Rutten on Madoff

LAT columnist Tim Rutten writes today that the $50 billion fleecing that Bernard L. Madoff gave the securities markets and investors is the result of insufficient regulation. Deregulation has failed, he writes, and the "absolutists insistence on the superiority of 'individual choice' and 'free markets' now is exposed as so much vacant rhetoric." Rutten doesn't explain how unfree markets and lack of choice would work or why it would be better than what we have now.

Rutten then writes of people like Mort Zuckerman and Jeffrey Katzenberg and questions why such people, who presumably are sophisticated investors, would allow themselves to be taken in by someone like Madoff. One answer, though not Rutten's answer, seems to be that they were looking for a higher rate of return than others were getting. Madoff seemed to be producing that higher rate of return.

Bob Citron, treasurer of the County of Orange, California, produced higher rates of return than other treasurers in the years leading up to the 1994 bankruptcy. Until the bankruptcy, everyone thought he was a genius, like investors thought Madoff was. He wasn't. He just took more risk than anyone else did.

There will always be Madoffs and Citrons and Enrons and Worldcoms. No amount of regulation can prevent it. Bureaucrats aren't that smart. Investors need to be wary. It's extremely foolish to think you can beat the market.