Now that Madoff is starting what will eventually become a long stay in the clink, let the post-mortems begin. Would you like to know who were his real accomplices in this affair? It's a gang that goes by the nickname, the "Securities and Exchange Commission" and it brazenly operates right out in the open in Washington, D.C. And the nature of their fraud? Why, they con the investing public into believing that they're "protected" against guys like Bernie Madoff!

As a review of Madoff's case shows, he was investigated multiple times by the SEC but nothing was done despite some tut-tutting in memos. In the years between these various ignored warnings Madoff scammed billions more, much like a serial killer who continues his spree while the cops keep bumbling the investigation. Meanwhile a new generation of Madoffs are probably being born as we speak, all being protected in a sense by the public's perception that the SEC is going to protect it! (A close reading of SEC statements and internal memos on this affair suggest that the only thing they really protect is their own behinds.)

Here's a story about Madoff that reached me through one of my investment banking contacts. It seems that several years ago a major New York bank's trust department (it must go nameless) was approached by Madoff on behalf of a large client.

This bank asked for the client's trading records and then turned the matter over to some junior clerk. His assignment? To "reverse" Madoff's various trades shown in the account history in an effort to replicate the claimed returns. It's a time consuming but simple exercise and after numerous attempts the young kid couldn't prove how Madoff did it. The bank then politely backed off.

And what, with infinitely greater investigative resources, did the government do? By most reports they interviewed Madoff and simply accepted his answers as "the truth" without further investigation. It's like interviewing Ted Bundy about his role in the murders and accepting his alibis without further investigation. Any police cadet would know better.

But not the SEC. And any lessons that readers wish to draw from this sorry episode about government's capacity to manage the economy, please feel free to do so.