“Crime is naught but misdirected energy.”-Emma Goldman (1869 – 1940), political activist

The sad banality of financial crime came into clear resolution today. Bernard Madoff is the fraud we suspected. Only worse.

A colleague of mine said she could not help but feel sorry for Madoff, that all this had befallen him. She even apologized for saying so, because she knows that charities I am personally committed to have suffered mightily from Madoff’s silent violence. Sorrow is actually the right emotion, not for the man, but for the psychosis he exhibited for years upon years as he carefully executed his crime.

I could not help but feel profoundly revolted when I read his prepared statement from his hearing today. The calmness of it. It had the emotion of an annual report of a company in the red.

Through the split-strike conversion strategy, I promised to clients and prospective clients that client funds would be invested in a basket of common stocks within the Standard & Poor’s 100 Index, a collection of the 100 largest publicly traded companies in terms of their market capitalization. I promised that I would select a basket of stocks that would closely mimic the price movements of the Standard & Poor’s 100 Index. I promised that I would opportunistically time these purchases and would be out of the market intermittently, investing client funds during these periods in United States Government-issued securities such as United States Treasury bills. In addition, I promised that as part of the split strike conversion strategy, I would hedge the investments I made in the basket of common stocks by using client funds to buy and sell option contracts related to those stocks, thereby limiting potential client losses caused by unpredictable changes in stock prices. In fact, I never made the investments I promised clients, who believed they were invested with me in the split strike conversion strategy.

I have heard countless presentations like this, just on the edge of a corporate finance text book and illogic. Everything was neatly done by Madoff. Funds to this bank account for that reason. Statements written to this client to verify that balance of funds. Everything was neat, calm, organized. “As the years went by I realized that my arrest and this day would inevitably come,” he said today — as if pleading guilty to defrauding nearly 5,000 people of tens of billions of dollars is akin to a doctor’s appointment.

Yes, I feel bad for him. I feel bad that someone could become so sick, so rationally deranged. Madoff is a knife to Wall Street’s heart. To any of the whiz-kid portfolio managers who are biding their time for this recession to end so that the Dow can rocket back and they can do away with their annoying high-water marks I say this: be humble. Only humility will counter Madoff’s misguided energy.