Monday, September 12, 2011

Signor Ponzi and the Governor

The governor of Texas, who has put himself forward as the cowboy candidate for president, is campaigning on the platform that global warming is a fraud perpetrated by crazed scientists lusting for cash, evolution is a hare-brained theory on the agenda of godless (never mind the redundancy) atheists, capital punishment is a sacred institution even if an occasional unlucky innocent person is exterminated, and Social Security is a vicious Ponzi scheme.  I leave the merits, if any, of his opinions to more learned savants, including those of the idiot variety, and limit my comments to the meaning of “Ponzi scheme.”

First noted in general usage about 1957, a “Ponzi scheme” refers to an investment scam in which early investors are paid using the contributions of later ones, and so on, and so on.  It is similar to plans known as “pyramid clubs,” but unlike them, it implies specific criminal deception.

The term got its name from Carlo Ponzi, who was born in Italy, near Parma (where the ham and cheese come from), in 1882. Something of a ham himself, he also hoped to be a big cheese. He came to the United States in 1903 and worked in various cities as dishwasher, waiter, clerical assistant, translator, bank teller, smuggler, and embezzler, finally settling in Boston, where he got a bright idea.  In 1919 he established an outfit he called the Security Exchange Company (has a sort of familiar ring, doesn’t it?), which promised investors a 50% return in 90 days.  Where do I sign up?

The plan, which he marketed from Montreal to Florida, was immensely successful. Ponzi used the money of succeeding waves of investors to make the promised pay-offs to earlier investors (pocketing what he wanted along the way). Such schemes were nothing new; they’ve been around for centuries—one is even mentioned in Dickens’s Martin Chuzzlewit.  But Ponzi did it on a grander scale than ever before and at one point was taking in more than a million dollars a week—and in those days, a million dollars was real money. Theoretically this could have gone on for years, until the wealth of the entire planet was recycled and the final group of investors was left holding a great big empty bag.

But people caught on. Eventually Ponzi was charged with mail fraud and larceny.  He jumped bail and was arrested in New Orleans by a Texas deputy sheriff, acting outside his jurisdiction, brought to Texas, and extradited to Massachusetts. He served several years in prison, was then deported to Italy, and wound up in Brazil, where he died in poverty in 1949.  The wages of sin were the death of him.

The Bard of Buffalo Bayou operates a kind of Ponzi scheme in verse, in which he takes thousands of words from unwitting writers, keeps a few for himself, and recycles the rest in supposed payoffs like these:
              Carlo Ponzi, the conman of Parma,
              Had skills that allowed him to charm a
              Whole host of investors,
              Who turned to protesters
              When they found he had very bad karma.

              Rick Perry, the Sage of Paint Creek,
              Declares that he really cain’t speak
              About Social Security,
              ‘Cause it’s full of impurity,
              And by gum, it simply ain’t chic.

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