Real Insight. Real Estate.

Today’s question comes from a Forbes article that posits the relationship between Bernie Madoff’s sentencing, and what Lehman Brothers head Dick Fuld and others deserve to get….

Q: Is Madoff Really Worse than Fuld?

In a word, “Yes.”

In a few more words, “Are you f@#*ing kidding me?!?!?!”

Trust me, I am no fan of Dick Fuld. He made some terrible decisions and cost all of us a lot of money. He did not, and this is important, intend to rip us off. At the time of collapse, from what I’ve read, their books were in order and everyone knew what the business model was. Fuld and his staff placed their bets and they didn’t pay off. If you want to say, after the fact, that they were bad bets, fine.

Madoff, on the other hand, stole money and lied about it. He lied to prospective clients, he lied to current clients and he lied to regulators. He lied to charities and stole their money. He lied to friends and stole their money. He did so on a grand scale and for a long time.

The comparison between Fuld and Madoff is outrageous and reveals a common fundamental misunderstand about capital markets. If you buy a stock and it goes down, it does not mean you made a bad investment decision. The measure of a bet is not its payoff; it is in the risk reward profile at the time the bed was made. Fuld et. al. made some bets; they made them in public, and fully intended to pay back their investors.

If you think Fuld was paid too much, or the bonds they churned out were over-valued or being levered 30 to 1 is insanity; go talk to the board, the ratings agencies, and/or the regulators. None of them, as far as I know, were lied to.

To specifically answer the question, a lying thief is worse than a bad gambler – especially a gamble enabled by everyone around them - by a long shot.

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