Answer: they weren’t. Joe Nocera has a fascinating piece in the New York Times about the Madoff hearing — and the reactions of the people who entrusted their fortunes to his Ponzi scheme.

Judge Denny Chin had made clear that he was not going to allow the Madoff guilty plea to turn into a Wailing Wall for the victims, so most of them stayed away. Though Judge Chin allowed them to speak, he insisted they stick to the issue before the court: whether he should accept Mr. Madoff’s guilty plea. One woman argued that the judge should not and force a trial instead, for the “opportunity to find out where the money is.” But of course there is no money — certainly nothing close to the supposed $60 billion plus he was “investing.” That is the whole point of a Ponzi scheme: the fraudster uses money coming in from new investors to pay old investors, pretending that that is their gain.

Afterward, the TV cameras surrounded a woman named Sharon Lissauer. She had not been wealthy, she said, but she’s lost everything. She didn’t know what she was going to do. She was weeping. It was hard not to feel sad for her — indeed, for all the victims of Mr. Madoff’s evil-doing. But one also has to wonder: what were they thinking?

At a panel a month ago, put together by Portfolio magazine, Mr. Wiesel expressed, better than I’ve ever heard it, why people gave Mr. Madoff their money. “I remember that it was a myth that he created around him,” Mr. Wiesel said, “that everything was so special, so unique, that it had to be secret. It was like a mystical mythology that nobody could understand.” Mr. Wiesel added: “He gave the impression that maybe 100 people belonged to the club. Now we know thousands of them were cheated by him.”

Nocera’s central question — what were these people thinking when they put all their eggs in the Madoff basket? — is just the latest reminder of the extent to which we are not rational creatures. I’ve never owned shares personally, but even I know that one should spread one’s risk. As Nocera puts it, “Diversification has many virtues; one of them is that you won’t lose everything if one of your money managers turns out to be a crook.” Many of Madoff’s eager victims had plenty of money, but most seem to have sought no professional advice before handing over the dosh. This kind of behaviour was, said one fund manager who interviewed Madoff years ago and concluded he was fishy, “like trying to do your own dentistry. It is a real lesson that people cannot abdicate personal responsibility when it comes to their personal finances.” Nocera goes on to say:

And that’s the point. People did abdicate responsibility — and now, rather than face that fact, many of them are blaming the government for not, in effect, saving them from themselves. Indeed, what you discover when you talk to victims is that they harbor an anger toward the S.E.C. that is as deep or deeper than the anger they feel toward Mr. Madoff. There is a powerful sense that because the agency was asleep at the switch, they have been doubly victimized. And they want the government to do something about it.