Mick Weinstein The Week's Best Stock Blogs

While all eyes were turned to the Big 3 bailout, another shocking, large-scale fraud case emerged in the finance world Thursday. As the WSJ reported: "Bernard L. Madoff, a former chairman of the Nasdaq Stock Market and a force in Wall Street trading for nearly 50 years, was arrested by federal agents Thursday, a day after his sons turned him in for running what they said their father called 'a giant Ponzi scheme.'"

• Paul Kedrosky finds the allegations "staggering," and provides the key excerpts from the SEC's complaint where Madoff confesses to "paying returns to certain investors out of the principle received from other, different investors." Said Madoff, according to the report: "It's all just one big lie."

• The anonymous fund manager/blogger Cassandra suspected for years that something was wrong with Madoff - it's a fascinating post: "Either he was crooked beyond belief or he was an evil contrapreneurial genius. Who would have thought he was both??!!"

• Michael Panzner quotes fund manager Doug Kass, who believes this could be "the biggest story of the year... it is bigger than Enron, bigger than Boesky and bigger than Tyco. It attacks at the core of investor confidence -- because, if true, and this could happen... investors might think that almost anything imaginable could happen to the money they have entrusted to their fiduciaries."

• Yves Smith wants to know where the money went: "This has to top what any dictator ever siphoned out of a banana republic... In the case of other Wall Street operations that are now toast, the losses were the result of very big losses on positions and overpaying themselves bonuses in years that appeared to be good, but if the profits had been risk adjusted, were not so hot. But a Ponzi scheme is all about fraud... So where did the dough go? Madoff had to know this would blow up. Wonder why he didn't flee to Panama."

• Greg Newton, who specializes in covering hedge fund shenanigans, digs up a 2001 report on Madoff's fund. The report, entitled "Madoff tops charts; skeptics ask how, wonders: "What is striking to most observers is not so much the annual returns... but the ability to provide such smooth returns with so little volatility." We may now know how that feat was possible.

• Felix Salmon says this may very well be the world's biggest ever heist: "Right now, there are a handful people whose world has suddenly been turned upside-down: who have, overnight, suddenly lost billions of dollars of dynastic wealth to a Wall Street con man... when has one man ever managed to steal $50 billion dollars?"

• Blodget: "we're hearing that the smart money KNEW Bernie had to be cheating, because the returns he was generating were impossibly good. Many Wall Streeters suspected the wrong rigged game, though: They thought it was insider trading, not a Ponzi scheme. And here's the best part: That's why they invested with him."

• Jim Cramer calls it "the highest profile hedge-fund scandal I may have ever seen... It's a gigantic green mass on the screen and its heading right for the psyche of this frail market."

Finally, Corrente wraps together today's two big stories: "The absurdity of the current debate on a loan to the Big Three automakers is that they're only asking less than one-third of a [$50 billion] Madoff Unit. Chump change!"