Ponzi Was a Piker; C. Manion

Then in August of 1920, the federal authorities moved in on this nnancial wizard. They closed his Boston bank and thus cut off his cash. The next day Ponzi was arrested for using the mails to defraud. He stoutly maintained that he had paid everybody; that if left alone he would continue to do so. But the federal government wouldn't leave Ponzi alone. It cut off his intake and outgo. Ponzi was through. Dr. Manion, formerly Dean of the Law School of Notre Dame, now practices law in South Bend, Indiana. This article is from the Manion Forum of Opinion Broadcast, February 5, 1956. [65 ] Three months later he pleaded guilty. After serving eleven years of his long sentence, he was deported toms native Italy. Ironically, Ponzi was hardly out of the country before the same federal government that had imprisoned him for fraud proceeded to adopt the Ponzi "get rich easy" scheme as its very own. Ponzi had represented his finan cial jackpot as a '"'securities exchange." The federal gov ernment proceeded to call it '"'SocialSecurity."

The federal government was able to add some impor tant features to this bizarre shell-game that were unavail able to Ponzio First of all, the federal government cannot be prosecuted for fraud. But more important than that is the exclusive governmental feature of compulsory participation. Ponzi had to induce his customers to come in volun tarily; whereas, the government now forces 65 million workers to "invest'>six billion dollars a year in its glorified version of the Ponzi scheme. Ponzi paid back at the annual rate of sixteen to one. The federal government does even better. Some of its very lucky participants are now drawing back at the rate of $100 for every dollar invested. First Come, First Served How is this miracle worked? Here is what the Court said in the Ponzi bankruptcy cases: '"'Ponzi'sscheme was the old fraud of paying the early comers out of the con tributions of later comers." (In re Ponzi 280 Fed. Rep.

[66 ] 193.) "That Mr. Ponzi took advantage of a weakness and willingness of the community to be victimized is appar ent.... So long as the current of money continued to How in, he could pay the first investors with receipts from the latter. It was another instance of robbing Peter to pay Paul, of which the past affords examples." (In re Ponzi 268 Fed. 997.) The Court did not know that the future government Social Security scheme was to provide the most striking example of all. The Chief Actuary of the Social Security system now says of it: ,cThe system is not fully funded in the sense that all benefit rights earned to date could be met by the existing assets if the program were to be liquidated, but the system is more or less self-supporting on the assumption that it continues indefinitely into the future with the compulsory coverage that exists by legis lation." In other words, the official assumption is that there will always be more Peters to be robbed than there are Pauls presently to be paid. In fact, the susceptible Peters will be so numerous and will be robbed at such high rates of return that the Pauls can all be paid, with billions left over each year for the Israelis, the Egyptians, the British, and the French. This is now the official theory of the same government that put Charles Ponzi in jail for fraud.

[67 ] THE LONGER WE LIVE THE DIFFICULTY of satisfying immediate needs during our working lives leaves many of us with little time to think of the economic challenge of retirement. But the chal lenge stands. Just now the senior citizens of the United States num ber more than 12.5 million; population experts tell us that by 1975 our number will be 21 million. If that num ber of us oldsters then expect an average yearly income equivalent to the present per capita figure-about $2,200 -our total claim would exceed $46 billion, an amount greater than current annual expenditures for national defense. But our senior citizens are not, and will never be, the sole claimants to our production of food, clothing, hous ing, and other economic goods. Today, there are about 44 million dependent children in the United States. Should present high birth rates continue to 1975, we then would have approximately 75 million youngsters under 15 years of age.