In times of trouble, it is easy to suspend disbelief and to give credence to those things that one would discount in a calmer climate. My brother John called me Friday night. He wanted to know what I knew, if anything, about the rumor going around that Stanford International Bank was the actual owner of the well known brokerage Pershing LLC. The story was that Pershing's assets had been frozen by the Securities and Exchange Commission as part of the securities fraud enforcement action it brought last week against Robert Allen Stafford pictured above in happier times. This would have been bad news for the family seeing as how the assets in Mother's revocable trust are held and maintained by Pershing.
To bring you up to speed if you have not heard, the SEC brought the aforementioned enforcement against Sir Allen (he was knighted by Antigua and is fatuously referred to as such in Stanford press releases despite his being a Texan) when the 8 billion dollars representing investors' money said to be on deposit in Certificate of Deposits in the Bank of Antigua did not actually seem to exist. The Bank of Antigua, owned by Stanford, was offering rates of 10% for its CDs, a rate of return which should have put the prudent investor on notice.
Actually, there are numerous red flags in the preceding paragraph: 1) a rate of return on CDs wildly out of kilter with rates offered by stateside investment products ) offered by an offshore bank in a part of the world known for banking and insurance fraud 3) owned by a Texan who refers to himself in the honorific. One would think that the prudent investor would steer clear of something that appears to be to good to be true especially if it would require him to deposit money with a bank in an offshore, and hence uninsured, bank. Alas, you would be wrong. Rumor has it that a local businessman, lured by the siren call of the 10% return, deposited ten million dollars with Bank of Antigua. One would also think that if one had that much money one could get by with,say, a 2% return. That is why I suppose that I am merely solvent as opposed to wealthy. I do not think big.
The extent of the losses associated with Stanford International Bank have yet to be completely fixed. However, the loss to investors who put their trust in New York's Bernard L. Madoff, currently stands at some 50 billion dollars. Indeed, the trustee appointed by the Court to go through what passes for the books, has indicated that Madoff had not actually made any investments with the money given him by investors for at least the past 12 years. 12 years! Some have predicted that the Madoff Ponzi scheme may eventually go down as the biggest fraud in the history of finance.
And they say one person can't make a difference.
In my conversations Friday night I learned that more than one person I know had money on account with Stanford or an entity owned by Stanford. Their money is frozen. It's insured but they don't have access to it and nobody seems to know how long this will last. One man called his Congressman who advised him to "get a lawyer." This is not good.
If the last 2 years have taught the American people anything, it is the essential truth of a couple of time worn statements: What goes up must come down. If it sounds too good to be true it probably is. And here's one more. The notion that "the market will police itself" has been proven to be a complete falsehood. And thousands of people, innocents and idiots alike, have tasted financial ruin at the hands of imprudent, if not criminal, big talkers like Stanford and Madoff who made millions while the regulators looked the other way.
The truth eventually shook itself out by Saturday. Ray the Magician, our financial guy, left me a message. His voice was that of a man who had been on the phone a lot lately.
"No," he said. " Pershing is not owned by Stanford. Your mother's assets are not frozen. Everything is fine." Turns out that the SEC had frozen money Stanford was running through Pershing. "Running through" being an apt phrase for what I predict will eventually be revealed to be a pretty impressive money laundering operation. But all is well. Mother will not be kicked out of the nursing home.
I read recently that the Talmud makes a distinction between a crook and a thief. A crook pulls a gun on you and takes your wallet. The violation is episodic and limited. However, the thief sets upon while you are unaware, takes everything you have and leaves you destitute. Worse of all, the thief, in his hubris, forgets that God sees everything.
God sees everything.
Tell it to the guy who can't afford to keep his Mom in the nursing home anymore. Or worse, has lost every dime he ever had.
See if it makes him feel any better.
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