For anyone still struggling to grasp the sheer scale of Bernard Madoff's fraud, the records of the Fairfield Greenwich Group are instructive. The boutique finance firm has lost $60 million of its own directors' funds by channelling them to Mr Madoff's Ponzi scheme. But it has earned nearly ten times as much in fees for doing the same thing with clients' money. Fairfield Greenwich kept the fees, but lost the clients' investments - all $7.3 billion of them.

It has taken two weeks for investigators to begin to establish how Mr Madoff's “one big lie” operated, what it cost, and whom it stung in a direct and ruinous way. But it is already clear that the scandal's broader effect will be to tarnish a global financial services industry reeling from the effects of its own greed and hubris with evidence of staggering gullibility and neglect as well.

Estimates of the size of the black hole that the Madoff affair has left in world markets range from $30 billion to $50 billion. Bill Gates's entire net worth could not undo the damage. Its victims are emerging in ever expanding circles centred on three floors of luxuriously appointed offices in midtown Manhattan. They include New York spinsters robbed of their life savings, Jewish charities from California to Tel Aviv rendered worthless overnight, high street banks on at least three continents and hedge fund managers who have cultivated superhuman reputations only to be exposed as childishly inept or worse.

There is a difference between outright criminality and the bad practice that must be blamed for much of the financial crisis. But there is also a difference between Mr Madoff's fraud and earlier seismic financial scandals. Barings Bank collapsed because of an inadequately supervised rogue trader. SocGen, the French giant, lost nearly €5 billion to the secretive dealings of Jérôme Kerviel.

Mr Madoff was not secretive, or rogue. His alleged deception grew and deepened over decades and depended on the explicit trust of thousands. He may have operated in a world of lies, but his actions will have consequences in the real world. As one observer notes, they have turned a bad year for hedge funds into a catastrophe. They may also sour a generation on the idea of trusting their personal wealth to others. To this extent the Madoff scandal is emblematic of the great crash of 2008 and will need a regulatory response as well as retribution in the courts. As Barack Obama has noted, nothing has brought home quite so powerfully the need for “adult supervision” of financial services.

But first Mr Obama and his incoming administration must focus on the case in hand. Who knew what, and when? US officials are said to believe that Mr Madoff, who confessed his fraud to his apparently unknowing sons this month, cannot have acted alone. No wonder. His compliance officer was his brother. His chief attorney was his niece. His niece's husband used to have responsibility for compliance inspections at the Securities and Exchange Commission (SEC).

Not everyone fell for the Madoff mystique. The SEC now admits that it has been receiving formal complaints about Mr Madoff's methods since 1999, including a 2005 report entitled The World's Largest Hedge Fund is a Fraud. The report was shelved in 2006; no action taken. The SEC, under its new management, must find out why. It must establish why feeder funds, from Connecticut to London and Paris, were so relaxed about investing vast sums without even a semblance of due diligence. And it must ask Mr Madoff's sons awkward questions about how they could have known so little for so long.

Before writing new rules for a new financial era, the old ones must be enforced on any who broke them.