Since the start of the holiday season, we’ve all been scratching our heads.

How… really, how on earth could someone possibly scam a laundry list of some of the country’s wealthiest and most financially savvy people out of $50 billion? Furthermore, how this could have gone on for 10, 15, 20 — who knows how many — years? And how could this all have been perpetrated by someone as trusted as his clients are… well, were rich?

News of Bernie Madoff’s epic Ponzi scheme broke during an equally epic time; the full effects of the economic meltdown were beginning to resonate beyond Wall Street and corporate boardrooms, at places like the local grocery store and the university financial aid office. Americans were not only afraid of what was to come of their 401Ks and nest eggs, but angry they were left out in the cold while the government came to Wall Street’s rescue. The air was volatile.

While the sheer magnitude of money lost is both astounding and heartbreaking, the psychology of the Madoff scheme is really what intrigues me. The way bad old Bernie convinced so many intelligent people to entrust him with billions of dollars was, of course, partially due to the respect he held in the financial world. Working in the investment sphere for over four decades, Madoff built an empire around his name and a marketing strategy that made participation in his hedge fund a social privilege.

The twist on this story, however, is no secret. We must only look back to the days of lockers and lunchrooms in high school where reputation ruled lives and cliques ruled the hallways. Madoff was the king — the guy everyone wanted to befriend, who had that mysterious quality that gave him nothing short of the Midas touch.

The thing is, he knew and played this game well. Our prom king Madoff capitalized on needs and fears lurking within the psyches of his clients. He knew that by offering his services by invitation only — where you “gotta know somebody,” — he could create a hype that went beyond the already enticing allure of a steady 8 to 10 percent annual return. And boy, did he ever.

The story really is unfortunate. Beyond robbing foreign billionaires and wealthy heirs, movie producers and celebrities, Madoff’s Ponzi scheme ensured investments of many retirees, charities, scholarships and trust funds were wiped out as well. NYU and Yeshiva University also lost significant portions of their endowments, which could shut out many students who would have otherwise received scholarships this year.

But it doesn’t stop at Madoff. His story stands out only because he committed fraud — and $50 billion worth is a lot for one guy all by himself. Wouldn’t his $50 billion pale in comparison, though, to an even larger amount, say, $7 trillion? That’s how much Americans lost in the stock market during the financial disaster known as 2008.

In reality, Madoff’s fraud was nothing more than a scratch on a much larger festering wound — the real problem is Wall Street itself, and a regulatory system no longer capable of handling the complexities of today’s global financial markets and hybrid financial instruments.

The investment bankers and financial fat cats of Wall Street managed to convince the investing public the stock market was a safe place for their money. They, along with the government, also created the illusion the market was carefully regulated.

As we have since discovered, neither was true. Consequently, Americans poured trillions of their hard-earned savings into a proverbial fiscal black hole by trusting a regulatory system that had lost its legs long ago. In many ways, the Wall Street wizards who amassed large personal fortunes for their efforts and the financial regulators who ignored legions of warning signs are no different from Bernie — they just have a system to hide behind.

So my New Year’s toast is this: Here’s to hoping Barack Obama and his administration can rise to the occasion and sort out one hell of a mess. Here’s to hoping he can restore confidence in the American financial markets by modernizing our regulatory system to make it less vulnerable to fraud and adapting it to the way modern global markets now function. And most of all, here’s to hoping he gives Madoff one swift kick in the rear.

Laura Brennan ([email protected]) is a senior majoring in communicative disorders.