The greed of money that led Madoff to resort to unethical accounting practices is not a unique event. In fact, the very basis of corporate America seems to be greed and unsustainable profits. As the case of the collapse of Lehman Brothers clearly illustrates, the unrealistic ambition of CEOs of large corporations is a major factor. For example, Henry Fuld, the Lehman Brothers CEO who took his company to bankruptcy, had earned $350 million as compensation in the three years before the collapse. This figure is comparable to the money earned by Henry Ford, the founder of the Ford Motor Company in the three years leading up to the Great Depression. The deregulated economic environment of the Coolidge years is quite similar to the right-wing economic policies implemented by the Bush Administration during its eight year tenure. (The Washington Times, 2009, p. A12) The Madoff Scandal then looks like a case of history repeating itself. In this context, it is incorrect to place the entire blame on Bernard Madoff and the fraud that he carried out.
The responsibility for the crisis lies primarily with such institutions as the SEC, the Federal Reserve and other government agencies. In the case of Federal Reserve, its policy to encourage trading in complex financial products such as derivatives had played a major role in the economic crisis. The policies framed by the Federal Reserve had indirectly contributed to income disparities in American society, which proved to be a key factor. For example, in economies where income and wealth are unevenly distributed, the supply-demand equilibrium is threatened. In the years leading up to the present crisis, the middle and lower classes which form the majority of the population, found themselves with inadequate disposable income to buy products and commodities. In other words, the supply overshoots the demand thereby leading to a state of economic instability. During the first few years of this millennium the gap between the affluent and the middle class got wider. During the second term of the Bush Presidency the top 1 percent of the population owned more wealth than the bottom 90 percent of the population put together – an unbelievable fact. In the same period, the top CEOs of major financial institutions were drawing more than $39 billion in bonuses alone. These imbalances led to an unstable economic climate, which ultimately precipitated the market crash and recession (Daily Record, 2009, p.9). Considering this, it would be imprudent to make people like Bernard Madoff the sole culprit.
It is indeed remarkable that in spite of several episodes of recession in the last sixty years, the American legislatures have not been suitably amended to mitigate future recessions. Even under the new leadership of President Obama, no major changes have been made to change the policy framework. In fact, judging by the remedial measures taken so far, it seems that the present stimulus and bailout packages offered by President Obama does not measure up to the New Deal initiatives taken by President Franklin Roosevelt in the aftermath of the Great Depression. In this scenario, singling out Bernard Madoff and his ponzi investment scheme for the present economic turmoil is quite inaccurate. (Rothschild, 2009)
It should be noted that the economic recessions are not unpreventable. The leading economists of our time, Joseph Stiglitz and Paul Krugman, both Nobel Prize winners in the field of economics, have unequivocally expressed their support for the nationalization of banks, which they believe would enforce greater controls on the financial system. But their voice of reason and prudence was drowned out by the more influential corporate media commentators and lobbyists. The problem is compounded by the prejudices held by a majority of Congressmen and Senators against the notion of ‘nationalization’. The very term, according to most of them, betrays the key founding principle upon which the American nation is built, namely that of unfettered capitalism. Furthermore, the collapse of Lehman Brothers and the Madoff Scandal were not an one-off events; several other major banks such as Meryll Lynch and Citibank were also on the verge of bankruptcy. This should have convinced the policy makers about the systemic failure of the financial system in America – something which piecemeal solutions like financial bailouts will fail to address. But the political and corporate opposition to the measure is so vocal that President Obama had to settle for the next best plan, namely, infusion of taxpayer money to support privately owned banks (Rothschild, 2009).