Conversations with your father about money are often traumatic. But Mark and Andrew Madoff could hardly have been prepared for the fireside chat they had with their Dad, Bernard Madoff, last week.

The 70-year-old Wall Street money manager sheepishly informed his sons that he’d stolen $50 billion from a variety of individual, charitable and institutional investors in a massive Ponzi scheme. “It’s all just one big lie,” Madoff reportedly admitted. “There is no innocent explanation. I paid investors with money that wasn’t there.” His sons promptly turned him in.

The following day, Madoff senior was charged with a single count of securities fraud. He was released from prison a few hours later after posting $10 million bail. If convicted, Madoff faces 20 years in prison and a fine of $5 million. His list of victims includes Steven Spielberg, New York Mets owner Fred Wilpon, and the European bank HSBC (HBC).

The question arises: How did this happen?

The answer is quite simple: Madoff’s investment firm was allowed to operate for 2 years without regulation from the SEC.

Odd, isn’t it? Diamond miners in the Congo are subjected to body-cavity searches to prevent them from secreting tiny gems - but savvy, ambitious men like Madoff are allowed to wander around unsupervised, carrying diamonds the size of fists. And we pretend to be shocked when some of the loot goes missing.

Here’s a thunderbolt: There’s no such thing as a “free-market economy.” What does the “free” part of it mean? I have found no convincing explanation.

Every financial system requires rules and regulations to function. The PR coup of the “free-market economists” is that they managed to convince the American public that only little people need rules.

Hogwash. In the late 1990s, when Bill Clinton was president, the financial industry spent $300 million lobbying Congress to deregulate. Astonishingly, Congress went along with it - despite the fact that deregulation of the savings-and-loan industry a decade earlier triggered an orgy of plundering that eventually cost the federal government more than $500 billion.