The FMA and the MInister of Commerce and the Minister of Justice should say "get lost" to a bunch of unhappy capitalists looking to force the taxpayer to share their losses.

Of course any leader so frank would pay a huge media price for such commonsense, so we will not see it. Instead  Bruce Tichbon and his flock of distraught investors may nourish false hope over Christmas.

Bruce is surely well intentioned. He's had commendable  energy in gathering the shocked investors together so promptly. But the slightest prospect of the FMA being liable to anyone for the RAM (Ross Asset Management ) ponzi scheme should be appalling to all interested in the freedom, vigour and fairness of our economy.

Our whinging law and culture  commonly rescue people from life's lessons. Frequently that is at the cost of others who have much less practical prospect of mitigating the risk. If the FMA was to pay, it will be at the cost of taxpayers, most of whom will probably still be poorer than the RAM investors. And if that risk drives the FMA into building more  "fences at the top of the cliff" they'll be woven of arse protecting red tape that frustrates honest companies and investors, discourages the innovative but does not deter the dishonest (who simply cut through such fences). 

It was not foolish to be a RAM investor. It was only foolish for those who had too many eggs in that basket. David Ross had a track record that many honest and diligent people relied on, to their advantage. Some who lost money at the end had nevertheless taken out far more.

But the returns were so high that they stood to lose much of their money anyway. Doubling one's money in three or four years carries with it the risk of losing most of it, even without fraud. The genius of capitalism is that it lets people choose and experiment  and risk their capital in ways that no authority could ever evaluate or forsee or permit (because most ventures fail). The superiority of capitalism lies in the excess returns of the ventures that succeed, and more than cover the losses.

But health in capitalism requires that losses be left to lie where they fall under the relevant contracts. If they do not, and people can take high returns then transfer losses to other, the essence of capitalism is destroyed.  "Irrational exuberance" becomes rational, and risk taking is unbridled. A capitalism that calls on taxpayers to protect fools from their folly retrospectively loses both its moral claim and the disciplines that make it work.

This is not to say that the state has any excuse for failing to put crooks behind bars.  And it should seek any treasure they've hidden, and take it to compensate their victims. But that is very different from saying the state should compensate victims from taxpayer money, even if if the state has been dilatory. 

In the RAM case I've seen no evidence  that the FMA should be embarassed in any way. From public material they seem to have acted swifty and decisively once properly alerted. And even if that was not the case, no sensible law would make them responsible for well executed fraud, if that is what this proves to have been.

Disclosure – Franks & Ogilvie has clients with RAM investments. There are complications that might need a Court to unravel, but in our opinion, having looked closely at precedents, there is a trivial likelihood of any return on good money thrown after bad in trying to get the government on the hook.