Madoff Investors Deserve Sympathy, Not a Bailout 19 comments
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A consistent 15% return over 25+ years, without any losses, is impossible without some illegal advantage, such as inside information. Thus, Madoff's investors could not have reasonably believed they were receiving 10 to 15% every year without some insider information. In fact, Madoff's position as Nasdaq chairman probably convinced investors they had access to information no one else did. Click here for more.
Madoff's investors should have diversified or at least done more due diligence. Their failure to follow the well-known and cardinal rules of investing--diversify and buy only what you understand--is the sine qua non of their current situation.
Also, most of Madoff's investors were not unsophisticated investors--most were educated, English-speaking, and affluent. This is why Madoff slept soundly at night--in his mind, even if someone invested a million dollars with him, s/he most likely had plenty of money left over. Madoff may have even believed himself to be a modern-day Robin Hood--stealing from the rich to give to the poor and the charities.
At the end of the day, the blame belongs on Madoff and the fiduciaries of charities and other entities who failed to diversify donor and investor money. Rather than excuse negligence, Madoff's investors should serve as an example to those who fail to diversify or who do not question impossible returns. Bailing them out would result in the following:
- It would tell the world America will print money and devalue the dollar when its citizens--especially the rich and well-connected--make avoidable mistakes. If the Japanese, Chinese, Swiss, and British begin to question the U.S. dollar's integrity, it will be the beginning of the end for our entire country. We have major deficits and are currently dependent on foreign investors to finance our expenditures. When we have a surplus, we can afford to be generous. Right now, we can afford to be sympathetic only with our hearts, not with our wallets.
- It would weaken faith in our country's sense of fairness. Any time a government gives money away arbitrarily, others not part of the largess rightly cry foul. What about all the other victims of investment fraud, like the Baptist Foundation of Arizona or Sunrise Equities Inc.? What about the mortgage brokers who ripped off ordinary Americans by submitting mortgage applications with false income information? (By the way, where's the perp walk for those people?)
To those of you who say I have no sense of compassion or morality, let me say this: if anyone ought to receive taxpayer money, it should be the families of Americans who were slain in Iraq. They are also victims of government inaction and negligence and have lost more than just money. The list of more deserving victims is endless, but if we go down that path, we will transform America into a land of sympathy-seekers, not strength. For a country that has been the symbol of hope for so many people worldwide, such an image shift is unacceptable.
Although I opposed the auto and bank bailouts, they will help hundreds of thousands of ordinary Americans who had little power to avoid their current situation. Auto workers themselves did not cause their current financial mess--the banks, their unions and the Big Three did. In contrast, Madoff's investors failed to do due diligence, failed to diversify, and/or must have believed Madoff had inside information. As a result, they do not have clean hands.
Regulations resulting from the Madoff scandal, if any, should focus on requiring nonprofits and other charities to publicly disclose (preferably on a website) more than just basic financial information. Even in the absence of a law, donors should ask charities and nonprofits to disclose not only their P&L statements and budgets, but also where they are holding their donations, and what specific investments they have bought. As long as taxpayer money is not involved, some good may come of this yet.
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This article has 19 comments:
By the way, has there actually been any talk of bailing out the Madoff investors?
Recovery of as much cash as possible and equitable distribution of it.
Replace the blind regulators with some who can see.
A famous man in our history once said, "Trust but verify".
W.C. Fields said ib best perhaps.."you can't cheat an honest man"
The very core issue of our economic woes in a word.. Greed..on so many levels
I'll gladly pass on this little bit of wisdom that I, a non-accredited investor, have been able to accrue over the span of my life - there are wicked people out there who will steal your money. They may even lie to you. That little chunk of wisdom is free of charge.
The money was custodied at Bear Stearns (remember Ralph Ciofi who was indicted in the Bear Stearns hedge fund problems? He was also involved in the Maricopa deal and testified in the case) and Morgan Stanley. The Morgan broker was also an investor in the partnership and sat idly by as the manager used funds in the partnership account to purchase a $1 million house in Aspen. He thought it was for the "western headquarters" of the partnership. He was told by the manager (who is currently serving a 17 year prison sentence) that the trading account was at Bear Stearns. He told Bear that the trading was done at Morgan.
The guy ultimately confessed when withdrawal requests exceeded the assets. Sound like Madoff?
Your more diligence comment is crazy. Can you tell me how a private investor can get information when the big funds were also taken??
This article is a joke.
On Dec 29 01:34 PM User 327530 wrote:
> It wasn't only hedge funds that he stole from. It was people's IRA
> accounts. You talk about bailing out the auto industry because it
> will at least help "regular" people. Who do you think these people
> are? Not everyone was a billionaire. But even if they were, the SEC
> turned their back and probably took payoffs. So the government needs
> to fix this as the SEC is a government agency that failed the people
> they were supposed to protect. It's a joke. So my elderly parents
> have to go back to work because the SEC slacked off and Madoff stole
> what my father worked 40 years lugging pipes in and out of asbestos
> filled basements for. You act like everyone should have known...well
> they didn't. You use an investment firm because you're not an expert.
> I sincerely hope you never have anyone steal your future.
www.youtube.com/watch?.... copy and paste to your web browser , or click on my website
Furthermore, If the U.S. Gov't immediately paid each account a maximum of $5 million in settlement -- based upon each Nov 30, 2008 Bernard L. Madoff Investment Securities LLC end of month statement dollar value amount -- in exchange for look back taxes paid & walk forward theft deductions, this would save $billions, along with the cost and effort of the legal process, and, in particular and most favorably, the excessive legal fees and the decade plus time of the adversarial legal process. In addition, claw back rights should be extinguished.
This would be a matter of the benefit to public policy, as a whole, and the immediate amelioration in the life circumstances of thousands of the elderly who, and most reasonably so, thought that after so many years the SEC was watching out for their honest interests in terms of both the brokerage and investment advisory/power of attorney fiduciary responsibilities of Bernard L. Madoff and of Bernard L. Madoff Investment Securities LLC.
For example, if the average individual account had a $2 million balance a/o Novemeber 30, 2008 end of month statement, and there were 5,000 such accounts [the 8,000+ claim forms sent out by the SIPC Trustee includes many duplicates], the total amount paid by the U.S. Government to all account holders would cumulatively amount to $10 billion, which is an estimated $7 billion to $10 billion LESS than the total estimated $17 to $20 billion the U.S. Treasury will lose to tax refunds & theft deductions, not including the judicial resources that will be consumed by all forms of litigation.
I therefore recommend that my suggestions should be adopted as an alternative to years of questionable & costly civil actions, complaints, and cost to the U.S. Treasury.
This is not class warfare, just simple economics, wherein the ONLY choices are . . . "Pay the victims $10 bln today [my plan] or upwards of $20 bln in the near future [the IRS plan]."
"A consistent 15% return over 25+ years, without any losses, is impossible without some illegal advantage..."
On my own blog, the phrase, "without any losses," is emphasized.
Last week, a letter to the WSJ talked about a plan similar to yours. You may want to read it and post a link here for everyone's benefit.
"the Commission may, by rule, exempt any transaction in the over-the-counter markets or on any national securities exchange where necessary to provide for the assessment of fees on purchasers in transactions in such markets and exchanges on a comparable basis. Such fee shall be collected by the broker or dealer effecting the transaction for or with the purchaser, or by such other person as provided by the Commission by rule, and shall be paid to SIPC in the same manner as assessments imposed pursuant to subsection (c) of this section but without regard to the limits on such assessments, or in such other manner as the Commission may by rule provide."
www.law.cornell.edu/us...
On Jan 06 01:18 PM Matthew Rafat wrote:
> SJACOBS: read the first line of the article again:
>
> "A consistent 15% return over 25+ years, without any losses, is impossible
> without some illegal advantage..."
>
> On my own blog, the phrase, "without any losses," is emphasized.
>
>
> Last week, a letter to the WSJ talked about a plan similar to yours.
> You may want to read it and post a link here for everyone's benefit.