NEW YORK (Reuters) – The chairman of a House capital markets subcommittee called for a comprehensive probe into whether the liquidation of Bernard Madoff’s investment firm treats Ponzi scheme victims fairly and costs too much.

Scott Garrett (R-N.J.) and three other representatives called on the Government Accountability Office to examine the work of Irving Picard, the court-appointed trustee seeking money for former investors in Bernard L. Madoff Investment Securities LLC.

Garrett, who chairs the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, wants an examination on whether Picard and his law firm Baker & Hostetler are overcharging for their work, and on the trustee’s “net equity method” to distribute funds.

A federal appeals court in New York is expected to rule on the distribution issue.

Garrett also asked the GAO to examine the Securities and Exchange Commission’s role in the process, and the Securities Investor Protection Corp’s oversight. Madoff’s estimated $65 billion fraud was uncovered on December 11, 2008.

A thorough probe is needed “given the ongoing situation where many defrauded investors have still not received any compensation from SIPC and/or have the threat of a lawsuit from the Trustee hanging over their heads,” Garrett wrote to Comptroller General Gene Dodaro in the GAO office.

Others members of Congress signing the letter are Rep. Peter King (R-N.Y.), Rep. Carolyn McCarthy (D-N.Y.), and Rep. Ileana Ros-Lehtinen (R.-Fla.). Many of Madoff’s victims lived in the New York City area or in Florida.

Amanda Remus, a spokeswoman for Picard, declined to comment. SEC spokesman John Nester declined to comment. The SIPC did not immediately return a call seeking comment.

Picard has said he has recovered more than $7.6 billion for former Madoff customers, but that all but $272 million is tied up in litigation.

Some customers believe they should recover the amounts on their final account statements, even if those sums were made up. The trustee believes some of these customers are in fact “net winners,” meaning they withdrew more from their accounts than they invested, and should forfeit ill-gotten gains.

Through March, Baker & Hostetler, which represents Picard in his capacity as trustee, was paid $148.9 million to cover fees and expenses, while Picard was paid $3.6 million.

In March, SEC Chairman Mary Schapiro said she regretted that former general counsel David Becker took part in the agency’s work on Madoff, given that he received an inheritance that included Madoff funds. Becker is now in private practice.

(Reporting by Jonathan Stempel in New York and Sarah N. Lynch in New York, editing by Matthew Lewis)

NEW YORK – Here’s a markets riddle for you: What has jumped in value more than its biggest fans expected and withstood worries like slowing U.S. growth, European debt woes and even the specter of the U.S. losing its top credit rating?

No, it’s not the stock market.

Stumped? It’s junk bonds, a sort of IOU from risky companies thought most likely to not pay back their debt.

Junk has gained 55 percent the past two years, 5 percentage points more than stocks. That’s good for the many brave investors who’ve bought junk bonds. And good for the economy, too. The hot market for junk means companies that once seemed close to bankruptcy can sell these bonds with ease and use the proceeds to run their businesses.

“Companies struggling during the recession have been able to borrow, and that’s given them time and that’s good,” says George Cipolloni, co-manager of Berwyn Income, a mutual fund that holds junk.

The latest sign of this economic elixir at work came Wednesday. While stocks were in a two-day decline, research firm Dealogic published a report showing a record amount of junk bonds has been sold so far this year — $158 billion, nearly double what was sold during the same period in 2007, when the economy was still booming.

But this rally is not without its critics. Junk is up partly because companies are more likely to pay back their bonds and other debts now that the Great Recession is over. But Federal Reserve Chairman Ben Bernanke has also played a role in rising junk prices. That worries investors who think the Fed has a habit of inflating bubbles.

The Fed’s policy of setting benchmark interest rates at zero and buying government securities has frustrated investors who are getting miserly interest payments on those and other conservative assets. That led many to rush into risky investments. To some extent, that’s exactly what the Fed wanted. The hoped-for result is that money will flow more freely to companies and that investors will feel richer — and that both will spend more. Bernanke’s efforts were mostly designed to push investors into stocks after many pulled money out of stocks during the financial crisis. They’ve fled into all sorts of assets including tradable bank loans, heating oil futures, carbon-emission credits and, yes, junk bonds.

A revived economy may justify the higher assets prices on junk that Fed policy has facilitated. But critics of the Fed note that such easy-money policies have helped lead to two stock bubbles in a decade, a credit market bubble and a housing bubble — all of which burst, socking investors with hundreds of billions in dollars in losses. When junk bonds imploded in 2008, for example, investors in mutual funds holding them lost 26 percent, according to Morningstar. Buyers were so scared that bond yields, which move in the opposite direction from their price, spiked to over 20 percent.

The big appeal of junk now is that safer assets are so unappealing. Holders of five-year Treasurys get 2 percent annually for their money now. Put cash in five-year certificates of deposits instead and you might get 2.6 percent. Junk bonds? They’ll give you 6.7 percent, according to Barclays Capital.

That sounds great, but in reality, junk bond yields are near record lows and they’re down 1.75 percentage points in just a year.

“Companies are more healthy now, but I’m not getting paid as much,” says Andrew Smock, co-chief investment officer at Merganser Capital, a money manager that has been selling junk for several months as investors have piled into the market. “It’s junk, it’s risky. I can’t get excited.”

Referred to in polite company as high-yield bonds, junk is issued by companies that rating agencies like Standard & Poor’s consider less likely to pay back their lenders. They have too much debt, too little cash or too few prospects for the kind of growth that would generate cash — or all three.

Of companies rated junk, 2.9 percent have defaulted over the past year, which means they mostly failed to pay interest or paid it late, according to Moody’s Investors Services. That’s better than the previous year, when 11 percent stiffed their investors. Should the recovery lose steam, defaults could rise sharply and investor returns plummet.

And if the recovery continues apace instead? Danger lurks there, too. Fast economic growth could lead to inflation. Higher prices eat into the purchasing power of a bond’s principal when it’s returned upon maturity and on its interest payments. Some investors in junk and other fixed income securities will sell at the first hint of inflation, which could mean losses for those still invested in junk.

So far, investors have decided to put off worrying about the risks of junk.

Consider the reception they gave a recent offering from Ford Motor Credit. On April 28, the finance arm of the car maker sold $1.25 billion worth of bonds offering 5 percent annually over seven years. Ford was thought by many investors to be on the brink of bankruptcy just three years ago. And yet demand among investors was so great, Ford had enough buyers to sell its bonds nearly three times over, says Merganser’s Smock, who reviewed the deal but decided to pass it up.

The bullish argument is that Ford never collapsed and it’s profitable now and selling more cars. But is 5 percent enough of a return in exchange for the risk that the company or the economy won’t stumble again? Not too long ago, super-safe Treasury notes of similar maturity to the Ford bonds were yielding the same 5 percent. Treasury notes get an Aaa rating from Moody’s (for now; Standard & Poor’s says the U.S. could lose its top rating because of concerns about the federal budget). The Ford bonds just sold are provisionally rated Ba2, or 11 steps lower. Historically, 8 percent of Ba-rated bonds have defaulted within five years.

“Ford isn’t necessarily the poster child of junk, but you’re not being paid enough for the risk,” Smock says. He adds that while he doesn’t consider the junk market a bubble, it is “overbought.”

Count Cipolloni, the money manager who praises junk’s impact on the economy, among the skeptics, too. “People are more desperate for yield than they are fearful of losing principal,” he says, adding that he has been selling junk recently after buying it during the credit crisis. “They’re overlooking the risk.”

If you ask most people, they will probably tell you that their real estate investments over the last two years have not performed well. Some have questioned whether or not real estate will ever be the cash cow it once was. But if you look at the actual returns of real estate over the last two years, a different picture appears. In 2009 and 2010, the FTSE NAREIT Index, which measures the performance of all real estate investment trusts listed in the NYSE, NASDAQ, and American Stock Exchange, returned more than 25 percent. That’s not too shabby, and probably a bit surprising to the average investor.

How is it possible that the real estate index performed so well?

[In Pictures: 10 Major Cities Where Buying Beats Renting.]

First, understand that you are comparing two completely different investments: your home, which is one residential property, and the index, which measures a group of publicly traded companies, called real estate investment trusts (REITs), all with multiple properties in various sectors of the market. The big difference is that public REITs generally invest in commercial properties, such as malls or office buildings, not one or two houses in your neighborhood.

Public REITs give average investors the opportunity to participate with the “big guys,” while still allowing them the liquidity to get their money back when they need it. However, while REITs have been around for a long time, the opportunity to make money with them depends on several factors. Here are some things to consider before you invest:

Timing is everything. Historically, REITs have only had four bear markets since 1973: 1973 to 1974; 1987 to 1990; 1998 to 1999; and 2007 to 2008. These relatively short periods of negative performance were followed by one 12-year run of positive returns with an average return of 23 percent and two 7-year runs with positive returns of 20 and 22 percent respectively.

[For more investing and money advice, visit U.S. News Money, or find us on Facebook or Twitter.]

Understand the economic backdrop. The economic backdrop includes the amount of available capital, the state of the economy, and the amount of new construction in the market. At present, access to capital is back and investors have injected millions into new and add-on offerings in both public and public non-traded REITs. This influx of fresh capital has allowed these REITs to purchase many properties at discounted prices from distressed sellers such as banks, insurance companies, and pension plans. Combine these low-cost buildings with increasing rents and minimal new construction and you have a fairly good outlook for REITs.

Choose your sector wisely. When investing in REITs, there are several sectors to choose from, such as health care, shopping centers, office buildings, apartments, and hotels. These sectors tend to perform differently depending on where we are in the economic cycle. The length of a typical lease for the sector also plays into how volatile or sensitive the sector is to the economic cycle. Hotels and apartments have a typical lease arrangement of one day to one year. Thus the cash flow to the owner is impacted almost immediately when there is a change in occupancy rates. Health care, malls, and shopping centers tend to require leases of 10 to 20 years. This provides a more stable cash flow to the owners.

The longer the lease the less volatile the share price may be–the first movers in the sector are generally the ones with the shortest leases.

[See Should You Worry About Stagflation?]

Monitor the net asset value (NAV). Public REITs tend to trade at a discount to their NAV in an economic downturn, and at premiums during an economic recovery. The current premium to NAV as of the end of the first quarter was about 13 percent, according to Green Street Advisors. A possible reason for the premium is that investors anticipate further appreciation in the value of the underlying real estate.

Understanding the valuations of public-traded REITs and non-traded public REITs can help investors decide which type is most appropriate for them. Liquidity and dividend yields are also big differences between the publicly traded and the public non-traded REITS. The dividend yields of the non-traded REITs tend to be higher than the traded REITs, but investors should consider the lack of liquidity of non-traded REITs. An investment in a non-traded REIT usually requires a commitment of several years.

But the trend is still your friend: Investors should reconsider real estate upside potential, but not at the same 20-plus rate of the last two years. The economic backdrop is improving, financing is becoming more available, prices have been moving higher, rents are increasing, and valuations are still below historic levels. There are some headwinds on the horizon, but as long as we see the economy continue to strengthen, there is money to be made in real estate in 2011.

Timothy S. MicKey, CFP®, is a managing director and cofounder of Monument Wealth Management in Alexandria, Va., a full-service investment and wealth management firm. Monument Wealth Management is backed by LPL Financial, an independent broker-dealer and Registered Investment Advisor, member FINRA/SIPC. Monument Wealth Management has been featured in several national media sources over the past several years. Follow Tim and Monument Wealth Management on their blog Off The Wall , on Twitter at @MonumentWealth and @TimothySMickey, and on their Facebook page. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendation for individual. To determine which investment is appropriate please consult your financial adviser prior to investing. All performance references are historical and are not a guarantee of future results. Strategies involving asset allocation and diversification do not ensure a profit or protect against a loss.