The media were all over the sentencing of Bernie Madoff yesterday, featuring the wailing and gnashing of teeth of the Madoff victims. To a person, these people have an over-developed sense of entitlement. First of all, they felt that their invitation to join the coterie of Madoff investors entitled them to a life of ease, without doing a shred of work or investment diligence.  As Joe Nocera says in the NYT:

What’s more, most of the people investing with Mr. Madoff thought they had gotten in on something really special; there was a certain smugness that came with thinking they had a special, secret deal not available to everyone else. Of course, it turned they were right — they did have a special deal. It just wasn’t what they expected.

Some, it appears, put their entire life savings with Madoff, without the slightest concern for diversification. That was pure greed. And these same people now feel that they are entitled to be reimbursed by the taxpayer, not only for the loss of money that they put in, but even for the profits that Madoff fraudulently reported to them.

There must be consequences for bad investment decisions, particularly the failure to perform even the most rudimentary due diligence. Otherwise these frauds will spread, because they will in effect receive a taxpayer guarantee. People need to learn that they are on their own with these decisions, that government agencies such as the SEC do not provide any useful protection, and in fact favor the industry over the public.