Where is the outrage? Or are we just completely numb to these things now? Investors who did no due diligence and received out-sized rewards are now going to collect a tax-payer financed windfall as a reward for their stupidity. According to today’s New York Times:
Under the plan, the I.R.S. will allow investors, including those who are suing Mr. Madoff, to claim a theft loss equal to 95 percent of their investments, minus any withdrawals, reinvested gains and payouts from the [SIPC]…
The plan appears generous in that it allows investors to take a deduction against their total ordinary income on investment gains they were told they had received from Mr. Madoff but that turned out to be fictitious.
These were people wealthy enough to pass Bernie’s test in the first place. Losing it all is the price they pay for a) putting it all in one place and b) not doing any due diligence. The lesson, learned by many people over the past couple years seems to sadly be: It pays to be greedy and chase returns because even if it goes bad, if it goes bad in a big enough and spectacular enough way, someone will bail me out of it. All the rest of us who didn’t max out on our homes and didn’t chase yield with charlatans are nothing but suckers.
I’m not against giving relief to people who paid taxes on what turned out to be ficticious income. The government wasn’t really owed that money (since it didn’t exist) and should pay it back to those taxpayers. But giving them tax relief on lost principal is quite another thing.
Here’s an idea: Anyone who objected to any federal money being used to help homeowners with exotic mortgages or banks or auto companies should be ineligible for this Madoff tax relief.