Bernard Avishai reviews Adam LeBor's book on the Madoff scam and addresses "the really interesting question of the book":

not why investors were taken in, but why professional investment fund managers and bankers could believe that something like Madoff's fund was not a scam. After all, the fellow who eventually exposed Madoff, Harry Markopolis, was nothing but a Boston fund manager who knew his business. Why didn't more brokers and fund managers smell a rat right away, the way a Las Vegas casino's sharks home-in on the card counters at blackjack tables?

The answer, LeBor's insiders think, suggests what it really means to be, well, inside. Madoff's company, BLMIS, had two arms: a trading arm, buying and selling equities, and an investment and advisory arm, taking other people's money and (ostensibly) holding positions for them and managing their money more generally--the latter being the home of the now exposed Ponzi scheme. What enough Wall Street people told LeBor to be statistically significant is that they assumed the trading arm of BMLIS was subsidizing the investment arm in some way: that Madoff was benefiting from his vast network of connections--not only Jewish connections, but all the aforementioned social connections from Nasdaq to his country clubs--to gain insider information for stock trades; that trading in insider knowledge, itself illegal, was so profitable BLMIS could afford to keep its investment clients happy.

Why, you may ask, did not Wall Street pros then blow the whistle on trading irregularities? Here is where the nods and winks come in. You have to believe that insider trading is, to some extent, so ingrained in the culture of Wall Street that to have suspicions about it is itself unremarkable. Who wants to look pathetically naive?

Read the whole thing here.