A Madoff Victim Bailout? I don’t think so
James Besser in Washington
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Just in case you haven’t read enough about mega-swindler Bernie Madoff, check the book-like article about many of his victims in the current Vanity Fair.
Needless to say, most of the victims interviewed are Jewish, and the tales are poignant, like the story of the wealthy physician’s widow who invested with Madoff and ended up working as a kind of maid.
But there’s also something galling in the story: the insistence by some of the victims that the government should make good their losses.
Make good on their decision to invest in a scheme that obviously was too good to be true? Make good on the decision by some to invest all their money in a single fund, not diversify, like you learn in Money Management 101?
Many of us put our money in bank CDs because, while the return is low, it’s guaranteed; the low return is the price we pay for the security of government insurance. Stock market high rollers think we’re chumps, but some of us just don’t like excitement.
Many of these Madoff victims, blinded by dazzling returns and turned dumb by their trust in friends and family members who led them to Madoff like lambs to the slaughter, chose what any sensible person would have concluded was, at best, a risky investment
Should they be bailed out? If the government compensates them for their losses, shouldn’t we also help out people defrauded by those “work from home” schemes, or patent medicine and vitamin scams? I’m sure their personal stories are poignant, too. Maybe we should bail out big losers at the tables in Las Vegas? How about setting up a special branch office of the Treasury Department at a Vegas casino to hand over government compensation to slot machine losers?
I don’t think so.
It’s easy to have sympathy for many of Bernie Madoff’s victims. It’s not so easy to see how their agony merits a government bailout.
March 15th, 2009 at 1:23 pm
How is this different from bailing out Crysler, GM, banks, etc?
March 15th, 2009 at 2:52 pm
Well, I suppose the argument is that bailing out the automakers is necessary to prevent further deterioration in the economy. It would be a lot harder to make that argument about Madoff! ( but I also have questions about whether the defense of automaker bailouts makes sense)
You’re right in that bailing out Detroit looks like a reward for bad/stupid/shortsighted behavior.
jb
March 17th, 2009 at 11:23 am
There is NO logic behind the concept of providing a bailout for Madoff victims, not even one speck of a rationale.
The fact is that people who invested in Madoff funds did so in order to obtain a higher than average return on their investment — and with that GREED comes extra risk. Now that their investments have turned bad, they wish to socialize that risk and pass it on to everybody, from the cleaning lady working 10 hours a day at minimum wage to the nurse working some 80 hours a week to pay her rent.
in the past, Ponzi scheme victims never had recourse to a government bail-out and there is NO reason to set a precedent here.
The Madoff victims have claimed that the SEC was unduly negligent in supervising Madoff, and on the basis of that negligence, there should be governmental compensation provided them.
Well, the SEC was unduly negligent policing the tech superbubble in the late Nineties, and many lost their fortunes in failed tech investments….and many others lost huge fortunes shorting the tech bubble, on account of lax SEC regulation. Yet none of those victims received governmental financial assistance and there is NO reason to provide a penny of such aid to Madoff victims.
The only people that should step in to assist Madoff victims are their family or friends…..and if they have neither, well, then something is wrong with those people. But do NOT call on me, my family, or my friends to assist the compensation for Madoff investors’ GREED! It would be obscene to do so and the worst ramification of forcing through such aid will be even greater hostility aimed toward Jews, since most of the Madoff victims appear to be Jewish. If you wish to see an explosion of anti-Semitism in America, then a government bailout for these Madoff investors will definitely lead to that result.
April 6th, 2009 at 9:17 am
“How is this different from bailing out Crysler, GM, banks, etc?” Because the automakers employ hundreds of thousands of people plus many more than that when one considers parts suppliers to the American auto industry.
We have a discussion on the Madoff case going on at our class action board: http://www.medlawplus.com/classaction/madoffvictims.tpl
Perhaps your readers will find it of interest.