The Grift

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We have spent the better part of the last decade debating about Trump and his coterie of Grifters that define both his business, Trump Enterprises (whatever those were) that included Real Estate, Casinos, Clothing Lines, Wine, Classes/Seminars, Steak, and other labeled brands that extended to other members of the Family that shared the name of Trump. From the seat in the White House he managed to further extend that brand to the point it drew attention from the State of New York which prosecuted members of his corporation, his personal Attorney and finally Trump himself for acts of duplicity and fraud regarding his real estate “empire.” That led to a massive penalty which he will not or will pay and this will go on perhaps for years more. There are other debts, trials and tribulations that seem to never have an end game in sight and that is what falls into that classification of the “Long Con.” A long con is one that takes place over a much longer time frame, I feel the story on John Oliver’s show regarding Pig Butchering is a great example of one of the current crops of long con. Bitcoin is a fabulous example of how that also plays into this story. A great long con if ever there was one, with the nefarious invisible “Banksy” who created all this but no one really knows who he is, where he is and what is this about? But even Kara Swisher in her new Memoir writes of another in Silicon Valley, Mark Zuckerberg, who may be perhaps the best at this new type of Grift. Social Media is one long con.

This article in the New York Times discusses the growth of the Grift. And where I found this definition which I have paraphrased and added my own comments.

The difference between a Grifter and “Grafter” are often tied together. “Grift” evokes not so much specific criminal acts as a broad, opportunistic racket, executed with a bit of cunning and panache; Grafters are stolid and conventional, lining their pockets and then quietly retreating to one of their several homes. A Grifters has both flair and ambition, who seem to delight in the con itself — the cleverness of the scheme, the smooth ease with which the marks were gulled. So while Trump is a classic grifter take a look at many who attach themselves to his varying schemes and plans. Many worked for him during his Administration quickly extricating themselves post January 6th but would happily Vote and/or work for him again if the opportunity arose. A Grifter loves a Grafter as they give them legitimacy. I prefer the term “Enablers” which is another way of allowing or permitting if not encouraging the behavior, a person usually associated with Addiction and there is no greater addiction than money. All of Venture Capitalists are some type of Enabler. Without them or the banks would Sam Bankerman Fried or Bernie Madoff made as far and in his case as long without them?

Now we are all being grifted or are grafters at some point. We take an opportunity and we work it to our advantage. I like to think of Real Estate Agents as the lowest on the professional totem pole who play the role of Counselor, Financial Advisor and Best Friend as you try to buy or sell a home. They dip their wick in both pots often coming out well ahead of the game when you are working with one and this adds to the price of housing and why many cannot afford to as they work in tangent with another Grafter, the Mortgage Broker/Agent. Banks are not the only one who writes these loans and they too have a massive interest in making money, yours. The process of this led to a massive financial crisis in 2008 and yet not one saw a trial or a penalty in the process for this and many banks were bailed out and rescued from their misdeeds. But without the Agents and these secondary lenders, few would have made it to sign the papers and make the sales of a product they could not afford. Used Car Salesman get a bad rap, add Real Estate Agents to the list. There are many many more stories about Real Estate Agents and their acts of fraud and duplicity, and by far more costly. Just Google “Real Estate Fraud” to see the list of crimes they have committed.

This week a neighbor and her husband moved out of my building. He is a Surgeon and she is a “Model”/ Real Estate Agent. I did not like nor dislike them I simply lived down the hall from them and kept it at that. Upon their final move out our Refuse room was full of their rejects, disgusting broken furniture, filthy smelling couch cushions, and largely junky items that seemed to be from a college dorm than an adult professionals home. Their move out was done in a small order Uhaul truck with two hired hands who packed what they took with them to relocate to Pittsburgh. To say crap in both quality and design is to be polite. I had to remind myself that this Man was a fucking Surgeon and this filthy shit is his? His wife the model did not adorn herself with the quality of designer goods but they did have three vehicles, two Porches and Volvo. Well priorities. And while living in a building that is largely filled with Asian families and Students who live very cheaply I did laugh as it explains why the fascination with my decorated digs is a source of discussion. And for the record many many folks who rent now are taking it upon themselves to decorate and design living spaces that reflect their taste. And yes folks what comes up can come down and if you are responsible you restore, replace all what you did back to the shit the building gave you. Or you can be like the Doctor and his wife, leave it there and pay for that via forfeit of the damage deposit. Clearly he has the cash. But man would I want that Man operating on me? NO! Again, this is a choice and it takes a weekly wander outside any apartment building at end of month to see the treasures and trash left behind.

And that too is another kind of Grift, the tip. There is now an industry tied to the Tipping Economy. The complaints about the added “service fee” and the mandatory tip on screens when at the Bakery or Butcher even have made one wonder what is appropriate and how much also has become an insidious way of doing business. Living in already overpriced multi family housing means Tips at the Holiday time are mandated if not expected. For many the strain of tipping a building with often dozens of staff, many invisible can be an expensive proposition. To give you an idea, we have in our Building we have Six Front Desk Staff, some whom work Graveyard and often have limited Tenant contact but no less an important job in which to provide security and maintain package inventory and distribution for those who do collect them at odd times. The cleaning and maintenance staff are (often at times) 10 in number and do most of the heavy lifting; Add to that the Superintendent who oversees that crew and lastly the Manager and when we have one, an Assistant. (And for the record the Manager has massive problems holding staff so the turnover is high and often overtly dramatic adding to buildings toxic demeanor) So, at one point we have over 18 people we have to pay at some point, and how much and do all of them get it? I mean the fat fuck who is the Gossip troll deserves the most as that way you won’t be gossiped about right? He should get the most too as he is fat, old, barely walks and is a troll right? Over the young girl who works her ass off. But how about the former Lead who used her position as “helping people” by enabling those with Dogs and Kids to be largely ignored when the kids were running wild in the gym unsupervised or the Dogs shit everywhere or the ones that killed a dog and another attacking a woman, but they were “good” Tenants as they tipped more and more often. So that is hierarchy in Apartment living, who tips, how often and how much matters. And there are a lot of holidays and dates of import. Valentines Day, Lunar New Year, Holi, their birthdays, your birthday all are on the calendar and have cards ready in which to shove in that obligatory payment.

We think of Grift as something associated with Politicians and there is no greater profession guilty of it, but it is everywhere. It is the way we assert our control and and influence even in the most benign of situations. And with that we are not exempt from the fraud, the duplicity and the guilt associated with our role as Grifter or Grafter. The recent story about the New York Times Reporter who handed over 50K in cash to a recent scam, but the Bank who willingly handed over 50K in cash is the same banker who is supposed to notify the IRS if you have deposited more than 10K in your account to notify them as earnings. Or the payment apps if you have transfers exceeding 300 dollars. The Police who will take any amount a cash during a traffic stop legally as a it too is suspect under the guise of Civil Forfeiture. So that Estate Sale, Car Sale, or some transaction is all watched or monitored or taken as it is all seen as gotten gains. But taking it out and in cash to pay an extortion not a problem in the least.

Grift or Graft, the Con, the Long Con and we are all players or victims in the game. This article from Psychology Today explain who is more likely to be a victim, but in reality we all are at some point players in this game. It is just how much you lose what matters. We are all pigs waiting to be butchered.

The Art of the Con and Why People Fall for It

How the con is pulled off, why fraudsters are successful, and how to spot them.

Posted September 26, 2019 | Reviewed by Jessica Schrader

By definition, a con artist is a manipulator who cheats, or tricks, others through persuading them to believe something that is not true. Through deception, they fool people into believing they can make easy money when, in fact, it is the con artist who ends up taking the victim’s money. The criminal and legal consequences of such indiscretions can be insignificant or great, depending on the circumstances and the laws of the land. In the course of co-authoring The Crime Book, which covered more than 100 crimes, I researched and wrote a chapter about con artists. Their crimes are varied, as are their behaviors. But the one thing they each have in common is the power of persuasion to take advantage of unsuspecting people.

Name of the Game

The confidence game, as scam artistry is called, is one of the oldest tricks in the trade. It exploits people’s trust. Human nature is on the side of these masters of fraud when it comes to defrauding their marks, or victims, and contributes to the con’s enduring success. Perpetrators have been referred to everything from flimflam operators, hustlers, grifters, and tricksters. The victims have been called marks, suckers, and gulls. And while media publicity has further romanticized cons and put their crimes in the public eye, their actions are anything but glamorous.

Even further, the cost of the capers to victims may run anywhere from a couple hundred to a few million dollars, with some victims learning the hard way, using their own free will, that when an offer seems too good to be true, it probably is. In fact, the Federal Trade Commission reported that people lost $1.48 billion to fraud in 2018, an increase of 38 percent in 2017.

It Can Happen to You

How do unsuspecting people get duped to begin with? After all, even the most rational people have proven susceptible to crimes of trickery. That’s because con artists often prey on people’s trust and their propensity for believing what they wish was true—especially with get-rich-quick schemes and individual’s desire for a quick buck. They let their guard down and buy into what con artists feed them—all in the belief of the scammer and a high rate of return in exchange for a small investment, albeit a shady deal. But the convincing scammer skews the victim into thinking the payoff will come true and the scheme is legitimate.

Some famous con artists were at the top of their game—until they ultimately got caught. With impersonator Frank Abagnale and international career jewel thief Doris Payne, they are the epitome of the swindling game. By their own rights, they became experts at the art of the con and successfully evaded law enforcement for years. Two centuries earlier, Jeanne de la Motte, a cunning Frenchwoman, orchestrated a diamond necklace affair, which was one of several scandals that led to the French Revolution and helped destroy a monarchy.

Other significant confidence criminals, from forged artwork to fake manuscripts—Elmyr de Hory, a Hungarian-born forger of Picassos and Matisses, who sold more than a thousand pieces to art galleries worldwide, and novelist Clifford Irving, who wrote a fabricated autobiography of reclusive billionaire Howard Hughes. These stories break down how grifters pass off their own works as those of masters and literary greats—but eventually they too were caught.

A con artist can execute remarkable expertise in their trickery, as with Czechoslovakian Victor Lustig, who in an underhanded plot sold the Eiffel Tower for scrap metal—not once, but twice.

Psychology of the Con

Each of these con artists have one thing in common: the power of persuasion to swindle their victims. The successful ones exhibit three similar characteristics—psychopathy, narcissism and Machiavellianism—which have been referred to by psychologists as “dark” personality traits.

Those characteristics allow con artists to swindle people out of their money without feeling any remorse or guilt. Another thing most chiselers have in common are their egos. These extortion sales people boost the psyche of the perpetrators and make them feel even more confident, thus the description of the con has been termed as a confidence game.

Because cons often change their identities as part of their game, it can be pesky for law enforcement to catch them. Also, police may not even go after them when the crime has to do with bilking property and even money from their marks. That’s because the law can consider the loss a civil issue and not a legal one, unless it’s a corporate white-collar crime, such as those committed by Bernie Madoff, a former stockbroker, financier, and operator of a massive pyramid scheme that perpetrated the largest financial fraud in recent US history. Going after grifters is often of low status, more difficult to prove, and less likely to be prosecuted, with violent crimes and terrorist acts of higher priority.

That happenstance leads to a message for everyday people: Buyer beware.

Hide in Plain Sight

I started watching Survivor again during the pandemic to see how this war horse would handle a pandemic and the demand for more diversity on the cast. They made many changes to the time frame played, shortening it, to the way the game was played with varying immunity challenges and the ideas to form bonds across tribal lines while maintaining the original core of the game, the million dollar winner. It is always almost always White Men. And this season despite being the most interesting of diverse casts and the ability to literally cast away most of the White Men and the two Black Men whose alliance was the target versus them (which frankly is a departure) ultimately the sole Survivor was who? The sole White Man who did nothing to add to the tribe but be a manipulator who claimed he was hiding in plain sight. What a tool and it was that ability to be such a fucking white man that a Jury of largely who? White folks rewarded him with the million. And with that denied the most interesting of players who are of color and one a woman nothing. Typical so for the future I am out. I cannot think of another reason to watch white men win shit for largely just being white.

And with that it brings me to another White Man, the Crypto King, Sam Bankman-Fried. The moppy hair flop top of cargo shorts, dirty tee shirts and sneakers that looked like he just rolled out of bed from a hard night of frat boy partying is now in the slammer. He is the token of late but he will be joining the sole Female of that, the Theranos Queen and her former boyfriend, Sunni. Well that is some survivor diversity right there! Naturally they are missing a wider cast, the Uber asshole, the We Work Shyster and some others who have committed equal levels of duplicity if not fraud in building the bullshit that defines the Silicon Valley hubris. There are other players in the game, equally diverse but now crime free. The Robinhood Partners, who are first generation Americans, so they did not get the memo about how Meritocracy was a myth. Then we have the SPAC founder who flew off on his private plane and left investors on the runway.

In profiles of both SBF and Chamath Palihapitiya, there is a consistent narrative – fake it, make it and cash out. SBF had not been smart enough and instead went Madoff. As the Times points out:

Michael Klausner, a professor at Stanford Law School, has written about the difference between those who back SPACs, like Mr. Palihapitiya, and investors who buy their shares after the listing. A backer can put in a small amount of money but still gets 20 percent of the shares, essentially for free. Ordinary investors don’t get the same terms.

“Sponsors make a killing, and public shareholders take a bath,” Mr. Klausner said.

These people are no different than the Gold Rush speculators of a 100 years ago, the Railroad or Steel Magnates of their day. Some make it big, a killing perhaps is the expression and with that some are left dead in the wake. 1929 brought a lot of suicides to the windows and not much has changed as the recent suicide of Bed Bath and Beyond CEO is one not lost. The push to satisfy the insatiable greed of Wall Street, of Venture Capitalists and of course the rank and file investors who believe the hype can take a toll on anyone. I always look at Jack Welch the true benchmark of what the modern day CEO has become, the slash and burn type who has little to worry about as their golden parachute can land them safely in their Bahamian mansion. They may wear a different uniform, aka, costumes to plead their case or manipulate the media, but they have a similar mein – win and win big fuck everyone else.

Think about your 401K or even a pension fund, they are run by these same type whose primary concern is their fees and there push to make more for you is in reality a way to make more for them. They make money regardless of if you win or more importantly lose, and the recent hits on the market have dramatically affected many a net worth when it comes to retirement savings. I recall an exchange where a moron informed me that my investments, largely outside the provenance of 401K (although I have one for tax purposes) was a waste and rip off. Yeah okay so tell me now what?

I meet many people who are looking for that ground up, the early Apple investor, the Amazon shareholder and I laugh. Really the only way is to possibly fuck them or a family member to get that foot in the door. Look at the walking idiot Elon Musk, I am sure that his largest contribution to his initial holdings in PayPal was holding the actual creators dicks while they were coding the platform. They fired him. Hey his check cleared so what more do you need? Do people still use PayPal? I sure as fuck don’t unless forced to. And I don’t keep my credit or banking info on the site once done. Same with Venmo (who owns it? PayPal) and the rest, as they are ripe for fraud and are often used for criminal activities, like Crypto only more legitimate but not bound to banking laws. But all of them are largely children of privilege and with that access and availability to con, scam and manipulate people out of money. Just like Survivor.

SBF family are very much a part of the Cypto King’s persona and rise into the social conscience, whoops I mean media, of our lives. They are prominent well established Professors at where? Stanford. That has to be the place where all good people go to become criminals, right Elizabeth Holmes. The earlier prototypes were Harvard but now West Coast baby! After “dropping out” they in turn talk a game and with that find again those rich white men who can write a check without blinking an eye, but that is not the real mark. The real marks are real people who want to be the first, on the ground floor and say “I was there from day one” And then promptly if wise cash out and head to a legitimate financial industry to handle the cash. Well on paper right? But the Crypto King was a family affair, aside from his Parents, his Brother was employed and of course the cult of followers was a Girlfriend who ran the other business that he used to double dip. Ick that vision takes on a nasty turn but given the speed and manner of how quickly the FBI and SEC are charging this doofus means someone on the inside is spilling. Remember that it was George Schultz’s own Grandson who tattled on Theranos. I suspect no fury hath a woman scorned. But his parents for now are not being charged but given what I have read they are either Erika Jayne who never knew of husband Tom Gerardi’s dealings or did sorta kinda know but hey those diamond earrings are super nice, thanks honey! Yeah a mansion is a great place to hide those tears.

And that brings me to the next layer – celebrity and politics. Now CBF was openly buying Democratic support but he was using Dark Money to fund Republicans for equity and parity I am sure! He used Celebrity endorsements, large Philanthropic efforts (another who did this – Jeffrey Epstein) and of course the media both mainstream and social in which to draw the masses. And yet for all its modernity it was just old school embezzlement. It is all a reality program just without the dirt and lack of sleep and food and whoever wins the payoff is the ultimate Survivor.

But we are not even players in the game and if we are we are the early ones booted off for varying reasons, none of which make sense as no one knows each other so whichever white man can convince, con or lie his way into the graces of his tribe mates, aka strangers on a plane, they kick to the curb the one the perceive as a threat. In the case of many these high flying fuckwits are Libertarians and they are against Government regulation like Republicans but they think of themselves as less Conservative and Political. For the record Rand Paul and his father Ron who served in the House are “Libertarian” and Paul Ryan considered himself a devotee of the movement after reading the Queen of the concept, Ayn Rand. Yes, folks policy and economics all delved from a poorly written book of fiction.

To the costumes akin to attending a sporting event to know which team you are for, they play the same with the buff on Survivor. In white collar world it is a suit and tie and in Silicon Valley it was the Black Turtleneck replaced by a hoodie. We all wear some type of body armor in which to identify and belong. We are conformists and followers which means we are sheep and easily lead. For those who don’t walk that path they are ostracized, demonized and vilified. They are the true renegades and often better leaders, creators and yes folks better citizens, but they pay it at a price. They are often invisible and in turn not ones whom others seek and that may be a benefit. But the world is full of outliers and with that they don’t win the spoils. The recent fraud of FTX follows a long line of Ponzi schemers, Bernie Madoff who died in Prison was one. Enron sent at least one to prison, Jeffrey Skilling and he was released in 2019. The Enron Scandal was described as The Smartest Guys in the Room. No wonder my new Manta is: I don’t know, I’m not very bright.

This is just one of many both past and present and there will be more in this world of winner takes all Capitalism. We love money just slightly more than we love guns. But mostly we love rich white guys as we are sure they earned it the hard way, by their bootstraps. Yes made by poor children in Asia. They fall apart easily both the bootstraps and the children so they are quickly and easily replaced. Fast food, fast fashion, fast money.

**ETA: The Stock Market is bullish on the Bulls and with that this announcement may change how many access and understand the market:

FROM CNN:

Wall Street’s top cop has voted in favor of major changes to the way millions of everyday investors buy and sell stocks.

The Securities and Exchange Commission Wednesday proposed a rule that it says would add competition to an unseen — but potentially costly — part of the stock trading system for retail investors. The changes won’t be implemented just yet — a vote in the spring could finalize the rules. But the agency is majority controlled by Democrats and the proposal is expected to be adopted next year.

Today, when you buy or sell a stock on an app, the trade appears to be instantaneous. But beneath that simple buy/sell action is a complex web of Wall Street players exploiting tiny differences in price to rake in huge amounts of cash.

When you tap buy or sell, the broker, such as Robinhood or E*Trade, takes your order to a firm known as a wholesaler or market maker — middlemen firms that are supposed to get you the best price. Wholesalers pay the brokers for the privilege of executing the trades.

That process is known as “payment for order flow.” To support free trading, brokers typically make pennies from wholesalers off each transaction — but those pennies add up, accounting for the bulk of brokerages’ revenues. The SEC said the six largest wholesalers collectively paid retail brokers $235 million in payment for order flow for stock orders in the first quarter of 2022.

Payment for order flow has come under intense scrutiny by regulators following the fallout from the January 2021 run-up in meme stocks like GameStop. The SEC notes that wholesalers typically execute trades “without providing any opportunity for other market participants to compete to provide a better price.”

The SEC’s proposed changes would add more competition at the middleman level to ensure retail investors are actually getting the best prices. Orders would be routed into auctions where trading firms would have to compete to execute them.

SEC Chair Gary Gensler has been a longtime critic of the way the current payment for order flow market operates, arguing that it lacks transparency and competition to the detriment of investors.

Gensler and other critics of the process say the brokers and market makers have conflicts of interest, and that payment for order flow hurts everyday investors while amassing huge wealth for Wall Street firms.

“Today’s markets are not as fair and competitive as possible for individual investors — everyday retail investors,” Gensler said. “This is in part because there isn’t a level playing field among different parts of the market: wholesalers, dark pools, and lit exchanges.”

Gensler noted that everyday folks don’t have the same benefits as larger, deeper-pocketed investors who are often able to execute orders at the best price possible.

“The markets have become increasingly hidden from view, especially for individual investors,” Gensler said. “Thus, today’s proposal is designed to bring greater competition in the marketplace for retail market orders.”

Scam Me

This week brought the viewers of Netflix some new scam artists to ponder over in both fiction and non fictional accounts – The Tinder Swindler and Inventing Anna. The former about a con artist who dated largely Northern European women scamming gorgeous young women via Tinder, taking them out for expensive dates/trips and then leaving them with the bill and naturally, heartbreak. Inventing Anna is a fictional account of a true person with shape shifting abilities in both name and demeanor, profiled in both Vanity Fair and The New York Magazine. During her time in New York she stiffed a few folks and hotels in her wake of pursuing a real identity, that may or may not have any fact or actual concept, but seemed good on paper, if she could manage to find said paper.

They are in a long line of hustler/swindlers who conned the rich out of bucks to fund their Music Festival, their personal wealth and business, the pleasure of the con, the art world, the real estate business, their start ups, their trade, and anywhere and everywhere cons and more importantly their marks exist. Listen to the podcast about Siegfried and Roy and you may find yourself thinking that maybe playing with Tigers is a curse, right Tiger King? Or how about Dirty John? There are dozens of podcasts about many who have been conned, tricked, manipulated and murdered in search of money, love or fame.

Hasn’t everyone at one point been conned out of something be it pussy or cash in pursuit of both pussy or cash, or dick, depending on which way the con swings. I have and I learned the hard way. And yes I was lucky as my credit or earnings were not overtly affected. I have been conned twice, once for love/dick, the other in search of housing. The first one I won’t get into detail as it was too long ago to care, but it was worth the price of the plane ticket to get this garbage out of my house and with that I lost a couple of grand and had some charges wiped, but most I paid. I do consider the drugging and near killing me a partial con, but the reality of that was it was a crime and it was without consent and knowledge so I elect to call it what it was, attempted robbery and murder. A con is when you have the ability to go along with the predator. And then again those too can turn nefarious, Jeffrey Epstein anyone?

But other con was just a basic one and was just a few years ago in Nashville, go figure home of the con. My apartment lease was terminated due to the property being sold and turned into condos and I needed temporary housing. The property I found for a temp lease was a fraud, not uncommon in these days; however I paid via PayPal using my American Express card as security. As one watches both the Tinder Swindler and Inventing Anna, that is one company that comes out with four stars!! They were right on the case and yes I filed useless Police charges and harassed PayPal for their inability to actually vet and verify accounts but it was AMEX who saved me. I ended up fine, but now as I have said repeatedly, come after my pussy or my money we gots problems.

I was listening to the Juicy Scoop podcast by Heather McDonald and she discussed her dating a con who took her for a couple of grand. He did his via a rental car issue after dating her for a few weeks and she knew immediately that something was wrong and found the car and paid the bill. It takes only one and that should be enough. But for many thousands goes into the larger numbers you have to wonder how good that dick or pussy is?

But with the pandemic taking over our lives in a world already soused with the cologne of social media, we can smell our happiness right through our screens. Or not. What.ever. But the FOMO culture, the Millennial neediness to be cool and that is one factor that both Tinder Swindler and Inventing Anna show in spades with the Instagramming of their every fucking movement, next up our bowel movement, further demonstrates the insatiable pettiness and self loathing one possesses in which to document their every move.

And stories about the endless cons and manipulations of those online fraudsters and those who do manage to make it to meet in person became another show itself, Love Fraud, who not only conned the women, he married them! And this group was neither young or wealthy, and not living on the coasts, but the heartland of America. Again, we think all this shit we have outgrown, this says, no, not really.

So natch I found this article on Twitter about the victims of the swindlers and how often they are in fact women, usually impressed with money, and with that in fact all of Anna’s victims were her peers, she defined influencer with throwing about cash to the staff and personnel who served her, conning those who had no life or identity and in were in search of one as well. She never succeeded in getting into the doors of the rich and famous as she aspired, there is where a Madoff succeeds, being male and well connected pays off, women still pay with pussy then charge the work they need to secure entry to said pussy on their own credit. Either/or we lose when it comes to finding dick, we always pay!

The expression, too good to be true, has a point. But loneliness, isolation and the lack of connection to anyone takes a toll. If I found people interesting I would feel that way but it takes only one dip into that pond when I recall the asshole from Ireland, (yes the Irish are born con artists) and the asshole who drugged me, enabled me to get into a car and nearly die, forcing me to fight not only for my life but the truth, to realize there is no man capable of being a presence in my life. That was taken without my consent and at least if I handed the cash over with knowledge as I did with the Irish lad a decade earlier, I might have been able to tell the tale with some laughter but I cannot. This is what online dating does. It takes a life away, sometimes literally. Again I was lucky. I have now eight lives left so fuck off I have no interest in testing that again.

Pop Goes the Bubble

My favorite gym show is The Property Brothers.  If you have not seen said show then you are one of the few.  I of course loathe the Real Estate twin as he is like many in his field with $$ versus stars in his eyes.  It is why when I watch Million Dollar Listing I pretend to be Elvis and shoot the TV.  However, the contractor twin is either the gayest man on the planet as he is both a designer, architect and builder rolled into one or they neglect to mention that somewhere there are those with said skill sets hiding off camera to design and renovate properties in under a month and look amazing.   And all without any type of property inspection, the first rule of property buying is know your property and find any all things wrong with it as that can affect the deal, the outcome and the cost. But hey this is reality tv and who wants reality with their tv.

Property Brothers sort of remind me of a less angry but no less attractive version of Gordon Ramsay’s Kitchen Nightmares or the many other shows that enter a business or home to fix, flip or save.  Of course it rarely lasts in the real world as when you hand the keys over it is back to business as usual.

Last week I saw the return of the con “Rich Dad Poor Dad” and his wealth generating business holding fake seminars about house flipping. And as one car wreck happens on HGTV with regards to some house flipping couple another are in the wings waiting to demonstrate their amazing skill set to design, renovate, improve, build all in weeks for immense profit and pleasure.

And of course we have elected the premiere con in chief of said industry to the highest office in the land.  Talk about art of the deal.

In Nashville I am seeing a horrific trend only in this case commercial real estate.  A different animal but with the same concepts, the same inflated sales and turn arounds with largely out of state investors, likely some REIT’s with possible foreign investors and funded by mostly banks from out of state.  The current largest is Bank of the Ozarks which is reminiscent of Golden West Financial that was largely responsible for many fraudulent mortgages.   And in turn sold itself off to later Wells Fargo.  No wonder they went  into pushing fake accounts on customers as that was one expensive deal. 

A once small lending institution with a taste for grander things was also behind the collapse of Washington Mutual, a staid stable regional bank that too took a walk on the wild side.  And for the record WaMu collapsed but Bank of the West still rages on and it like Ozarks were bailed out during the ’08 crisis.  Here is a list of all the players who received federal bailouts, there are your welfare queens.

I live in Nashville where on a daily basis we are told 100 people a day move here.   It was 85 when I moved here a year ago but hey I am always at the cusp of a trend.  Really they do?  I drive by apartment building after apartment building with free rent and other “deals” to get you in the door.  In my building we are turning over units at a high clip.  I am staying only because the costs to move for the time I am planning to stay will not pay for itself as I actually know how to do math.  That may be one problem that many have when it comes to figuring out the bottom line.

The difference here is the commercial properties are hitting the bubble. I feel it as along with the fake stats our ledger of record, the Tennessean, has a story every day on another property being sold or flipped for millions of dollars. The buyers are from out of state and many talk big with big plans that are bigly huge.  I assume they graduated from Trump University.

My favorite is the old industrial plant, with a water tower no less, just up the street from my apartment that sold for millions and a year ago had plans to build a multi unit dwelling with up to 300 units for rent, all while keeping the historic feel.  The same for the property adjacent that was once the ballpark for the baseball team here.   For the record there is one way in and one way out here and it crosses a train track that runs trains 24/7 that blast horns and block access for hours at a time. Good luck with that.

The dump apartment just under the track which held Section 8 housing was sold and in turn going to be demolished is now being renovated and that work has mysteriously stopped.  Who or why anyone would rent those units are beyond me.   And I have spoken to numerous people who were living in rentals that were not great but worked as they were cheap and then suddenly the house/building flipped and in turn rent went up not 10% but 50%.  Did their income as well go up? But they are told that is what the costs are to improve and maintain the property.  And in turn are the new tenants earning wages to support said rent?  Funny while rents have risen wages are stagnant. But in the bubble you have no idea what is outside of it.

But this is part of what complicates commercial lending for multi housing and development.  You have to “guarantee” a certain rent per square foot and occupancy rates that ensure the lender that you are going to maintain the property and earnings will exceed costs that include payments and taxes.  And well taxes are being raised across the area as this is the only way to generate revenue, so the equation that was used to generate the loan will have to be adjusted.  You know like adjusted rate mortgages that destroyed families when they had inflated balloons attached to their payments that when they lost their jobs could no longer meet.

And this complicates the commercial market as they have to find new investors or tap into the existing ones for more revenue.  I watched the Wizard of Lies on HBO this weekend about Bernie Madoff and his pyramid scheme and thought perfect timing (although ABC also did one a couple of years ago it was just less star studded and comprehensive).  Madoff ran his family firm as an autocratic dynasty for decades, had been investigated once before and in turn a whistle blower informed the SEC that his numbers were clearly frauds. But, it was only when finally the bubble burst outside of this rarefied world above the 17th floor (the floor that housed the criminals that aided Madoff)  did he finally confess to his family his fraud.  It was his sons, both now dead, who turned him in.  They too remind me of two other sons in similar situation today.  I will let you do that math, it’s simple.

Timing, history and reality are in perfect flux right now.  The rolling back of regulations and consumer protections, the hyper speak of jobs and of course the reality that debt is back in a big way all lead to  a potential collapse.  If health care is fully repealed this too will affect the job market in many ways, the ones related to health care (for one Physician there are 18 positions connected to that function in patient care) and those who are receiving it, both personally and professionally.    As well as those considering retiring which opens up jobs and opportunities for others to move up or at least into another position that can enable growth.  And again what that fuels is housing and cars all things that too are a large part of our GDP. 

Right now the equation is off and I feel it here in Nashville in a way that I think the rest of the country feels other than those who are in insulated bubbles.  They too will pop.

How Tales of ‘Flippers’ Led to a Housing Bubble

Economic View

By ROBERT J. SHILLER
THE NEW YORK TIMES
MAY 18, 2017

There is still no consensus on why the last housing boom and bust happened. That is troubling, because that violent housing cycle helped to produce the Great Recession and financial crisis of 2007 to 2009. We need to understand it all if we are going to be able to avoid ordeals like that in the future.

But the explanations for what happened in housing are not, I think, to be found in the conventional data favored by economists but rather in sociologically important narratives — like tales of getting rich through “flipping” houses and shares of initial public offerings — that constitute the shifting mentality of the era.

Consider the data for a moment. It shows us that extreme changes took place but doesn’t tell us why.

Real home prices rose 75 percent from February 1997 to December 2005, according to the S&P/Case-Shiller National Home Price Index, corrected for inflation by the Consumer Price Index. And then, from 2005 to 2012, real prices reversed course, falling to just 12 percent above their 1997 level. In the years since 2012, they have climbed 29 percent, about halfway back to their 2005 peak. This is a roller coaster in national home prices — it has been even scarier in some more volatile cities — yet we have no clarity on why it happened.

The problem for economists is that these changes don’t correspond to movements in the usual suspects: interest rates, building costs, population or rents. The Consumer Price Index for Rent of Primary Residence, compiled by the United States Bureau of Labor Statistics and corrected for inflation, went up only 8 percent in 1997 to 2005, so unmet demand for housing services can’t explain the huge increase in real home prices. It doesn’t explain the 29 percent rise in real home prices since 2012 either, because inflation-adjusted rents increased only 10 percent in that period. So what has been driving the wild ride in home prices?

I believe the price swings have something to do with the changing mentality of the times, changes caused by narratives that have gone viral and swept across the population. Looking for answers in such popular stories contrasts starkly with the prominent approach of modeling people as though they react logically to economic forces. But a less orthodox approach can be quite useful.

One thing is clear: The prevalent narratives of 1997 to 2005 did not include the concept of a housing bubble, not at first. A computer search using ProQuest or Google Ngrams shows that the phrase “housing bubble” was hardly used until 2005, the end of the boom. What is a bubble? It typically includes the notion that, spurred by the public’s expectation of ever further price increases, demand eventually reaches levels that cannot be sustained, and so the enthusiasm wanes and the bubble collapses. But that thought was just not on many people’s minds then, the evidence suggests.

Instead, during the 1997 to 2005 boom there were multitudes of narratives about smart investors who were bold enough to take a position in the market. To single out one strand, recall the stories of flippers who would buy a house, fix it up, and resell it within months at a huge profit. These stories appear to have been broadly exciting to people who didn’t flip houses themselves but who appear to have begun to think that stretching a little and buying a house with a large mortgage would make them wise investors.

In his book “The Complete Guide to Flipping Properties,” published in 2004, Steve Berges extolled what he called “the O.P.M. principle,” meaning “other people’s money.” He wrote, “Your objective is to control as much real estate as possible while using as little of your own capital as possible.” In other words, borrow as much as you can. He wrote about the upside of leverage but not about the perils of leverage during the kind of big price drops that were just around the corner.

It can take a long time for narratives like this to grip the popular imagination. Flipping was “a thing” in the condominium conversion boom of the 1970s and ’80s. The idea then was this: Big-time converters with deep pockets would buy apartment buildings and convert the rental apartments to owner-occupied condos, selling units to diverse individuals, some of them flippers. For public relations purposes, converters would offer to sell at reduced prices to renters already living in a building, and typically to some outsiders, too.

This generated buzz. When renters and speculators flipped their purchase contracts at a big profit, sometimes using borrowed money for down payments to flip multiple units without actually even closing on the condos, it was thrilling. It seemed that anyone with energy and initiative could get rich doing this.

Some people eager to make quick profits bought Donald J. Trump’s well-timed 2004 book, “Trump: Think Like a Billionaire: Everything You Need to Know About Success, Real Estate, and Life,” written with Meredith McIver. Some enrolled in the less well-timed Trump University, which emphasized real estate investment in 2005, at the very end of the housing boom; it shut down, amid lawsuits and recrimination, in 2010.

Narratives about flipping weren’t restricted to real estate. Just after the time of the condo boom, stories of rapid buying and selling of initial public offerings took off as well. As with the condo promoters, I.P.O. underwriters would sell some shares below market prices to customers, who might then flip the I.P.O. for a quick profit.

The promoters of condo conversions and I.P.O.s were onto something. By giving discounts to buyers who would make a high return, they captivated the nation with tales of people who had no advanced degrees or hefty résumés but made fortunes anyway.

By now, the notion of getting rich by flipping houses is entrenched. I searched Amazon for books on “flipping houses” and came up with 328 hits, most written in the past few years. Buying and rehabbing existing houses for resale is a legitimate business. But many of these books make extravagant pitches and seem aimed at inspiring amateurs to plunge into risky ventures.

The public fascination with speculating in housing has been held in check by regulators empowered by the 2010 Dodd-Frank Act, but that restraint is tenuous with the election as president of a real estate promoter intent on reducing regulators’ power. These narratives are still potent and could easily spur further spirals in the housing market.

Madoff only Less with the Made off

On the heels of all the corruption finally getting some legal attention comes another idiot with aspirations of being a total douchebag.  He has no worries there what-so-ever.  What is with the White Establishment (btw I am obsessed with that phrase after hearing Bill O’Reilly use it) and their freaking weird parties to mark their birthdays?

This dude was a financial advisor at Wells Fargo for the love of God, not a hedge fund manager from Blackstone, and yet has the 50th Birthday theme party of Saturday Night Fever.  Okay I outgrew them when I hit about 10, is that a rich people thing or is that he was a poor and never had one? Compensate much?

I said the other day that men are like Baby Ducks when they imprint they follow whoever or whatever is that leads them .  For the White Establishment Male its that moment when they equate sexuality with money and power.  It’s at that age and moment that freezes for them and they connect all of their lives from that moment on. Clearly for this dude it was when:  a) he heard the soundtrack of Saturday Night Fever b) thought John Travolta was the man and heterosexual or c) got laid after that movie or d) all of the above.

Now I bank at Wells Fargo. Nicest clerks in the history of banking really. I love my branch kids but for any type of financial advice of scale and scope I try to actually find those people whose backgrounds and experience are well versed in finance, economics and accounting.  I am not sure the dude at the branch is quite what I am looking for and I am not investing 10 Million dollars so right there I find that interesting to say the least.  And also call me kind of crazy but I know this is a man thing but I am not doing business in a parking lot.  If women did this at a Tupperware party men would go “of course you were ripped off dummy.” But I get it, golf is man’s Tupperware.

I love that he was his own version of Bernie Madoff, the nickel and dime scale of it was awesome but he lived large. I really need to get out more.

Madoff Aside, Financial Fraud Defies Policing

By Jessica Silver-Greenberg
Published January 7, 2012
 
A mock image with Philip Horn’s head on John Travolta’s body.

LOS ANGELES — To Philip Horn, the Braemar Country Club was not just a golf course, it was an extension of his office. Most weeks, Mr. Horn, a financial adviser at Wells Fargo, chatted up potential clients between holes at the upscale club set against the backdrop of the Santa Monica Mountains.

“I always thought, ‘This is a great guy and a straight shooter,’ ” said Barry Zelner, one of several country club members who invested with Mr. Horn.

Now, those same clients are wondering what went wrong.

After Wells Fargo alerted him to account discrepancies, Mr. Zelner, a corporate lawyer, said he stormed onto the club’s rolling greens in April, accusing the broker of theft. “Tell them what you did, Phil,” the lawyer bellowed among a crowd of members.

A few months later, Mr. Horn pleaded guilty to defrauding more than a dozen clients and Wells Fargo.
While Mr. Horn is a relatively minor player in the pantheon of financial fraud, his actions highlight the persistent problems with policing the industry, even after the wave of rules enacted since the collapse of Bernard L. Madoff’s giant Ponzi scheme in 2008.

And the challenge of oversight is not becoming any easier, with the ranks of financial advisers swelling. As new regulations crimp profits, big banks like Wells Fargo are ramping up their brokerage businesses in an effort to make up for lost revenue.
Amid the renewed focus, banks have spent millions of dollars to beef up their compliance systems and improve their oversight. Regulators, too, have bolstered their efforts, increasing enforcement and adopting new measures.

Every month, the Financial Industry Regulatory Authority, a Wall Street watchdog, penalizes more than 100 brokers for various actions, including unauthorized trading and fraudulent activities, as well as smaller violations.

“Theft, Ponzi schemes and other financial scams continue to happen at an alarming rate,” said Thomas Ajamie, a plaintiff’s lawyer who represents two of Mr. Horn’s clients.

For more than two years, Mr. Horn systematically executed and canceled trades in clients’ portfolios, pocketing the profits. To avoid detection, he limited his paper trail and made it appear that the trades originated in his own account, according to court documents.

“It’s simply unbelievable to me that this kind of fraud could happen for so long without Wells Fargo doing anything about it,” Mr. Zelner said. After meeting Mr. Horn on the golf course, Derek Brown invested more than $10 million with him in 2006, assured by the Wells Fargo name on his business card. “This wasn’t just Schlepper & Schlepper,” Mr. Brown, a retired pharmaceutical executive, said.

A Wells Fargo spokeswoman, Raschelle Burton, said the bank discovered the problems with Mr. Horn in October 2011 and immediately alerted law enforcement agencies. Wells Fargo also fired Mr. Horn. Mr. Horn is set to be sentenced on Monday. Prosecutors have recommended an 18-month sentence. A lawyer for Mr. Horn declined to comment.

Some of Mr. Horn’s clients are struggling to understand the extent of their losses. Mr. Brown and Mr. Zelner say that Wells Fargo has not let them review the trading records. Instead, they have had to rely on the bank’s analysis. “The firm believes it has provided appropriate information,” Ms. Burton said.

Prosecutors estimate the scheme’s damages at $732,000. But there are indications the losses could be higher. Last year, Wells Fargo, without explanation, transferred roughly $500,000 to an account that Mr. Brown has at Merrill Lynch. Mr. Brown said he planned to file a lawsuit seeking additional compensation.

While some clients still have concerns, Wells Fargo said the matter had been resolved and declined to provide further details. “In cases where his actions harmed the clients, the firm has either credited those accounts or reached another resolution with those clients,” Ms. Burton said.

On paper, Mr. Horn seemed like a model broker. After a short stint at Lehman Brothers in New York, he spent a decade at Citigroup in Los Angeles, moving to Wells Fargo in 2006. For much of his career, his regulatory record was clean, with few customer complaints.

At Wells Fargo, Mr. Horn, who worked in a team of brokers, seemed to land clients without an aggressive approach. He wooed clients slowly, often over many years. Between golf holes, he would casually mention winning trades, almost as an aside.

He nurtured friendships with clients. Norman Strang, an 80-year-old retired aerospace executive, said his wife regularly cooked dinner for Mr. Horn at the couple’s home in Pacific Palisades, Calif. “Here he was being this friendly guy, and yet he stole several thousands of dollars from our account.” Mr. Horn went to the weddings of both Mr. Brown’s children and planned to join him on a charitable trip to Israel and Morocco in the fall of 2011.

In 2011, Mr. Horn invited clients to his 50th birthday party inspired by the movie “Saturday Night Fever.” The tall and lanky Mr. Horn wore a white disco suit and handed out CDs with a cover that superimposed his head onto John Travolta’s body.

Given Mr. Horn’s gregarious nature, clients say they dismissed what should have been red flags. According to Mr. Zelner, Mr. Horn avoided meeting at his office, preferring the golf course. Between games, they would meet in the country club’s parking lot, where the broker would pull trading documents from his trunk.

“Phil would present his investments as if he was giving you something that would protect you,” said Mr. Zelner, adding that “he was also just a guy you wanted to drink with.”

Many clients trusted him. Each month, they received thick booklets detailing trading activity, but few pored over the trades. “If I had time to do that, I wouldn’t need a broker,” Mr. Brown said.

Amid hundreds of legitimate transactions, a dubious trade was also hard to spot. In one instance, Mr. Horn bought 1,000 shares of an exchange-traded fund for $77.93 apiece on Feb. 15, 2011, according to Mr. Brown’s bank statements. A month later, Mr. Horn canceled the trade. By then, the price had surged to $86. But the transaction was buried within more than 50 double-sided pages. It appeared as a canceled trade, which by itself was not alarming.

Mr. Brown and his wife did not know anything was amiss until they received a startling call from an executive at Wells Fargo. While the couple were celebrating the Jewish holidays in Toronto in October 2011, the bank executive told them about the problems with their account. Mr. Brown added, “He said we had a ‘six-figure problem.’ ”

Smoke Meet Fire

In the world where there is usually smoke there is usually fire. And that seems of late to follow bankers in Wall Street or Bond Street to Players in locker rooms.  Where there are those with money and power and fame it almost seems natural to presume, not assume, that they will do what it takes to get there and do whatever they need to stay there.

I write a great deal about the fraud in banking and I have never about sports and yet it is the most synonymous part of our American Unicorn Mythology as the Marlboro Man.

I was listening to BBC America this morning discuss the travails of Lance Armstrong and the ultimate result of the revelation that his biking success was largely due to drug use and more importantly to the immense logistics due to covering it up.  And of course with that was the “well we knew it but hey we couldn’t prove it” nonsense that almost always accompanies such stories.  I recall when I lived in San Francisco and suddenly Barry Bonds awoke one morning to find himself with a s super power of home runs. 

I remember loving Sports and then somewhere along the line I realized that they weren’t all what they were cracked up to be. One only has to look to Muhammad Ali to see that toll.  The current stories of the hockey players, rugby and footballers who are slowly losing their minds due to the repetitive blows to the head are all one needs to stop enabling in whatever role that means, observer or player.  But in America sports are another up by the bootstraps legacy of how braun can trump brain in making one rich and successful. Emphasis on braun as the brain can only take so much trauma before it finally stops.

I lived in Austin when Lance Armstrong made this amazing recovery from testicular cancer to ride to not one but several Tour de France medals.  His fame was suddenly appointed to some type of amazing genetic heart he possessed that until the cancer was also dormant and then kicked in to ride him to health and success in all areas.  Then leaving his family for fame and relationships with Sheryl Crow ironically to disengage when she too had cancer always left a bad if not ironic taste in my mouth.  Perhaps her illness was too close to home for him or would it show that when one is recovering from a life altering illness naturally its not as effortless as it seems. 

The same can be said for the rich and famous in banking. When Bernie Madoff was riding high despite the fact that those in the know and experienced thought this made no sense, when a whistle blower not only blew but blew loud and often was ignored, it was quite awhile before the losses became no longer ignorable. 

Or we have John Corazine of MF Global, or the London Whale of JP Morgan Chase or now Steve Cohen of SAC Capital Advisors who seems to be the next guilty of only by association as one after another of his former staff are arrested and prosecuted for financial fraud.  My mother always a great source of colloquialisms said “you are only as good as the people you hire or work for” Clearly they needed her as the head of HR in some Wall Street banks.

Blind eyes when it comes to money seems to be the common suit be it in banks or sports. I won’t even touch the numerous and disturbing sexual molestation charges that have become commonplace in the locker rooms of many Universities.  Again where there is money there is this need to not upset the apple cart. 

Is this a male dominant thing? Is it because women are not present nor when they are are so marginalized that even when alarm bells ring they are ignored. Clearly with regards to the banks and their issues that has been historically the case as recorded by Brooksley Born and Sheila Blair. 

I thought this was interesting from ProPublica via the New York Times with regards to the issue of ethics when it comes to performance. And it appears that its the later versus the former that matters to those Masters of the Universe. I note the word Master and it has an interesting an unflattering connotation in every sense of the word.

When Wall Street Investors Favor Performance Over Ethics

By JESSE EISINGER, ProPublica

To have one employee tied to insider trading may be regarded as a misfortune. But, with apologies to Oscar Wilde, to have six looks like carelessness.

Poor Steven A. Cohen, the powerful hedge fund manager who heads SAC Capital Advisors. People he employs just keep getting swept up in a sprawling insider trading investigation that has spanned years. In addition to the six who have gotten in trouble for activities when employed at SAC, at least six others have been ensnared by insider trading ivestigations after leaving the firm. The latest arrest, of the pharmaceutical industry analyst Mathew Martoma, is the first that ties Mr. Cohen to trades the government says were illegal.

An investment manager has defended Mr. Cohen as the Michael Jordan of the investing world. But what if he is the Lance Armstrong?

While Mr. Cohen has not been accused of any wrongdoing, you have to wonder whether his returns have been generated not only through his trading brilliance but also through a culture of cutting corners and pushing employees to the point where they break the law. In the United States, you are innocent until proved guilty, and nowhere can that be seen more than for a man who can generate amazing investment returns.

Astonishingly, investors don’t seem to mind terribly. They added as much as $1.6 billion in new capital to SAC’s flagship fund from 2010 to the end of 2011, when the insider trading investigation was in full bloom, according to Absolute Return, an industry trade publication.

“Insider trading isn’t acceptable in our culture of compliance, and we don’t give a wink or nod to the contrary,” said a SAC spokesman, who declined to make Mr. Cohen available for comment.

At least some big institutions have begun to contemplate thinking about perhaps withdrawing money from Mr. Cohen. Congratulations. What took them so long? Citigroup’s private bank has told its clients not to put in new money, according to Bloomberg. What about getting their clients out? Why hasn’t bank given that advice before this?

A Citigroup spokeswoman explained that the private bank “typically puts funds on watch when there is significant news around a company; that is not a recommendation to move or keep money in the fund.” She declined to comment on Citigroup’s relationship with SAC.

Blackstone is thinking hard about it, according to reports. Think think think. That firm declined to comment.

Several prominent funds-of-funds still have money with him. Société Générale, the big French bank, decided to redeem its money only after the latest allegations. Given all that we know, how in the world do major institutional investors still have any money with Mr. Cohen?

The biggest, most sophisticated investors certainly put an enormous amount of pressure on hedge funds. But almost none of it is about ethics and clean culture. It’s about performance. A fund that runs a few ticks lower than its peers for several months running can get put out of business.

But investors seem to demonstrate little interest in whether the person is ethical and trustworthy. Shouldn’t their threshold be a wee bit higher? After all, these institutions are mainly investing other people’s money. Investing money isn’t quite a sacred trust, but it’s a trust nonetheless.

Many institutional investors have so perfected the art of looking the other way that they make bystanders on a New York City subway platform look like models of social responsibility.

The operating standard is to allow fund managers — or affiliated businesses or employees — to go as far as they can until the moment they are caught doing something wrong. Through their actions, Citigroup, Blackstone and the others are sending a message that they will forgive rotten ethics for great returns.

This is a long-standing Wall Street custom. Citigroup and JPMorgan played handmaiden to help
 Enron commit fraud, according to the Securities and Exchange Commission. The two banks didn’t admit or deny guilt in settling with the regulator.

There is a point where willful blindness turns to complicity. Investors profit from any added juice that SAC might gain, whatever its source. And if Mr. Cohen were to face charges, they would pay no price.

Major banks and investors around the world shoveled money to Bernard L. Madoff despite doubts about his purity. Some thought that Mr. Madoff was using his brokerage firm to front-run. In other words, they thought he was cheating on their behalf, not ripping them off. And that was an enticement.

The arrests and bad trades are finally hitting close to SAC, but there is nothing new about the questions surrounding Mr. Cohen’s business. He was always one of the most aggressive traders on Wall Street. Speculation that he may have tapped into legally dubious information wasn’t just whispered in private but splashed across the pages of The Wall Street Journal in a 2006 profile that raised questions about whether his firm traded improperly.

In SAC’s defense, a person familiar with the firm pointed out that two of the employees charged with insider trading started their scheme before joining the fund and had admitted taking extraordinary steps to circumvent SAC’s procedures while another was trading in his personal account.

“We expect our people to play by the rules and act with integrity,” the SAC spokesman said.
The firm has more than 30 legal and compliance officials in addition to a dedicated technology team devoted to compliance, says the person familiar with the firm.

But given how forgiving institutional enablers are, one wonders why Mr. Cohen even bothers.