Charlie Munger Interviewed in the Stanford Lawyer
Article Excerpts (Via Stanford Lawyer)
Harry Markopolos, a hedge fund expert, sent a detailed memo to the Securities and Exchange Commission (SEC) articulating why Madoff must have been a fraud. The SEC did nothing with it. We don’t know the reason why, but I’m willing to suggest that the lawyers who received Markopolos’s warning simply didn’t understand the finance or math that Markopolos relied on.
Lawyers who only know a mass of legal doctrine and very little about the disciplines that are intertwined with that doctrine are a menace to the wider civilization.
Why didn’t the SEC understand the warning that was clearly placed at its door?
The SEC is pretty good at going after some little scumbag whom everybody regards as a scumbag. But once a person becomes respectable and has a high position in life, there’s a great reticence to act. And Madoff was such a person.
Why aren’t our regulators capable of addressing many of the issues that we confront in the market today?
Most of them plan to go back to living off money made in the system they are supposed to regulate. You can argue that financial regulation is so important that no one in such a position should ever be allowed to do as you partially did—serve and then leave to make money in the regulated field. Such considerations led to lifetime appointments for federal judges. And we got better judges with that system.
So government service should be a little like a monastery from which you can never escape?
What you can opt to do is retire, which is pretty much what our judges do.