“Given what the SEC claims is the magnitude of the fraud, this is something you would hope an inspection would have uncovered,” said Mercer Bullard, a former mutual-fund attorney at the SEC. “It’s hard to imagine a fraud of this alleged size not being accompanied by significant and pervasive compliance problems.”

But it’s actually very easy to imagine. The SEC only has about 800 investigators. They target companies that smell rotten from a hundred paces. Madoff was an old boy, former chairman of the NASDAQ and head of the trading committee at the Securities Industry Association. He knew what perfume to wear.

The $50-billion Madoff fiasco happened for the same reason the subprime mortgage debacle happened: It was allowed to happen. Our lawmakers and politicians were bribed to shut their eyes and look the other way.

In corporate and commercial law, there’s a legal requirement that every contract be negotiated in “good faith.” Good faith is defined as “the observance of honorable intent and the avoidance of any attempt to deceive.”

So how is a major bank allowed to go into a poor neighborhood and sell mortgages to people with “teaser rates” that triple a year later? Why is a guy like Madoff allowed to shuffle around tens of billions of dollars without any branch of the government glancing over his shoulder to see what he’s up to?

Our priorities have become random and perverse. We spend $6 billion a year incarcerating 300,000 American men and women guilty of drug offenses. We're supposed to be grateful to our government for keeping these nasty criminals away from us, while we applaud the purity of the “free-market economy” that encourages guys like Madoff to rip us off.

Mark and Andrew Madoff did the right thing by turning their father in. I doubt it was easy. I suspect he was a good, loving dad. I predict, as the case goes to trial, that coverage will focus on Madoff’s personality flaws, the warning signs, and his dramatic fall from grace.

But that’s trivial. What’s important, and worth discussing, is that Americans are so deathly afraid of “regulation” that we meekly allow ourselves to be swindled.