Welcome back to Acrimoney. We hope you enjoyed your Fourth of July—pies, parades, and fireworks. We had our own fireworks over the weekend. Although not the kind you would expect.

What is it the press doesn’t understand about conflicts of interest?

We are referring, of course, to Joe Nocera’s article published by The New York Times on July 3: Ire at Madoff Swings Toward the Referee. The essence of the article can be summed in the following paragraph:

Now that Mr. Madoff is in prison for good, this is where the anger of the victims has turned — toward those with their hands on the purse strings, starting with Mr. Picard. But while that anger may be understandable, it’s not remotely justified.

Hey, Joe. If you’re defending Irving Picard because he didn’t create “the system,” we agree the ire toward the trustee is not justified. So what.

The big point, the elephant in the room so to speak, is not what people think about Irving Picard. The system is flawed. Madoff victims are angry, in part, because their recoveries are vulnerable to back-room deals.

Take a look at our last post, Madoff: 150 Years Are Just The Start. SIPC pays Picard. Picard makes decisions, which can help SIPC while hurting Madoff victims. Madoff victims, already hurt by the SEC’s monumental blunders, wonder whether they can trust the government.

How can we tolerate a process where 1) a trustee makes decisions; 2) those decisions have zero-sum consequences (one side wins and the other loses); and 3) one of the two parties is paying the trustee?

There has been so much criticism of Wall Street over the past twelve months. We keep hearing stories about cronies and “banksters.” The government, it seems to us, should turn the lens inward. Focus on fixing the conflicts of interest within, especially for Madoff victims who have suffered so much already.

And one last thing. In the Madoff liquidation, the trustee is not just an umpire. He’s the A-Rod of compensation. We would not be surprised if Picard earns $60 million or more when the Madoff liquidation is complete.

About the author

Norb Vonnegut wrote 178 articles on this blog.

Do you ever feel the financial news makes no sense? Do stories leave you with more questions than answers? I created Acrimoney to discuss Wall Street’s behavior behind the headlines. As a veteran of a wealth management business that exceeded $1 billion in assets, I offer insight into the people and the “doings” that affect your money. I’ll start the discussion. But I hope you’ll jump in and say what you think.

• Blog