Posts Tagged ‘caritas’
Name it Ponzi or Caritas, it’s still plain foolishness
While the greatest brains in the world were trying to save their companies – investment banks, and so on, other great brains were coming up with schemes to fool other great brains which were basically playing the same game. I am talking about Bernard Maddoff, who pulled of a $50 billion Ponzi scheme with money from big name investors like HSBC,BNP Paribas, Nomura, Santander, just to name some of the firms with exposure to Maddoff’s investment funds. Because that was Maddoff’s trade. He came up with investment funds, convinced investors to buy in and then, instead of putting those funds to work, he just paid old investors with the money from new investors. The problem was more investors started to redeem their money, because of the financial crisis, they needed liquidities.
In Romania, the scheme is called Caritas, which was a pyramidal game back in the 90s. The only difference is that Caritas fooled regular people, who didn’t know anything about business and about how to check the credibility of a company coming with promises of overnight gains. This guy Maddoff’s accounting firm was an obscure one; some investors saw it and avoided doing business with Maddoff. But the rest of the flock went on. I would say they kind of deserve it. Altough I must admit that considering how financial products evolved and how debt was packaged in various ways, and how funds made lot of money out of it for long enough, investors may have had the impression they could go on like this forever. I have no idea what they were selling or buying or what were the rules of the game, but I am sure that at some point, neither had they.
To end it with humour, below is an extremelly clever and funny piece on the credit crunch and on investment bankers. I like investment bankers, it’s my job to hear them out and understand them. But this is genius.
