Tuesday, December 16, 2008

Madoff, Merdle and Money

Isn't money just weird...My first job was as a graduate trainee in a government organisation that was intended to regulate the City, the body that eventually transmuted into today's FSA. I ran away - two things in particular drove me. First of all, I felt physically sick commuting even the seven stops from Kentish Town to Bank, walking in a strange rhythm with thousands of fellow-lemmings from the Tube to the office, and second, once I was there, learning about the futures markets, I recoiled in some sort of allergic reaction to the idea of essentially betting millions and millions of pounds, dollars or yen. My limited understanding of most financial transactions of a more sophisticated variety was that they were very fancy ways of gambling, a past-time which has never held much appeal for me. I used occasionally to take on room-mates at school or university for stakes of Smarties or matchsticks, but real money has always been rather too rare for me to take any chances when it came into my possession.

The thing was, as a reader, I knew about families who lost everything. I knew about Little Dorrit, I'd read The Way We Live Now, and Middlemarch, I'd heard of the South Sea Bubble. Those of us who love literature and study history are well aware that once we humans have lost our understanding of money as a tangible, we teeter on a precipice which leads to darker places, like the Marshalsea, or Turkish baths where we may slit our throats rather than face the music. Merdle in Little Dorrit, as BBC audiences will have seen this last week, nabbed his step-son's pearl-handled knife so he could do away with himself in his local hammam, but Madoff (and what serendipity led a man with a name like Madoff to make off with so many people's moolah!) must face the music in court.

So here we are, those banks who seemed to be slipping through the credit crunch somewhat less scathed than others - HSBC, Santander, BNP Paribas, they turn out to be mugs facing potentially billions in losses for bunging the odd quid in Madoff's direction. It's all very well being a brilliant scientist/mathematician/economist/analyst, but once again, we have a prime example of how the financial world depends not on common sense or science, but on a herd instinct focused purely on false expectations. The Greeks, Chaucer, Shakespeare, and of course Dickens and Trollope (both of whom had direct personal experience of the fall-out of financial shenanigans) have all warned us against the pitfalls of handing over our hard-earned to the first plausible smooth-talker. Having watched with interest scams of one sort or another from Ernest Saunders' games with Guinness up to Madoff's appearance in court yesterday, I keep wondering how theoretically intelligent people (eg. Nicola Horlick and all the rest of them who thought Madoff's operations were safe) can fall for the scam. But of course, the other lesson that literature and history teach is that round the next corner, there is always another sucker.

Few fraudsters are remorseful, like Bulstrode, George Eliot's banker whose shameful dealings are exposed when he is at his height in terms of power and influence. Bulstrode has the bulwark of a faithful wife, willing to stand by him through his shame as she enjoyed his erstwhile glory. Ruth Madoff has posted bail to keep Madoff temporarily out of choky. This time, the bad guy will take the fall. But of course, it's still caveat emptor out there. Getting tangled up with money seems to me like getting tangled up with one of those men that country and western gals sing about, the types who leave a girl high and dry, or weeping into their whiskies, lipstick on his collar, a twinkle in his eye, and a permanent label that only shrewd women can read which says, "I will mess you around, you'll be walking after midnight, crazy for me."

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