Multiple choice math question: 

Organization X invests $10 million with Bernard Madoff, which, due to his brilliant investing strategy, grows (he says) to $100 million.  Madoff  tanks and loses it all.  How much of the principal* of its investment did Organization X actually lose?  

a) $100 million
b) $10 million
c) $6 million* ($10 million plus/minus whatever the principal would have earned if legitimately  invested in the stockmarket. (Most IRAs, 401Ks, stock portfolios are down an average of about 40% at the moment.)

Answer:  C

I just read an interesting article in Haaretz that points out that most victims affected by the debacle initially reported their Madoff losses as being whatever they thought their portfolios were worth at the time Madoff's scheme was revealed.   Those amounts were far in excess of the initial investments, whose owners were misled into believing their investments had grown exponentially thanks to the phoney gains Madoff had reported to them.

Furthermore, if the Madoff investors had put their money into the stock market or mutual funds like the rest of us rather than giving it to Madoff to invest, their portfolios would also have lost an average of about 40% from their  highs before the 2008 economic crash.  Of course the hypothetical "$6 million" investments are gone forever, while those made by us not-so-clever or well-connected shmendricks, to whom Madoff wouldn't have given a second glance, may someday rebound, if not to their historic highs, to somewhere above their nadirs.   The damage to individuals, institutions and organizations is very real, even when not inflated by imaginary gains.

The low figure of Answer C, by the way, does not take into account the supposed "interest" that investors, including philanthropic funds, non-profit organizations and foundations, received as payouts during the years the funds were invested with Madoff. The payouts received would have to be deducted from the $6 million loss to accurately assess the damage.

This doesn't excuse Madoff's thievery nor his vile strategy of deliberately targetting non-profit organizations and foundations because they were happy with the alleged interest they received from him, while inclined to leave the principal in place.  It just puts it into perspective some questions that should be asked with regard to how the actual dollars and sense, or lack thereof, should, in point of fact, be calculated not only in the Madoff scandal, but in assessing the meltdown of the economy has a whole and what it will cost to address the problems this meltdown has brought about.

Which got me thinking about the general financial meltdown and the bailout of the big banks being foisted upon U.S. taxpayers...

Here's are a few more interrelated multiple choice math problems:

X lends Y $10.  Y promises that he will pay X back $100. If Y doesn't pay X back anything at all, X has lost:

a) $10
b) $100

X's insurance company agrees to reimburse him  for his financial loss.  The insurance company should reimburse X:

a) $10
b) $100

Taxpayers are told that X's insurance company (IC) has so many customers like X, who they can't afford to reimburse, that they will go bankrupt.  Taxpayers should provide IC with a bailout equivalent to:

a) $10   x the number of customers who have made $10 loans
b) $100 x the number of customers who have made $10 loans expecting to get back $100
c) An amount equal to or between a) and b) PLUS additional  millions or perhaps even billions, to cover IC salaries, expenses, bonuses, exective meetings (including massages--"aye, there's the rub!") to decide how much of a bailout they need.

Gives an entirely new meaning to "no pain, no gain," doesn't it?