All Wall Street a Ponzi Scheme

Wall Street's just a Ponzi scheme too
By Kevin Spak,  Newser Staff
Posted Dec 19, 2008 8:12 AM CST
In this Thursday, Oct. 23, 2008, file photo, SEC Chairman Christopher Cox testifies on Capitol Hill.   (AP Photo/Lawrence Jackson)
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(Newser) – Bernie Madoff’s $50 billion fraud wasn’t all that different from what his Wall Street peers were up to, writes Paul Krugman in the New York Times. Oh sure, “Madoff allegedly skipped a few steps,” stealing the money without bothering to load up on debt, buy dubious high-yield assets, then pay himself a big bonus for his “profit.” But in both cases, money managers got rich and investors got screwed. Call it “America’s Ponzi era.”

The damage likely amounted to about $400 billion a year, or 3% of our GDP, but the costs “went beyond direct waste of dollars and cents,” Krugman writes. “The vast riches being earned undermined our sense of reality and degraded our judgment.” An entire generation was lured into the fraudulent arms of investment banking “at the expense of science, public service and just about everything else.”