Who is next to be caught swimming naked?
This has been a month of headlines about frauds, Madoff’s ‘$50bn loss’, and today news that the chairman of Anglo Irish Bank has had to resign after transferring loans off the bank’s books for a number of years.
I’m reminded of an argument by Charles P. Kindlberger in his book Manias, Panics and Crashes. Kindlberger gives a history of different speculative bubbles and shows a feature of many of them is that frauds are perpetrated that only come to light after the bursting of the bubble.
If history is a guide, we’ll see more fraud uncovered before this shakeout is over. As Warren Buffett says, ‘you only find out who is swimming naked when the tide goes out’.
