All in the Family

Today a friend was explaining to me an educator's theory (I've forgotten her name) of class and education:

the lower and working class families tend to live for today, without saving a lot, or looking ahead, and they hold their family members very close and rely on family;

the middle class and upper middle class are more goal oriented, they save, they encourage their children to take risks and achieve, and they are less bonded emotionally to their kids and immediate family;

the upper class and extremely wealthy live on past loyalties and connections, and they also hold their values, family and wealth very close.

Watching the Madoff ponzi scheme meltdown and his family ties I think she's on to something. Madoff's niece married a SEC employee, and Walter Noel (Fairfield Greenwich Fund with close ties to Madoff) has 4 or 5 sons-in-laws in the business and they have involved banks and clients for billions around the world--Spain, Brazil, Switzerland, etc.

"The Securities and Exchange Commission plans to probe the relationship between the niece of financier Bernard L. Madoff and a former official at the agency, according to a report in The Wall Street Journal on Wednesday. The probe comes on the heels of an admission by SEC Chairman Christopher Cox that the agency was aware of numerous red flags raised over Bernard L. Madoff Investment Securities LLC, the focus of an alleged $50 billion Ponzi scheme." Market Watch

"In 2002, Vanity Fair dispatched the photographer Bruce Weber to shoot a lavish spread of Mr. Noel’s wife and their five grown daughters at his home in Connecticut (“Golden in Greenwich,” read the headline). That was followed, in 2005, by a Town and Country story on the Noel family’s tropical retreat in Mustique." NYT

Makes you wonder if the glossies will be the next victim of the meltdown, because they follow all the socialites and charity balls. Some charities are closing their doors, and the wealthy aren't answering their phones. In today's WSJ, Holman W. Jenkins, Jr. asked, "When has the SEC ever found a fraud except by reading about it in the newspaper.?" These allegations surfaced in the late 90s, but the SEC never recommended any action. Sort of reminds me of the banking committees in Congress, aka The Barney and Chris Dog and Pony Show. They didn't think there was any problem in the Fannie and Fred housing schemes to back loans to people who couldn't possibly pay it back. Jenkins also suggested that the government, when Madoff makes bail which is tough since the people who could help him are his victims, he be put in charge of Social Security, an even bigger ponzi scheme.

Chart of Madoff losses