It turns out you don’t have to be Calpers to have an investment go to less than zero. Institutional investors who invested with scamster Bernie Madoff may find that they’ve lost more than just the total amount of the funds they handed to him.
How is that possible? If an institution, say a university endowment, lost a bundle of money in the Madoff scam it may find its overall financial health in question. That could mean higher borrowing costs. Over time, that means the total cost to investors of the Madoff Scheme could be even higher than the estimated $50 billion.
Think that’s far fetched? Well, just today S&P announced it will be reviewing entities that invested with Madoff to see if their ratings should be cut because of the losses.
“We understand that the list of investors in the Madoff funds includes other managers and financial institutions, and some municipal entities may have investments in funds of funds managed by other institutions that are Madoff investors,” the credit ratings agency said in a statement.
Adding it will rely on public borrowers to disclose the impact of any losses they have suffered, the credit agency added that until the Madoff investigation is complete it will assume “the complete loss of the market value” of the stakes.