"From Crowhurst to Madoff to - Us?"

In the extraordinary book, "The Strange Last Voyage of Donald Crowhurst," a pair of journalists reconstruct the mysterious end to a lone sailor's life at sea. It would appear that Crowhurst, facing terrible embarrassment and shame at having faked a journey around the world, stepped off into the deep to become one with His Maker, at least as he understood Him at the time.

Crowhurst was among the few sailors to join the world's first single-handed round-the-world "Golden Globe" race in 1968, and he mounted it on a multi-hull, which had never been attempted. To say that he was in over his head is to make a bad joke at the expense of someone trapped by ambition, financial pressure, the British penchant for extreme adventure and trying to prove something that perhaps is not worth proving. (It has been said that nothing is more important to the British than to getting through life without being embarrassed.)

 

Crowhurst came to mind as I read Bernard Madoff's recently published confessions to The Financial Times and New York Magazine. What began for Madoff as a temporary solution to investor demands became a permanent problem from which he could not escape. As he got deeper in, he found he could not get out because the numbers would never add up - the Achilles heel of any Ponzi scheme, where yesterday’s investors are paid by those induced to put money in today. Mounting liabilities outstripped his capacity to deliver adequate returns, putting him on a slippery slope to self-destruction.

Crowhurst created a similar dilemma for himself in sneaking ashore in Brazil to make repairs, unbeknownst to the world, and effectively disqualifying himself from the competition. But he kept it secret and lay in the Southern Ocean making prodigious mathematical calculations to convince the world he was still racing. He had embarked on the race to prove his business worth as an inventor and signed contracts that he was ill prepared to meet. 

When the fleet came around the bottom of the globe and headed home, Crowhurst joined them. But he soon realized that his fraud would be revealed and would be ruinous. Despite having a wife and children waiting for him, he apparently stepped overboard rather than to face the music. (His story is also brilliantly documented in the independent film "Deep Water.")

Sadly for Madoff, his elder son Mark could not abide his father's fraud and its tortuous aftermath and hung himself on the anniversary of his father's confession. Madoff now faces life in prison, where he may contemplate the destruction of his own family.

Madoff's rationalizations for his behavior present a strange mix of blaming the victims and fingering the investment world for its greed and intellectual dishonesty - greed in seeking outsized gains, however they may be generated, and dishonesty in pretending returns like Madoff's could be legitimately produced year after year.  We now know that many professional investors smelled a rat in Madoff and for some time had refused to entrust funds to him. Other sophisticated investors/institutions - Carl Shapiro, Jeffry Picower, JP Morgan and HSBC, to name a few - poured money in. The SEC had ample reason to see a problem, since Madoff was reported to be involved in a Ponzi scheme of some kind, but the SEC brass either did not see it or chose not to intervene. That no one from the SEC went to jail for appalling failure in oversight is reason to wonder what kind of "financial regulatory reform" will actually work on Wall Street.

Both Crowhurst and Madoff faced inevitable music because Crowhurst's trimaran Teignmouth Electron had to come to shore eventually and Madoff had to deliver billions in returns even as the market collapsed. Something had to give and lives would be sacrificed in the balance. 

With such inevitable reckoning in mind, one has to wonder if the mounting debt crises in Europe and the US - which Madoff calls "a government Ponzi scheme" - is soon to sink its share of ships. Portugal, Ireland and Spain cannot be bailed out indefinitely without the bills coming due, as interest payments outstrip their ability to earn their way out. And the US leadership's current answer to our fiscal problem is to raise the debt ceiling - again.

We have seen the enemy, and it is - us?

Comments

[Meleanna Meyer]

aloha -

If it is indeed us, what should "us" do now that the game is almost over for "us" does what "us" need to do to make corrections?

mahalo nui,
mm

[Eric Best]

Good question! In Europe, the ECB is funding "bailouts" and those are hard for anyone in the US to influence. in the US, a citizen has a few choices - write, call, speak out, lobby, demonstrate, contribute money to this effort or that. I am not a Tea Party aficionado but those people believe in mobilizing candidates, money and arguments, which may be foolish or unfounded or too ideologically driven, but there you are. To do nothing, someone said, is to choose.

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