Bernie Madoff as Tyler Durden

It's becoming increasingly difficult to stretch the imagination enough to believe that the Wilpons had absolutely no knowledge of what Bernie Madoff was doing. I don't care how much people trusted Fred Wilpon, shouldn't the idea that people were only allowed to ask about their investments through the Wilpons; that they were not allowed to contact Madoff directly, set off some alarms? I mean, what the heck was this, Fight Club?

The rules, at Mr. Madoff’s request, were clearly stated in advance by the Sterling partners to investors invited into the club. Account holders were never to speak directly with Mr. Madoff or anyone at his business, Bernard L. Madoff Investment Securities. All communications regarding any of the accounts had to go through Sterling. Clients would receive monthly paper statements from Mr. Madoff, though the year-end tax statements were sent from Sterling.

One woman who, along with her husband, held several accounts with Mr. Madoff said she thought it was peculiar that they were told never to communicate with Mr. Madoff, but it did not stop them from wanting in.

“We never questioned the fact we weren’t allowed to contact Madoff because of our confidence in Sterling,” said the woman, who did not want to be identified as an investor with Mr. Madoff. “We invested because we trusted these two people absolutely; because they were big business and we assumed they knew what they were talking about.”

Irving H. Picard, the trustee trying to recover assets for victims of the fraud, has charged in a lawsuit that Mr. Wilpon and Mr. Katz willfully ignored repeated signs that Mr. Madoff’s enterprise was suspect. That investors were not permitted to contact Mr. Madoff is portrayed in the suit as an intentional and fairly elaborate way to erect a barrier between these individuals and him.

You have to wonder just what it takes for people to accept the "If it's too good to be true, it isn't" rule. It's easy to talk about greedy rich people in the context of the Madoff scam, but then I always go back to Loretta Weinberg, the reform-crusading New Jersey state senator who lost all of her retirement savings to Madoff through her money manager who invested it with Madoff. It might be easy to brand Weinberg as just another greedy rich asshole, but a million dollars in retirement savings accumulated because you lived frugally doesn't qualify one as rich anymore; not when the conventional wisdom is that MOST of us will need about this much in order to retire (and most of us will not have it).

After the 1987 crash, which coincided with the early years of the 401(k), people started to realize that what goes up could come down, and often does. In the decade from 2000-2010, stock returns were nearly flat, bank interest became next to nothing, and bond funds are usually considered as conservative investments. So most people saw their retirement savings barely tread water for most of the decade, and collapse during the crash of 2008. Those who stuck it out may have largely earned it back, but breaking even from 2008-2010 is hardly the "historical 10% return" that most of us were led to believe a growth-oriented asset allocation would yield.

So when you combine that reality with the "special" aura that surrounded the ability to buy into the Madoff Fight Club, it becomes easier to understand why people would want to get in on these returns. What's baffling is that they would buy into the idea that one should not look at the behind the curtain. Even in the (spoiler alert) hallucination that was Fight Club, members got to see who Tyler Durden was.