The Times adds some good reporting about Madoff, too.

First of all, it says that he’s not going to the pen even though he couldn’t hold up his end of his bail agreement. He’s a lonely guy now:

Federal prosecutors said on Wednesday that they had modified the terms of Mr. Madoff’s agreement so that he would not need to find four people to co-sign his bond. Mr. Madoff was unable to meet that condition, prosecutors said. Even his sons, Andrew and Mark, were apparently unwilling to help.

He’s now on a curfew and has to be in his apartment by 7 p.m. The Times has a picture of him walking down Lexington Avenue yesterday. You can’t say the guy doesn’t have chutzpah! Just don’t walk over to Park, Bernie. They might string you up over there.

The story also adds details of his ill-gotten gilded lifestyle, including frequent $7,000-a-night hotel stays, a private jet, and a couple of yachts, one in the south of France.

A second story in the Times looks at how the scandal is having an outsized impact on big real-estate players in New York, something that could have big ripple effects.

Across the city, industry executives said deals had been scuttled or jeopardized because of the scandal. Residential brokers are taking calls from Madoff investors who have had to put their apartments on the market. Many developers had pledged their investments with Mr. Madoff as collateral for projects, and are now worried that their banks will call in their loans…

Mr. Reisman said his clients were especially concerned because they counted on Madoff investments to complete some of their real estate projects, pledging their investments as collateral for projects. Those developers fear that when their banks realize that their investments with Mr. Madoff have disappeared, they will demand new collateral from other sources, Mr. Reisman said.

Finding those alternative lenders will be difficult given the financial crisis — and given that many other real estate investors have been hurt by the Madoff case.

“Many of these developers, their resources are all with Madoff,” Mr. Reisman said.

There are widespread concerns that some developers will have trouble completing projects currently under construction. Edward Blumenfeld, who runs Blumenfeld Development Group, had invested heavily with Mr. Madoff and considered him a friend. Gary Lewi, a spokesman for Mr. Blumenfeld, said he still planned to complete a shopping complex in East Harlem that is to include a Target and a Costco, as well as several other projects where construction is “in the ground.”

This whole affair reminds me of the Enron/WorldCom/Arthur Andersen year when markets plunged because investors suddenly wondered whether they could trust anybody.

Kenneth Mueller, a Manhattan psychotherapist who counsels many real estate and financial executives, said those who lost money to Mr. Madoff called his indictment “the nail in the coffin for the commercial real estate industry,” which had already been hurt by the recession.

Dr. Mueller said many patients were re-evaluating whether they can trust their business partners after Mr. Madoff’s betrayal.

Scams tend to get exposed in down markets and there are surely more to come in this one.

 

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.