After I wrote my piece about Madoff and his ponzi scheme I started to think: Should the Madoff ponzi victims be bailed out by the government?
Think of how much money is being poured into investment institutions with the economic stimulus…
Is $68 billion so bad to help people who were clearly swindled? It’s a lot less than what AIG has received!
These are people who, in many cases, lost about all of their retirement savings. If you’re young that’s one thing; you can build it back. But I suspect far more were older looking to retire sooner than later.
And what about the retirement funds, charities, and universities that had money invested with Madoff? Do we want to see them depleted of funds that could help so many?
But there’s a flip side to this as well.
Why should the government help out people who invested in something they didn’t understand? Doesn’t that happen all the time? People invest in things looking for the great return but they don’t understand why the return is even possible.
In some ways this reminds me a bit of the tech and housing bubbles. Investors rushed to pour money in these sectors looking at the great returns expecting to always make ridiculous money. When the market started to realize that the investments had no real grounding then the bottom fell out and many lost their shirts!
Should we feel bad for people who bought property assuming it would always rise and they could always flip it in a few years?
Caveat Emptor, as the saying goes – Let the buyer beware!
Yes, Madoff swindled everyone but isn’t this also a case where investors didn’t want to see that the emperor had no clothes?
Personally, I feel sorry for the people who lost their money. Most people don’t understand the investments they are in (I can’t say I’m 100% knowledgeable of mine) and they thought this was a great place to invest, coming from a respected and successful Wall St investor.
I’m not sure how much could be done for them though. I don’t think the government should bail them out. I don’t think taxpayers should shoulder responsibility for this. The best they can hope for is some of the money could be retrieved and returned but I suspect that would be a small amount (unless they found a huge account of Madoff‘s somewhere).
According to the NY Times, the IRS is looking into giving a tax deduction for ponzi victims. I guess this could help some people but if you had something like an IRA investment ties to a ponzi scheme there may not be a break.
Maybe there needs to be some sort of regulation to prevent this. I couldn’t say what but regulation should be in place to protect people from fraud (not from risk). For sure there will be greater scrutiny of investments that claim such a large steady return (I hope).
Still, the great lesson here is know what you are getting into.
What do you think?
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This is one of those interesting situations in which there is public outcry because this was such a huge scandal that affected so many people. I think that if this had only happened to one or two people, it wouldn’t have received the attention the Madoff scandal has received, and no one would be suggesting that taxpayer money be used to give the families refunds. It’s kind of like when there are natural weather disasters; if one person’s house floods, no one really pays any attention and that one house likely isn’t getting much help from FEMA, but if there is mass catastrophe like Katrina, it’s the federal government’s job to pay to fix everything. I know it’s a little bit of comparing apples to oranges, but still a point worth looking at.
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@ Hannah – It certainly is a large-scale scandal that is affecting average joe’s as well as celebrities. Still though, should anything be done to bail out their losses? I’m not sure if there’s a good answer.
Where were the regulators before the scandal came to light?
Shouldn’t someone have been checking him out?
The government should NOT bail these people out, even though my sympathy goes out to them.
It’s just opening up a Pandora’s box …
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No. They should take the money directly from Madoff. If he doesn’t have it, he should have to find a way to get it.
That’s just my opinion. It’s bad that people get scammed, and Madoff should be forced to pay up.
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TStrump makes an interesting point about a Pandora’s Box. I feel for these investors. I really do. Smart people got caught up in this scheme. But I don’t think this is a good trend to start. The government can’t fix all the mistakes that are made. It would be great if they could, but the funds just aren’t there.
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Why limit the bailout to Madoff’s victims?
Right now those of us victimized by the Lou Pearlman Ponzi Scheme are being sued for all interest paid to us over the years and the return of our principle investment (if we got out of the investment).
Those that did not withdraw their money, lost it all like those with Madoff.
This lawsuit is making us all equal 100% losers and the same thing will happen to Madoff’s victims if he is forced into Chapter 11 Bankruptcy.
I was hoping the laws would change because of the high profile Madoff case victims and that welcome change would benefit all the other victims of Ponzi Schemes.
We were all told we were putting money in an FDIC insured, very safe investment. Years later, we got the shock of our lives!
@ Tess – I’m sure there will be some sort of change in the oversight and investigations into why things like this can happen. From what I hear the SEC was warned about Madoff as early as ’99 and the warnings went unheard. That’s unacceptable.
I guess I’m really frustrated with all this government bail out stuff. Why not bail out every American? With the money that has been spent, each American could be given over a hundred thousand dollars by the government. Why not tha? We really need to stop looking to the government to solve all of our problems. The best thing the government can do is stay OUT of the economy.
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