A parable that will lead me to the fall of Bernie Madoff:
My first newspaper job was in the old Jerusalem Post, back when the rag was union-owned, left-of-center, and still one-fourth worthy of being called a newspaper. I wanted to work with words and ideas and politics. I also believed – and still do – in the old fifth-grade civics-lesson mission of a free press. I wouldn’t have considered for a moment being a wordsmith for an ad agency, certainly not one hawking cigarettes, no matter how much more money I could have made. The Jerusalem Post ran front page ads. Some were for cigarettes.
So while I considered journalism a calling, worth more than a big paycheck, I too lived off the scraps from the tables of the tobacco shareholders. I didn’t like it. I could tell myself that were I the boss, I wouldn’t have taken those ads, and that if the cancermongers went broke the next day, the paper would still limp along. But I couldn’t get around the fact that I was a vegetarian living off his uncle the butcher.
Years later, one of my freelance gigs was writing for Child, an excellent parenting magazine in the States. It gave good advice to parents, on the pages between the glossy ads for designer clothes for toddlers. I would never have bought that stuff for my kids, and in fact taught them to look askance at ads trying to sell you stuff which has no purpose other than to be bought and look expensive and fill landfill. But I fed them on the money that came from the ads.
Most people in the non-profit sector live with a similar dissonance. They’ve chosen to do human-rights law or teach Talmud or help refugees. They put up with lower pay than they could get doing something else because they want a payoff that can’t be measured in currency. And they live on the donations from people who have made other choices, and who give some meaning to the wealth they’ve acquired by giving it away. Now and then, when I’ve met a rich man who has taken exuberant joy in giving, I’ve come halfway to accepting the value of having rich people.
But among the rich who like giving money away, one of the easiest to dislike is Sheldon Adelson. He made the money in casino gambling, a peculiarly organized con-game in which the winnings of the minority fool the majority into voluntarily giving up their money, with the state cooperating in return for a cut. However, the ideas and opinions on gambling and casinos are now vastly different in the modern world, take this Times of Casino article as an example to see how the industry has greatly changed. There is a lot that is different about playing casino games now, for instance, the majority can be played online for anyone and everyone to play, with restrictions in place of course. Websites such as Login Casino discuss this further and what may lay in the future of certain casino/gambling sites. Not to mention the newest offers of the present, common on online gambling sites; such as free spins or no deposit offers which capture the attention of even more aspiring digital gamblers. Sports betting, which is both a form of entertainment and a simple way to make money online, is sometimes included in casinos. Nowadays, bookies give a sportsbook sign up bonus to entice new customers. However, before joining up, one must ensure that the player is aware of all the restrictions.
Adelson has given to Yad Vashem, and to establishing a Jewish high school in Vegas, and to Birthright. As Haim wrote last week, there’s no evidence that Adelson’s cash is the direct reason for the rightwing bias of some Birthright trips. At the same time, Adelson has directly and aggressively funded projects intended to promote his hard-right views in Israel and the United States. He backs the Shalem Center in Jerusalem, a think tank devoted to bringing the joys of neo conservativism to this country. He’s the money behind Yisrael Hayom, the give-away Israeli daily apparently created in order to help win Bibi Netanyahu another chance to fail as prime minister.
I can’t quite keep track of how many zillions of dollars Adelson has lost lately. Besides the religious prohibition of taking joy in another’s downfall, I have practical reasons for trying to avoid schadenfreude. Adelson, reduced to his last few millions, will retain his health insurance, I’m sure. He may lose a home or six, but not the last one. That can’t be said for all the people he’ll lay off. Meanwhile, the Forward reports, he may leave Birthright $20 million short this year. That’s the livelihood of tour guides, lecturers, and hotel workers.
Which brings me to Bernie Madoff. In principle, Madoff’s con worked a lot like a casino. It sold the illusion that everyone could get richer with nothing being produced. Unlike a Macao casino, it was illegal. Unlike a Norwegian casino (known in Norway as “casino på nett“), it was not only online. A lot of people will go down with Madoff. Some were well off till last weekend. The New York Times describes one man, Richard Spring, who
invested with Mr. Madoff, over time putting more than $11 million into the firm, virtually every cent of his savings, he said. “I’m taking care of my sick mother-in-law. My wife has cancer. I just can’t deal with it,” Mr. Spring said, only barely choking back tears. “I’m cooked.”
That’s one face of Madoff’s allegedcrime. Another is all the philanthropies destroyed, either because they had their money with him, or because they depended on donations from him, or because they depended on donations from people who invested with him. So the Gift of Life Foundation, the bone-marrow registry, is in deep trouble. The news reports describe this as if it’s a matter of numbers in accounting books, rather than of cancer patients who will die, not to mention employees who will be unemployed. Those who live in the United States won’t have health insurance. Wherever they live, their kids will be less likely to go to college.
The Technion will take a hit. Later we’ll find out whether that means junior faculty losing jobs or students not getting scholarships. Ramaz, the prominent modern Orthodox day school in New York, will suffer from the crash of one of its donors – so JTA reports. Likely translation: families without scholarships, teachers without jobs. (Some of those teachers considered teaching a calling, preferable to any salary on Wall Street.)
Madoff’s scheme, as explained so far, worked simply: Instead of making money on the market, he reported false profits, attracted investors, and used new investments to pay off any requests for cash from old investors. It could work until everyone asked for cash at once.
Notice: people are all asking for cash for once because of crash that began with the housing market. The way the housing market worked, everyone assumed that the value of houses could just keeping going up quickly. When older investors wanted to get their cash out by selling property, they’d get it from newer investors. The entire finance economy was a Ponzi scheme, covered up by repackaged mortgage securities, tolerated by regulators. Madoff, if the reports are accurate, if the courts work properly, will do time. Other people, only slightly less culpable, will sell off their third and fourth houses. And those not at all culpable will lose jobs.
Why did Madoff do it? My guess is that the start he was making profits legally. People admired him for it, and wanted to belong to his country club. When he had a bad month, he got embarrassed, like a smart kid who doesn’t want to admit he got a bad report card. So he faked good results, figuring he’d cover the loss later and that he had enough money to cover any requests for cash. Eventually, faking became his full-time business. I’d feel sorry for him, if I wasn’t busy feeling sorry for the rest of us.
Hi Gershom, excellent article. Just one small critic. I am not a casino player, but I understand that the casino gives you the joy of playing (to those who enjoy playing, thats it). Of course it takes the money of the majority to pay to a minority, but if that were the only thing it did, it wouldn’t attract so many people, would it?
I used to be one of those who thought that gambling is just a tax for those who are lousy at statistics, but people have the right to purchase ilusions with their money. And if everything is over the table and clear, then I don’t see what the problem is with the casinos.
Best,
Fabian
BTW, great book you published about the settlement enterprise. I’ve read it a few months ago.
This is a really refreshing perspective – despite the tragedy for “the rest of us” who may suffer the consequences of being “Madoffed”. Its obvious from this and from other sources, that giving to Israel is suffering. I have a simple theory which I’m having great difficulty proving and that is that leading up to and after the 1929 Crash, at the end of a decade that began with the original Madoff – Charls Ponzi, donations to the Yishuv from the US and to the nascent Zionist movement, smilarly suffered. How can I find proof or otherwise for that theory.
And meanwhile Rav Todot for including me in your blog list.
Thanks to the man who is properly named “May doff” – with the money – the suffering will be great for many good idealistic people. (The pun is my nephew’s.)
Will the Clarion Fund-Aish HaTorah distributions of hate literature like “Obsession” and “The Third Jihad” cease? Will the Moskowitz organization, built on bingo and gambling receipts cause economic disaster for the settler movement? Will right-wing Israeli politicians have to run their elections differently? Will Chabad political activities be curtailed? Will the Eckstein – Christian Right organizations stop funding madness? OK, I’m looking for a silver lining!
(Tell me the name of Fabians book.)
Thanks for putting me on this list.
Haim Dov Beliak, rabbi
A wonderful website, especially today’s piece on Ponzi schemes. I was the editor of Present Tense magazine (1973-90) and believe I published you once or twice.
Unrelated question: Re Bilin, today’s NY Times has a piece by Isabel Kershner saying that demonstrators supporting Bilin included “Israeli far-leftists” (Maoists? Reds? Anarchists? Terrorists?). Can this be so? My BS-detector thinks not. What’s your take?
Best,
Murray Polner
Fabian’s remark about purchasing an illusion made me wonder if it isn’t the case with most of us. Gershom, if your speculation about Maloff’s motivation is correct, and it may well be, then he is just another example of insecurity, he purchased the illusion of being a respectable, responsible, good man.
Why are we so insecure by nature? Why, from the rich to the poor do people crave something from outside to prove to themselves they are worthy? Why must even Oprah long for a huge estate that could house a hundred people in splendor? I don’t doubt she has some purchase in mind at this moment.
That’s why I have so little hope for our species meeting the challenge of global warming and attendant threats. With a minority of exceptions, we are creatures that want without limit and without satisfaction when a given want is met. The only limitation for most seems to be the inability to get enough money (or credit). What kind of curse could be more terrible than this unquenchable desire that recedes as soon as it is approached, that roars anew as soon as it is tamed?
As for your feelings on making money while supporting something you dislike – want to form a club? I spend 23 years in broadcast TV aiding the effort to promote the kind of grotesque over-consumption that has landed us where we are. All I can tell my conscience is that I quit before spending my whole career at it.
You are still no better than you were when you worked for tobacco mongers. Your organizations are funded by the EU, which probably obtained some of its wealth by ripping gold teeth out of Jewish corpses. That stolen Jewish gold helps you avoid productive labor and call for an Israel without borders, a true “final solution” for the Jewish problem.
We all “probably” contain the benefits of genocide, Mr Berg. An “Israel without borders”? Do explain this one.
There’s a little more blame to go around. UJA-Federation (according to the Jewish Week) had conflict-of-interest rules in place so that those in charge could not invest its funds in their pet projects. As a result, they emerged unscathed in this particular debacle. YU, on the other hand, had no such rules (although the JW reports that they were working on instituting some), and it is said that they are in the soup for $100 million. UJA is looking pretty good right now, and it’s because they behaved responsibly. Some (not all) of the institutions that were hurt were certainly defrauded, but they bear some of the blame for not being responsible in the first place.
Let me explain an Israel without borders. Yossi Beilin prepared the groundwork for the Oslo agreements in 1988. He felt that Israel should be integrated into the Arab world. Jews would live and do business in Tel Aviv, but the cops would be Arab, the mayor would be Arab, the army would be Arab, and there would be no separate Jewish state. Kind of like the absorption of Hong Kong by China. However, Mr Beilin did not subject his proposal to a vote of the Israeli people, because given the fate of minorities in the Arab world, and fresh memories of dhimmitude, they might not go for it.
I will state what Gershon Gorenberg already knows. The EU elite that he desperately tries to appease cannot distinguish him from Bernie Madoff or the “hooligans” of Hebron. To the EU elite, they are all stinking Jews, with whom Europe is better off without. However, the presence of Israel threatens EU deals with repressive regimes, ie Iran, Pakistan, Saudi, so a final solution is still needed. Therefore, the EU funds NGOs to weaken Israel, ie Mahsom Watch, ICAHD, ISM, Gush Shalom, Anarchists Against the Wall (Anarchists in favor of suicide bombings as long as it doesnt affect us), Ir Amim, and other parts of Gershons pantheon. Yes, Gershon is benefitting from Europes obsession with Jews
as for the “old Jerusalem Post”, too bad the really old JPost wasn’t mentioned. you know, the time when as the Palestine Post, Moshe Sharret used to come over and dictate the editorials to make sure the government had full media support.
I sense a little jealousy. Madoff was a contender. Gorenberg never was
Are the Jewish Bil’in demonstrators ‘far leftists’? well, ‘anarchists against the wall’ certainly are:
http://www.awalls.org/
Anarchism is far more popular than marxism in many parts of the west, but the social values involved are far leftist – they have not (except for a small number of hard right russian groups) flipped over into right-wing ‘anarchism,’ like the Makhnovites or something.
“I’d feel sorry for him, if I wasn’t busy feeling sorry for the rest of us” – I couldn’t think of a better way to summarize this sad story.
It’s terrible to see how many institutions and organizations have been hit.