Harry Markopolous's 19-page letter to the SEC in 2005: "The World's Largest Hedge Fund Is a Fraud"

Various laws attempt to protect and reward insider whistleblowers who call to public attention wrongdoing by the institutions that employ them. But little incentive exists for outsiders to point out big shots' fraud and misinformation, other than public approbation. So, let's take a moment to salute Harry Markopolous, who first brought Bernie Madoff's Ponzi scheme to the Securities and Exchange Commission's awareness in 2000 and then wrote them a 19 page letter in 2005 listing 29 Red Flags (you can read it here; thanks to Clusterstock).

Of course, the SEC didn't do anything substantitive about it (other than one SEC official marrying into the Madoff family). Markopolous tried to talk the SEC into taking action by warning them that if they didn't move fast, Elliot Spitzer would beat them to it. (But now we know that the Spitzer family real estate firm, like so many New York real estate businesses, had money with Madoff.)

One thing that stands out is that Markopolous wasn't alone. He was just the guy who kept complaining about it. Markopolous's 2005 letter cites numerous experts, either by name or by position, who figured out this was a fraud. But Markopolous was one of the few to do anything about it.

Also, at least two journalists, one for Barrons and one for a trade paper, exposed this scam early in this decade, but nobody cared.

There's just not much of a market for debunking. People want to believe in geniuses. Look how many people believe Malcolm Gladwell is a genius. If he isn't a genius, everybody asks, how come he's so rich? Hunnh? Hunnh?

Malcolm, himself, is dimly aware that he's kind of an idiot, but he believes that the true geniuses are the people he profiles so credulously. In turn, the folks Malcolm writes up probably had doubts about their own brilliance, too, at least until they saw themselves acclaimed in The New Yorker. After all, you can't put anything over on The New Yorker -- they've got a hung-over Jay McInerney checking the facts! So, they must be legit.

My published articles are archived at iSteve.com -- Steve Sailer

What's the difference between Bushnomics, Obamanomics, and Madoffnomics?

Do you ever get the sinking feeling that the biggest difference between Bernie Madoff and most of the public figures our age is that he admitted he was running "a giant Ponzi scheme?"

Madoffnomics consisted of making conspicuous donations to worthy ethnic causes in order to build a benevolent reputation in order to get an ever increasing amount of money flowing in to pay off those who had gotten on board early, but with no chance of later investors coming out ahead. How different is that from the Bush-Rove program of "compassionate conservativism," as embodied in Bush's jihad against down payments on home mortgages as denying minorities the American Dream?

My published articles are archived at iSteve.com -- Steve Sailer

Chicagoization of the American Economy

Political reporter Marc Ambinder of The Atlantic writes:

Barack Obama has launched the era of the political economy [well, I think George W. Bush and his minions gave it a good push in that direction], where, to an unprecedented degree, the White House will determine the course, structure and function of the American economy; where, if reports of $2 trillion worth of stimuli are to be believed, the size and scope of the federal government has the potential to nearly double over the course of eight years. He's already shifted the paradigm's default from private enterprise to public action. To the extent that your program or pet cause gets to share in the spoils, it must justify itself to the Obama administration.

Everyone who wants anything from the federal government has to interface with the now conjoined office of intergovernmental affairs and public liaison in the Obama White House. To head this office, Obama has appointed his best friend and most trusted counselor, Valerie Jarrett. Jarrett has appointed as her chief of staff Michael Strautmanis, one of the Obama family's best friends and another trusted confidant. Traditionally, the intergovernmental affairs portfolio and the OPL portfolio have been kept separate, although Karl Rove unified them in the Bush White House.

Cecilia Munoz, a senior vice president at the National Council for La Raza, is a powerhouse who knows everyone in Washington. She's going to be the formal director of intergovernmental affairs. Tina Tchen, another long-time Obama friend, will be the head of the office of public liaison. Additional staff appointments will follow; usually, the deputies in these offices aren't big names; the names being considered for the sub-department portfolios in the Obama administration would have been credible candidates for the top jobs themselves.

The bigger the federal government gets, the more important these offices become. They'll probably be THE powerhouse in the Obama White House from the perspective of politics, constituency relations, interest and client groups, the Washington community, state, local and tribal governments. Jarrett won't just pass messages between the outside world and the president. Her job will be manage the relationship between the outside world and the president, and, vitally, she and her staff will have the juice to make decisions about how the Obama administration relates to just about every external constituency.

No wonder Valerie Jarrett dropped out of the bidding for Blago's blessing. Who wants to be crummy U.S. Senator when you get to be fixer-in-chief for the new quasi-nationalized economy?

And how about having a Senior VP of La Raza stationed right at the chokehold?

My published articles are archived at iSteve.com -- Steve Sailer

Spielberg and Katzenberg hit by Madoff losses

The LA Times reports "Madoff Debacle Hits Region's Jewish Community," with movie moguls like Spielberg and Katzenberg on the list.

The interesting questions at this point are whether the Madoff case represents merely a conventional affinity scam, exceptional only in being carried out among the richest and most influential affinity group in the country, or whether it's representative of a general trend where the more ethnocentric Jews are being hit particularly hard by the general financial collapse (not just Madoff), perhaps due to being more aggressive risk-takers. If so, that could have sizable political and cultural ramifications.

For example, consider the high regard with which the opinions of the Southern Poverty Law Center are treated. It basically comes down to the assumption: if they are rich, if they can afford to trumpet their assertions widely, then must be legit, right? (In truth, the vast wealth this so-called charity has piled up is more a sign of their moral corruption, but human beings respect riches.) What happens, though, if the SPLC, which gets much of its money from the kind of people who invest with the Bernie Madoffs of the world, isn't quite so rich in the future?

The other question is: Exactly what is so unique about what Bernie Madoff did, other than to admit his business was a "giant Ponzi scheme"?

My published articles are archived at iSteve.com -- Steve Sailer

Bernie Madoff as an "affinity scam"

Because it's so much work to be a Mormon in good standing, Mormons tend to trust other Mormons, making them famously vulnerable to large scams operated by the small number of conmen self-disciplined enough to have spent years piling up credentials as good Mormons.

Bernie Madoff's $50 billion Ponzi scheme was rather like the kind of "affinity scams" that have plagued Mormons. Madoff joined all the right Jewish country clubs and gave to all the right Jewish charities, allowing him to fleece some very deep Jewish pockets.

But the sophistication level of the victims is rather different. While there are rich Mormons, overall Mormons are pretty middling in wealth (depending on whether you measure per capita or per family), while Madoff's victims weren't middling.

Why did members of the Palm Beach Country Club, various hedge fund managers, and major league sports franchise owners fall for what appears to have been a simple, old-fashioned scam in which implausible returns are seemingly delivered, but only by using new investors' cash to pay off old investors? (By the way, the golf scores Bernie reported to the USGA for handicapping were all in the eighties, as remarkably consistent as his reported return on investment.)

One theory (and it's only a theory) is that more than a few of these sophisticated clients assumed Bernie was cheating -- either through insider trading or "front-running" -- and they wanted in on his illicit profits.

They just never dreamed Bernie was cheating them.

And why did Bernie cheat them in particular? Because, these days, as bankrobber Willie Sutton replied when asked why he robbed banks, "That's where the money is."

My published articles are archived at iSteve.com -- Steve Sailer

Blago and Diversity

Here are excerpts from my new VDARE.com column Blagojevich, Obama, and the Diversity-Fueled "Chicago Way:"

This scandal is of particular interest to VDARE.COM readers because immigrants and immigration policy play such a large role. For instance, the go-betweens in the alleged deal in which Rep. Jesse Jackson Jr., apparently the high bidder, would raise at least $1 million for Blagojevich were members of what the Chicago Tribune calls [Blagojevich Fundraiser Held by Jackson Allies Saturday, by David Kidwell, John Chase and Dan Mihalopoulos, December 12, 2008] “the close-knit and politically active Indian business community”.

Another of Blagojevich’s Senator schemes has proven embarrassing to one of the strongest supporters of illegal immigration: the huge Service Employees International Union, which claims to represent unskilled workers, often illegal aliens. The SEIU is potent political force on the far left, but it curiously less potent at getting higher pay for its teeming members.

On page 60 of the criminal complaint:

"ROD BLAGOJEVICH stated, 'I want to make money.' During the call, ROD BLAGOJEVICH, HARRIS, and Advisor B discussed the prospect of working a three-way deal for the open Senate seat. HARRIS noted that ROD BLAGOJEVICH is interested in taking a high-paying position with an organization called 'Change to Win,' which is connected to Service Employees International Union ('SEIU'). HARRIS suggested that SEIU Official make ROD BLAGOJEVICH the head of Change to Win and, in exchange, the President-elect could help Change to Win with its legislative agenda on a national level."

In other words, in this scenario, Blagojevich, who has apparently been under financial stress ever since his Lady Macbeth-type wife had to give up her job as a real estate agent / bagwoman because most of her commissions were barely disguised bribes for her husband, would promise to resign as governor. Obama would lean on his friends in the SEIU to give the disgraced governor a job paying $250-300,000 pushing SEIU’s agenda (which includes amnesty). Before moving on, Blago would appoint to the U.S. Senate Valerie Jarrett, Michelle Obama’s old boss when she worked for the Daley Machine.

Tom Balanoff, head of the janitors’ local in Chicago and a close ally of Obama, evidently conveyed Blagojevich’s brainstorm to the Obama camp.

President Andy Stern’s corrupt SEIU is less a union that battles for higher wages for its members than a front for the Open Borders lobby pushing for higher immigration. Wages are ultimately determined by supply and demand, which is why Cesar Chavez, during his prime, ruthlessly fought against illegal immigration in order to keep the supply of labor down and the price of labor for his members up. But, in contrast, Stern’s strategy is to maximize the number of unskilled service workers paying dues into his union at the expense of his members’ wages. Much of his energies go toward promoting leftist political victories rather than getting higher pay for his workers....

Seen up-close, Chicago politics resembles a bizarrely intricate multi-generational soap opera.

Obama and Blagojevich have long been allies, but never have been particularly friendly, coming as they do from very different ethnic bases. They do have a close friend in common: Tony Rezko, the Syrian immigrant operator whom Patrick Fitzgerald sent to jail earlier this year....

The second main reason for Chicago’s corruption: Chicago’s diversity.

Its long history as a major immigrant gateway means that the population is greatly divided by ethnicity. As Singapore’s Lee Kuan Yew, perhaps the most astute statesman of the 20th Century, noted: "In multiracial societies, you don't vote in accordance with your economic interests and social interests, you vote in accordance with race and religion."

The voters who comprise Chicago’s various ethnic blocs know their representatives are sonsabitches. But at least they are their sonsabitches.

You let your group’s veteran politicians pocket some bribes because if you got all high and mighty and threw the bums out and replaced them with some public-spirited novices, your ethnic group would find itself despoiled by all the other ethnic groups’ wily old politicians.

In summary: clearly, the Main Stream Media failed to tell us much about the real Obama.

The fact is that he’s much more interesting than his canned image as the post-racial reconciler.

Not as edifying, perhaps—but interesting.

And the Obama Presidency is just going to get more and more interesting.

To learn who Obama really is, please buy my new book, which serves as a reader's guide to the President-Elect's opaque but revealing autobiography. Just click here to buy America’s Half-Blood Prince: Barack Obama’s “Story of Race and Inheritance."

More

My published articles are archived at iSteve.com -- Steve Sailer

Con man executed for $416 million ant-breeding scam

From the International Herald-Tribune:

China has executed a businessman convicted of bilking thousands of investors out of $416 million in a bogus ant-breeding scheme, state media reported Thursday. The official Xinhua news agency said Wang Zhendong, who had been found guilty of fraud and sentenced to death in February 2007, was executed in Liaoning Province on Wednesday.

Wang, chairman of Yingkou Donghua Trading Group, had promised returns of up to 60 percent for investors who purchased ant-breeding kits from two companies he ran.

Ants are used in some traditional Chinese medicinal remedies, which can fetch a high price. Wang sold the kits, which cost $25, for $1,300, the local news media reported earlier.

Wang attracted more than 10,000 investors from 2002 to June 2005, when investigators shut down his companies. The closure of his business set off a panic among small-time players who saw their life's savings disappear overnight.

Xinhua had reported that one investor committed suicide after realizing he had been duped. Investigators put the size of the fraud at $416 million. Only $1.28 million was recovered.

My published articles are archived at iSteve.com -- Steve Sailer

The Steve Sailer Man of the Year Award for Annoyingly Relentless Skepticism goes to ...

Harry Markopolos, who has been a complete pain-in-the-ass for the last nine years as he tried to alert a world that totally didn't want to hear about it that Bernie Madoff's money management business was actually a $50 billion pyramid scam. The WSJ reports:

Harry Markopolos, who years ago worked for a rival firm, researched Mr. Madoff's stock-options strategy and was convinced the results likely weren't real.

"Madoff Securities is the world's largest Ponzi Scheme," Mr. Markopolos, wrote in a letter to the U.S. Securities and Exchange Commission in 1999.

Mr. Markopolos pursued his accusations over the past nine years, dealing with both the New York and Boston bureaus of the SEC, according to documents he sent to the SEC reviewed by The Wall Street Journal.

In a statement late Friday, the SEC said "staff from the Division of Enforcement in New York completed an investigation in 2007, and did not refer the matter to the Commission for enforcement action." The SEC said it reopened the investigation Thursday. It's not clear what the focus of the 2007 investigation was, or why it was closed. A person familiar with the matter said it related to issues raised by Mr. Markopolos.

My published articles are archived at iSteve.com -- Steve Sailer

Obamajobs: yup, filling potholes

The Washington Post catches up to what I've been saying all along:

Stimulus Package to First Pay for Routine Repairs

President-elect Barack Obama calls it "the largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s." New York Mayor Michael R. Bloomberg compares it to the New Deal -- when workers built hundreds of bridges, dams and parkways -- while saying it could help close the gap with China, where he recently traveled on a Shanghai train at 267 mph.

Most of the infrastructure spending being proposed for the massive stimulus package that Obama and congressional Democrats are readying, however, is not exactly the stuff of history, but destined for routine projects that have been on the to-do lists of state highway departments for years. Oklahoma wants to repave stretches of Interstates 35 and 40 and build "cable barriers" to keep wayward cars from crossing medians. New Jersey wants to repaint 88 bridges and restore Route 35 from Toms River to Mantoloking. Scottsdale, Ariz., wants to widen 1.5 miles of Scottsdale Road.

On the campaign trail, Obama said he would "rebuild America" with an "infrastructure bank" run by a new board that would award $60 billion over a decade to projects such as high-speed rail to take the country in a more energy-efficient direction. But the crumbling economy, while giving impetus to big spending plans, has also put a new emphasis on projects that can be started immediately -- "use it or lose it," Obama said last week -- and created a clear tension between the need to create jobs fast and the desire for a lasting legacy.

"It doesn't have the power to stir men's souls," said David Goldberg of Smart Growth America. "Repair and maintenance are good. We need to make sure we're building bridges that stand, not bridges to nowhere. But to gild the lily . . . where we're resurfacing pieces of road that aren't that critical, just to be able to say we spent the money, is not what we're after."

Minneapolis Mayor R.T. Rybak is proud that his city was able to quickly rebuild the Interstate 35 bridge that collapsed into the Mississippi River in 2007 while making sure to include capacity for a future transit line on it. But he worries that many of the road and bridge upgrades around the country will not be done in a similarly farsighted way, given the time pressures.

"The quickest things we can do may not be the ones that have the most significant long-term impact on the green economy," he said. "Unless we push a transit investment, this will end up being a stimulus package that rebalances our transportation strategy toward roads and away from [what] we need to get off our addiction to oil."

In other words, under Obama's "use it or lose it" rule, we'll end up doing right away a whole lot of things like repainting bridges that didn't seem worth doing back when we had lots of money.

My published articles are archived at iSteve.com -- Steve Sailer

Sometimes, there are good reasons for a liquidity crisis ...

The revelation of the non-existence of $50 billion in funds supposedly managed by Bernie Madoff is a reminder of why there is a liquidity crisis, in which financial institutions are terrified to lend money because who knows which respected Wall St. entity will next turn out to be based on nothing?

Here's an interesting question: How many other Ponzi schemes and similar frauds of which we are as of yet unaware have managed to survive so far due to the trillions of bailout dollars handed out?

Can you see how this question undermines the effect of Helicopter Ben Bernake's strategy of dumping cash out of a helicopter -- why the effect of stimulus has widely been described as pushing on a noodle? With Madoff, the bailouts may have delayed the final reckoning by a couple of months. For less colossal scams, it may delay them for even longer. But there will be a reckoning, so who (besides the government) wants to pour good money after bad?

My published articles are archived at iSteve.com -- Steve Sailer

Is the balance of power shifting?

Rupert Murdoch once said in private, I am told on good authority, that the reason he decided to subsidize the neocons (a decision with substantial historical ramifications) was not because of any particular devotion to the tenets of neoconservatism. Instead, funding The Weekly Standard was simply to insure against being defenseless against vendettas by the American media and politicians against his American businesses. As a foreigner of generally conservative political views, he felt he needed to protect his huge investments in America by having at least one set of Jews staunchly on his side.

I doubt if Murdoch cares much about, say, West Bank settlements, but he understands that the small number of people in America who do care about them tend to be passionate, powerful, and rich.

Hillary Clinton seems to have absorbed a similar lesson. In 1991, George H. W. Bush was on top of the world. His Secretary of State James Baker expressed displeasure with West Bank settlements. The next year, Hillary's husband beat Bush 41. Coincidence? Perhaps, but I suspect Hillary wouldn't bet her career on it just being a fluke.

Similarly, Barack Obama has acted quite Murdochian recently, making Hillary Secretary of State and giving crucial insider jobs to Rahm Emanuel (who patriotically rushed off during the Gulf War to serve at an Army base, an Israeli army base) and Larry Summers, greatly reassuring AIPAC.

But are all these political calculuses a little too 2007? Is the assumption that the kind of guy in New York or Las Vegas who cares about Israel in the same way that rich guys in Oklahoma care about the Oklahoma Sooner football team -- but are just so infinitely rich that they must be pandered to -- getting to be out of date? What if the Sheldon Adelsons and Bernie Madoffs lose even more money in this crash then everybody else? How does that rearrange the political landscape?

I don't have any data, but I'm sensing anecdotally that the kind of man who funds Israel hardliners is losing money faster than the average. Today, the New York Times writes in "Standing Accused - A Pillar of Finance and Charity" about Bernie Madoff, the money manager who just admitted to the FBI that he had been running a giant Ponzi scam and had lost maybe $50 billion (billion!) of his investors' money:

“There was a joke around that Bernie was actually the Jewish T-bill,” the executive went on, referring to the ultrasecure investment of treasury bills. “He was that safe.”

Mr. Madoff had traveled far from his roots in eastern Queens, where as a young man he cobbled together a $5,000 grubstake from his earnings as a lifeguard and sprinkler installer to start the famed investment firm that eventually bore his name, Bernard L. Madoff Investment Securities.

He had come to move easily in the clubby Jewish world that iterates between New York City and its suburbs and southern satellites like Palm Beach.

Indeed, in the world of Jewish New York, where Mr. Madoff, 70, was raised and found success, he is largely still considered as a macher: a big-hearted big shot for whom philanthropy and family always intertwined with — and were equally as important as — finance. ...

As Mr. Madoff’s success increased, so too did his interest in philanthropy, which was often handled, much like his business itself, as a family enterprise. He sits on the board of trustees for Yeshiva, whose officials issued a statement on Friday saying they were “shocked” at the news of Mr. Madoff’s arrest. And with his wife, Ruth, he runs the Madoff Family Foundation, a $19 million operation that last year gave money to Kav Lachayim, a volunteer group that works in Israeli schools and hospitals, and to the Public Theater in New York.

Another NYT article reports:

The news was equally devastating for the Robert I. Lappin Charitable Foundation in Salem, Mass., which works to reverse the dilution of Jewish identity through intermarriage and assimilation by sending teenagers to Israel and supporting other Jewish education efforts.

The foundation was forced on Friday to dismiss its small staff and shut down its programs to cope with its losses in the Madoff funds, according to Deborah Coltin, its executive director.

“We’ve canceled everything as of today, everything,” she said tearfully.

Very anecdotal, but I'm definitely wondering if the Obama-Clinton-Murdoch consensus about where the power rests is becoming obsolete. Certainly, finance and casinos will be greatly downsized for years to come. The more liberal (but still connected) media business is harder to forecast -- Hollywood did well in the last Depression because movies are cheap entertainment -- but newspapers are obviously in trouble. (Of course, Sam Zell, another fairly hardline donor, didn't put much of his own money in his now bankrupt purchase of the Chicago Tribune and LA Times.)

Could there be a pattern where the most ethnocentric Jewish rich guys get hit hardest by the crash? John Kenneth Galbraith once said, "Recessions catch what the auditors miss," which certainly proved true in Bernie Maddof's case.

Anyway, even if there is a major rebalancing of wealth, that doesn't mean that political influence will rebalance. It's not just that Jews have more money, it's that they give more of their wealth to influence politics.

The amount of wealth devoted to influencing politics in this country is remarkably small. For example, Murdoch is said to spend about $3 million per year on The Weekly Standard, which adds up to a lot over the decades, but hardly a crippling cost for a billionaire.

What about politicians? The Exile had a lot of fun when Rep. William Jefferson was arrested with $90,000 in cash in his freezer. An American politician has an icebox with $90,000 in it, while a Russian politician, despite having a much smaller economy to loot, winds up with a few blocks of Mayfair or a Premiere League football team.

The news of how little Blagojevich was thinking of getting for selling Obama's U.S. Senate seat to Jesse Jackson Jr. should open some eyes. Do you imagine anybody in China is saying right now: "It only costs $1 million for a U.S. Senator? Are you kidding? Buy me a dozen!"

With an increasing portion of the American economy nationalized, the price of political influence will be increasing. Do you think any former shareholders of Lehman Brothers are kicking themselves right now for not donating more to the last Bush campaign and instead let their old enemy from Goldman Sachs get to put them out of business while propping up Goldman's allies?

That may be the most lasting influence of the Bush Administration: by vastly increasing the power of government, the price of government will eventually go up, too.

My published articles are archived at iSteve.com -- Steve Sailer

New info on the Rezko-Obama land deal

Back on October 18, a blog for the NY Daily News (via Kausfiles) reported that a Chicago real estate appraiser was claiming in his wrongful termination suit that his ex-employer had inflated the appraisal of the strip of land which Tony Rezko's wife bought at the same June 2005 closing at which Sen. Obama bought his stately home. The blog said:

We have no idea of the merits of the case ... But the fact that the suit has been filed brings back yet another item that Team Obama would rather not have to deal with in the closing days of the contest.

Of course, Team Obama didn't have to deal with it, just as they didn't have to deal with much of anything.

The Washington Times reported on Election Day:

A former Illinois real estate specialist says FBI agents have questioned him about a Chicago property that had been bought by convicted felon Tony Rezko's wife and later sold to the couple's next-door neighbor, Sen. Barack Obama.

The real estate specialist, Kenneth J. Conner, said bank officials replaced an appraisal review he prepared on the property and FBI agents were investigating in late 2007 whether the Rezko-Obama deal was proper.

“Agents and I talked about payoff, bribe, kickback for a long time, though it took them only a short number of minutes of talking with me while looking at the appraisal to acknowledge what they already seemed to know: The Rezko lot was grossly overvalued,” Mr. Conner told The Washington Times Monday.

“Rezko paid the asking price on the same day Obama paid $300,000 less than the asking price to the same seller for his adjacent mansion,” he said. “This begs the question of payoff, bribe, kickback.”

To be pedantic, it raises the question ...

According to his complaint, Mr. Conner reviewed the appraisal of the Rezko property by another firm, Adams Appraisal, which had set the value at $625,000. The complaint said he told his bosses the property had been overvalued by at least $125,000 and that a “reasonable and fair evaluation” should have been no greater than $500,000.

Mr. Conner said the removal of his appraisal “seemed understood as a crime with respect to the subpoena” of the Rezko property and the FDIC audit.

Well, who knows? There was a housing bubble going on and appraisers were doing a lot of screwy things in 2005.

But Blagogate has reminded the country that they just elected a Chicago politician to the White House.

And the appraiser's contention that his bosses inflated the value of the land Rezko purchased adjoining Obama's house at the same closing fits in with the low-level general fishiness of the deal.

As you'll recall, the Obamas got $300,000 knocked off the asking price of the house, while the Rezkos paid the full $625,000 asking price for their adjoining property. Think about it from your point of view. You see a house that you want to buy, but the price is steep. The sellers own both the house and a big side yard, which might be big enough to build another house on (or might not, depending on a complicated web of development rules in this historic district). They are willing to sell the two pieces of land separately and have published separate prices for them.

You call up an old friend and have him come look at the property with you. On closing day, his wife shows up and buys the side lot while you buy the big house, meaning that the sellers unload everything, which is obviously of interest to the sellers.

The sellers wind up with $300,000 less than their asking price for the two pieces of land together.

Question: How do you and your old buddy divvy up the $300,000 discount? I would assume that most friends would split it pro-rata based on the asking prices, which means that Rezko would have gotten about $70,000 off. If the discount was split unevenly, the normal thing would be for the person doing the favor to get more. And clearly, Obama was asking a favor of Rezko -- he called Rezko about the property, not the other way around. So, if you aren't going to split it pro rata, then Rezko should get more.

Instead, Rezko got none of the $300,000 and Obama got all of it.

The Chicago papers had reported back in March 2005, several months before Rezko and Obama bought the land at the same closing, that Rezko had illegally gotten the Panda Express franchises at O'Hare by claiming they were actually minority-owned and operated, that minority being Jabir Muhammad, the son of the notorious Black Muslim leader Elijah Muhammad. So, Obama would have known about Rezko being a crook just from reading the newspapers.

Of course, no doubt Obama knew far more about Rezko's Rezkoness than what was making the papers. But, still he went ahead with the deal. It's the Chicago Way.

This $70,000 isn't the biggest deal in the world. Bill Clinton doesn't get out of bed for $70,000. It's precisely its yuppie size that makes it interesting: What would you do for $70,000?

That's an interesting amount of money... It's not one of these hypothetical questions -- "Would you do something immoral for $100 million?" -- that sophomores like like to discuss. Instead, it's the kind of money that you can imagine having dangled before you at some point.

Did Rezko owe Obama a favor? Sure, Obama had been chairman of the Illinois Senate committe on Health and Human Services for the past two years, during which time Rezko had come to corruptly control the Illinois Health Facilities Planning Board, which picked winners in the contest to build big hospitals. Obama played a helpful role in Rezko's gang getting picked to build a hospital. See, Rezko owned 5 of the 15 board members, so he wanted the board "streamlined" from 15 to 9 in the interests of "efficiency," which gave him a majority of 5 of 9. RezkoWatch pointed out:

A review of senate records shows Obama played a major role in pushing through Senate Bill 1332, that led to the "Illinois Health Facilities Planning Act," which reduced the number of members on the Board from 15 to 9, making the votes much easier to rig.

Democratic Senator Susan Garrett sponsored the bill, and the co-sponsor was Republican Senator Dale Righter. These two senators were also on the Human Services Committee with Obama. The bill was assigned to the Committee for review on February 27, 2003. As chairman, Obama sent word to the full senate that the bill should be passed on March 13.

Blagojevich made the effective date June 27, 2003, and the co-schemers already had the people lined up to stack the Board and rig the votes with full approval from Obama.

A June 2003 email exchange produced in the trial shows Obama received the names of the nominees for the Board ahead of time, from the office of David Wilhelm, who headed Blagojevich's 2002 campaign. Rezko's attorney made the point to the jury that the email was from Blagojevich's general counsel and Wilhelm's office, and indicated the appointees were recommended by Wilhelm and supported by those who received the memo.

The new Senate bill said, the “Board shall be appointed by the Governor, with the advice and consent of the Senate." But the Senate Confirmation Hearings were a joke. For instance, the Feds recorded Levine talking to co-schemer, Jon Bauman, the day Levine learned he was approved by the Senate from the executive secretary of the Board.

He told Levine Senate President, Emil Jones [Obama's godfather in the Senate], only allowed 2 members to be approved and "that was you and the other person he just put in."

"Isn't that hysterical 'cause you know they had this big battle going on," Levine told Bauman, "don't you just love it."

"I'm one of those independents and not part of the block."

"Well, good, you know it's good to be just a true independent civil servant," Bauman said laughing along with Levine.

"Is, is that a good thing," Levine replied, "I've never been that."

The corrupt new appointees were all contributors to the presidential hopeful, Rod Blagojevich, and the US senate hopeful Obama. The Board’s then sitting-chairman, Thomas Beck, appointed by a Republican governor, testified under a grant of immunity that he brought a $1,000 check to Rezko on July 15, 2003, to make sure Blagojevich reappointed him.

Beck also testified that Rezko told him Blagojevich was set to appoint Rezko’s three doctor friends to complete the rigged voting bloc.

Dr Michel Malek gave Obama $10,000 a little over a month before the first Board meeting on June 30, 2003. He also donated $25,000 to Blagojevich three weeks later on July 25, 2003, and gave Obama another $500 in September 2003.

Dr Fortunee Massuda donated $25,000 to Blagojevich on July 25, 2003, and gave a total of $2,000 to Obama on different dates. Massuda's husband, Charles Hannon, is a co-schemer in the pension fund case and testified against Rezko in the trial.

Dr Imad Almanaseer contributed a total of $3,000 to Obama after he landed the appointment. On March 13, 2008, Almanaseer testified against Rezko and told the jury he was an investor in Rezko's fast-food businesses.

You'll notice the Middle Eastern flavor to Rezko's flunkies. In Chicago, Arab operators like Rezko don't control enough votes to matter, so they have to pay to play.

We're not used to thinking of health as a corrupt field. Yet, as bankrobber Willie Sutton answered when asked why he robs banks: That's where the money is. The health industry is, what, $2 trillion per year. So, it naturally attracts operators like Tony Rezko ... and politicians like Barack Obama.

You can read more about what attracted Obama to Chicago -- of all places -- to make his political career in my new book, a reader's guide to Barack Obama's autobiography, America's Half-Blood Prince: Barack Obama's "Story of Race and Inheritance," which you can buy here.

My published articles are archived at iSteve.com -- Steve Sailer

Height and weight

In October, the government published the latest version of their National Health and Nutrition Examination Survey (NHANES) study of sizes, "Anthropometric Reference Data for Children and Adults: 2003-2005," which is of great interest to clothing manufacturers. And you might find it interesting too.

Let's look just at the medians for people ages 20-39, since they are most likely to be in the marriage market.

		Height
Age 20-39	Males	Females	Diff
NH White	70.4	64.8	-8%
Black	70.0	64.2	-8%
Hispanic	67.1	62.6	-7%

So, the average Non-Hispanic white man between 20 and 39 is 5'-10.4" tall (178.9 cm.).

People are measured while wearing foam slippers.

As you can see, whites are a little taller than blacks, with Hispanics lagging more than a standard deviation behind.

The average height of the Hispanic population is probably bipolar, depending upon whether they were born in the U.S. or not. At the illegal immigrant march I observed in Van Nuys, CA in 2006, the average participant was very short, with men averaging well under five and a half feet tall. (This suggests, by the way, that U.S.-born Hispanics didn't care enough about illegal immigrants to turn out in large numbers.)

The male-female gaps are similar for all three groups, with women averaging 92%-93% of the height of their menfolk.

The 95th percentile for younger white males is 6'-2.9", for blacks 6'-3.1", and for Hispanics is 6'-0.3" For both white and black women, age 20-39, the 95th percentile is 5'-8.7", while for Hispanics its 5'6.5".

The standard deviation for white males appears to be a little more than 2 1/4th inches and for other males around 2 1/2 inches. The average NBA player is between 6'-7" and 6'-8" (and has been for the last 20 years). I believe that's measured in socks rather than in shoes, although college heights tend to be exaggerated. For instance, last year's UCLA All-American center Kevin Love was listed by UCLA at 6'-10" but was measured by the NBA for the draft at 6'-7.25.

Assuming a black median of 5'-10" and a standard deviation of 2.5", that means that 6'-8" is four standard deviations from the mean. Assuming that height is normally distributed (a big assumption),then one standard deviation above the mean is 6'-0.5 and that is the 84th percentile. Two s.d.'s up is 6'-3" and that is the 97.7th percentile. Three s.d.'s up is 6'-5.5" and that is the 99.87th percentile. And four s.d.'s at 6'-8" would be the 99.997th percentile.

Five s.d.'s would be 6'-10.5" (a seven-footer in recruiting parlance) and if the population is normally distributed, only one would be born in America, black or white, each year. So, the population probably has "fat tails" when it comes to height.

Still, it's worth noting how rare truly tall men are. When Colby Cosh asked who was the tallest man famous for something not height-related, his readers mostly came up with novelist Michael Crichton at around 6'-10" and economist John Kenneth Galbraith at maybe 6'-9". (The pretender to the throne of Albania is often said to be 7 feet tall, but I can't say how accurate that is.)

When I was young and naive, I said to a friend who had gone to three colleges, "Even if you are really tall, you have to be a good athlete to play college basketball." He said, "No, you don't. You just have to be tall. On every campus I've been on, there were two seven footers, and they were the starting and back-up centers on the basketball team." When I was at Rice, there were two guys on the basketball team listed at 6'-11" and, sure enough, they were the tallest people on campus. When I was at UCLA with 35,000 students, there were two seven footers, the starting center Stuart Gray at 7'-0" (who spent 8 years in the NBA as a backup center) and the 25 year-old backup center, a clumsy-looking ex-auto mechanic named Mark Eaton, who is said to be 7'-4" and 290. Eaton kept improving as he aged into his height and eventually made the NBA All-Star game. But I don't recall anybody else on campus close to them in height.

Among whites, the median man 20-39 is 0.4" taller than the median man age 40-59 and 1.6" taller than the median man 60 or over (however, old people shrink).

		Weight
Age 20-39	Males	Females	Diff
NH White	186	148	-20%
Black	190	171	-10%
Hispanic	176	155	-12%

People are weighed wearing disposable paper medical gowns.

At 148 pounds, younger white women average only 80% as heavy as younger white men, but black women weight 90% as much as their menfolk, so the male-female gap is only half as large among blacks. And Latinas weight 88% as much as Latinos.

		Waist
Age 20-39	Males	Females	Diff
NH White	37.0	33.5	-9%
Black	36.4	36.8	1%
Hispanic	37.1	36.1	-3%

So, the median white man age 20-39 has a 37 inch waist, and the median younger white woman has a 33.5 inch waist, 9% smaller. (Pregnant women are excluded.) Among blacks, however, the typical younger woman has a wider waist than her male counterpart.

		BMI
Age 20-39	Males	Females	Diff
NH White	26.4	24.5	-7%
Black	27.8	29.4	6%
Hispanic	27.7	27.7	0%

The oft-criticized Body Mass Index (BMI) reflects the same findings: whites are the skinniest, with black women considerably fatter than black men.

The total sample size who were subjected to quite a few measurements were an impressive 19,593, so subgroup sample sizes were quite adequate. (The smallest subgroup shown below numbered 361.)

My published articles are archived at iSteve.com -- Steve Sailer

Penny Ante Stuff

Prominent NYC lawyer Marc S. Dreier, head of a high-flying 250 lawyer firm on Park Avenue, was arrested earlier this month for stealing something like $380 million by selling forged promissory notes from other institutions to hedge funds by ... pretending to be somebody else. According to the NYT:

Mr. Dreier was initially arrested in Canada on Dec. 2 after an elaborate ruse to sell $45 million of the phony promissory notes there collapsed, according to a Toronto police department document.

After meeting with a lawyer for a teachers’ pension plan on another matter and obtaining that man’s business card, Mr. Dreier asked to use a phone and was ushered into a conference room by a secretary, according to the document. A short time later, he used the room to meet with the representative of a hedge fund whom he had previously invited to the offices, and impersonated the lawyer whose card he had just been handed.

But the scheme quickly unraveled, authorities said, when the hedge fund representative and the secretary felt something was amiss, and Mr. Dreier was arrested soon after.

By this point, I'm kind of disappointed that this guy only stole $380 million. Now, stealing $380 billion using other people's business cards, well, that would be impressive. But $380 million in this day and age is nothing.

My published articles are archived at iSteve.com -- Steve Sailer

So much for bailing out the automakers ...

USA Today reports:

Federal authorities have charged a Wall Street veteran with running a Ponzi scheme that prosecutors allege lost a staggering $50 billion.

Bernard Madoff, founder of Bernard L. Madoff Investment Securities, 70, was charged on Thursday by the Manhattan U.S. Attorney's office and the Securities and Exchange Commission with securities fraud. The charge comes a day after the complaint says Madoff told some high-level employees that his investment management business was a "fraud" and "basically, a giant Ponzi scheme."

The U.S. Attorney's complaint accuses Madoff of losing some of his investors' money on bad trades, then attempting to hide it by replacing that lost money with cash from his other investors. Madoff's investment management business had between 11 and 25 clients and $17.1 billion in assets as of a Jan. 7 filing, the complaint says, and one of Madoff's senior employees had "several million" under his management.

The scheme finally came unraveled because Madoff's clients asked for $7 billion in redemptions as of the first week of December, the complaint says, and Madoff couldn't come up with the cash to cover the requests.

Authorities say Madoff told senior employees at a private meeting at his apartment in New York that he planned to turn himself in within a week and that he was "finished" and had "absolutely nothing." Madoff estimated he had lost at least $50 billion but first wanted to pay out his remaining $200 million to $300 million to employees, family and friends, the complaint says.

Fifty billion here, fifty billion there, pretty soon we're talking about real money.

The government will presumably have to bail out Madoff's investors, so that's all the money that could have gone to bailing out Detroit (after all, Madoff's investors don't actually make anything, so they come first).

Oh, I forgot, we can just make up more money at no expense. Never mind!

Anyway, that reminds me of what a brilliant career move I made from changing from being a corporate executive to being a writer. Sure, it may not have seemed like that smart a switch from the perspective of my net worth and all that, but here's the thing: writers don't retire, thus positioning me perfectly for our coming Work Until You Die economy.

In other kinds of jobs, you reach a point where you just feel too old to keep making the 7am flight to Dallas, so you want to retire. But writers can keep shuffling from their bedroom to their home office indefinitely.

Sure, when I'm 80, I won't have as many original insights as I do now. But, I have too many now. I'll be more popular then.

My published articles are archived at iSteve.com -- Steve Sailer

OMG, we just elected a Chicago politician to be President!

As John Kass of the Chicago Tribune points out, the media in 2008 devoted far more attention to a Vice-Presidential candidate's career in a small town in Alaska than to a Presidential candidate's career in the transportation hub of the United States.

The best antidote for the media miasma about the next President of the United States is ... my book, America's Half-Blood Prince: Barack Obama's "Story of Race and Inheritance," which you can buy here. I get a really nice cut of out of each book sold, so I'd greatly appreciate it if you'd pick up a copy or two.

My published articles are archived at iSteve.com -- Steve Sailer

The Fundamental Flaws of Obamanomics

The two basic shortcomings of Obamanomics are that Obama is planning for 2009 with ends that are very 2007 (compact fluorescent lightbulbs! carbon! inequality! health insurance for everybody! spiff up inner city schools!) and means that are very 2008 (Carnival in Rio spending!).

Obama's thinking is still stuck in the 2007 mindtrap, the assumption that the fundamental problem of scarcity has been solved so now all we have to do is redistribute wealth and reorganize society in a more Stuff White People Like fashion. Instead, it turns out the Bush Boom was really a Bush Bubble and we actually have much bigger problems than the conventional wisdom of 2007 assumed.

My published articles are archived at iSteve.com -- Steve Sailer

Save GM: Bring back the Hummer!

The Democrats are now going to run the American auto industry, and they've got a foolproof plan to restore GM's profits: GM should stop making so many big, high-profit vehicles and start making more small, low-profit vehicles. They're going to lose money on each little car but make up for it on volume! You can see now why investors could never come up with such an idea. It just took a business genius like Barack Obama, with his extensive experience at making a profit in so many private industries, to make the auto industry come to its senses.

(By the way, Obama, personally, bought a 4,000 pound Chrysler 300 land yacht when he got rich -- his family's safety is a high priority to him -- but who's checking?)

You might think that with gas at $1.75 per gallon, the smart response would be to suspend temporarily the CAFE rules and let GM make more big high-profit big cars and fewer low-profit little cars. That seems more likely to bring in enough cash flow to get them through the next couple of hard years than insisting that they right now switch over to building go-karts powered solely by the owner's sense of enlightened superiority.

And, why does anybody think that even after GM spent years of government-mandated retooling to make small cars that it would even then be competitive with Toyota and Honda at making small, well-engineered cars? It's not like Toyota and Honda are going to be getting worse over the intervening years. I don't understand how that would work without slipping dumb pills to Toyota's and Honda's engineers. The only policy that would make sense would be a high tariff on the car parts that are imported from Japan (transmissions?).

The reason that Japanese car companies build cars in America is because the Reagan Administration imposed import quotas on them in 1982, which is roughly the equivalent of a tariff.

If we are serious about Detroit carmakers surviving, then protectionism seems like the only alternative. Think about the recruiting problems the Detroit carmakers must have getting young engineers and designers out of college to move to the Detroit area, which a giant ring of suburbs around a central void. If I was a 22 year-old Purdue engineering grad, I'd much rather take a job in Chicago than in Detroit.

My published articles are archived at iSteve.com -- Steve Sailer