Ms. ROS-LEHTINEN. Madam Speaker, I spoke recently of the urgent need for certain amendments to the Securities Investor Protection Act, SIPA, in order to protect victims of Ponzi schemes.
Under no circumstances, except complicity with a crooked broker, should these investors be subject to clawback litigation. If necessary, I am prepared to propose such legislation. Instead of representing the best interests of the victims, the Madoff trustee is representing SIPC against the victims. Let's do the right thing for the average American who works hard, saves money, invests in the stock market with the hope of ultimately retiring on his savings.
I now want to address the need to provide such victims with tax relief. Tens of thousands of Americans have lost their life savings because of the incompetence of the SEC and its failure to close down the operations of Bernard Madoff, Allen Stanford, and so many others. Congress cannot ignore the fact that the biggest beneficiary of Madoff's and Stanford's crimes is the Federal Government. Every year, even if investors did not take money out of Madoff or Stanford, they paid taxes on the supposed income from those investments.
With respect to Madoff, the reported income was short-term capital gains, which is subject to the highest income tax rate under the Internal Revenue Code.
Congressman Bill Pascrell has proposed legislation, H.R. 5058, providing some tax relief to the victims of these Ponzi schemes. I strongly support the bill, and I urge the House to pass this bill as quickly as possible. Senator Schumer, along with 17 cosponsors, has proposed a similar bill in the Senate, S. 3166, which I also support. However, these bills need certain changes to strengthen them.
With respect to the House bill, there is a 10-year carryback for theft losses. Under existing law, taxpayers can utilize the theft laws for 20 years going forward. However, elderly investors who have lost all of their savings and don't work have no ability to utilize a theft loss going forward. Thus, giving these people a 10-year carryback is only fair.
The Senate bill proposes a 6-year carryback, which is insufficient.
Both the House and the Senate bills give a theft
loss for IRA investors. However, the House bill is more generous than the Senate bill, providing for a theft loss of up to $2 million; whereas, the Senate bill limits the loss to $1.5 million.
We have been infinitely generous to Wall Street, so it is long overdue to be fair to Main Street.
Finally, both bills are deficient because they preclude a theft loss for investors whose retirement savings were in 401(k) plans or defined benefit pension plans or deferred profit-sharing plans. Congress should not discriminate against some investors based on the form of their retirement investments, all approved by Federal tax laws. Therefore, the bills in both Houses must be amended to provide the same theft loss relief for all retirement plans no matter how they are structured.
Congress has shown extraordinary generosity to the financial service industry in the past years. Despite the fact that these companies that make up this sector caused the global financial collapse, Congress provided $400 billion of funding to them with no strings attached.
Let us not nickel-and-dime Wall Street's victims, the taxpayers who lost their life savings because of the greed of Wall Street and the incompetence of the SEC. We are not seeking to make them whole. We are simply disgorging some of the fictitious profits that the government received in tax payments from the victims of these crimes.