Bernie Madoff, the Santa for decades to the well-connected wealthy, delivered a lump of coal this season. As the magnitude of the financial losses became known, disbelief and incomprehension became apparent. The Christmas suicide of Rene-Thierry Magon de la Villehuchet, the international gateway person who funneled the wealthy to Madoff through Access International Advisors, is not the last nor even most significant consequence of this monumental swindle.

In fact, the impact has already been felt here in West Virginia. The Southern Appalachian Labor School was planning to seek funding through the Justice, Equality, Human dignity, and Tolerance Foundation for prisoner re-training and re-entry programs. Such initiatives were a priority of the foundation, set up by the Levy family through investments controlled by Madoff. The Foundation will shut in January, leaving in its wake more than 150 domestic programs expecting $30 million during 2009 for that purpose.

The holiday season, traditionally a time when faiths shun materialism and greed, has been also the time to reconnect with people and I took the opportunity to have conversations with many who were historically strong advocates of laissez-faire economics. The consistent message was the sense that the Bush administration and agencies such as the Securities and Exchange Commission have been asleep at the switch. They have both de-regulated and under-regulated the entire financial backbone of our economy. Furthermore, as noted by Nobel prize winning economist Paul Krugman in a recent New York Times column, the cost of financial sector management accounts for 8 percent of the Gross Domestic Product, almost double from a decade prior, and this $400 billion annual increase consisted of waste, fraud, and abuse. Krugman notes that the financial industry "has been destroying value, not creating it ... and the vast riches achieved by those who managed other people's money have had a corrupting effect on our society as a whole."

There certainly is little question that trust and confidence in our financial system have evaporated. People now think twice about investing in 401(k) plans, stocks, and similar pieces of paper because the perception is that money managers get rich while investors witness the disappearance of their money. One is reminded of the joke about the oldest professions. The second oldest is scheming how to take money away from others.

Obviously, the bubble that burst involves more than housing. It consists of a vast interconnected systemic array of financial arrangements that are dependent on expanding credit, money resources, and off-shore tax-haven investments. When the flow slows or stops, as was the case with Madoff, the Ponzi operation cannot sustain the drawdowns by those who are forced to cash-out. As a result, the pyramid topples into rubble.

The Obama administration has many challenges to face. A key one is to restore trust in the overall financial system with responsible oversight and regulation. Those who work real jobs and struggle to survive will likely not have much tolerance for snake-oil sales pitches in the future. If the nation is to remain a beacon of hope, the financial system crisis must be addressed and we must all take responsibility for making sure that the fox is not guarding the henhouse.

David, a professor at WVU-Tech, is a Gazette contributing columnist.

Bernie Madoff, the Santa for decades to the well-connected wealthy, delivered a lump of coal this season. As the magnitude of the financial losses became known, disbelief and incomprehension became apparent. The Christmas suicide of Rene-Thierry Magon de la Villehuchet, the international gateway person who funneled the wealthy to Madoff through Access International Advisors, is not the last nor even most significant consequence of this monumental swindle.

In fact, the impact has already been felt here in West Virginia. The Southern Appalachian Labor School was planning to seek funding through the Justice, Equality, Human dignity, and Tolerance Foundation for prisoner re-training and re-entry programs. Such initiatives were a priority of the foundation, set up by the Levy family through investments controlled by Madoff. The Foundation will shut in January, leaving in its wake more than 150 domestic programs expecting $30 million during 2009 for that purpose.

The holiday season, traditionally a time when faiths shun materialism and greed, has been also the time to reconnect with people and I took the opportunity to have conversations with many who were historically strong advocates of laissez-faire economics. The consistent message was the sense that the Bush administration and agencies such as the Securities and Exchange Commission have been asleep at the switch. They have both de-regulated and under-regulated the entire financial backbone of our economy. Furthermore, as noted by Nobel prize winning economist Paul Krugman in a recent New York Times column, the cost of financial sector management accounts for 8 percent of the Gross Domestic Product, almost double from a decade prior, and this $400 billion annual increase consisted of waste, fraud, and abuse. Krugman notes that the financial industry "has been destroying value, not creating it ... and the vast riches achieved by those who managed other people's money have had a corrupting effect on our society as a whole."

There certainly is little question that trust and confidence in our financial system have evaporated. People now think twice about investing in 401(k) plans, stocks, and similar pieces of paper because the perception is that money managers get rich while investors witness the disappearance of their money. One is reminded of the joke about the oldest professions. The second oldest is scheming how to take money away from others.

Obviously, the bubble that burst involves more than housing. It consists of a vast interconnected systemic array of financial arrangements that are dependent on expanding credit, money resources, and off-shore tax-haven investments. When the flow slows or stops, as was the case with Madoff, the Ponzi operation cannot sustain the drawdowns by those who are forced to cash-out. As a result, the pyramid topples into rubble.

The Obama administration has many challenges to face. A key one is to restore trust in the overall financial system with responsible oversight and regulation. Those who work real jobs and struggle to survive will likely not have much tolerance for snake-oil sales pitches in the future. If the nation is to remain a beacon of hope, the financial system crisis must be addressed and we must all take responsibility for making sure that the fox is not guarding the henhouse.

David, a professor at WVU-Tech, is a Gazette contributing columnist.