The three books are “Too Good to Be True: The Rise and Fall of Bernie Madoff” by Erin Arvedlund, “Betrayal: The Life and Lies of Bernie Madoff” by Andrew Kirtzman, and “Madoff With the Money,” by Jerry Openheimer.

Among the highlights, according to reviewer Carlos Lozada:

Madoff’s heartlessness was breathtaking.

On the day of Madoff’s sentencing, Judge Denny Chin described a letter he received from a widow who went to see Madoff after her husband died of a heart attack. Bernie put his arms around her and said, “Don’t worry, your money is safe with me.” She lost everything and had to sell her home. It was such personal betrayals, as much as the financial losses, that transformed Madoff into one of the most vilified men in America.

The warnings from Madoff competitor Harry Markopolos to the feds regarding his scheme were detailed, complete, and totally on the mark.

Markopolos’ November 2005 memo to the SEC, a 21-page document titled “The World’s Largest Hedge Fund is a Fraud,” belongs in the Unheeded Warnings Hall of Fame, the financial world’s answer to “Bin Laden Determined to Strike in U.S.”

In the end, Madoff’s swindle wasn’t all that hard to figure out. It was just an ordinary, run of the mill Ponzi scheme:

Maybe there is just not much to say about Bernie Madoff, no great depths to plumb. He may simply be a heartless man of middling intellect who felt no compunction in defrauding strangers and loved ones. His scam was not some devious piece of financial engineering and technical know-how; for years, he simply deposited investors’ cash in a bank account, taking vast amounts for himself and hoping to pull enough in to keep the scheme going. Madoff does not embody the perils of a turbulent marketplace; in fact, the market did him in.

As Lozada points out, it’s too early to comprehend Madoff’s legacy just yet, but undoubtedly as more details leak out regarding his operation, we’ll know and understand more. In the meantime, the books about him so far don’t add up to a portrait of an evil genius. As Lozada puts it, Madoff certainly may have been evil. But a genius he was not. Which makes his swindle all the more fascinating, for those of us still trying to figure out how so many rich and powerful people got totally taken in by it.

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People are “rightly outraged” about the AIG bonuses that were paid to executives notwithstanding the firm’s huge losses, Obama said, but “just as outrageous is the culture these are a symptom of.” He cited a culture that rewards “excess greed and risk-taking.”

As we get out of this crisis, as we work towards getting ourselves out of recession, I hope that Wall Street and the marketplace don’t think we can return to business as usual. The business models that created a lot of paper wealth but not real wealth in this country can’t be the model for economic reform. We have to move beyond a constant bubble-bust mentality.  We have to be thinking about economic growth … increasing our productivity across sectors. Shareholders and boards of directors have to hold executives more accountable for their compensation scales. The fact that these guys are looking for bonuses after having run down AIG raises the question of why were they making this kind of money beforehand? This kind of culture has to change.

Obama said he’ll be working with his economic team — including Treasury Secretary Timothy Geithner, who he expressed full confidence in — to develop “smart regulations” so the government never has to step in again.

Although he assumed responsibility for having to clean up the situation now, Obama took a not-so-subtle swipe at Republicans who’ve long resisted any regulation of executive pay.

A whole bunch of folks now are feigning outrage about these bonuses, but a year or two ago they said we should never meddle in these compensation plans. That it’s part of the market. Now suddenly they’re outraged. …

My hope is that one of the lessons we learn here is that putting smart regulations in place is important. These things are not anti-market, they’re pro-market.

As Calculated Risk puts it, it’s time to party like it’s 1997.

Indeed, the Wall Street Journal runs the numbers:

The Dow Jones Industrial Average, which suffered a 485-point slide last week to hit new bear-market lows, ended down 250.89 points, or 3.4%, at 7114.48, its lowest closing mark since May 7, 1997. The S&P 500 dropped 26.72 points, or 3.5%, to 743.33, its lowest close since April 11, 1997.

The economy was booming in those Clinton years. But it’s painful to see the stock market falling back to  mid-1990s levels.

When it comes to the stock market, forget about nostalgia. Just cross your fingers and hope for an end to the free fall.

Ordinary taxpayers would like an answer to this question: Why have they been billed more than $45 billion to rescue Citigroup from failure when, as president of the Federal Reserve Bank of New York, you were its primary supervisor? Three major problems led to Citigroup’s downfall: bad investment policy; overexpansion, which overwhelmed Citigroup’s management; and an inadequate capital base. Why was Citigroup’s supervision inadequate to deal with these problems?

Here’s another:

How do we more effectively regulate the financial services industry without adding unnecessary regulations that cripple our ability to compete globally?

I’d like Geithner to lay out honestly, and in clear terms, exactly how bad the mess we’re in has gotten – and how scared we should be. Judging by Wall Street’s reaction on Tuesday to mounting bank troubles, this is a crisis that’s getting worse by the day. To earn the trust of Americans, Geithner needs to go on the record here, and begin offering the kind of transparency that has previously been missing.

Financial shares alone fell to a 14-year low, Bloomberg added:

State Street Corp., the largest money manager for institutions, tumbled 59 percent after unrealized bond losses almost doubled. Wells Fargo & Co. and Bank of America Corp. slumped more than 23 percent on an analyst’s prediction that they’ll need to take steps to shore up their balance sheets. The Dow Jones Industrial Average plunged 4 percent, the most on an Inauguration Day in the measure’s 112-year history.

As if that’s not bad enough, there’s more. Also from Bloomberg:

U.S. financial losses from the credit crisis may reach $3.6 trillion, according to New York University Professor Nouriel Roubini, who predicted last year’s economic and stock-market meltdowns. “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion,” Roubini said at a conference in Dubai today. “This is a systemic banking crisis.”

Well.

Calculated Risk puts the problems in perspective:

From an economic perspective, Mr. Obama’s first few weeks in office will be critical as his administration finalizes the stimulus package and addresses the ongoing crisis in the banking system. Best wishes to Mr. Obama. You are now on the clock.

I guess today’s slide is just Wall Street’s way of welcoming the new administration.

For example, Norris points that some stocks actually are up today, among them MasterCard.

He doesn’t explain why. I’m guessing investors figure people are going to have to live off their credit cards more.

At 10 a.m., when the market was still sliding, Norris offered his theories on why stocks are in such turmoil. The panic he refers to is the shakeup in overnight global markets:

First, the world is finally waking up to just how bad the world economy is, and that earnings are going to fall everywhere. Only a couple of weeks ago, some people were claiming the S&P 500 was trading at 12 times next year’s earnings, even if it was around 18 times trailing earnings.

If that is the problem, then this could be nearing an end, and this panic could really mark the bottom. (Fair warning: I’ve spotted bottoms before during this bust — and been ever so wrong.)

Second, this is the hedge fund devastation, as overleveraged hedge funds are forced to sell by falling prices, and then are forced to sell more because they drive prices even lower.

There are rumors that the Fed is liquidating one hedge fund. There are also denials, so I won’t name the fund. But even if the rumor is false, it encapsulates one big worry.

If that is the explanation, this will end when the hedge funds have finally been forced out. Then the rise could be explosive.

Happy following the market. Fortunately, Happy Hour isn’t too far off.

Treasury Secretary Henry Paulson (WDCpix)

Congress’s failure to pass the Bush administration’s financial plan has triggered a wave of scare commentary -– “financial Armageddon,” a leap “off the cliff” or “into the abyss,” the trigger for “the Depression of the 2010s.”

There have been good background analyses of the $700 bailout plan in both The Economist and The Wall Street Journal. Two weeks ago, after Federal Reserve Chairman Ben Bernanke and Treasury Sec. Henry Paulson Jr. refused to rescue Lehman Brothers from bankruptcy, they were shocked at the subsequent reaction in credit markets. Sorting out claims was far harder than expected, and the losses on Lehman paper had a nasty snapback on supposedly safe money market funds.

Illustration by: Matt Mahurin

Shaken, Bernanke and Paulson decided that they couldn’t risk any more major bank failures. Instead, they decided to re-capitalize the industry by buying up its bad assets. The $700-billion price tag was just a guess. The terms of the purchase were intentionally loose to make it an offer that the banks couldn’t refuse, or even haggle over.

Paulson was called “The Hammer” on Wall Street. In a classic “bear hug” acquisition, you stampede the target’s board by the early release of an attractive proposal to shareholders. He used the same tactics with the U.S. Congress. To less effect.

By announcing the bailout to the public even before the congressional briefings, Paulson counted on, and got, a huge market recovery. He was essentially daring Congress to turn him down. But it did.

The plan was misrepresented from the start. The core problem is that banks are carrying toxic assets at far more than their true market value. If they mark them correctly, however, the accounting losses will wipe out their capital.

So the only way a bailout can “recapitalize” them is by vacuuming up the bad assets at much more than their true value. Taxpayers will get some money back at some point — but not much.

Nor does the plan have anything to do with preventing a recession. Major-market house prices more than doubled from 2000 through 2005; that’s about a 14 percent annual growth rate, the highest on record. If you bought a house with 1 percent down, which was easy, you got your investment back sevenfold in just three years!

With the value of the underlying assets growing so fast, banks lent to anyone on anything, and mounted second mortgage marketing campaigns to get current homeowners to cash in their paper gains. There were similar, if smaller scale, bubbles in corporate takeover loans, commercial real estate and auto loans.

Home-equity loans paid for 6 percent of all consumer spending from 2000-2007. Now that consumers are maxed out on debt and house prices are dropping back toward normal levels, that source of cash is gone. Consumer spending must go down — a lot. That’s why we’re in a recession, and the bailout can’t do much, if anything, about it.

How many votes would the bailout plan have gotten if the administration and the congressional leaders had told the truth — that this is a bank bailout that won’t prevent a recession or help homeowners?

Saleability aside, is the Bernanke-Paulson plan really such a good idea? One leading economist insists that it’s necessary to avoid the “destructive power of deleveraging.”

But excessive leverage is what the crisis is all about. Deleveraging, however painful, is the solution, not the problem.

Today, panicky interbank markets pushed the overnight lending rates to 7 percent. But a quarter-century ago, then-Federal Reserve Chairman Paul Volcker intentionally pushed the overnight lending rate to 19 percent(!). He had chosen to spike inflation by choking off the supply of money and credit, knowing that he would trigger a vicious recession.

Real gross domestic product dropped 1.9 percent in 1982 — the worst downturn in postwar history. President Ronald Reagan, Republicans might note, supported Volcker all the way. Together, they laid the groundwork for the strong growth of the 1980s and 1990s.

Bernanke and Paulson talk about a recession as if it’s the equivalent of a nuclear holocaust. It’s not.

The whole country has grossly overspent its income for the last half decade and is wallowing in unpayable debt. The leveraging-up process has also created a bloated and omnivorous financial sector that needs to be shrunk drastically.

In short, it’s about the same scale of problem that Volcker faced in 1982, and warrants similar resolve. Many banks will doubtless fail without the bailout, with possibly severe short-term consequences. The long-term cost of a zombie financial sector on life support might be even higher.

The bailout was a questionable idea at best, made worse by the ram-through attempt and the misleading sales pitch. And neither presidential candidate has any stake in delaying the start of a recession until he takes office, and gets stuck with the blame.

So Congress did the right thing. It’s time to let the bailout die.

Charles R. Morris, a lawyer and former banker, is the author of “The Trillion Dollar Meltdown: Easy Money, High Rollers and the Great Credit Crash.” His other books include “The Tycoons: How Andrew Carnegie, John D. Rockefeller, Jay Gould and J.P. Morgan Invented the American Supereconomy” and “Money, Greed, and Risk: Why Financial Crises and Crashes Happen.”

Illustration by: Matt Mahurin

Related Video: Pain on Main Street

As lawmakers continue fighting on Capitol Hill over a $700 billion taxpayer bailout for banks and lenders on Wall Street, the foreclosure machine grinds on and the mortgage crisis at the heart of the problem continues to worsen.

Every day, people show up looking for help at the modest offices of United Communities Against Poverty, a housing counseling agency in Prince George’s County, Md., in suburban Washington. Homes are going into foreclosure at one of the fastest rates in the nation here, and to chief counselor Caprice Coppedge, it’s hardly surprising that the bailout bill doesn’t have much in it to help them.

Illustration by: Matt Mahurin

“I’m not shocked,” she said. “Each one of these so-called rescues hasn’t done much to help homeowners. There has to be a little bit more of a solid plan. I don’t understand why they

Image by: Matt Mahurin

When it comes to the bailout, homeowners understand one thing for sure: They aren’t too big to fail. A long-sought measure that might help some of them — changing federal law to allow bankruptcy judges to modify mortgages — faces tough odds, with the lending industry strongly opposed to it.

Even if gets approved, some borrowers can’t afford bankruptcy attorneys or don’t want to file. Still, housing groups estimate the change would keep some 600,000 families in their homes, which is why they have been pushing the idea.

To help even more, Senate Democrats want the government to modify as many of the loans it buys as possible. But just because the government owns all those bad mortgages doesn’t mean it can do a massive restructuring to make them more affordable.

In taking on toxic loans, the government faces a huge Humpty-Dumpty problem — mortgage-backed securities were sliced into pieces and sold that way to investors around the globe. Spending all that taxpayer money to buy those securities still won’t ensure the government can own or control them all, so it can’t redo loans on a large scale. Even $700 billion won’t be enough to put all the pieces back together again, said Adam Levitin, a Georgetown University law professor and expert on the credit industry.

The small percentage of loan modifications that might get done will be “random and arbitrary,” and not based on the merit’s of a homeowner’s case, he said. Not to mention that second mortgage holders regularly refuse to do loan modifications, and many subprime homeowners took out two mortgages.

Given all this, the bailout ends up rewarding the most egregious of the subprime lenders — the ones who made the most abusive and predatory loans and who disproportionately targeted minority borrowers — since they’ll be the ones with the most toxic securities to buy. Banks that didn’t do as much subprime lending won’t need to sell off as many loans, and they won’t get as much government money, Levitin said.

And don’t count on banks being subject to tighter regulation in return for their bailout, he added. It’s possible that banks and lenders in a few years might use the same taxpayer dollars that rescued them to stave off regulatory reform of the financial markets, the ultimate irony of the bailout effort.

That very real possibility could be avoided by having Congress fast-track approval of a bailout but insist on regulatory reform within a short time frame, and specify that it can’t be filibustered, said economist Dean Baker, co-director of the Center for Economic and Policy Research. Otherwise, as the bill now stands, banks seem to be escaping the consequences of their past lending behavior.

“It’s pretty insidious,” Levitin said. “We’re bailing out banks that got us into this mess because of years of abusive and predatory loans. And there’s no price to pay. I find that deeply troubling.”

No where is it more troubling than places like Prince George’s County, the nation’s wealthiest black suburb, which has been hard hit by subprime loans and foreclosures. Credit scores here rank at or above the national average, but the community has more than its share of subprime loans, with almost twice as many homeowners holding high-cost mortgages as the national average.

That pattern holds true elsewhere. In majority black and Latino communities nationwide, nearly half of all mortgages made in 2006 were subprime loans. All during the housing boom, racial differences became more pronounced as income increased — so middle-to-high income black and Latino borrowers were more likely than non-minority borrowers with modest incomes to have subprime mortgages.

Iris Pulliam, 51, a social worker in the District of Columbia public schools, refinanced her Prince George’s County home with a 9.5 percent Countywide loan three years ago. She tried to do some research before refinancing and refused the adjustable rate mortgage the lender first offered.

Looking back, Pulliam said she wasn’t aware she could have had a real estate attorney with her at the closing, and didn’t comprehend all the additional fees included in the loan before she signed. Still, she kept up the payments until her husband died almost two years ago, leaving her with just one income to pay the mortgage and take care of her 15-year-old son.

Pulliam began falling behind on her mortgage, and tried working out a loan modification with Countrywide. But the lender agreed only to a repayment plan that would increase her monthly payments.

She stood in a long line in the July heat to try to get a loan restructuring through the Neighborhood Assistance Corp. of America, a housing advocacy group. But Countrywide still hasn’t approved it. A Countrywide representative called her recently to discuss her case, but she called back again and again and couldn’t get through to anyone.

At this point, Pulliam has taken on a part-time job in addition to her full-time position and has dipped into most of her retirement savings to keep up with the mortgage. Her day starts at 5 a.m., and she gets home around 8 p.m. She’s thinking of trying to refinance again, if possible. One thing she’s well aware of: The bailout plan isn’t going to do a thing for her.

“It’s not taking the average homeowner into consideration, to me,” she said. “I feel that they’re putting all this money out for all these big money industries, investment companies and firms, and they should do something more for the average homeowner, to try to make sure we keep our homes.

“I think the scales are tipped toward the mortgager who has billions of dollars. For the little person, we might as well be off the scales.”

Modifying bankruptcy laws won’t help her, Pulliam said. She wouldn’t be able to afford a bankruptcy attorney. Congress could make a difference by forcing subprime lenders in future to be “upfront and above board,” she said. She’s not convinced that will happen.

To Coppedge, the housing counselor, part of the problem is that people need the sort of help neither Congress nor the Treasury Dept. is talking about. Coppedge, a former mortgage banker, is well aware that keeping credit flowing will help people in the long run to buy homes or take out loans — in that sense, she sees the need for a bailout.

But the people who come to her could use help too, like emergency assistance to cover even a month or two of mortgage payments to stay in their homes. For along with subprime loans, Coppedge noted, higher gas and food prices are cutting into the ability of the elderly and other homeowners on fixed incomes to pay their mortgages.

“I see a lot of clients who are not your typical five or six months behind on their mortgage,” Coppedge said. “I see some individuals, especially the elderly and the handicapped, who were preyed upon and asked to refinance their mortgages to make repairs or whatever the case may be. And these people just need one or two months of mortgage assistance to catch up, and catch their breath, and be able to get back on track.”

As part of the bailout, Democrats in the House and Senate want government agencies like the Federal Housing Admin. to expand their lending programs and help more homeowners, building on an effort included in the mortgage rescue bill. Under that program, the FHA will provide $300 billion in guarantees for lower-rate mortgages refinanced by lenders willing to accept a loss on the loans.

The program, which begins Oct. 1, is voluntary, and no one seems sure how well it will work. Coppedge noted that most of her clients either don’t have enough income or owe so much more on their mortgages than their homes are worth that they usually don’t qualify for FHA or other government programs.

On Capitol Hill, some lawmakers and economists are questioning whether the bailout plan will do enough to ease the credit crunch and to hold off a recession. But to groups like the Center for Responsible Lending, they are asking the wrong questions. Unless any bailout also deals with the problems of people facing foreclosures, it can’t fix the economy.

“The bailout will not solve our economic problems because it will do virtually nothing to stop the foreclosure epidemic,” the center said in a statement. “Continuing foreclosures will drag down the economy even further.”

John Taylor, president of the National Community Reinvestment Coalition, which represents housing advocacy groups, called it “unconscionable” for Congress to approve a plan that never addresses the underlying problem behind the crisis. His group met with Federal Reserve Chairman Ben Bernanke on Monday to complain that the government should first help homeowners facing foreclosure, before shoring up Wall Street.

Pulliam says the bailout for Wall Street mostly means that she’s on her own to save her home. Does anyone in power understand what she’s going through?

“The CEO of Countrywide wouldn’t know,” Pulliam said. “Or the vice president of Countrywide; or the Bank of America. They’re all out buying up other banks while the consumers have trouble keeping their houses.”
Pulliam grew up in a house with a white picket fence, and she wants that same sense of the benefits of homeownership for her son. She’s thinking about taking in a roommate to help pay the mortgage. Her sister is also facing foreclosure, and they’re considering sharing a household to solve both of their difficulties.
“I’ll do everything possible that’s legal and above board to keep my home,” Pulliam said. “That’s what I want for my son — a stable neighborhood environment.”

Like other troubled borrowers dealing with a crisis that seems far removed from the political posturing on Capitol Hill, Pulliam seems willing to pay whatever price it takes to keep it.

Last week, I reported that the financial crisis enabled Democrats to attack McCain on Social Security privatization — a largely forgotten issue that could “gain traction in swing states with large elderly populations.”

This weekend, Obama hit McCain on Social Security in Florida, a state with one of the oldest demographics in the country. Seniors make up 17 percent of the Florida population, and an even higher share of the electorate.

Obama warned that if Republican privatization plans had been implemented, over the past week “millions would’ve watched as the market tumbled and their nest egg disappeared before their eyes.” He also told voters that McCain “wants to gamble with your life savings.”

Even if you accept that characterization of Social Security privatization, though, it is unlikely that a McCain administration would succeed in privatizing the program. A GOP-controlled Congress could not pull off the task in 2005, coming off Bush’s reelection.

Any similar proposals would likely be D.O.A. in the next Democratic Congress.

Obama is still right to expose the pitfalls of McCain’s pro-market past. Neither candidate pulls punches when an opponent’s plan is unlikely to be implemented, either.

But these Social Security attacks are a bit like a Democratic version of the Republican attack on guns — even if a Democratic president prioritzed a huge federal crackdown on gun ownership, it would never get through Congress.