Regulation

Most everyone says that what we need now is more regulation and better regulators. If we had had those things, Madoff could not have made off with $50 billion of investors' money. Everyone is wrong.

Hedge funds and funds like Madoff's need to be regulated to protect investors, some say. But why should the wealthy not be able to invest in unregulated funds? They have the resources to hire people to check out potential investments before they part with their money. Why should taxpayers be saddled with protecting such people?

People like Mort Zuckerman, Steven Spielberg and Jeffrey Katzenberg invest in funds like Madoff's for a better rate of  return. There would be no other reason to invest with Madoff. They could invest in U.S. Treasury Bills without risk, but would need to accept the low rate that Treasury Bills return. They could invest in index funds where the potential rate of return is a little higher, but the risk also would be higher. The people who invested with Madoff wanted better rates of return than Treasury Bills and index funds provide and they were willing to accept greater risks to achieve the better returns. Their rates of return were excellent for a while but then they lost all they had invested. They gambled and lost.

Regulation is necessary for investment vehicles in which amateurs invest and for investment advisers who advise amateurs. Those who enforce such regulation need good training, tools and supervision. But wealthy people should be allowed to invest however they wish. They should be allowed to take such risks as they are willing to take. They are able to look after themselves. The government should have no role in protecting such people.