PrintMarch 11, 2010
Madoff victims seek bailout from Congress
In a further sign of the deterioration of society, the wealthy (or formerly wealthy) believe they are entitled to be bailed out for their losses. The victims of the Madoff and Stanford scams are appealing to Congress for a bailout. Bloomberg reports:
Together, the groups hope to persuade Congress to add a requirement to the regulatory overhaul bill, now under Senate consideration, that brokerage firms pay about $4 billion in additional fees to the Securities Investor Protection Corp. fund. SIPC protects U.S. investors' accounts against fraud or bankruptcy. The victims also want Congress to require the fund to compensate them up to $500,000 each in losses.
We all should have sympathy for the victims of these two Ponzi schemes. After all, their lives have been adversely affected, in some instances irreparably. However, to believe that the rest of the country has an obligation to make them whole is a bit outrageous.
The lobbying initiative "gives new meaning to the word chutzpah," said James Cox, a professor at Duke University School of Law. "This is just a tax increase. It's levied on banks but customers end up paying."
Their effort is natural. After all, in a society that bails out banks that created the economic crisis, why would others not believe they are entitled to the same treatment? When "victimology" becomes the code, all deserve to be recompensed for anything that is bad, or even unsatisfactory. No one should lose money, even when it is their fault.
The claimants seek more than to be made whole. Apparently they believe they should be compensated for the fictitious profits that were reported to them:
Stephen Harbeck, president of SIPC, said his fund has enough money to cover all legally permissible claims up to the $500,000 maximum. SIPC has agreed to pay more than $650 million to other Madoff claimants.
Harbeck declined to comment on the victims' lobbying. "Speaking only for myself, I cannot see where it would be good policy to change the law to pay fictional, contrived investment profits in a Ponzi scheme," Harbeck said.
What has become of society when such claims can be entertained? Have we socialized all losses? No, only those losses for the rich or politically connected.
The madness of this game is obvious. Joe Sixpack, struggles with increased expenses and taxes. He tries to feed his family and save some money along the way. Yet he is increasingly being asked to divert his earnings to bail out others for their unwise decisions.
Sometimes bad things happen to good people. That is just a fact of life. When that happens, we tend to want to help out. But the way the government plays this game is different from how private charity would play it. Good people, in the eyes of the government, are defined as rich people or large corporations. When bad things happen to them, we must make them whole.
Joe and Jill Sixpack are not rich enough to be considered "good people." When something bad happens to them, they must fend for themselves. One wonders how long this scam can continue. How long will the Joes and Jills of this country tolerate this abuse?
Monty Pelerin www.economicnoise.com
