My Thoughts on the $750 Million Dollar WorldCom Payout

CNN Money ran a story on the $750 million dollar fund the SEC created to compensate WorldCom investors. What does this fund mean for the future of investing? Is everyone who made a bad investment decision entitled to a payout?

People generally go into the stock market knowing full well their investments may lose value, and if they don’t understand the risks involved they probably deserve to go bankrupt. When I read this story I felt like I was back in elementary school playing kick ball and my teacher insisted that “everyone was a winner because they tried.”

When you take risks to make money you win some and you lose some. It’s the nature of the game. When you start rewarding people for bad choices or bad luck you start down a slippery slope.

I guess the real question I should be asking myself is why would the SEC authorize a $750 million dollar payout? Well, there does seem to be a valid reason, SEC Chairman Chris Cox explained to CNN Money that reimbursing WorldCom shareholders would increase the confidence investors have in U.S. markets.

Is compensation really going to have an impact on investor confidence? No. It has been about 4 years since WorldCom collapsed and I haven’t read any articles lately on investors moving funds from large cap stocks into savings accounts and bonds because they’re afraid of accounting scandals.