“The regulators who were assigned to oversee Wall Street dropped the ball” in this economic downturn and “reminded us yet again how badly reform is needed,” Obama said. For this reason, he noted, “I’m announcing these appointments months earlier than past administrations have.”

To head the Securities and Exchange Commission, Obama appointed Mary Schapiro. Schapiro is an SEC veteran, having served as a commissioner from 1988 to 1994, including two months as acting chairwoman in 1993. She is currently the chief executive of the Financial Industry Regulatory Authority, an independent oversight organization whose “chief role is to protect investors by maintaining the fairness of the U.S. capital markets,” according to its website. In confirmed, she will be the first woman to hold this post.

The SEC has come under fire in recent months. During the presidential campaign, John McCain said that if he were president, he would fire SEC head Christopher Cox for allowing the financial crisis, although it’s unclear that he would have the authority to do so. Now, the SEC has been accused of sleeping at the wheel during Bernard Madoff’s $50-billion Ponzi scheme.

“As the events of the past year, even the past week, have shown us, this is a perilous time for investors,” said Schapiro. She and Obama both stressed the need for increased regulation to get Wall Street back on its feet.

Obama also announced the appointment of Gary Gensler to lead the Commodities Futures Trading Commission. Gensler spent 18 years at Goldman Sachs before serving as assistant secretary of the Treasury from 1997 to 1999 and undersecretary of the Treasury from 1999 to 2001. He also worked on Obama’s economic transition team.

Finally, Obama named Dan Tarullo, whom he called “one of my trusted economic advisers,” to an open seat on the Federal Reserve Board. Tarullo, a Georgetown law professor, differs from the other Fed governors in that he does not have an academic background in economics or a professional background in finance, according to Bloomberg. Instead, his expertise is in law and international trade. He served as President Bill Clinton’s representative at several Group of Eight summits.

Tomorrow, Obama is expected to announce the appointment of Rep. Ray LaHood (R-Ill.) as his transportation secretary.

Did I say piece? Actually, the Daily Beast calls it a “wrenching saga” of how Penney lost her fortune.

Here’s Penney, describing the way she pondered her future, after learning she’d lost everything:

I began to think about my options: I’d have to sell the cottage in West Palm Beach immediately. I’d need to lay off Yolanda. I could cancel the newspaper subscriptions and read everything online. I only needed a cell phone. I’d have to stop taking taxis. And who could highlight my hair for almost no money? And how hard was it to give yourself a really good pedicure?

Then there is my jewelry. I’ve always collected nice watches and pearls. In the back of my mind I’d think, “Buy good stuff because if you’re ever a bag lady, you can sell it.” It might have been a rationalization then—but here I am now: The nightmare may be coming true.

Look, no one deserves to be ripped off, and everyone has sympathy for those in shock from losing their life savings. But Penney also talks in this piece about how she got involved with Madoff to begin with – and part of this story really should be about the networking among the wealthy and well-connected to get in on a piece of the Madoff returns. They didn’t succumb to a cold call from a broker. Madoff’s funds were an accessory available to only the selected few, as exclusive as a Birkin bag.

Again, from Penney:

I suddenly had a lot of money. I was in my late 40s, and I felt that I was just too old to have it in a plain old bank account. But I was a creative person, not a savvy investor, so I asked around and talked to my smartest friends with Harvard and Wharton MBAs. There appeared to be a secret society of Madoff investors. A friend who was older, wealthier, and more established somehow got me in. I’ve always had good luck, and I thought it was another stroke of good fortune to be invested with the legendary Bernard Madoff.

Every month I got detailed statements, and my money looked to be growing around 9 to 11 percent. It didn’t seem greedy because I knew people other people who were making 15 or 20 percent. I thought, “This is just a very smart investor.”

If anything comes out of this economic crisis, it will be that people with financial degrees from fancy schools often aren’t really all that smart, are they?

Anyway, back to Penney. She’s got more problems ahead than losing her Florida seaside cottage. The part that stuck with me is her freshly ironed white shirts. She’ll no longer be able to pay Yolanda, her domestic, to take care of that task. From Penney:

I wear a classic clean white shirt every day of the week. I have about 40 white shirts. They make me feel fresh and ready to face whatever battles I may be fighting in the studio to get the best out of my work.

How am I going to iron those shirts so I can still feel like a poor civilized person? Even the no iron ones need touching up.

Yolanda makes my life work. She comes in three mornings a week, whirlwinds around, and voila! The shirts are ironed, the sheets are changed, the floors are vacuumed. She’s worked with me for seven years and is a big part of my life. She needs money. She sends it to her family in Colombia. I have more than affection for Yolanda, I love her as part of my family.

On Friday, I tell her I have had a disastrous thing happen to me, but I don’t have the guts to tell her I cannot keep her with me any longer. I’ll wait till Wednesday.

I think I can help Penney here. Everyone I know gets those no-iron white shirts from Target. Then you don’t have to pay someone to iron them. You can even switch to t-shirts and those always go one sale there! Besides, Yolanda, it seems, has bigger problems on her plate than a lack of crisp, white shirts. I’m glad Penney at least acknowledges that.

But then she moves on. She’s not going to spend her golden years, it seems, dividing her time between her New York artist’s pad and the Florida cottage. She has “terrifying thoughts” about ending up in what she calls a state-run old people’s home, with “slow-eyed” attendants who drug you and strap you to your wheelchair.

I believe the proper term is “nursing home,” and millions of people who didn’t benefit from fraudulent returns end up being cared for in them. It’s sad, and it’s hard on their families, but often there’s no other choice. Some nursing homes are run well, and abuses occur at others, and in most cases there’s not enough money from the state, the federal government and the private sector to make them better.

But wasn’t this woman an editor at a national magazine? Did she ever think, back then, about applying her journalistic clout to afflicting the comfortable and comforting the afflicted? I don’t remember any nursing home exposes at Self magazine, although I’m sure I could have found tips on finding an eyeliner that didn’t run and losing those last five holiday pounds.

Maybe I’m being unfair. Penney noted that she was a divorced, single mother in the 1970s, and she worked lousy jobs to claw her way back into money and prestige. Good for her. Too bad those heady returns from the Madoff years, and her exclusive membership in the Madoff fraternity, seems to have clouded those memories, leaving her just like everyone else she knows. Another wealthy sucker.

But we know what you’re really interested in: The big names – people supposed to be much smarter than the rest of us – who lost money with Madoff. That would be Mortimer Zuckerman, a charity of Steven Spielberg, Fred Wilpon, owner of the New York Mets, and Sen. Frank Lautenberg, just to name a few, the Wall Street Journal says.

From The Journal:

Mr. Zuckerman, the chairman of real-estate firm Boston Properties and owner of the New York Daily News and U.S. News & World Report, had significant exposure through a fund that invested substantially all of its assets with Mr. Madoff, according to a person familiar with his investments. A spokesman for Mr. Zuckerman declined to comment.

The Spielberg charity, the Wunderkinder Foundation, in the past appears to have invested a significant portion of its assets with Mr. Madoff, based on regulatory filings. In 2006, the Madoff firm accounted for roughly 70% of the foundation’s interest and dividend income, according to regulatory filings.

A representative of Mr. Spielberg confirmed that the foundation has suffered losses on its investments with the Madoff firm. He said he didn’t know the size of the losses and couldn’t comment further, including on whether Mr. Spielberg had any of his own money invested with the Madoff firm.

Jewish schools and charities have been particularly hard hit by losses that government authorities estimated last week at $50 billion. Among them: the Elie Wiesel Foundation for Humanity, founded by the famed Holocaust survivor and writer, according to two people familiar with the organization’s investments.

Ritholtz also says the whole Madoff debacle smells funny to him – how did a 70-year-old man run a $50 billion Ponzi scheme, all by himself?

I’ve got other questions. Why did such prominent people spend their own, and other people’s money, before doing even a little checking first? What do the ultra-wealthy base their investment decisions on – dinner party conversations?

As investigators continue sorting through the damage, watch for other players – and victims – in a fraud that seems more astounding every day, even by Wall Street standards.

From Smith:

If $50 billion really went poof in Bernie Madoff’s self-described Ponzi scheme, where did the proceeds go? This has to top what any dictator ever siphoned out of a banana republic. (Note that the Journal suggests that at least $17 billion has disappeared, so inflation adjusted, the Perons may be ahead). The story also suggests he was merely a very bad trader and merely lost the money.

In the case of other Wall Street operations that are now toast, the losses were the result of very big losses on positions and overpaying themselves bonuses in years that appeared to be good, but if the profits had been risk adjusted, were not so hot.

But a Ponzi scheme is all about fraud, all about taking as much out for yourself as possible (well, that is also the name of the game on Wall Street generally, but the rent-seeking is presumed to be on the back of an underlying legitimate activity) So where did the dough go?

And Madoff had to know this would blow up. Wonder why he didn’t flee to Panama.

More questions to look into today, as the biggest fraud in Wall Street history continues unraveling.

Clusterstock has the indictment, if you want to read the details. Madoff’s firm, Bernard L. Madoff Investments, ran more than two dozen funds for decades, overseeing $17 billion and promising high returns and low fees. But a few days ago, Madoff blew the whistle on himself, telling senior executives at his firm and the FBI, according to the indictment, that it was all one big lie, a giant Ponzi scheme. He was broke.

But what pushes this beyond a juicy Wall Street rip-off story is the sheer size of the swindle — possibly the largest fraud in Wall Street history — and its implications for other hedge funds and investors.

From the New York Times:

“We are alleging a massive fraud — both in terms of scope and duration,” said Linda Chatman Thomsen, director of the enforcement division at the Securities and Exchange Commission. “We are moving quickly and decisively to stop the fraud and protect remaining assets for investors.”

Andrew M. Calamari, an associate director for enforcement in the S.E.C.’s regional office in New York, said the case involved “a stunning fraud that appears to be of epic proportions.”

Those proportions have some concerned about how this will play out, beyond Madoff’s personal saga, according to The Times:

There was some worry on Wall Street that Mr. Madoff’s fall would shake more foundations than his own.

Calculated Risk supposes Madoff had about 10 to 25 hedge funds as clients, that they lost everything, and that some hedge funds will be taking some serious write downs soon.

Looks like Wall Street will be sorting through the wreckage of all this today, to see how much damage has been done. As if there weren’t enough to worry about, already.