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post #1 of 1 (permalink) Old 09-04-2009, 12:12 AM Thread Starter
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Join Date: Jul 2002
Location: An Investment Bank
Posts: 13,733
SEC botched Madoff

Here's an outline I did regarding the SEC's mishandling of the Madoff fraud. Again, doesn't transfer well visually due to the fact that it's pasted from Excel.
Also, another article regarding the tax relief acts of the last few months:

SEC made numerous errors regarding the Madoff scheme

I. SEC missed several red flags
A. Due to unseasoned investigators
1. were often enthralled and intimidated by Madoff
2. at least 6 formal complaints
a. resulted in 3 investigations and 2 examinations
(i) never verified implausible volumes reported
by Madoff
(A) simple 3rd party inquiry would have
revealed the volumes were fictitious
3. Madoff option volumes often implausible
a. SEC received a report that confirmed Madoff was
holding no option on days he reported ridiculously high volumes
(i) SEC never continued investigation
4. Madoff employee once ended meeting with SEC abruptly when he was asked
to produce documents he didn't agree with
a. walked out and said meeting was over b/c it was lunch time
(i) it was 3pm
B. Other problems
1. investigators were discouraged by supervisors to pursue inquiries into Madoff
2. investigators often described Madoff as a "wonderful storyteller" and were
smitten with him
3. Madoff actually used SEC investigation as a selling point to clients
a. told client the govt had investigated him and found no issues, everything was fine
b. told investigators he was going to be next SEC chairman
c. Madoff dictated which documents he provided to the SEC
4. bureaucratic issues
a. 2 separate branches of the SEC were once concurrently conducting identical
investigations of Madoff's firm and were not aware
(i) Madoff was actually the one who informed the SEC of the two
identical investigations


Economists split on benefits of $62.5 billion in tax breaks

I. Recovery Act tax relief programs
A. Program is 6 months old
1. will provide total tax relief of $288 billion
a. $62.5 billion enacted to date

2. provides relief in the form of credits, payments, incentives
to businesses and individuals
3. majority going to individuals and seen directly in their paychecks
II. Size
A. Payments to individuals
1. largest is direct paycheck credit of $400 per individual, $800 per
couple filing jointly
a. seen in $15 increments given 26 pay periods
b. idea is that customers more likely to spend the credits if
they see it consistently rather than a 1 time lump sum credit
2. credits of $23.2 billion thus far
a. forecasted to cost $116 billion through 2010
B. Incentives to businesses
1. $17.2 billion in tax breaks to encourage investment in equipment or to
help secure a cash cushion
a. most of available has already been used this year
(i) estimated to total $23 billion for 2009
C. Others
1. $8000 home buyer credit
2. subsidization of Cobra payments
a. govt subsidizing 65% of COBRA payments for up to 9 months
for unemployed workers
(i) estimated to total $24.7 billion
(A) $7.6 billion used so far
III. Effectiveness
A. Business incentives
1. some argue that companies do not want to make new equipment investments
right now because they see no demand for their products
2. others argue that they have stimulated manufacturing, particularly for energy companies
B. Consumer programs
1. some argue that it's simply a small cushion and that will be saved as consumers
are still over-leveraged
a. consumer spending was down 1% in the 2nd quarter
(i) would it have been worse without the program?
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