To sum it up, various banking institutions like Banco Santander, Royal Bank of Scotland, and even HSBC exposed millions, even billions, of their money to this scheme and are now paying for it after being bodyslammed by the subprime crisis. It is said that the total exposure that Madoff has gotten runs to around $50 billion.
The scary thing here is that no one suspected a scam was in the works as this was being headed by someone who was supposedly reputable in the financial world. He's a former Nasdaq chairman, dagnabit! Who would suspect someone like him to dupe institutions around the world? Alas, they found out about it too late. They should have suspected something when the promised returns were too good to be true. Even I would raise an eyebrow at a promised return of 10% per annum even in bad times.
This kind of situation has shown itself time and again in various forms but it all boils down to one thing: the person has enjoyed a particular lifestyle and is having a very hard time simplifying his lifestyle that he has to think of ways to support the high maintenance life even at the expense of others. Either they were born without a conscience or they threw it out the window after enjoying the lifestyle of the rich and famous.
I guess this now puts to rest the question if many of the banks' actions were well thought out or were they lured by the big returns. No wonder greed is one of the mortal sins. It really destroys lives when it's not controlled.