Are we all broke????
Most of us measure our net worth from the statements we receive from the various institutions where we keep our money and investments. How can we distinguish what is a Ponzi Scheme and what is not?
Bernie Madoff was a reputable investment advisor. Businesses, individuals, universities, and foundations depended on the integrity of the financial statements they sent him. Landlords, employees, and many others depended on his clients. Now many may be forced to shut down triggering further implosions. Here is one example:
The programs of the Robert I. Lappin Charitable Foundation and the Robert I. Lappin 1992 Supporting Foundation are discontinued, effectively immediately. This includes Youth to Israel and Teachers to Israel.
The money used to fund the programs of both Foundations was invested with Bernard L. Madoff Investment Securities and all the assets have been frozen by the federal courts. Mr. Madoff was arrested Thursday morning by the FBI and charged with criminal securities fraud by federal prosecutors. The money needed to fund the programs of the Lappin Foundations is gone.
The Foundation staff has been terminated today.
This is just one...how many will be affected by the shuttering of this foundation alone? What about the counterparties to his market making activities?
How do we know what is legit when someone of Madoff's status can be a fraud? What about Tom Petters and the Poloroid brand? What about all those businesses that existed simply because easy credit was extended to their customers regardless of ability to pay? What about all the banks that are sitting on Trillions of loans that may default?
How do we know that what we see on our monthly statements actually exists or is exposed to evaporation?