Commentary by Amity Shlaes
-- The difference between recession and depression is simple. Recession, goes the saying, is when you lose your job; depression is when I lose mine.
These days recession is starting to feel like depression to a lot of people. Recession starts to feel like depression every night at General Motors Corp. when they turn off the escalators and turn down the lights in the faint hope that one more person will get to keep his wage and benefits one more day.
Ron Gettelfinger, head of the United Auto Workers union, knows that worker packages, which cost carmakers $74 an hour in wages and benefits, are way out of line with deflationary reality. But most of Gettelfinger’s proposals aren’t about slashing those packages. Instead, Gettelfinger is emphasizing plans for federal assistance to manufacturers, or federal cash to improve terms of auto loans.
These latter approaches aim to fortify the overall economy. In a recovered economy, the logic runs, worker pay won’t seem so egregious. Behind Gettelfinger stand economists who argue that bringing down wages isn’t right or possible, even in a troubled period. Wages, economists says, may move up, but they are “sticky downward.”
These economists cite the U.K.’s John Maynard Keynes. They also often cite one of the parents of modern economics, Irving Fisher of Yale. Around World War I, Fisher wrote up a then-novel plan: index wages to the growth of the economy so that raises are automatic.
But in recent years scholars have been making a different argument. Lee Ohanian and Harold Cole of the University of California, Los Angeles, say that the high-wage method of fending off economic depression can make a depression more likely.
Ultimate Depression
The model Ohanian and Cole use is the ultimate depression, the Great Depression of the 1930s. Early in that depression, unemployment hit 25 percent. It fell all the way to 13 percent or 14 percent in the mid-1930s, only to head up to 19 percent in the later 1930s. This was a huge shift from the preceding decade, when unemployment averaged less than 5 percent.
What was transpiring at GM or Ford Motor Co. in those days? In the 1920s, Henry Ford pushed for wage increases in the faith that they would enable workers to buy more cars. A young labor leader named John L. Lewis was also pushing for higher wages. Lewis convinced Herbert Hoover, who, first as Commerce secretary, and then as president, insisted higher was better. After the stock market crash of 1929 -- the equivalent period to now, more or less -- Hoover sought to block wage cuts.
Reverse Order
In the 1930s, the Roosevelt administration continued the trend, leading Congress in passing the Wagner Act. This gave unions the power to organize Detroit and threaten sit-down strikes. At the same time, unemployment was heading up.
Until now, many economists have tended to blame broad monetary forces for a general decline, and hence the new joblessness.
But the order was probably the other way around. Ohanian and Cole ran the numbers and found that in the late 1930s, manufacturing wages were 20 percent above the trend for the rest of the century. They posit that employers were unable to cut wages, so they simply fired or failed to hire.
Another truism that we all know -- “nice work if you can get it” -- captured this period perfectly. The unions got, the jobless paid. The Depression duly earned its adjective, “Great.”
At the time, employers knew what was going on. When executives were asked to rank what New Deal laws they wanted to see repealed, they put the Wagner Act high on the list, way above, say, the law that created the Securities and Exchange Commission or deposit insurance.
Nothing Wrong
Fast forward to today’s auto industry and the famous $74 hourly package. Everyone knows the U.S. automakers would have a better chance of survival if that package were pared. But an economist who follows manufacturing closely, Ken Mayland of Clear View Economics LLC in Pepper Pike, Ohio, notes that in the modern discussion, “price and labor are not allowed to adjust.” Instead the pressure is, as in the 1930s, to address trouble via other methods.
Maybe it’s worth trying out the idea that there’s nothing wrong with allowing wages to fall. Sometimes they just have to go down. Even one of the favored fathers cited above -- Irving Fisher -- acknowledged this.
In 1918, Fisher wrote of what his proposed index system would do for employers if the general price level dropped: “Those firms which have advanced their employees’ wages on the basis of index numbers can make a reduction, at least to the point at which they started, with the understanding on the part of the employees that the reduction is the automatic result of a price change similar but opposite to that which gave the high- cost of living compensation.”
Gas prices are down today. So are prices at the mall, even pre-Christmas. If the U.S. automakers and their workers can make reasonable packages their goal, then we’re all less likely to have our own personal depression.
Dec. 17 (Bloomberg) -- Former Iowa Governor Thomas Vilsack is set to be named by President-elect Barack Obama as his choice for Agriculture secretary, and Colorado Senator Ken Salazar is being selected for Interior secretary, a Democratic official said.
Obama will formally announce his intention to nominate the two men today in Chicago, according to the official, who spoke on the condition of anonymity. Vilsack and Salazar will join Obama at the news conference, scheduled for 10:45 a.m. Chicago time.
Vilsack, 58, was elected as Iowa’s governor in 1998, the first Democrat to win the office in 32 years. He was re-elected in 2002. Now an attorney at the Dorsey Trial group, Vilsack endorsed New York Senator Hillary Clinton during the Democratic presidential primary campaign after ending his own presidential bid in February 2007, before the first contest took place.
He would bring to the Department of Agriculture experience as the former chief executive of a state heavily reliant on agriculture and related industries. Iowa is one of the nation’s top producers of corn, soybeans, hogs and eggs and ranks third in the value of agricultural products sold, according to government statistics.
Agriculture is the fourth-largest Cabinet agency, with a budget of about $100 billion and 110,000 employees.
Salazar, 53, is in his first term in the Senate after serving as Colorado attorney general and executive director of its department of natural resources.
Oil Production
He has criticized the Bush administration’s efforts to develop oil from Western shale formations, saying that while shale may have potential to produce billions of barrels, the technology may not be commercially viable. He also says it isn’t clear how much pollution would result from shale oil development or how much water would be needed for the process. Salazar supports more oil and gas drilling off U.S. shores.
The Interior Department, which has been called the “department of everything else,” encompasses the National Park Service, Bureau of Land Management, Fish and Wildlife Service and Bureau of Indian Affairs, among other agencies. It has more than 70,000 employees and a budget of $16.8 billion.
Salazar’s support for expanded energy production raised concerns from some environmentalists.
“The Department of the Interior desperately needs a strong, forward looking, reform-minded secretary,” Kieran Suckling, executive director of the Tucson-based Center for Biological Diversity, said in a statement yesterday. “Unfortunately, Ken Salazar is not that man.”
Announcement in Chicago
Both posts are subject to confirmation by the Senate. Colorado Governor Bill Ritter, a Democrat, would name Salazar’s replacement in the Senate for the remainder of the term if Salazar is nominated and confirmed.
Obama has moved faster than any modern president-elect in selecting his Cabinet and other top members of his administration. He is expected to wrap up the remainder of his Cabinet appointments this week before he leaves for vacation in Hawaii.
Obama named Arne Duncan, chief executive of the Chicago public school system, to be the next secretary of education. He has yet to name secretaries of Labor, Transportation and the Director of Central Intelligence. His choices for U.S. trade representative and director of national intelligence also haven’t been announced.
Dec. 18 (Bloomberg) -- Confidence in the world economy fell in December as a recession spread beyond the U.S. and growth weakened in China and Latin America, a survey of Bloomberg users on six continents showed.
The Bloomberg Professional Global Confidence Index slipped to 6.1 from 6.6 in November. A reading below 50 means pessimists outnumber optimists. The index, which is a year old, reached an all-time low of 4 in October.
“Confidence is still very shaky,” said Alvin Liew, an economist at Standard Chartered Plc in Singapore, who took part in the survey. “Some countries are already in recession and 2009 will be even more challenging.
Shrinking economies in the U.S., Europe and Japan are forcing policy makers to push interest rates toward zero and try to resuscitate consumer and business spending by buying bonds directly and guaranteeing loans. In China and Brazil, a collapse in exports and commodity prices is undermining economies once considered a bulwark against a global downturn.
The U.S. Federal Reserve yesterday cut the main U.S. interest rate to between zero and 0.25 percent and said it “will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability.”
A measure of confidence in the U.S. increased to 7 from 6.9, the survey showed. Sentiment worsened in most other surveyed economies, with the index for Japan halving to 3.9 from 8. The gauge for Western Europe fell to 6.5 from 9.2 and the reading for the U.K. slipped to 4.1 from 4.8.
‘Bad News’
The survey of 2,991 Bloomberg users in 10 countries was conducted between Dec. 8 and Dec. 12. Since the November survey, U.S. jobless claims surged to a 26-year high, recessions were confirmed in Japan and the euro region, and Chinese exports fell for the first time in seven years.
“It’s bad news on top of bad news,” said Lindsey Piegza, an economist at FTN Financial in New York. “People are wondering who’s going to fail next, who’s going to lie to us, and there’s just a lot of mistrust and skepticism. Confidence in the banking and financial system has been eroded.”
The global crisis has cost banks almost $1 trillion so far in writedowns and losses. Citigroup Inc. announced plans to eliminate 52,000 jobs and accepted a $45 billion bailout from the U.S. government. Bernard Madoff was arrested last week for allegedly defrauding investors of $50 billion in a Ponzi scheme.
The International Monetary Fund on Nov. 6 forecast that global growth will slow to 2.2 percent in 2009 from 3.7 percent this year.
Emerging Markets Hit
“Economies previously regarded as doing well have taken a dive,” said Dominic Bryant, an economist at BNP Paribas SA in London and a regular participant in the survey. “It’s going to get very bad before it gets better.”
The Bloomberg confidence index for Brazil, where economic growth accelerated in the third quarter, slipped to 16.6 from 30.2.
“People are scared,” said Roberto Padovani, a senior strategist at Banco WestLB do Brazil SA in Sao Paulo who took part in this month’s survey. “The dive in the U.S. is much bigger than expected and good fundamentals in Brazil and China aren’t enough to offset pressure in the other direction.”
Bloomberg users in all surveyed countries expect short-term and central bank interest rates to fall further, the survey showed. The U.K. has already cut borrowing costs to the lowest since 1951 and the European Central Bank last month cut its benchmark rate the most in its 10-year history.
Views were almost evenly divided on whether the U.S. dollar will rise or fall in the next six months against the world’s most active currencies, with the index at 50.2 compared with 60 in November. The majority of users in the U.K. expect the pound to depreciate further.
U.K. unemployment rose at the fastest pace since 1991 in November, the country’s statistics office said today.
“We are in the weakest spot,” said Aurelio Maccario, chief euro-area economist at UniCredit SpA in Milan and a participant in the survey. “We are bound to experience the current weakness until after the first quarter of 2009.”
Dec. 17 (Bloomberg) -- Two weeks ago, Bernard Madoff stopped by the Everglades Barber Shop off Worth Avenue in Palm Beach, Florida, for the usual: a $65 haircut, a $40 shave, a $50 pedicure and a $22 manicure.
“For me, he was a gentleman,” said Senio Figliozzi, 72, the owner of the three-seat barber shop who has been cutting Madoff’s hair for the past 17 winters. “What he did outside, it was news to me.”
What Madoff did outside -- running an alleged Ponzi scheme that may have bilked investors around the world out of $50 billion -- has been the talk of Palm Beach this week. The arrested money manager owns a $21 million home on the Intracoastal Waterway about a mile from the Palm Beach Country Club. He was a regular at the club, where his 9.8 handicap this year has been as steady as the returns he promised investors.
It was those returns that lured Marilyn Lane, 72, and her husband, William, 81, into Madoff’s orbit. The Lanes, who own a Chevrolet and Saturn dealership in Manassas, Virginia, and a place in Palm Beach, invested more than $1 million with Madoff about six months ago.
“He certainly had a track record,” Lane said at Green’s Pharmacy and Luncheonette, a popular Palm Beach breakfast and lunch spot. “Everyone you spoke to highly recommended him. It wasn’t like you were going with a fly-by-night scheme. You think.”
Many of those who gave their money to the 70-year-old Madoff say the same thing: He was gregarious, generous and highly regarded -- all excellent qualities for an alleged con man. Whether they met him at the Palm Beach Country Club or in Montauk, Long Island, where he owned a beachfront home, or in New York, where he lived with his wife, Ruth, in a duplex on East 64th Street, most were impressed with his credentials and his manner.
Table in Front
“He’s very personable, very charming,” said Jerry Reisman, an attorney in Garden City, New York, who recalls meeting Madoff five or six years ago at the Glen Oaks Country Club, a golf course in Westbury, New York. “He moved in the best circles. He was a pro at it. He was probably one of the best social networkers in America.”
Now Reisman, a lawyer with Reisman, Peirez & Reisman in Garden City, New York, is representing 10 people who invested with Madoff and say they lost a total of about $150 million.
At the Palm, a steak restaurant in East Hampton, New York, manager Tomas Romano says Madoff has been a regular for 20 years. He always insisted on a table in the front of the restaurant, Romano said, and was often surrounded by well- wishers. Many of the people listed as victims of Madoff’s fraud, he noted, were also customers of the Palm.
Mystery Adviser
“Even Spielberg,” he said, referring to filmmaker Steven Spielberg, whose Wunderkinder Foundation had money invested in Bernard L. Madoff Investment Securities.
“It’s like when you profile somebody,” Romano said. “You say, ‘No, this person couldn’t do that.’”
If Madoff enjoyed himself in public, his advisory activities were a mystery to most people at the company he founded in 1960, said two employees who declined to be identified, citing concern they might be drawn into the probe.
The firm occupied several floors of what is known as the Lipstick Building on Third Avenue in midtown Manhattan. Madoff’s market-making and proprietary trading units were on the 19th and back-office functions on the 18th, the employees said. The advisory operations were on the 17th floor, which wasn’t linked to the others. There was little interaction between the groups, according to the employees. The units used separate computer systems, a person with knowledge of the arrangement said.
Draw the Blinds
Madoff’s sons, who ran the market-making and proprietary units, told employees their father kept them in the dark about the advisory unit, the employees said. While Madoff seldom appeared on the 18th and 19th floors during the workday, he was known to inspect during the evening for sloppy desks or window shades that weren’t fully drawn, one of the employees said.
Madoff lived about 10 blocks from the office in an apartment in a tan-brick building on the corner of Park Avenue and 64th Street that he bought in 1990 for $3.325 million, according to county real estate records. He also owned a 55-foot wooden fishing boat that he bought in 1977 for $462,000. The yacht, built in 1969 by Rybovich & Sons in Riviera Beach, Florida, is called “Bull.”
Both Madoff and his wife were born in Queens. Bernard graduated from Hofstra University in Hempstead, New York, in 1960 and served as a trustee from 2004 until he was suspended on Dec. 12, according to Stu Vincent, a spokesman for the school. Ruth graduated from Queens College in 1961. She joined the board of the Queens College Foundation in 1993 and voluntarily stepped down from her job as secretary of the foundation several days ago, said Phyllis Cohen Stevens, a spokeswoman for the school.
‘You’re Finished’
Ruth Madoff, who also has a master of science degree in nutrition from New York University, co-edited a cookbook in 1996 called “The Great Chefs of America Cook Kosher.” The book contains recipes for kosher dishes by well-known chefs, such as Daniel Boulud and Wolfgang Puck.
The couple has two sons -- Mark, 44, who graduated from the University of Michigan in Ann Arbor in 1986, and Andrew, 42, who graduated from the University of Pennsylvania in Philadelphia in 1988. The family was very close, according to a person who knows the Madoffs, and both boys went to work at their father’s firm after graduating from college. Madoff’s brother, Peter, also worked at the firm, as chief compliance officer.
Mark and Andrew have both lost millions of dollars, the person said, and they haven’t talked to their father since his arrest.
There are plenty of people in Palm Beach and elsewhere who would like to talk to Madoff, if only to find out how everything could have gone up in smoke.
“This town isn’t about class or culture,” said Laurence Leamer, a Palm Beach resident since 1994 and author of “Madness Under the Royal Palms: Love and Death Behind the Gates of Palm Beach,” which will be published in January. “This town is about money. Bernie was revered because he had money. If you lose your money, you’re finished.”
Dec. 17 (Bloomberg) -- The dollar declined the most against the euro since the 15-nation currency’s 1999 debut and sank to a 13-year low versus the yen as near-zero interest rates and rising budget deficits led traders to abandon the greenback.
The dollar extended its drop against a gauge of currencies of six U.S. trading partners, falling 11 percent from a 2 1/2- year high reached Nov. 21. Investors including hedge funds reversed bets that the dollar will appreciate to minimize losses as the end of the year approached, traders said.
“This move is historic,” said Russell LaScala, New York- based head of North American foreign exchange at Deutsche Bank AG, the world’s biggest currency trader. “It’s just going to keep going until the last bit of pain stops. I would not be shocked to see $1.50.”
The dollar fell as much as 3 percent to $1.4437 per euro, the weakest level since Sept. 29, from $1.4002 yesterday, before trading at $1.4402 at 4:08 p.m. in New York. It was the biggest intraday drop since the euro’s inception. The U.S. currency decreased 1.8 percent to 87.43 yen from 89.05 and reached 87.14, the lowest since July 1995. The euro increased 0.9 percent to 125.81 yen from 124.71.
The pound weakened for the first time beyond 93 pence per euro after the Office for National Statistics said jobless claims rose last month at the fastest pace since 1991. Bank of England policy makers voted 9-0 to cut the nation’s benchmark on Dec. 4 to 2 percent, minutes showed. Sterling slid as much as 3.5 percent to 93.27 pence per euro. The pound dropped 0.4 percent to $1.5518.
Dollar Index
The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden’s krona, fell 2.2 percent to 78.908. The dollar has given back about half of a rally in which it increased 24 percent from a low of 71.314 on July 15 to 88.463 on Nov. 21.
The Fed lowered its target rate yesterday to a range of zero to 0.25 percent, from 1 percent, below the Bank of Japan’s 0.3 percent rate. The central bank reiterated plans to purchase agency debt and mortgage-backed securities and said it will study buying Treasuries, a policy known as quantitative easing.
“This is a very much a panic exodus from the dollar,” said Brian Dolan, chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. “The primary reason is the Fed’s embrace of quantitative easing, in which they start printing dollars and start flooding the market with U.S. assets.”
The federal budget deficit widened last month to $164.4 billion, compared with a gap of $98.2 billion in November a year earlier, the Treasury Department reported last week.
Yen’s Gain
The U.S. currency depreciated 21 percent against the yen this year, the most since 1987, as more than $1 trillion of credit-market losses sparked a seizure in money markets and threw the world’s largest economy into a recession.
Japan’s Finance Minister Shoichi Nakagawa said the government is ready to take steps in the currency market to help the economy, Dow Jones Newswires reported. Nakagawa earlier told reporters he isn’t considering intervention now.
The government needs to take action on the yen “swiftly,” Honda Motor Co. President Takeo Fukui said at a press conference today. The country’s second-largest automaker cut its operating profit forecast for a third time for the year ending March 31 to 180 billion yen ($2.03 billion) from a prior estimate of 550 billion yen as the currency’s gains pushed up prices for overseas customers.
G-7 Intervention
Central banks intervene when they buy or sell currencies to influence exchange rates. The Group of Seven, which comprises the U.S., Japan, Germany, the U.K., France, Italy and Canada, propped up the dollar in 1995, when it declined to a post-World War II low of 79.75 yen.
The fed funds target was cut to below the BOJ’s rate for the first time since 1993. Japanese policy makers struggled in the 1990s to revive growth as deflation and recessions stranded the nation in what is known as the Lost Decade.
A dollar turnaround could come as early as the first quarter of next year as other central banks lower their interest rates, according to Nick Bennenbroek, head of currency strategy at Wells Fargo & Co.
“The Federal Reserve remains ahead of the curve or more aggressive than most central banks with what it’s doing with its monetary policy,” said Bennenbroek, who forecast the euro will reach $1.45 and possibly $1.50 against the dollar. “Given how severe conditions are, a lot of other central banks are also very rapidly moving their interest rates down toward zero.”
Expectations for currency appreciation were the highest in Japan, Mexico and Germany, a monthly survey of 2,991 Bloomberg users last week showed.
Currency Outlook
The Bloomberg Professional Global Confidence Index for the yen was 67.16, compared with 71.23 last month. For Mexico it was little changed at 61.96, from 61.95 in November. In Germany, a proxy for the euro, it jumped to 63.67 from 46.56. A reading above 50 indicates participants expect a currency to gain.
Mexico’s peso declined for the first time in three days, dropping 0.2 percent to 13.0826 per dollar on concern the Fed may have few tools left to boost the global economy.
Dec. 17 (Bloomberg) -- Bernard Madoff, accused mastermind of a $50 billion investment fraud, was placed under house arrest as pressure mounted on the Securities and Exchange Commission to explain its failure to detect his financial wrongdoing for almost a decade.
Madoff, 70, will be subject to electronic monitoring and a 7 p.m. curfew while his wife, Ruth, agreed to give up homes in Montauk, New York, and Palm Beach, Florida, if her husband flees. Madoff, who appeared briefly today with his wife in Manhattan federal court, was arrested Dec. 11 after telling his sons that his firm was “one big lie,” the SEC said.
The legal developments came after SEC Chairman Christopher Cox said yesterday the agency failed to act on “credible, specific” allegations about Madoff dating back to 1999. The Madoff affair will be at the center of planned congressional hearings on the reform of the SEC, said a senior Senate official, speaking on condition of anonymity.
The allegations “were repeatedly brought to the attention of SEC staff, but were never recommended to the commission for action,” Cox, 56, said in a statement yesterday, without detailing the allegations. He announced an internal probe to review the “deeply troubling” revelations. Cox today said the agency has no evidence of any wrongdoing by SEC personnel.
The SEC, already faulted in connection with the collapse of Bear Stearns Cos. and Lehman Brothers Holdings Inc., now faces criticism for failing to detect what Madoff termed “a giant Ponzi scheme.” Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, and Senator Charles Grassley, an Iowa Republican, have questioned its vigilance in enforcing securities laws. A House panel will hold a hearing next month.
Victims
Victims of Madoff’s fraud stretch from Tokyo to Paris, encompassing foundations set up by Boston philanthropist Carl Shapiro and Nobel laureate Elie Wiesel and clients of global banks such as Banco Santander SA of Spain, Nomura Holdings Inc of Japan, and HSBC Holdings Plc of the U.K. Yeshiva University in New York lost $110 million, mostly through hedge funds controlled by trustee J. Ezra Merkin.
Madoff’s responses during a 2005 SEC inspection of his brokerage operation should have raised suspicions and prompted further inquiries, said two people familiar with the matter.
Two years later, the agency closed a separate probe into tips and press reports suggesting his investment returns were too good to be true. Money manager Harry Markopolos helped trigger that inquiry by suggesting Madoff may be running a Ponzi scheme or front-running, in which traders buy shares for their account before filling customers’ orders, a person with knowledge of the case said.
Front-Running
Investigators focused on the front-running theory and, after encountering obstacles, didn’t finish verifying trades Madoff claimed were for advisory clients, the person said. His company’s trades had been cleared through a single account at the Depository Trust & Clearing Corp., making it difficult to distinguish transactions specifically for Madoff’s advisory business. Others transactions were completed through foreign brokerages, forcing the SEC to persuade foreign regulators to collect the data. Instead, investigators closed the case.
Cox, a Republican appointed by President George W. Bush, has said he will leave office when Bush leaves office Jan. 20. Cox’s term ends in June 2009 after taking over in August 2005. President-elect Barack Obama may name Cox’s successor as soon as tomorrow, people familiar with the matter said.
Instead of wielding subpoena power to obtain information, SEC staff “relied upon information voluntarily produced by Mr. Madoff and his firm,” Cox said.
Recusals
The internal review will include “all staff contact and relationships with the Madoff family and firm,” he said, and mandate the recusal of any SEC employee with more than an “insubstantial personal” contact with Madoff and his family.
Eric Swanson, a former assistant director of compliance and examinations at the SEC, is married to Madoff’s niece, Shana, who was a compliance lawyer at the Madoff firm. Swanson left the SEC in August 2006 and is now general counsel of Bats Trading Inc., the third-largest U.S. equity exchange by trading volume.
Cox, speaking after a commission meeting today, said determining what happened is of “utmost’ importance and he had “no reason” to think staff suppressed the Madoff allegations. Cox declined to discuss possible action against any employees.
“We have thus far found no evidence of any wrongdoing by any SEC personnel,” Cox told reporters.
DiPascali
Besides talking with Madoff, who met with federal prosecutors yesterday, authorities are scrutinizing the role of Frank DiPascali, a senior official in Madoff’s investment advisory firm, according to people familiar with the case.
Janice Oh, a spokeswoman for acting Manhattan U.S. Attorney Lev Dassin, declined to comment. Madoff’s lawyer, Ira Sorkin, didn’t return a call seeking comment.
“Like everyone else, we’re trying to sort out everything and learn the facts,” DiPascali’s lawyer, Marc Mukasey of Bracewell & Giuliani in New York, said in an interview, declining further comment.
U.S. Attorney General Michael Mukasey, Marc Mukasey’s father, has recused himself from the Justice Department’s investigation into Madoff because his son represents someone involved in the case, a department spokesman said today.
Michael Mukasey is a 1959 graduate of the Ramaz School, a modern Orthodox Jewish school in New York that invested as much as $6 million in a fund that invested with Madoff, said Kenny Rochlin, Ramaz’s director of institutional advancement. Mukasey’s wife, Susan, was headmistress of Ramaz’s Lower School for children in primary grades, Rochlin said.
Passports Surrendered
U.S. Magistrate Judge Gabriel Gorenstein in Manhattan also ordered Madoff and his wife, Ruth, to surrender their passports. The ruling came as a bail hearing for her husband was postponed for a second time in as many days.
The number of co-signers on his $10 million bond was reduced by Gorenstein from four to two after Madoff was unable to find two additional guarantors. Madoff’s wife and brother, Peter, have co-signed the bond.
Madoff and his wife were in court today to sign a confession of judgment to properties they in Montauk, Palm Beach and on Manhattan’s Park Avenue.
The case is U.S. v. Madoff, 08-mag-2735, U.S. District Court, Southern District of New York (Manhattan).
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