In December, the financial world received its biggest shock yet, when Bernard Madoff, former Nasdaq chair and founder of Bernard L. Madoff Investment Securities, admitted to employees (and, presumably, to FBI agents who raided his offices the following day) that his hedge fund business was “just one big lie,” a “giant Ponzi scheme” that had lost an estimated $50 billion in investments.
Among the numerous worthies taken in by Madoff’s scam were Oscar-winner Steven Spielberg, Nobel winner Elie Wiesel and publishing magnate Mort Zuckerman. Nonprofit institutions such as the Rockit Foundation and the JEHT Foundation, both large donors to civil rights organizations and other liberal causes, were so heavily invested with Madoff that they were forced to close.
It is, of course, well and good that Madoff will be tried and, most likely, punished for this breathtaking fraud. One also hopes Congress will make heads roll at the somnambulant Securities and Exchange Commission for its lax regulations that largely enabled the scam. But Paul Maliszewski’s excellent new book, Fakers: Hoaxers, Con Artists, Counterfeiters, and Other Great Pretenders (New Press, January) – written before the Madoff story broke – suggests that our search for accountability should not end there.
Consider that those working in the hedge fund industry had long held serious concerns over the performance of Madoff’s fund. Back in May 2001 (so, nearly eight years ago), an article in the trade publication Mar/Hedge–headlined “Madoff tops charts; skeptics ask how” – quoted observers who were “baffled by the way the firm has obtained such consistent, nonvolatile results month after month and year after year.” The skeptics, it continued, “noted that others who use or have used [Madoff’s] same [investment] strategy … are known to have had nowhere near the same degree of success.”
That naturally leads to the question: If it was widely known that something was fishy about Madoff’s fund, how did it continue to draw investors? The answer, according to the financial blogger Henry Blodget, is that, “the smart money KNEW Bernie [Madoff] had to be cheating, because the returns he was generating were impossibly good. Many Wall Streeters suspected the wrong rigged game, though: They thought it was insider trading, not a Ponzi scheme. And here’s the best part: That’s why they invested with him.”
In Fakers, Maliszewski calls this dynamic the “unsuspecting collaboration between the con artist and the conned,” and it’s one of the main themes tying together the book’s disparate essays, interviews and profiles on hoaxers throughout history. Maliszewski is interested in the perpetrators, mechanics and purposes (sometimes noble, usually less so) of fraud, and examines them in fascinating detail. But he also notes that “with every story and every new hoax, [I became] more interested in the faked, in those who believed.”
Or, as he explains in creating an Aesopian-type fable about an art forgery scam (that could just as easily apply to the Madoff scandal):
One day, the crow set the foxes fighting for control of an apple. The apple, the crow swore, was unlike any other in the world, and the foxes chose to believe him. But the apple was really nothing special, and the crow, in the end, was found out and driven from the forest for its lies. But what of the foxes that desired blindly and wildly, and so were fooled? Should not they too learn a moral from such a story?
Maliszewski is careful to note, however, that while such wild and blind desire might be something of a constant in frauds across time, the object of that desire – and the ends to which the faker manipulates it – can vary from case to case. Indeed, the difference of those ends is what separates the mere fakers from those who Maliszewski endorses as the “great pretenders.”
To wit, in a shrewd chapter dissecting the fabrications of the notorious New Republic “journalist” Stephen Glass, Maliszewski skewers the widely held notion that Glass succeeded largely because he was “a brilliant storyteller … [whose] articles burst with the sort of feverish, anxious invention that can sometimes seem like life.” Rather, Maliszewski demonstrates through close readings that Glass’ imagination was “crushingly banal” and that “his talent lay less in the originality of his imagination than in his solicitous ability to seize on whatever the conventionally wise were chatting about at cocktail parties and repackage it in bright new containers, selling the palaver right back to them.”
Ironically enough, that palaver often consisted of mocking various idealists for holding dissenting beliefs outside of the mainstream. The mockery, Maliszewski writes, “confirm[ed] the continued validity of his assumptions: the resistance remains small … [and] the real business of politics marches on without them.” And thus, by flattering his editors’ and readers’ beliefs in themselves as wised-up cynics, hip to the follies of marginal idealism, Glass exploited the naivety of their cynicism, playing them for fools.
Not, Maliszewski wisely cautions, that it is necessarily foolish to be fooled. In one chapter, he details the wildly successful hoax that the New York Sun–looking to increase its circulation – pulled on its readers in 1835, in which it soberly announced that an Edenic paradise on the moon (inhabited by strange creatures, living in blissful harmony) had been discovered via a powerful, new telescope. Part of the hoax’s success, Maliszewski notes, stemmed from the desires of Sun readers to escape the grim, painful realities of 1830s New York, which was beset by crime, poverty, inequality, disease and racial and religious strife. Their gullibility and optimism, Maliszewski writes, “may have excused – or made it all too simple to ignore – the squalid conditions in the country’s young cities and the looming political crisis over slavery, among many other wrongs in dire need of fixing.”
But Maliszewski refuses that sole reading. He recognizes that the New Yorkers’ optimism and belief in the outrageous story “might be understood instead as a critical impulse – call it a utopian urge … to form in the future a society that more closely matches [the Sun’s] bucolic vision; to make lives better; and to improve, finally, on what is here and what is known for real.”
To rise to the status of a “great pretender,” one must combine this utopian urge to make lives better with a skeptical intelligence about the bedrock certainties of one’s own society. For Maliszewski, the model is, still, Jonathan Swift, whose satire, he writes, “doesn’t just entertain … [but] reach[es] out to readers and demand[s] from them great intelligence and imagination and rigor.”
Fakers is a fine example of intelligence, imagination, and rigor, as well as a timely reminder that these qualities must always be used in tandem with hope, which, no matter how audacious, is necessary, but not sufficient.
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