The list of those defrauded by Bernard Madoff's massive, alleged Ponzi scheme is long and illustrious, but there are some names conspicuously absent from it: those of the major Wall Street banks ... and it may not be an accident, either.
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While banks may have missed the warning signs on mortgage-backed securities, they appear to have sniffed out that not all was kosher with Madoff's fund a long time ago, according to the Financial Times. The newspaper
writes:
Banks were skeptical that Mr. Madoff could deliver the consistently high returns that he reported, and they were also put off by a lack of transparency at his investment firm. For these reasons, big Wall Street firms are notably absent from the long list of victims of Mr. Madoff's alleged Ponzi scheme. ... Two years ago, an internal Merrill report drawn up in connection with Merrill's European fund of funds group, concluded the group should not deal with Mr. Madoff, [Fabio Savoldelli, chief investment officer of Merrill Lynch Investment Management prior to its 2006 merger with BlackRock] said. "We had a red light on doing business with him. There was no transparency."
Still the large Wall Street firms appear to have kept their concerns to themselves (and didn't share them with regulators) for fear of alienating clients who had put money with Madoff. While the bank's reluctance to "bad mouth" Madoff may annoy those who lost out in the Ponzi scheme, there's probably a long list of investors that are thanking their lucky stars that they took the Wall Street firms' advice to steer clear of Madoff. -
George White See story from the Financial TimesSee Dealscape post on Madoff congressional hearingsSee Dealscape posts on Wall Street scandals
