As I suspected those (who are not earning minimum wage you can be sure) that have lost money on the Madoff case would expect others to bail them out: well paid lawyers (I am sure) are making their case for just such a bailout of their wealthy clients.
…
The SIPC has little more than $1.6bn of funds and has promised $500,000 to each Madoff victim who had an account with his firm in the past 12 months.
The debate needs to be about what is the proper role for government. Not about this instance. What type of losses do we want secured? How large of payments do we want to insure? That amount has been $500,000 if we are changing the rules after the fact for a few is that really the best course of action)? How should these payments be funded? Do we really want to raise taxes on our grand children (many of which who will earn less than the equivalent of $50,000 today)? I don’t think so. This SIPC fund should be paid for by fees on investments just like the FDIC is paid for based on fees on covered deposits (as the SIPC is now – but no taxpayer funding should occur).
If we decide we want to pay back people several million each then the fees just need to be raised to fund such a system. Just as with the FDIC if we want the government to backstop the fund by guaranteeing they will loan the fund money if it runs short of cash is fine with me. Then the SIPC fund just pays back the taxpayers with interest.
SIPC is essentially insurance. If the decision is made to payoff more than the insurance coverage should that is a bit odd. But doing that, at the same time changing the rules going forward (I can’t imagine how you can decide to pay a few well connected people today large amounts and then say it isn’t the right thing to make that the new policy). Then you just have to increase the SIPCs fees to pay off the debt. This is also helpful by setting up a constituency that doesn’t want to have to pay out increased fees so they will push back some. Still there is always a stronger concern by the special interest seeking large payments than the large group that will each just loose a small bit to payoff those getting large payments.
Related: Securities Investor Protection Corporation – Corrupt Officials Have Fled China With As Much As $100 billion – Consumer Debt Gets Bailout Attention – Fed Continues Wall Street Welfare – Why Pay Taxes or be Honest – Lobbyists Keep Tax Off Billion Dollar Private Equities Deals and On For Our Grandchildren
Comments
1 Comment so far
Is this what is meant by trickle down economics? We can bailout the uber rich in hopes that their good fortune rains down on us.:(
Seriously, if these rich folk actually believed in socialism then why didn’t they disperse their wealth long ago?
Maybe the SEC should implement a “know your advisor” rule.