From The Forward, the New York Jewish newspaper:
In Shakespeare’s play “The Merchant of Venice,” Shylock, the usurious lender, attains the status of literature’s classic antisemitic stereotype, in part because of his relentless preying upon non-Jews.
But the victims devastated by Bernard Madoff, the investment guru charged with running an alleged Ponzi scheme that blew through $50 billion of other people’s money, were primarily his own.
In this, say observers looking at the case through a psychological lens, Madoff achieved a wholly different level of notoriety.
“Hitherto, all ethnic groups who ascended into a national class of benefactors made their wealth off other ethnic groups,” said Nelson W. Aldrich, author of the 1996 book “Old Money: The Mythology of Wealth in America.” “They soaked the Irish or sued the French Canadians. They wouldn’t dream of doing what Madoff did.”
This is not to say that Madoff excluded non-Jews from his ruinous scheme. Several large European banks and other non-Jewish institutions and individuals lost millions, even billions, through their investments with Madoff. But in interviews with the Forward, mental health experts agreed that from a psychological point of view, Madoff’s exploitation of his vast Jewish network of friends — many of them close — and acquaintances to bring investors into his alleged Ponzi scheme constituted a level of behavior verboten even as criminal actions go.
“He might have violated a primitive rule against hurting your own tribe,” said Ira Moses, director of Clinical Services at the William Alanson White Institute, a psychoanalytic training center. “He may have broken a taboo amongst criminals.” ...
The novelist Nathan Englander said that he generally has no patience for the idea that Jewish misdeeds will stoke antisemitism. But he said that the Madoff scandal — with its long lists of bilked Jewish charities and individuals covered in major newspapers — embarrassed even him.
“It really raises up for me this primal thing of, ‘This is the kind of thing that looks bad in a general Jewish way,’” Englander told the Forward. “It gave me that ‘circle the wagon’ mentality that I don’t have very often.”
Yet this kind of betrayal from inside a community is not unheard of — there is even a name for it: affinity fraud — but it is unusual.
How Madoff might have justified to himself his exploitation of his own community — in which he was not only a major philanthropist, but also actively engaged in an elite country club scene in Palm Beach, Fla., and New York — would depend on the extent to which he believed his own lies, psychologists said.
Had Madoff deluded himself into believing that his scheme could go on forever, he actually might have seen his victims as beneficiaries, psychoanalyst and Yale professor Dori Laub pointed out.
“It’s possible that what we’re dealing with is a man who’s essentially depressed and as a compensation begins to feel some omnipotence to fight the emptiness,” Laub said. “If you end up really being the messiah, you’ll be glorified.”
At the other end of the spectrum, some psychologists posited that unconscious hostility toward the Jewish community may have provoked him to choose his victims as he did. Noah Shaw, who has studied the psychology of money, said that he had worked with patients who generalized their hostile feelings toward their own family into antagonism directed at their ethnic community.
Stephen Rittenberg, a former director of treatment at the New York Psychoanalytic Institute who collaborated with Shaw on his research, had a similar assessment.
“If he were my patient I would try to address that aspect: Was there some kind of psychological hatred of his own family, his own community?” Rittenberg said.
But Shaw speculated as well that Madoff may have given his victims little thought at all and chose them simply because the Jewish community was the group most accessible to him.
“When people have feelings of inferiority or inadequacy, they need to beat the system, to outsmart the rules,” he said. “It works in an extremely temporary way. It’s the psychological mirror of a Ponzi scheme: If you don’t keep doing it, you collapse.”
Madoff’s motives are further obscured by the fact that there is something suicidal about the very structure of a Ponzi scheme, which has no way of working indefinitely.
“Maybe the ‘deal’ with Madoff is that on some deep level he’s not able to believe that the future exists,” said Rivka Galchen, author of this year’s novel “Atmospheric Disturbances” and a trained psychiatrist herself. “Otherwise he wouldn’t have been able to sleep at night for pretty much the majority of his professional life."
In general, minority in-group morality as applied to business ethics rests on the assumption that most potential victims belong to the out-group. Gypsies, for example, tend to believe that driveway repair scams are morally okay because the great majority of the driveways in the world belong to non-Gypsies. But what if Gypsies got incredibly successful and ended up owning a sizable fraction of all the driveways in the world? Then they might wake up one morning to shocking headlines about how one Gypsy had scammed lots of other Gypsies out of billions.
Similarly, Bernie Madoff could set himself up as "the Jewish T-bill" (to quote the NY Times) with many of his customers trusting him with their money because they assumed he was delivering such stable returns by cheating (through front-running) the out-group of NASDAQ traders, not cheating (through a Ponzi scheme) the in-group of investors. After all, why would anybody try to cheat Jews, who, as we all know, are a tiny, beleaguered, discriminated-against minority ... Except that they now own a remarkable fraction of the world's financial assets, making them a prime target for scam artists.