully, you’ll be exposed to the great difficulties involved in observing the lives of the poor and the gangs that spring from them. The moral and ethical dilemmas this book presents are almost beyond belief.
6. Under the Table and Into Your Pocket: The How and Why of the Underground Economy
Under The Table And Into Your Pocket: The How And Why Of The Underground Economy by Bill Wilson will provide the non-specialist general reader with a complete education on a facet of the American economy rarely (if ever) covered in school. Beginning with an introduction to just some of the ways governmental regulations strangle business, overtax the little guy, and enable Washington to be the drunken big spender that it is today (if you overpay your taxes by $7,000 and don’t reclaim it within three years you’re out of luck - but underpay it by $7,000 and the IRS can and will come after you no matter how much time has passed!), Under The Table proceeds to demonstrate how the little guy can circumvent taxes by doing business away from Big Brother’s prying eyes. From boarding houses and flea markets to roadside merchants and dominatrix work, Under The Table covers the benefits, disadvantages, tips, tricks, techniques and much more of common underground ways to earn a living. Under The Table is emphatically not a legal guide; neither the author nor the publisher assume any responsibility for the use or misuse of information contained within - but the eye-opening ins and outs of a truly free economy make for quite fascinating and advantageous reading.
Are you fed up with giving so much of your hard earned cash to the government, then watching it get spent on ridiculous pork-barrel special-interest projects? Would you like to hold on to more of your money for your own special-interest boondoggles? The underground economy continues to grow in spite of ever-widening atttempts by the government to regulate and tax everything we do. Millions of Americans are practising fee enterprise in today’s increasingly unfree tax society. This is the most comprehensive how-to book ever written for those entrepreneurial individuals who have decided to end their slavery to a wage and to government taxation as well. Discover how you can keep more of what you earn for yourself. Here you will find complete and up-to-date information on the ins and outs of guerrilla capitalism and the underground economy in this country.
In December of 2001 Jeff Ferrell quit his job as tenured professor, moved back to his hometown of Fort Worth, Texas, and, with a place to live but no real income, began an eight-month odyssey of essentially living off of the street. Empire of Scrounge tells the story of this unusual journey into the often illicit worlds of scrounging, recycling, and second-hand living. Existing as a dumpster diver and trash picker, Ferrell adopted a way of life that was both field research and free-form survival. Riding around on his scrounged BMX bicycle, Ferrell investigated the million-dollar mansions, working-class neighborhoods, middle class suburbs, industrial and commercial strips, and the large downtown area, where he found countless discarded treasures, from unopened presents and new clothes to scrap metal and even food.
9. McMafia: A Journey Through the Global Criminal Underworld
In McMafia, Misha Glenny draws the dark map that lies on the other side of Tom Friedman’s bright flat world. That connected globe not only brings software coders and supply-chain outsourcers closer together; it’s also opened the gates to a criminal network of unsettling vastness, complexity, and efficiency that represents a fifth of the earth’s economy, trading in everything from untaxed cigarettes and the usual narcotics to human lives and nuclear material. Glenny’s a Balkans expert, and he begins his story there, with the illicit–but often state-sponsored–underworld that grew out of the post-Soviet chaos, but he soon follows the contraband everywhere from Mumbai and Johannesburg to rural Colombia and the U.S. suburbs. It’s not just a hodgepodge of scare clips, though: Glenny reports from the ground but follows the leads as high as they go, showing how the dark and bright sides of the flat world are more connected than we imagine.
10. Living Well on Practically Nothing
Living Well on Practically Nothing: Revised and Updated Edition is for people who need to live on a lot less money. If you have been fired, demoted, retired, divorced, widowed, bankrupted or swindled - or you just want to quit your job and remain financially self-reliant - this book is for you. In it are hundreds of tips, secrets and necessary skills for living well on little money. Chapters include: Save Up to $37,000 a Year and Live on $12,000 a Year; Low-Cost Computers for Fun, Profit, and Education; Some Ways to Live on No Money at All; A Day of Cheap Living; A New Career or Business for You; Fix Things and Make Them Last; and Protect Your Investments and Make Them Grow. From cover to cover, this book is stocked with proven methods for saving money on shelter, food, clothing, transportation, entertainment, health care and more. The author left the “system” in 1969 and has worked for himself ever since. Let him show you how you, too, can live happily, comfortably and with complete financial freedom.
P.S. If you’d like to know how I make my money (it’s not really “shadow” or illegal at all, but it give me freedom to do anything I want to, while providing steady stream of income), feel free to check out my websites - PickyDomains.com, NicheGeek.Com, StandupKings.com, SoftwareJudge.Com, Best Free Documentaries.
Link of the day - I will pay you $25, if you come up with a cool domain name for me.
Due to the lifting of the foreclosure moratorium at the end of March, the downward slide in housing is gaining speed. The moratorium was initiated in January to give Obama’s anti-foreclosure program—which is a combination of mortgage modifications and refinancing—a chance to succeed. The goal of the plan was to keep up to 9 million struggling homeowners in their homes, but it’s clear now that the program will fall well-short of its objective.
In March, housing prices accelerated on the downside indicating bigger adjustments dead-ahead. Trend-lines are steeper now than ever before–nearly perpendicular. Housing prices are not falling, they’re crashing and crashing hard. Now that the foreclosure moratorium has ended, Notices of Default (NOD) have spiked to an all-time high. These Notices will turn into foreclosures in 4 to 5 months time creating another cascade of foreclosures. Market analysts predict there will be 5 MILLION MORE FORECLOSURES BETWEEN NOW AND 2011. It’s a disaster bigger than Katrina. Soaring unemployment and rising foreclosures ensure that hundreds of banks and financial institutions will be forced into bankruptcy. 40 percent of delinquent homeowners have already vacated their homes. There’s nothing Obama can do to make them stay. Worse still, only 30 percent of foreclosures have been relisted for sale suggesting more hanky-panky at the banks. Where have the houses gone? Have they simply vanished?
600,000 “DISAPPEARED HOMES?”
Here’s a excerpt from the SF Gate explaining the mystery:
“Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.
“We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market,” said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. “California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You’d have further depreciation and carnage.”
In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity - only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as “shadow inventory.” (”Banks aren’t Selling Many Foreclosed Homes” SF Gate)
If regulators were deployed to the banks that are keeping foreclosed homes off the market, they would probably find that the banks are actually servicing the mortgages on a monthly basis to conceal the extent of their losses. They’d also find that the banks are trying to keep housing prices artificially high to avoid heftier losses that would put them out of business. One thing is certain, 600,000 “disappeared” homes means that housing prices have a lot farther to fall and that an even larger segment of the banking system is underwater.
Here is more on the story from Mr. Mortgage “California Foreclosures About to Soar…Again”
“Are you ready to see the future? Ten’s of thousands of foreclosures are only 1-5 months away from hitting that will take total foreclosure counts back to all-time highs. This will flood an already beaten-bloody real estate market with even more supply just in time for the Spring/Summer home selling season…Foreclosure start (NOD) and Trustee Sale (NTS) notices are going out at levels not seen since mid 2008. Once an NTS goes out, the property is taken to the courthouse and auctioned within 21-45 days….The bottom line is that there is a massive wave of actual foreclosures that will hit beginning in April that can’t be stopped without a national moratorium.”
JP Morgan Chase, Wells Fargo and Fannie Mae have all stepped up their foreclosure activity in recent weeks. Delinquencies have skyrocketed foreshadowing more price-slashing into the foreseeable future. According to the Wall Street Journal:
“Ronald Temple, co-director of research at Lazard Asset Management, expects home prices to fall 22% to 27% from their January levels. More than 2.1 million homes will be lost this year because borrowers can’t meet their loan payments, up from about 1.7 million in 2008.” (Ruth Simon, “The housing crisis is about to take center stage once again” Wall Street Journal)
Another 20 percent carved off the aggregate value of US housing means another $4 trillion loss to homeowners. That means smaller retirement savings, less discretionary spending, and lower living standards. The next leg down in housing will be excruciating; every sector will feel the pain. Obama’s $75 billion mortgage rescue plan is a mere pittance; it won’t reduce the principle on mortgages and it won’t stop the bleeding. Policymakers have decided they’ve done enough and are refusing to help. They don’t see the tsunami looming in front of them plain as day. The housing market is going under and it’s going to drag a good part of the broader economy along with it. Stocks, too.
[Via - Mike Whitney]
Screwed: The Undeclared War against the Middle Class and What We Can Do About It
Falling Behind: How Rising Inequality Harms the Middle Class
Not Keeping Up With Our Parents: The Decline of the Professional Middle Class
Link of the day - Talent Is Overrated: What Really Separates World-Class Performers from Everybody Else
1000000 pixels, charge a dollar per pixel – that’s perhaps the dumbest idea for online business anyone could have possible come up with. Still, Alex Tew, a 21-year-old who came up with the idea, is now a millionaire.
2. PickyDomains
Hire another person to think of a cool domain name for you? No way people would pay for this. Actually, naming domain names for others turned out a thriving business, especially, when you make the entire process risk free. PickyDomains currently has a waiting list of people who want to PAY the service to come up with a snappy memorable domain name. PickyDomains is expected to hit six figures this year. Full Story
3. Doggles
Create goggles for dogs and sell them online? Boy, this IS the dumbest idea for a business. How in the world did they manage to become millionaires and have shops all over the world with that one? Beyond me.
4. LaserMonks
LaserMonks.com is a for-profit subsidiary of the Cistercian Abbey of Our Lady of Spring Bank, an eight-monk monastery in the hills of Monroe County, 90 miles northwest of Madison. Yeah, real monks refilling your cartridges. Hallelujah! Their 2005 sales were $2.5 million! Praise the Lord. Full Story
5. AntennaBalls
You can’t sell antenna ball online. There is no way. And surely it wouldn’t make you rich. But this is exactly what Jason Wall did, and now he is now a millionaire. Full Story
6. FitDeck
Create a deck of cards featuring exercise routines, and sell it online for $18.95. Sounds like a disaster idea to me. But former Navy SEAL and fitness instructor Phil Black reported last year sales of $4.7 million. Surely beats what military pays.
How would you like to go on a date with an HIV positive person? Paul Graves and Brandon Koechlin thought that someone would, so they created a dating site for HIV positive folks last year. Projected 2006 sales are $110,000, and the two hope to have 50,000 members by their two-year mark.
Christie Rein was tired of carrying diapers around in a freezer bag. The 34-year-old mother of three found herself constantly stuffing diapers for her infant son into freezer bags to keep them from getting scrunched up in her purse. Rein wanted something that was compact, sleek and stylish, so in November 2004, she sat down with her husband, Marcus, who helped her design a custom diaper bag that’s big enough to hold a travel pack of wipes and two to four diapers. With more than $180,000 in sales for 2005, Christie’s company, Diapees & Wipees, has bags in 22 different styles, available online and in 120 boutiques across the globe for $14.99.
9. SantaMail
Ok, how’s that for a brilliant idea. Get a postal address at North Pole, Alaska, pretend you are Santa Claus and charge parents 10 bucks for every letter you send to their kids? Well, Byron Reese sent over 200000 letters since the start of the business in 2001, which makes him a couple million dollars richer. Full Story
Fake wishbones. Now, this stupid idea is just destined to flop. Who in the world needs FAKE PLASTIC wishbones? A lot of people, it turns out. Now producing 30,000 wishbones daily (they retail for 3 bucks a pop) Ken Ahroni, the company founder, expects 2006 sales to reach $1 million.
To see other businesses that have not made the top 10 list but came pretty close, visit Uncommon Business Ideas Blog
10+ Unusual Ways To Make Easy Money On The Internet If You Love Writing
Startups That Work: Surprising Research on What Makes or Breaks a New Company
Link of the day - Sway: The Irresistible Pull of Irrational Behavior
Just seven months ago, hundreds of mega-millionaires, including Ralph Lauren and David Geffen, were elbowing one another in the lineup to buy a $60 million Gulfstream G650, which was not expected to hit runways until 2012.
It did not matter that $500,000 had to be wired to Gulfstream’s account at a Midwest branch of JPMorgan Chase at exactly 12:01 a.m. on April 15, or that bidders who secured a place in the waiting line could not sell their rights if they changed their minds, according to one bidder.
Some eager moguls even tried to improve their chances of getting a jet quicker by opening accounts at Chase’s Midwest office. Among high-ticket status symbols, “me and my brand new jet” was it.
But that was another era — before the credit crisis and before billions of dollars in corporate and individual wealth were lost.
“The jet market stinks,” said Richard Santulli, the chief executive of Netjets, the private jet company owned by Berkshire Hathaway, the holding company led by Warren E. Buffett.
To control costs, companies including Citigroup and Time Warner are selling their jets. Alcatel-Lucent has allowed leases on two jets to expire without renewing them and has put its third jet up for sale.
And the public relations fiasco that engulfed the chief executives of Detroit’s automakers when they flew to Washington on company planes to seek a government bailout has underscored how inappropriate such travel can seem in this recession.
General Motors, which leases seven planes, put the majority of them on the market before the government said it must do so as a condition of government assistance. The automaker has also closed its air transportation services unit, which had 49 employees.
“We could not justify an in-house aircraft operation,” a G.M. spokesman, Tom Wilkinson, said. “We are negotiating to transfer the remaining planes to another operator. Ford too has shut down its flight department.”
Jet brokers, who normally have a worldwide clientele, say the market has constricted abroad in recent months as well.
“Our inventory is up dramatically, and demand is way down,” said Josh Messinger, of J. Messinger Corporate Jet Sales, a jet broker. “The decline is particularly pronounced for those who bought more recently because prices had soared so much.”
“I spent a week in Dubai, and the front page of the paper there had articles every day about their economy having issues due to real estate issues,” he said.
Mr. Santulli said that the Russians had been big buyers of jets.
“But the fall of the Russian stock market has had a huge impact,” he said. “The Indian stock market stinks, and the dollar has gotten stronger, which hurts airplane sales.”
Because jets are priced in dollars, they become more expensive for foreigners as the dollar gets stronger.
Among jets, the large-cabin, long-range segment of the market is suffering the most, said Bill Quinn, director of aircraft sales and acquisitions at Cerretani Aviation, based in Boulder, Colo. That includes planes from Gulfstream, Bombardier and Falcon.
Carrying costs are high. A Gulfstream G550 costs about $47 million. Though expenses can vary by state, one mogul’s business manager estimated that annual costs run about $1.3 million, including $500,000 for property tax and $400,000 for pilots and stewards. Typical operating costs are more than $2,000 an hour in the air, he said.
The corporate side of the business is particularly vulnerable because of public scrutiny. “They are not going to do employee layoffs and keep the jets,” said Mary Hevener, a tax adviser who specializes in executive compensation at Morgan Lewis & Bockius.
Besides, Congress stripped away the deductibility of personal travel for executives in 2004 by allowing companies to deduct from taxes only the rough amount of a first-class ticket, far less than private jet travel costs.
Corporate chiefs concerned about public scrutiny are more inclined to look for alternatives than to return to the airlines. Some are examining whether they should take delivery of planes already ordered. One company had been looking to upgrade its two planes. “Now they are weighing whether or not to buy new planes or keep what they have,” Mr. Quinn said.
Some are downsizing. “Some of these guys just move the deck chairs around,” he said. “They get rid of the big planes and go to fractional ownership, or they go to charter, or they come back into the marketplace with a leased plane,” he said.
But every part of the private jet industry has been affected. Netjets lets people buy a fractional ownership in planes, and it sells Marquis jet cards that give customers access to the fleet in 25-hour increments. Those businesses, too, are seeing a slowdown.
“People have lost a lot of money, and are careful about how they spend it,” Mr. Santulli said.
“I have never seen it like this,” said Mike Silvestri, the chief executive of Flight Options, which sells shares in jets as well as plans that cover a fixed number of hours a year of private jet use. “Customers are just not flying as much.” Some customers are stretching out the hours bought for a single year over a longer period.
Flight Options has laid off 134 people, including 104 pilots, and hopes it will be able to bring them back.
Mr. Santulli said that the jet market usually picks up three months after the stock market has reached a bottom. There is no indication of an uptick yet.
[Via - NYTimes.Com]
Asset Management Is Nothing But A Huge Ponzi Scheme
American economy as a circle of cavorting skeletons
The Day The Credit Died. How Americans Will Have To Live Without Visas And MasterCards
Link of the day - I will pay you $25, if you come up with a cool domain name for me.
Dec. 11 (Bloomberg) — Bernard Madoff, founder and president of a New York firm that invested funds for wealthy individuals, hedge funds and other institutions, was charged with operating what he told employees was a long-running $50 billion Ponzi scheme in what may be one of the largest frauds in history.
Madoff, 70, head of Bernard L. Madoff Investment Securities LLC, was arrested today at 8:30 a.m. by the FBI and appeared before U.S. Magistrate Judge Douglas Eaton in Manhattan federal court. Charged in a criminal complaint with a single count of securities fraud, he was released on $10 million bond guaranteed by his wife and secured by his apartment. Madoff, wearing a white-striped shirt, dark-colored pants and no tie, looked down as he left the courtroom with his wife, declining to comment.
“It’s all just one big lie,” Madoff told his employees on Dec. 10, according to the government. The firm, Madoff allegedly said to them, is “basically, a giant Ponzi scheme.”
Madoff faces as much as 20 years in prison and a $5 million fine if convicted. His New York-based firm was the 23rd largest market maker on Nasdaq in October, handling a daily average of about 50 million shares a day, exchange data show. It specialized in handling orders from online brokers in some of the largest U.S. companies, including General Electric Co. and Citigroup Inc.
‘One of The Pioneers’
“He’s one of the pioneers of modern Wall Street,” said James Angel, an associate business professor at Georgetown University in Washington. Madoff’s firm was among the first to automate market-making, in which a dealer continually buys and sells stock. The company was among the largest to offer “payment for order flow,” or paying to handle customer orders.
“The exchanges didn’t like the practice and questioned whether customers got the best price,” Angel said.
Madoff was also sued today by the U.S. Securities and Exchange Commission.
“Bernard Madoff is a longstanding leader in the financial services industry,” said defense lawyer Dan Horwitz. “We will fight to get through this unfortunate set of events. He’s a person of integrity.”
Fix Asset Management in New York, which had at least $400 million with Madoff, said it was checking with its lawyers regarding its holdings.
“We are very shocked,” John Fix, the son of founder Charles Fix, said by telephone from Greece. “We put in redemptions in the past few months and got our money back no problem. We are just so surprised about all this.”
‘Accelerating Their Redemptions’
Thomas Ajamie, a securities lawyer in Houston who won a $429 million arbitration award against Paine Webber Group in 2001, speculated that Madoff “couldn’t keep the Ponzi scheme going because investors were accelerating their redemptions.”
New York-based Fairfield Greenwich Group runs the $7.3 billion Fairfield Sentry Ltd., a fund that invested in Madoff. Andrew Ludwig, a spokesman for Fairfield, declined to immediately comment.
The SEC in its complaint, also filed in Manhattan federal court, accused Madoff of a “multi-billion dollar Ponzi scheme that he perpetrated on advisory clients of his firm.”
The agency said it’s seeking emergency relief for investors, including an asset freeze and the appointment of a receiver for the firm. Ira Sorkin, another defense lawyer for Madoff, couldn’t be immediately reached for comment.
Advisory Business
Madoff ran his investment advisory business from a separate floor of his firm’s office, keeping financial statements “under lock and key,” prosecutors said. Early in December, he told one employee that clients wanted to redeem about $7 billion and that he was struggling to free up the funds, the government said. After he told another staff member Dec. 9 that he wanted to pay annual bonuses before the year’s end, two months early, a pair of senior employees asked to speak with him, prosecutors said.
They had noticed he had been suffering from a “great deal of stress” and wanted to know what was happening, the U.S. said. When one of them challenged his explanations, Madoff invited them to his Manhattan apartment, saying he “wasn’t sure he would be able to hold it together” if they continued talking at the office, the government said.
While meeting the pair at his home yesterday, Madoff conceded that he was “finished,” that his advisory business is “all just one big lie” and “basically, a giant Ponzi scheme,” the government said. The business had been insolvent for years with losses of about $50 billion, he told the employees, according to the criminal and SEC complaints.
Madoff said he had about $200 million to $300 million left and planned to distribute money to select employees, family and friends before surrendering to authorities in about a week, the government said.
Confessed to FBI
Madoff allegedly confessed to FBI agent Theodore Cacioppi on Dec. 11, saying there was “no innocent explanation,” the SEC said in its complaint. Madoff said it was his fault and he had “paid investors with money that wasn’t there.” He also said he was “insolvent” and he expected to go to jail, it said.
The Madoff firm had about $17.1 billion in assets under management as of Nov. 17, according to NASD records. At least 50 percent of its clients were hedge funds, and others included banks and wealthy individuals, according to the records.
Madoff started his firm in 1960 with $5,000 of savings and took advantage of securities-law changes in the 1970s designed to spur competition in U.S. stock markets, according to a profile posted on the Web site Finance Tech.
75 Percent Owner
Madoff, who owned more than 75 percent of his firm, and his brother Peter are the only two individuals listed on regulatory records as “direct owners and executive officers.”
Peter Madoff was a board member of the St. Louis brokerage firm A.G. Edwards Inc. from 2001 through last year, when it was sold to Wachovia Corp.
Bernard Madoff served as vice chairman of the National Association of Securities Dealers, a member of its board of governors, and chairman of its New York region, according to the SEC Web site. He was also a member of Nasdaq Stock Market’s board of governors and its executive committee and served as chairman of its trading committee.
He was chief of the Securities Industry Association’s trading committee in the 1990s and earlier this decade, where he represented brokerage firms in discussions with regulators about new stock-market rules as electronic-trading systems and networks gained prominence.
He was an early advocate for electronic trading, participating in roundtable discussions at the SEC as regulators weighed trading stocks in penny increments. His firm was among the first to make markets in New York Stock Exchange listed stocks outside of the Big Board, relying instead on Nasdaq.
‘Third Market Makers’
“These guys were one of the original, if not the original, third market makers,” said Joseph Saluzzi, the co-head of equity trading at Themis Trading LLC in Chatham, New Jersey. “They had a great business and they were good with their clients. They were around for a long time. He’s a well-respected guy in the industry.”
At 6:30 p.m., security guards at the front desk of the lipstick-shaped building on Third Avenue in midtown Manhattan housing Madoff’s office were turning people away. Ganesh Sewpershad, a messenger with Speeddox, said he had been trying to deliver mail for 20 minutes and was told to return tomorrow.
Madoff’s Web site advertises the “high ethical standards” of his firm.
“In an era of faceless organizations owned by other equally faceless organizations, Bernard L. Madoff Investment Securities LLC harks back to an earlier era in the financial world: The owner’s name is on the door,” according to the Web site. “Clients know that Bernard Madoff has a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm’s hallmark.”
The case is U.S. v. Madoff, 08-MAG-02735, U.S. District Court for the Southern District of New York (Manhattan)
[Via - Bloomberg.Com]
American economy as a circle of cavorting skeletons
The Day The Credit Died. How Americans Will Have To Live Without Visas And MasterCards