By now you have surely read about Bernard Madoff and his $50 billion Ponzi scheme. For background, here’s a collection of New York Times articles on the scandal.

The Securities Exchange Commission is conducting an internal investigation to find out why Madoff’s criminal enterprise went undetected for so long. It’s already obvious that this was a massive regulatory failure.

The SEC was warned about Madoff:

The SEC had the authority to investigate Madoff’s investment business, which managed billions of dollars for wealthy investors and philanthropies. Financial analysts raised concerns about Madoff’s practices repeatedly over the past decade, including a 1999 letter to the SEC that accused Madoff of running a Ponzi scheme. But the agency did not conduct even a routine examination of the investment business until last week.

No one knows yet how many people were involved in helping Madoff conceal his fraud. And while Madoff’s operation was particularly massive, no one knows how many other fraudulent investment firms are out there, because the SEC lacks the resources to enforce compliance with financial securities laws.

Those who had invested with Madoff have lost the entire value of their accounts, and they are not the only victims of his crimes. In fact, Madoff may have indirectly harmed more victims than any other white-collar criminal in history. His clients included many non-profit organizations and charitable foundations, some of which have already ceased operations. Numerous Jewish non-profits have been hit hard, but the fallout will extend far beyond the Jewish community. The Picower Foundation alone gave out tens of millions of dollars in grants every year. Within months, the education, human rights and arts non-profits that relied on those funds are likely to be in financial crisis.

The JEHT Foundation was much smaller than the Picower Foundation but “was a leading supporter of civil rights causes, including groups working to expand voting rights in the South.” Its outgoing president noted when announcing plans to shut down operations that

The issues the Foundation addressed received very limited philanthropic support and the loss of the foundation’s funding and leadership will cause significant pain and disruption of the work for many dedicated people and organizations. The Foundation’s programs have met with significant success in recent years – promoting change in these critical areas in partnership with government and the non-profit sector. Hopefully others will look closely at this work and consider supporting it going forward.

We can hope that others will step in to support the worthy causes whose funders were defrauded by Madoff, but that is extremely unlikely. Just about every grant-making foundation has suffered a significant decline in assets this year because of the stock market’s slide. Individuals of great wealth have also seen their net worth shrink. Non-profit organizations were already bracing for a difficult fundraising year in 2009. The Madoff scandal makes it even more likely that many non-profits will not survive this downturn.

Consider them casualties of “small government” at the SEC, and remember what happened to them the next time conservatives whine about big, bad regulators.