#980 Bonus Ponzi

Not too long ago, when everyone was all in a dither about the AIG bonuses that were given to executives with bailout money, a thought occurred to me about the suitability of certain words.
As you are no doubt tired of hearing by now, since it still rankles, AIG rewarded the executives that precipitated that largest economic meltdown in history with bonuses. Not just any bonuses; bonuses using money they got from taxpayers who were ravaged by the meltdown. Trickle up economics.
In any event, when I heard about it I thought bonus was the perfect homonym for what AIG did.
But hey, there’s some good news on the economic horizon. I’m not sure how it will eventually all play out. The IRS, acting under pressure from recent sufferers, has instituted a new rule. Victims of Ponzi schemes can deduct up to 95 percent of their losses. This is far more generous to victims of fraud than earlier rules, which placed much lower limits on such deductions.
It’s still going to be messy, I’m guessing. What if your life savings was in a tax-free retirement fund managed under a tax-benefited foundation that lost only some of its billions to Bernie Madoff? Was the mutual fund in my 401-K that had a chunk of Stanford Company’s hedge fund fully exposed? And can I only count the loss if I sell the fund first and thereby have to leave the bottom of the market just as I’m about to take advantage of sharp upward trading in the other companies represented in rest of the fund?
I foresee only one huge beneficiary of this scheme—Accountants.
So further down the road, what happens when Social Security fails? Many predict that Social Security will have nothing left by the time us late baby boomers hit retirement. Since current beneficiaries are living on money we current workers are “investing” isn’t Social Security technically a Ponzi scheme? When do we get to deduct 95% of our losses in it?
Probably won’t happen.
I’m guessing it will be end up being another bonus situation.
America, ya gotta love it.