Frank Rich, NYTimes
As if to confirm that much of our so-called legitimate financial world has been six degrees of separation from Bernie Madoff, GMAC’s chairman was none other than J. Ezra Merkin. In addition to presiding over losses of nearly $8 billion at GMAC, Merkin had a separate investment management business that threw away another $2 billion by feeding other people’s money (including the endowments at N.Y.U. and Yeshiva University) into Madoff’s Ponzi scheme.
It is a small world at the top of the pyramid schemes of the Bush years. The impending bankruptcy of GM, with the hundreds of thousands of jobs at stake, is directly connected to its financial shenanigans. The “Real World” of blue collar jobs cannot escape the contagion of greed that brought down Wall St.
So who is J. Ezra Merkin?
He was Chairman on the General Motors Assurance Corporation from 2006 until he was fired in January of this year. GMAC is the financial wing of GM which was intended to help customers with car loans and such. Instead, it was used to generate “phantom profits”, accounting gimmicks that hid the extend of losses that GM was accumulating. Among other things they bet and lost big on the housing bubble.
Running a multi-billion dollar financial company was not enough to keep a financial genius like Mr. Merkin busy. On the side he was also running several hedge funds.
Mr. Merkin’s three private investment funds — Ascot, Ariel and Gabriel — are among the largest of the so-called feeder funds that placed investors’ money with Mr. Madoff without their knowledge, according to the investors. Mr. Merkin collected millions of dollars in management fees annually for his work.
When the Madoff firm collapsed, Mr. Merkin’s investors lost millions of dollars. Many of them, including New York University and New York Law School, are suing, contending that Mr. Merkin mishandled their money and misrepresented his operations.
The same tiny group of people were running Wall St. Banks, industrial giants, museums, universities and charities. Sitting on each others’ boards, they approved obscene pay packages for each other. As cover for their financial shenanigans they hired “quants” whose legitimate but obtuse mathematics could be used to bamboozle investors.
One of those crooks was “Sir” Allen Stanford. Even after his operation was exposed, his website is still touting his Stanford Investment Model (SIM)
Stanford Investment Model
The objective of the Stanford Investment Model (SIM) is to provide consistent returns regardless of market volatility, and it is based on the investment philosophy that has been used successfully for all of Stanford’s proprietary funds. We target a consistent yield or income stream as agreed upon with our clients, while monitoring risk and managing the overall volatility of the portfolio.
Our strategy for diversification to minimize the effects of market volatility is sophisticated and far-reaching. We pursue true global diversification with relentless intensity to meet our objective of targeted returns. We carefully consider asset classes, investment strategies, sectors, and regions of the world that most investors either don’t have easy access to or rarely receive information about. SIM was developed first and foremost to minimize the downside risk of a portfolio.
We recognize taking risk is essential to achieve investor goals, but there is a difference between accepting the risk the market gives you and managing that risk.
Although we may not outperform the indices during a bull cycle, our investment strategy is one of long-term consistency through bull and bear markets. The Stanford Investment Model offers investors a truly different view of wealth management.
WTF does this mean? Why would anyone believe that it is possible to get consistent returns regardless of market volatility? BTW, “Sir” Allen was one of the people duped by Jack Madoff. Big fish eat little fish who eat littler fish and so on.
Academics at the most prestigious institutions lent the hedge funds respectability in return for hefty consultancy fees. Hefty by academic standards, picayune for the Masters of the Universe bestowing the beneficence.
There is no university more hallowed than Harvard and no one more powerful in academia than its former President. Lawrence Summers was paid $5.2M in the last year as a consultant to the Hedge Fund D. E. Shaw. There is nothing illegal in these payments, but they do illustrate the two degrees of separation between Hedge Funds and the White House officials who are still regulating them. Surely Summers will recuse himself from matters involving his former employers. But is that enough?