As if the global credit crisis isn’t bad enough, the world economy is now left reeling through one of the greatest financial fraud in the history of mankind. Wall Street heavyweight Bernard Madoff is accused of running a pyramid scam that cost his investors US$50 billion.
US$50 billion! Not only is that a lot of money but the list of victims are some of the biggest, most respected banks in the world. Europe's biggest bank, HSBC, lost around US$1 billion; Santander, the second-largest in Europe after HSBC, has an exposure of more than three billion dollars; Fortis Bank Netherlands stood to lose up to a billion euros. Even banks in Asia are affected; Japan’s Nomura loss is at 303 million dollars and various South Korean financial institutions has a total exposure of 95 million dollars. Singapore’s Great Eastern is also affected, but as is usually the case in Singapore, no word yet on how much they are going to lose.
Funny thing is that almost no one is blaming these banks for losing the money to Bernard Madoff. Bernard Madoff is a trusted name, so trusted that he was once the chairman of the Nasdaq. A former chairman of a stock exchange who running a pyramid scam undetected for decades? If there were still any doubts that the US regulators were sleeping on the job, they are all gone now.
Which bring me to an earlier post on this blog. I suggested that America need to fix the structural fault in their economy; now it seems I was underestimating the problem. America not only needs to fix the fundamentals of their economy; they will also need to fix their financial regulatory system as well. More work for everyone!