Disgraced financier Bernie Madoff has claimed the weekly psychiatric therapy sessions, have helped him learn he is a “good person”.
Madoff, 72, serving a 150-year sentence after pleading guilty in March 2009 to orchestrating what is considered the biggest Ponzi scheme in history, revealed all in a telephone interview from prison with New York magazine writer Steve Fishman.
The line between what we know and what we don’t know is not as sharp as we would like to believe. Did Madoff’s bankers know about his Ponzi scheme, as he insists they had to? Did they not know? Or did they not know that they knew it?
You may find this a strange question but as a psychoanalyst, I have learned to appreciate of how the mind discards unwanted facts.
In the service of survival, familiar or useless information is eliminated. But the system enables it to get rid of other signals as well, anomalies or threats to its emotional security. Is this what happened to Madoff’s bankers?
Had they blown the whistle on Madoff, they would have called attention to their own poor judgment in having trusted him and, in many cases, referring him to their friends and clients. In protecting Madoff by discarding the signals of possible fraud, they were protecting themselves as well.
They were also preserving their membership in the fraternity of bankers and other investors.
Whistle-blowers are notoriously unappreciated, and usually ostracized. Not only are they seen as disloyal, they call attention to facts that others really do not want to know.
That the mind works this way has implications for those who want to avoid dishonesty. It is all too easy to discard information that will cause acute emotional discomfort, not to mention the loss of profits – even if the consequences are illegal.
The tendency is normal, but hardly a justification for ignorance or a defence against guilt. On the contrary, it points to the need for vigilant mindfulness and rigorous safeguards.
We have to work hard to thwart this self-serving tendency of consciousness.
For one thing, we have to want to be honest, and be willing to give up some advantages we might otherwise get as a result. For another, we have to bring in outsiders, those who are not contaminated by our own unconscious conflicts.
Outsiders not only will be free from this bias but they can be motivated to detect and amplify the weak signals of danger. Retrospective accounts of the credit bubble show how fully bankers and hedge fund managers allowed themselves to slight the signals of danger, and plunge over the cliff.
Risk managers had been put in place to guard against the dangers of excessive risk, but they were systematically ignored, thwarted or pulled into the process of discarding unwelcome information.
This is why we need regulation. No one likes regulators. They tell us things we would rather not know. But that’s exactly the point.
We need to know what it is we don’t want to know.