Feet of Clay

Thank you, Lance, and thank you, Oprah. The cat, as they say, is out of the bag. Our world has been rocked. Now what?

Shouldn’t we be a little used to hearing about the fatal flaws of our heroes or pillars of the community? Lance is just the latest in a pretty long line, of course. Many of the recent ones are from sports, like Jerry Sandusky. Politics? Arnold Schwarzenegger. Entertainment/media? Jimmy Savile of the BBC. Finance? Bernie Madoff. Part of us must enjoy seeing the mighty fall – but there’s the other part that yearns for someone absolutely flawless.

I’ve always believed that Human Being 1.0 comes with a “worship chip.” That’s why we invented religion. Atheism doesn’t fix this. If we don’t have religions or churches in the traditional sense, we make them up. The Baseball Hall of Fame. The Oscars. American Idol.

Americans in particular, as I have often said, turn everything into an Olympic sport. If you look at it from a distance, the whole notion of putting singers with widely differing talents – or actors, for that matter – into some kind of competition is a little silly. I knew the Last Days couldn’t be far off when I saw a similar competition on one of the food channels about who made the best cupcakes.

But we do have to have our winners. Those who get close to the top often feel the most pressure to get there and stay there. They know that no one is going to remember them if they only win the Silver Medal. Or become First Runner-Up. Or the last to be voted off the island. So they do bad things – in the case of Mr. Armstrong, some pretty awful things. Once they get to the top, they get into an almost life-and-death struggle to hide anything that would threaten that status. The tragedy is, those within striking distance of the top have extraordinary talent long before they dope, cheat, lie or commit other unsavory acts.

Once they’re on top, the majority of us want to keep them there. Investigative reporters go against the grain. They try to give us the truth. Someday, the majority of us are grateful, but for a long time, we just don’t want to hear it – which is why it takes extraordinary courage to do that job. The criers in the wilderness face scorn, financial ruin, and even threats of death.

When one of our idols is actually toppled, we’re ready to fix blame, but as usual, the idol wouldn’t have been on a pedestal quite as high without our help.

BTW, I write this under the influence of a performance-enhancing drug, which you may have heard of: caffeine. I leave it to you to decide if the performance was actually enhanced.

Trader or Traitor?

Just at the moment when our confidence capital is in its shortest supply, the Bernard Madoff scandal is another black eye for the American financial system.

Everyone, of course, is innocent until proven guilty, but should the allegations be true, Mr. Madoff’s actions are, in my view, right up there with treason, in terms of the damage done to this country’s standing in the world. The only mitigating factor is that treason probably wasn’t his intention, but the result is about the same.

You may not have a lot of sympathy for the Madoff clients in Palm Beach rushing to pawn their Ferraris, but many individuals who thought they had a comfortable retirement suddenly have nothing. Some cities face an instant financial crisis, as well as some of the most respected charities. A big problem, though, is how many foreign banks have been affected and the resulting loss of faith in the American system, especially our system of regulation.

The difference between this situation and the mortgage-backed securities meltdown is that this crisis is the result of alleged criminal activity, a giant Ponzi scheme. Wikipedia defines that as “a fraudulent investment operation that involves paying abnormally high returns to investors out of the money paid in by subsequent investors, rather than from profit from any real business.” The earlier Wall Street shenanigans were at least legal, so far as we know now.

If Mr. Madoff did what he’s accused of doing, he will likely get what’s coming to him. It’s pointed out that the analysts for many of his investors should have taken the time to find out what he was doing and figure out that the deal was just too good to be true. As is typical with these situations, the stain of blame has begun its rapid spread.

But what about that international crisis of confidence? Do we in the United States have an obligation to make the foreign Madoff victims whole, or as whole as possible? Instead of letting our own banks continue to stuff the bailout funds in their vaults, maybe some of the $700 billion should be reserved for the foreign entities that have been scammed. The necessary restitution isn’t available from Mr. Madoff or those folks who should have known better, including those in our own regulatory system, if there is one.

Restoring international confidence in our economy is practically a matter of national security. We have to show the world that whatever legitimate loss is the result of the Madoff case, the United States is good for it. And then we have to get about the business of plugging the holes in our regulatory dike. That is, if we want to continue to be proud to be Americans.

There, now I’ve said it.