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The World's Largest Ponzi Scheme (Hint: It's Not Bernard Madoff's)

BEGIN TRANSCRIPT

RUSH: You know, that's an excellent point. What's going on here, folks, is this is a larger debate over the future of the country. It's not just a debate about the Republican Party. There is a larger debate going on, and that is over the future of the country, and we are smack-dab in the middle of it; and sometimes people living in the middle of important and great events are so busy living in them that they don't understand how important and big they are as people who follow us, who are born after us and read the history of all this will look at this particular time. For example, let's look at Bernard Madoff. Do you people realize what happened here? Do you know the details of this? Fifty billion dollars. Ladies and gentlemen, the WorldCom scam was $30 billion. Enron was 35, $32 billion.

This was $50 billion. This guy took out and wiped out his friends, his charities. The psychiatrists are going to have a ball with this one trying to figure it out. This was a Ponzi scheme that went on for years, and do you know how it succeeded? It succeeded on the basis of two things. This guy was brilliant in setting himself up as brilliant and likable. He fashioned for himself a great reputation that nobody questioned. He also did something else. He had a bunch of guys when he started out that would troll these country clubs and other places where the high rollers were, and they would start bragging, as all people love to brag, about how well they're doing in the market. They'd start bragging about how well they were doing with this mystery guy, and of course everybody's ears -- when E.F. Hutton speaks, people listen -- perk up. "Who is this guy?"

"Oh, you need at least a minimum of ten mill to get in. This guy doesn't take just anybody." So present this great thing and then deny it to people, makes them want it even more. They trust the people that are telling them all this stuff. I can't tell you the number of times I have been out to places and people start bragging about their returns in the financial market or they brag about this or that and they've got the best broker here and the best broker there. I don't know anybody that knew this guy. Well, I probably do, but I'm telling a story about this guy. So he sets it all up, and he has this reputation. He's very avuncular, and he travels around. He joins these clubs, and he makes friends with these people, and it was not what he said that roped 'em in alone.

It was how he said it; it was how he comported himself. It was his reputation based on lies. There were no returns because there were no investments. It was a full-fledged Ponzi scheme. So for all these new suckers he was hooking, he was paying his so-called previous investors with money, came in stealing a little bit for himself, and fashioning this 100% phony reputation and life that these people never even questioned because it would have been impolite to do so. You would have had to criticize so many people. You would have had to express suspicion about so many of your friends. It's rather, you just don't know how this is happening. You didn't get monthly statements, or if you did, you couldn't decipher 'em, 'cause it was all bogus. Some of the so-called smartest people in the world!

We learn now that Mort Zuckerman, who owns New York Daily News, US News & World Report, financial guy; he's a big real estate magnate in New York, he got taken. Fred Wilpon, the owner of the New York Mets, $500 million! Hedge funds have had to shut down because of this guy. Banks all over the world, charitable foundations. People are putting their houses up for sale -- and this guy was a huge, huge Democrat! This guy was a contributor to Bill Clinton and some of his funds. I don't know if this guy's name is gonna show up on the donor list at the Clinton Library and Massage Parlor. He was a huge donor to Democrat policies and politicians. He was a huge donor to Obama and related issues. I'll tell you what's funny, too, today. I'm reading the Drive-By Media, and guess whose fault this is? Bush's!

In fact, some Drive-Bys are saying actually you can trace it back to Reagan, the era of greed and selfishness. Reagan created that, and then Bush came along. We forget the Clinton years in the middle of this. And then Bush came along, and he just had no controls over anything. I mean, Bush was just horrible. You could have anything you wanted any time you wanted. Of course these poor people just got hooked. You know, we had the Y2K thing and that didn't materialize but there was all this fear that has been lurking around every corner, every day. So now this is Bush's fault. It's not even Bernie Madoff's fault. Wherever you look... and I'm not being simplistic here. Wherever you look in this financial mess today, you find Washingtonians, in some cases of both parties.

But predominantly, as we know in the mortgage crisis, we know that it's Democrats. Now, one of the Drive-Byers who is trying to blame Bush is little Mike Lupica of the New York Daily News. He's a sports columnist, sports novels and so forth, and that Mike Lupica is blaming Bush and then taking up for the poor, says, "Of course, the poor are being blamed for the subprime mortgage problem." No, little Mike, the poor are not being "blamed." The people who lent them money are the ones responsible. Nobody's banging the poor here. The poor are as much victims as everybody else. The sad fact of the matter is that people who should never have been lent money in the first place were, and this was done on the order starting with Jimmy Carter, and it got popular and increased in momentum with President Clinton. The Community Reinvestment Act, all this stuff, Fannie Mae, Freddie Mac.

I mean, you find Democrats everywhere you go. With Bernard Madoff, you find Democrats wherever you go. Now, this is a Ponzi scheme, and I don't know how many of you people, Obama voters know what a Ponzi scheme is. Do you know what a Ponzi scheme is? If somebody asked you, Brian, to define a Ponzi scheme, could you do it? I'm not asking you to, just a quick yes or no. Okay, could you, Rachel? She doesn't think so. What about Snerdley? Snerdley's being scammed, by the way. Those of you calling us suggesting a third party after General Powell, we're not going to do a third party. You can spare us the calls. Do you know what a Ponzi scheme is, Snerdley? If somebody demanded you explain a Ponzi scheme, do you know what it is? Okay, you don't have to tell me. I just want to know if you could explain it.

Well, it was not Charles Ponzi. Charles Ponzi (interruption) No, he did not do the first Ponzi scheme. Ponzi schemes originated, you know, back in the Old Testament days. They've been around. It's just that Ponzi in the twenties was the first guy to make it massive. It was so big with Ponzi, that's why they named it after him. He was an Italian immigrant in the twenties and so forth, and he popularized it. Very simply, Ponzi scheme, for those of you and many of you who voted for Obama may not know what it is, a Ponzi scheme is where the con artist -- which is what Bernard Madoff is -- the con artist somehow convinces you to give him money with the promise that the money you give him is gonna turn into much more money very quickly, and you're not going to have to do anything for it except sit around and wait, and then the con artist goes and gives the same pitch to a whole lot of other people.

He takes your money, steals some up for himself, doesn't invest it anywhere -- or he may park it someplace for a while, but his parking it is not to generate whatever he's going to give back to you. What you get back is what he takes from others who are being scammed. Think of a hotel revolving door. Except this scam went on for years, years, and there were trouble signs. I read a story over the weekend, a 1992 Wall Street Journal story, where there were all kinds of red flags about this guy, but it just stopped because he had such a great reputation. He said what he said so well. He behaved so refined and dignified. He was loved and adored, and people have these balance sheets, these statements that show they were earning 15%. This guy in the last two months, Brian, the stock market's now 38, 36%, this guy is showing six to 12% gains, and nobody in his stable is questioning this.

A lot of people say, "Those people deserve what they get." I was reading some of the comments to a Wall Street Journal blog post on this, and you wouldn't have believed -- well, you would believe it. The number of people saying, "Good, good! It's about time these people found out what it's like to be hurting. It's about time these people found out what it feels like!" Wrong attitude, folks. Wrong attitude. Some of these people may have inherited it, but so what? It's their money, it's not ours. They've been wiped out! They have been scammed. You can say they deserved it 'cause they're stupid, 'cause they didn't look, 'cause they were too trusting and so forth. I don't care. It is horrible what happened to these people. But this, what they say is the biggest Ponzi scam in the history of Wall Street. Maybe. But it is not the biggest Ponzi scam in America. I'll ask a little question here. I'm not going to answer it. I'll see how quickly people can figure it out. What is the biggest Ponzi scheme in America, maybe even the world today?

BREAK TRANSCRIPT

RUSH: Folks, this Bernard Madoff guy, you stop and think of this. Every dime -- well, we don't know this yet. It's not accurate to say every dime. But with a $50 billion Ponzi scheme that this guy ran, you'd have to assume that the whole enterprise here is thus illegal. This guy has given lots of money to Chuck-U Schumer. This guy has given lots of money to Charlie Rangel. He has given lots of money to Democrats, Obama's campaign and so forth. And you have to ask, do these campaigns, should these campaigns have to give this money back? Should they have to return this money? This is ill-gotten money. And stop and think of the people who paid taxes on these phony returns. In the Ponzi scheme everybody thought they're doing well until the day came, what blew this guy up was the plunging economy despite him saying he had returns of 10, 12% while the rest of the market's down 38, he had clients totaling close to $7 billion asking for their money. They're getting worried, they needed some cash, they wanted to get it out of the market and they wanted to put it in munis, cash equivalents or what have you, and the amount of requests he had in October-November totaled seven billion, and he didn't have it. There's nothing there, he says, a couple hundred, $300 million to pay employee bonuses, but there was nothing there, and that's when the whole thing happened.

Now, there have been people who have been given money from this guy, the Ponzi scheme returns money to people at some point, and all of this money was more than what they gave the guy. They paid taxes on that. Should they get a tax refund? They paid taxes on money they actually did not earn. They've got zilch now, a lot of these people. Try this. Should these people be bailed out fifty billion dollars? Some of these people who got involved with this guy are huge movers and shakers in lots of moving and shaking type places, and a lot of these people are putting houses up for sale, closing down their charitable operations, banks and so forth. And this guy was a huge Democrat donor. Now, we've started the bailout process. We've started the bailout mentality, so where's it going to stop? These are good Democrats, folks. These are good Democrats who have been shaken down by another Democrat. This is Democrat-on-Democrat crime. Some Republicans in there, I'm sure, but most of these guys, these friends of Bernie Madoff are Democrats.

Will Obama bail 'em out? Some of them are ruined. There's a fund, I forget what the acronym for the fund is, but there's a fund that helps people who have been scammed this way, but that fund at most has one-and-a-half billion dollars in it, and this is a 50-billion-dollar scam. But this Ponzi scheme of Bernard Madoff's -- and again, he was able to pull this off on the basis of reputation, personality, image, public relations, nothing substantive 'cause there wasn't anything there. He was able to peddle a lie for 25 years on the basis of how he said it, not what he said, but how he said it. And, of course, the desire for people to be part of an exclusive little cult, a very small little club. But the Bernard Madoff Ponzi scheme pales in comparison to the largest one existing to this day in the entire world.

To the phones. I want to grab a phone call before we have to bring the hour to a screeching halt. This is Jeff in Roanoke, Virginia. Great to have you here, sir. Hello.

CALLER: Thank you. Hey, $50 billion is chicken feed, and we all get to participate in the largest one, and I would think that would be Social Security.

RUSH: Exactly right, sir. The largest Ponzi scheme, the most successfully run Ponzi scheme, a Ponzi scheme that even has morality attached to it, started by our old buddy FDR, Social Security, the single biggest, and here's the thing, you can back me up on this, Jeff, old buddy, old pal, every Ponzi scheme eventually collapses because at some point everybody in it wants their money, and there isn't any money.

CALLER: I don't like the sound of that.

RUSH: Well, brace yourself, buddy. People have been trying to warn about this, as you know, for who knows how long. This is why the effort to privatize it -- why do you think it was opposed, the effort to fix it? Government cannot give up the power; the Washingtonians cannot give up the power that running this Ponzi scheme gives them. They're willing to kick the can down the road and let it collapse when somebody else's gotta deal with it, except one thing. The difference between Bernie Madoff and the Washingtonians running their Ponzi scheme and others is he's probably going to go to jail. Our guys will be promoted and they'll be hailed as heroes, like Chuck Schumer, Barney Frank, Chris Dodd, all these clowns that are responsible for most of this financial mess now and I'd say that they're largely responsible or have a great deal of responsibility for the auto problem that we have today. They're being hailed as great heroes and fixers by the Drive-By Media. By the way, $50 billion is small fry to the Social Security Ponzi scheme, but again, just ask yourself, go to bed tonight and then pretend waking up tomorrow morning and you read the paper, found out everything you have is a lie, that you have nothing.

END TRANSCRIPT

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