The Congressional Bailout of Madoff's Investors

On seekingalpha.com's comments board, I've written that investors who invested directly with Madoff ought to get their original investment back from the SIPC, but nothing more. Feeder fund investors who invested indirectly with Madoff should look to their investment fund for recourse, not the SIPC or taxpayer. The SIPC fund was clearly not intended to reimburse mutual fund or feeder fund investors for bad investment decisions or advice. In any case, I assumed that only member banks and brokerages, not the taxpayer, fund the SIPC. I was wrong.

Most writers praised my earlier article, but a few detractors kept focusing on the SIPC coverage. I got curious about the SIPC and did a little bit of research. Guess what? At the end of the day, the SIPC is funded by American taxpayers. In fact, Congress is about to change the law, increasing the SIPC's borrowing limits and enabling the government to print money to give to the SIPC. No wonder the pro-Madoff-investor camp kept focusing on the SIPC--as long as the SIPC received taxpayer-backed funding, Madoff's direct investors would get paid. I naively thought that only private sector financial institutions were contributing to the SIPC fund. Again, I was wrong.

Some of what you will read below is technical. I did not spend more than half an hour researching the law, but I was able to ascertain a lot of information. It is shocking to me that the NY Times or some other major newspaper did not blow the cover off this scheme in early June 2009, when the House of Representatives drafted a special bill--H. R. 2798--for Madoff's investors.

Also, I cannot find anything online about what interest rate the Secretary of the Treasury is charging SIPC members. That number is key. If the interest rate is reasonably high, American taxpayers may eventually make money from SIPC loans; however, if the interest rate is low, then American taxpayers are basically giving Madoff's investors free money. In short, a low-interest-rate SIPC note is tantamount to American taxpayers acting as financial guarantors for Madoff's unconventional investment strategies and investors who voluntarily chose to invest in non-mainstream products.

First, let's cast aside the idea that most of Madoff's investors are going to be destitute. From the WSJ (Jay Miller, 07/02/09):

A total of $2.97 billion in claims has been allowed, including $2.74 billion that exceed the statutory limit of protection.

$231 million has been set aside for claims from victims of the Ponzi scheme, with another $2.74 billion authorized for potential recoveries.

Yes, Madoff's direct investors will divvy up almost $3 billion. If anyone starts talking about how Madoff's investors were poor widows, give them a three word response--three billion dollars--and a link to this article.

On top of the $3 billion, some of Madoff's investors--including the ones who invested through feeder funds--may come out ahead, courtesy of the American taxpayer. After the CPAs and tax lawyers are done exploiting new tax breaks, many Madoff investors will get credits for much more than their original investments.

These changes may result in windfalls for Madoff investors. For example, let's assume you invested $5,000 with Madoff in 1975 (we're using smaller numbers for simplicity's sake). By 1995, your $5,000 investment has become $25,000. Then, from 1995 to 2008, your account balance increases to $50,000, which allows you to withdraw an average of $5,000 each year for thirteen years. Thus, even if you lose your entire investment in 2009, you've still gained much more than your original investment of $5,000. In addition, you will submit an SIPC claim for the full $50,000, even though your original investment was only $5,000.

Now, let's discuss the SIPC. The SIPC is basically a government-backed institution similar to the FDIC. Like Fannie Mae and Freddie Mac, the SIPC is not technically a government entity, but operates in a murky zone that's not quite "private entity" and not quite "government agency." (For the lawyers out there, the SIPC is codified in Title 15 USC Sections 78aaa. The SIPC fund is codified in Title 15 USC 78ddd.)

Below is a good summary of the SIPC, from SEC v. GUARANTY BOND AND SECURITIES CORP, 496 F.2d 145 (1974):

The Securities Investor Protection Act was enacted in response to the need to protect the customers of securities brokers and dealers which might fail, thereby jeopardizing the cash and securities that customers had left on deposit with the firm. S.I.P.A. accordingly created the Securities Investor Protection Corporation as a 'non-profit corporation,' not designed to 'be an agency or establishment of the United States Government,' but rather to be 'a membership corporation,' consistent with the self-regulatory nature of the securities industry. 15 U.S.C. 78ccc(a). The S.I.P.C.'s role is primarily one of consultation and cooperation with the self-regulatory organizations which remain subject to the federal securities laws and the rules of the S.E.C. By mandating membership in the S.I.P.C. for certain members of the securities industry and by granting the S.I.P.C. general assessment authority over the members in order to establish an S.I.P.C. fund, Congress accomplished its intention that the cost of providing protection to customers under S.I.P.C. was to be borne by the securities industry itself.

But look at footnote 3:

S.I.P.C.’s first responsibility under the Act was to establish a fund which would consist of all amounts received by S.I.P.C. and from which all expenditures would be paid. 15 U.S.C. Sec. 78ddd(c). It the fund should become insufficient for the purposes of the Act, the S.E.C. is authorized, if necessary for the protection of the customers of brokers and dealers and for the maintenance of confidence in the United States securities markets, to issue notes under certain conditions to the Secretary of the Treasury in an amount up to one billion dollars, which then may be lent to S.I.P.C. 15 U.S.C. 78ddd(g).

Take a look at this bill, H. R. 2798, referred to the Committee on Financial Services in June 2009:

(b) Increasing SIPC line of credit with the Department of Treasury.—Section 4(h) of the Securities Investor Protection Act (15 U.S.C. 78ddd(h)) is amended by striking out “$1,000,000,000” and inserting “the lesser of $2,500,000,000 or the target amount of the SIPC Fund specified in the bylaws of SIPC”.

Congress wants to more than double the one billion dollars limit to make sure Madoff's investors will be paid in full. But that's not all. Congress also wants to increase the amount of money that the SIPC can directly pay Madoff's investors, from $250,000 to a whopping $850,000. See section (d) of the proposed bill:

(d) Eligibility for direct payment procedure.—Section 10(a)(4) of the Securities Investor Protection Act (15 U.S.C. 78fff–4(a)(4)) is amended by striking out “$250,000” and inserting “$850,000”.

Another section of the proposed bill increases the amount of cash payable to investors:

Standard maximum cash advance amount. For purposes of this Act, the term ‘standard maximum cash advance amount’ means [an increase from $100,000 to] $250,000, adjusted as provided under subsection (e) after March 31, 2010.

Don't let the March 31, 2010 date fool you--this proposed law will help investors prior to March 31, 2010, i.e. Madoff's investors. The language in subsection (e) refers to an "inflation adjustment" provision that gives the SIPC the discretion to increase the direct payment amount more than $250,000 after March 31, 2010.

It gets even better if you're a rich investor. There's practically no legal limit to the SIPC's power to increase the $250,000 cash advance amount. Two of the three factors allowing the SIPC to increase the amount are unconscionably vague. One talks about "economic conditions" and another refers to "potential problems affecting members of SIPC."

You'd think Congress would help non-rich Americans, who hold most of their money in bank accounts. The FDIC, not the SIPC, insures these bank accounts. Congress did pass similar insurance coverage for normal bank account deposits, but the coverage reverts to the old $100,000 limit in 2014. Here is a paragraph from the FDIC's website:

The standard insurance amount of $250,000 per depositor is in effect through December 31, 2013. On January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except IRAs and other certain retirement accounts, which will remain at $250,000 per depositor.

In contrast, the proposed SIPC changes have no sunset provision. Rich investors and Madoff's investors should thank House member Michael Arcuri, who represents New York's 24th congressional district, and House member Dan Maffei, who represents New York's 25th congressional district--these two men are the sponsors of HR 2798. They sure have their priorities right, don't they? After all, isn't it Congress' job to pay rich investors for their losses after they voluntarily invest their money with a reclusive financial advisor?

The best part? Although Arcuri's and Maffei's bill is basically a gift to Madoff's investors, it's called "Support Investment Protection for Customers Reform Act of 2009." The second best part? Both Arcuri and Maffei are Democrats. Next time you think there's much difference between Republicans and Democrats, or that Republicans are the party of the rich, just remember these words: "Support Investment Protection for Customers Reform Act of 2009."

Now, who is going to fund all this protection? Well, that’s where it gets confusing. A federal court's website states:

The fund is supported by assessments upon its members. If the fund should become inadequate, the SIPA authorizes borrowing against the U.S. Treasury. An analogy could be made to the role of the Federal Deposit Insurance Corporation in the banking industry.

Then look at 15 USC §78ddd(g) and (h):

In the event that the fund is or may reasonably appear to be insufficient for the purposes of this chapter, the Commission is authorized to make loans to SIPC...The Secretary of the Treasury may reduce the interest rate if he determines such reduction to be in the national interest.

See those words? Secretary of the Treasury? That means the U.S. Treasury, which manages government revenue--otherwise known as the taxes we pay. Have you figured it out yet? Yup, it’s the taxpayers who are going to pay off Madoff's direct investors, because the SIPC doesn't have enough money in the till to make the investors whole. The Treasury may just end up printing money--at a low interest rate--to save Madoff’s direct investors.

I really, really want to know what the interest rate is on these taxpayer-backed SIPC loans. (Where’s the NY Times when you need them?) What’s really funny / tragic is that the SIPC’s members include banks, which are already receiving billions of dollars of taxpayer money. Our government has printed money--to be paid by our children and their children--to give to banks, the SIPC, and Madoff’s investors. You might argue it’s not a giveaway, it’s a loan, but I’m not budging until I see the interest rate charged.

I can’t believe I didn’t see this before. I’m not a securities attorney, so I hadn’t looked at the specific code sections to see how SIPC was funded. (Where are all the articles from securities and tax lawyers? Perhaps they’re too busy figuring out how to make money for Madoff’s investors to do anything for the public interest.)

The way I see it, the American taxpayer has gotten screwed (again), and the rich seem to have a direct line to Congressional lawmakers. Rather than draft legislation that allows the orderly winding down of institutions when complex financial transactions cause multi-party failure, Congress is thinking about how to bail out Madoff's investors. No wonder China unofficially wants a modified reserve currency–our government keeps printing money without rhyme or reason. America’s financial credibility is eroding. Mark my words: unless fiscal discipline makes a comeback, this will end badly.

Comments

[logicalthought:]

I agree that conceptually, the Madoff investors should only get back the actual money that they put in and, by the way, that would still make them better off today than most people who put money into the "real" stock market at pretty much any time since 1997. Thus, ironically, anyone unsophisticated enough to have invested with Madoff who still gets back his or her original investment may turn out to be luckier than the average American.

Jul 05 09:22 AM

[edemet:]

You miss the point. Direct investors, just like feeder fund investors, should not be looking to SIPC either. Direct investors that lost money with Madoff were having their money managed by an investment manager, Madoff. SIPC reimburses customers who loose securities through failed brokerages, not money managers (as you correctly point out). That direct investors invested with Madoff through brokerage accounts is merely coincidental. Direct investors, like feeder fund investors, invested with a manager that engaged in fraud. Madoff's securities brokerage was above-board and operating normally. SIPC's decision to reimburse certain direct investors is based purely on a technicality (the fact that investors invested through brokerage accounts rather than another vehicle). To help direct investors and ignore feeder fund investors is purely arbitrary.

Jul 05 09:39 AM

[RWCMom:]

Matthew, thank you for your prodigious research into this.

Jul 05 10:01 AM

[Prudent Man...:]

Those with political connections, regardless of party, will make out. When the wealthy landowners in Cuba left after Castro took over, the Administration and Congress passed bills to let them write off their Cuban losses on their U.S. tax returns. It took a few years and a lot of "contributions" but they finally got it.

Thank you Gringos!

Jul 05 10:54 AM

[OnWallStree...:]

You end your story assuming that the taxpayer pays all. This is NOT the case. SIPC is authorized to charge a transaction fee for all securities transactions in order to raise enough funds to pay back their loans, and build up their indemnification fund.

With currently some, e.g., 100 billion shares traded per month upon the listed exchanges, not incl. derivatives, charging a mere $0.01 per side [buy & sell] per share fee would yield $2 billion per month, or some $24 billion per annum. At the very extreme, if each of the Madoff submitted to SIPC now 15,000 claims were paid the correct inflation adjusted $1.69 million [assuming each account was, at a minimum, valued as such upon their 11/30/2008 statement, adjusted for post 11/30/2008 cash additions & withdrawals], that would amount to $25.35 billion. Furthermore, said fee charge could be continued in order to fund the SIPC indemnification fund for future contingencies, with said funds held in U.S. Treasuries.

Jul 05 11:36 AM

[OnWallStree...:]

Furthermore, not to do this is license for me to issue auto & homeowners insurance to anyone, at, in the calculated aggregagate, approx. $0.005 per annum. Any SIPC inability to pay is tantamount to Fraud in the Inducement from its very inception.

Reminds one of AIG's, a private entity, inability to pay on their issued swaps, and we all know how that problem was satisfied.



On Jul 05 11:36 AM OnWallStreetSince1974 wrote:

> You end your story assuming that the taxpayer pays all. This is NOT
> the case. SIPC is authorized to charge a transaction fee for all
> securities transactions in order to raise enough funds to pay back
> their loans, and build up their indemnification fund.
>
> With currently some, e.g., 100 billion shares traded per month upon
> the listed exchanges, not incl. derivatives, charging a mere $0.01
> per side [buy & sell] per share fee would yield $2 billion per
> month, or some $24 billion per annum. At the very extreme, if each
> of the Madoff submitted to SIPC now 15,000 claims were paid the correct
> inflation adjusted $1.69 million [assuming each account was, at a
> minimum, valued as such upon their 11/30/2008 statement, adjusted
> for post 11/30/2008 cash additions & withdrawals], that would
> amount to $25.35 billion. Furthermore, said fee charge could be continued
> in order to fund the SIPC indemnification fund for future contingencies,
> with said funds held in U.S. Treasuries.

Jul 05 11:45 AM

[not so dumb...:]

If the SIPC is going to reimburse Madoff investors, it should also reimburse GM bondholders, many of whom are much more financially damaged by how they are being treated compared the the Madoff investors.

Jul 05 12:36 PM

[derryl:]

In a June 30 National Post column
www.financialpost.com/...
Diane Francis suggests Madoff may have originally set up his 'fund' as a money laundering device and only later came to take on more legitimate investors. The short piece is worth a read.

Jul 05 04:24 PM

[Henry Buttal:]

On WallStreet,

I think you miss at least part of the point. A 3X plus times increase adjustment to raise a SIPC payout that is, at $250k, higher than the average American's net assets, much less their investable assets, it not reasonable.

The most likely beneficiary of this as a percentage is New York investors, which should come as no surprise given the influence that state's Representatives have on committee...

Jul 05 05:02 PM

[Matthew Rafat:]

On WallStreet: you do not cite the law that allows the SIPC to charge transaction fees on securities transactions. Please include a citation. Also, your proposal fully reimburses all of Madoff's direct investors. As far as I know, the SIPC coverage is limited to 500K per direct investor and should continue to be limited to a total of 500K per direct investor. Maintaining or even reducing the 500K limit makes sense, because it creates incentives for investors to spread their wealth among different brokers/brokerages, thereby gaining a minimal form of diversification. Anything that promotes diversification is a good thing. Post-Madoff, we shouldn't have to hear the words, "too big to fail."

logicalthought: I understand your point; however, insurance coverage is a non-moral issue. If you have an insurance policy and some event triggers the policy, whoever issued the policy should pay. Here, the taxpayer may become the insurer because the banks and other SIPC members failed to properly fund the SIPC. SIPC members only had to pay $150 per year into the SIPC fund. (That's not a typo--it really is only $150.) The proposed new law only increases the amount to $1,000. Why not increase the minimum annual assessment to $5,000 or $10,000 per year until the SIPC fund reaches a reasonable amount?

The only part of the proposed bill I like is section (d), which creates civil and criminal penalties for misrepresenting SIPC membership or protection. However, even this part is watered down, because the penalties are too low. The maximum financial penalty is only $250,000 and the maximum prison term is five years--hardly enough to faze a future Madoff. You almost have to wonder if white collar criminals have a PAC or group of lobbyists.

Jul 05 09:09 PM

[RatWatcher:]

Not my area of expertise, but is there anything we can do about it? Ripped off left, right, up down....there's gotta be some smart honest lawyer/banker/broker (and judge, of course) to put an end to this nightmare carousel we're all riding in a spiral down to hell.....

Jul 05 10:09 PM

[Living4Divi...:]

" In addition, you will submit an SIPC claim for the full $50,000, even though your original investment was only $5,000. "

This is ridiculous. They should be reimbursing principal, not principal and promised investment returns.

Bailing out Madoff investors is ridiculous. While some Madoff investors were modest every-day americans who lost all, the vast majority of Madoff investors were super-wealthy.

Jul 05 10:45 PM

[nym:]

Congressional motto: he who pays the piper picks the tune.

Jul 05 10:45 PM

[mariocavolo:]

Matthew thanks very much....more eye openers that simply make me want to vomit as we watch these games of corruption of the rich, by the rich and for the rich....ha, not what Lincoln had in mind...Cheers, M

Jul 06 01:26 AM

[mwfall:]

honest, hard working stock traders should not bail out wreckless, irresponsible people trying to cut corners to get wealthier.


On Jul 05 11:36 AM OnWallStreetSince1974 wrote:

> You end your story assuming that the taxpayer pays all. This is NOT
> the case. SIPC is authorized to charge a transaction fee for all
> securities transactions in order to raise enough funds to pay back
> their loans, and build up their indemnification fund.
>
> With currently some, e.g., 100 billion shares traded per month upon
> the listed exchanges, not incl. derivatives, charging a mere $0.01
> per side [buy & sell] per share fee would yield $2 billion per
> month, or some $24 billion per annum. At the very extreme, if each
> of the Madoff submitted to SIPC now 15,000 claims were paid the correct
> inflation adjusted $1.69 million [assuming each account was, at a
> minimum, valued as such upon their 11/30/2008 statement, adjusted
> for post 11/30/2008 cash additions & withdrawals], that would
> amount to $25.35 billion. Furthermore, said fee charge could be continued
> in order to fund the SIPC indemnification fund for future contingencies,
> with said funds held in U.S. Treasuries.

Jul 06 03:04 AM

[elcopone:]

Great article. Throughout this economic collapse you can see our entire political system being exposed for the fraud it truly is. The Dems and Repubs have both gotten too powerful and corrupt through this two-party only system. The wealthy individuals and corporations control the laws and use their lobbyists and special interest groups to legally influence. We need a legit third party and a new political system badly. A system without lobbyists and mutli-million dollar re-election campaigns and with strict term limits. Stop thinking of yourself as a dem or repub because in the end it won't matter. Vote them all out come election time.

Jul 06 08:14 AM

[t-bird:]

Let me get this right...Bailout investors who thought they would receive a consistent double digit return on their $.

To become a Madoff client one learned of his expertise by word of mouth @ the yacht club, golf course etc... Big Secret; only the PRIVILEDGED are awarded the opportunity to invest in this company.


Greed!!! Bet these same folks if they had doubled their $ would have shared with all of us incompetents!!! Risk is RISK...REALIZE you have been had and you and yours are not TOO BIG TO FAIL!!!

Jul 06 09:04 AM

[quickchange:]

Madoff investors are entitled to their original investment less any monies taken out. If there was more taken out than invested they are responsible for the shortfall. SPIC is to protect investors from brokerage house fraud.
Do anyone protect the American taxpayer?

Jul 06 09:06 AM

[shovel99:]

Great article and observation of how Wall Street is lying again and screwing the little guys (taxpayers) for the benefit of... Wall Street and their ACCREDITED rich guy insider investors.

So called Hedge Funds were created by fund managers to get around SEC 50% leverage and fees paid to manager rules that protect the smaller individual investor not qualifying as a high net worth investor. The leverage restriction was put in place in 1933 in the aftermath of the 1929 crash, where 10x1 leverage was common... and was the overwhelming source of the 1929 crash and its magnitude.

The theory was that ACCREDITED INVESTORS were rich people who knew how to read all the statements and could afford to take the risk..... AND LOSE ALL THEIR MONEY AND NOT BE REIMBURSED OR PROTECTED BY THE FEDERAL GOVERNMENT! The sponsor's (fund manager's) reason for having a so called Hedge Fund is twofold: (1) to use extreme amounts of leverage... 30 times was not uncommon... instead of 2 times... to be able to "Proforma" or "Project" a huge return to attract the investors ... and (2) get around limitations by SEC on the size and structure of fees and the reporting of same.

The SEC rule served America well since 1933 and only in the past ten years (Long Term Capital.. a single hedge fund... was enough of a threat in collapsing in 1998 that Greenspan went outside his legal authority and cobbled together a buyout of LTC by the Wall Street Majors.. and cut interest rates to keep the world afloat.) have so much world capital buypassed the regulated market into Hedge Funds.

The US Fed Govt has failed America in allowing Hedge Funds to bypass sound SEC rules, suck up most of the capital in the known world... borrow outrageous amounts of money... and pi** it away on risky Poor Credit loans. Failure to regulate has allowed this to happen.

All stock market activity should be limited to 50% leverage if the public is going to have to pay to bail out. Shut down all the Hedge Funds because we taxpayers cannot keep them from borrowing from banks insured by us.

Jul 06 09:34 AM

[lostark98:]

One thing you CAN and should do is call and write your representatives (not email, a real phone call and letter.) Let them know specifically where you stand on H. R. 2798 and how you recommend they vote on the bill. Do not attach a check to the letter. (Kidding! Seriously though - write!)


On Jul 05 10:09 PM RatWatcher wrote:

> Not my area of expertise, but is there anything we can do about it?
> Ripped off left, right, up down....there's gotta be some smart honest
> lawyer/banker/broker (and judge, of course) to put an end to this
> nightmare carousel we're all riding in a spiral down to hell.....

Jul 06 09:38 AM

[cjhodgson:]

Madoff Investors....I am sorry they lost money because of the Ponzi scheme Madoff created, but they have also gotten tax breaks and other special treatment. The Depositors at IndyMac simply deposited, not invested. There has been no tax breaks, no special congressional hearings or anything else other than sorry suckers. These investors are getting special treatment because they contributed to our corrupt goverment officials. If not, they would be fighting to getting their money back also.

Jul 06 09:44 AM

[bobbobwhite:]

As usual, the gov't just wants to cover up a problem as quickly as possible and never even attempts to consider the end point of what it does. By gifting Madoff investment losers with taxpayer dollars, the gov't is sending a very clear message to other crooks that cheating other innocent investors is OK as the gov't will reimburse them for any losses.

What could be a greater incentive to criminal behavior than for the gov't to do something that allows perps to think what they do to others is just fine because no one is really hurt?

Jul 06 10:48 AM

[Pottermus:]

With Bernie out of the way should anyone else be going to jail? I mean rich folks.

Jul 06 11:10 AM

[Anil Aluri:]

Well here we go again, this just show's what the lawmakers in washington are doing, they add little clauses into laws that no one will look into and they then pass the laws, this is where there is so much pork in the budget. We have got to change this rule by allowing the line item veto to pass then we can get rid of most of the waste in washington. Now about the Madoff investors, why should the SIPC have to bail them out. They should have read more carefully or they should have researched the fund, you can't just sink all your money into a hedge fund and be happy that you are getting a great return on the investment, even when the market is down. My Mother has an IRA that she very carefully follows and when she can follow it, then everyone who has money in a hedge fund should also follow it. Yes what Bernie Madoff did was horrible to the investors, but also they should have followed it up, especially when every year the fund was doing well in spite of the economy. As my Mother always say's, "If it's too good to be true, then it probably is not true". This adds to my dictum where investors have to look into what funds they have invested in and how they are making money. We can't just take them at face value!

Jul 06 11:16 AM

[Ellen:]

Hi Matthew,

I appreciate your research and article pointing this out to you, and my first reaction was outrage, but then I looked more closely and now I see the SIPC's coverage, which is limited, and covers only certain investors who directly invested in Madoff, I don't see this as a bad thing.

There's FDIC insurance to protect our bank accounts, and there's SIPC insurance, which is similarly limited in amount, to protect us if the brokerage firms we use go belly up. Similarly, there's SIPC protection to cover brokerage accounts, up to a limit.

Madoff investors who invested through Hedge Funds or Feeder Funds will not get SIPC protection.

Remember that the SEC let down Madoff investors horribly. I think it's appropriate to let Madoff's direct investors apply for the limited recovery under SIPC that anyone who had a brokerage account covered by SIPC anywhere else would have.

Also, just like the FDIC, which has bank members pay in hefty fees to share in the insurance coverage, the SIPC works the same way too, so this is not entirely coming out of taxpayer money.

Investor confidence - in banks and brokerage firms - is key, or we'll all be worse off. In the great Depression, one of the biggest problems was that when banks failed, depositors lost all their money. One of the reasons our economic system didn't fail completely last fall was that we have things like the FDIC in place. That goes for SIPC too. If everyone had become terrified of the solvency of their brokerage firm and had yanked their money out all at once, just like with their bank accounts, the country - and we as taxpayers - would have suffered worse.

One of the reasons the dollar is staying strong (for now anyway) is that the safeguards and policies of the US Govt make the USA look better to foreign investors than their own currencies. We are fortunate as a country that we can have some safeguards such as SIPC and FDIC.

Jul 06 08:19 PM

[Sanitychecker:]

Caveat emptor

Jul 06 09:50 PM

[a. palmer jr.:]

I guess the Lehman losses will be repaid also?

Jul 06 09:59 PM

[Al-USA:]

elcopone wrote:
"
Great article. Throughout this economic collapse you can see our entire political system being exposed for the fraud it truly is. The Dems and Repubs have both gotten too powerful and corrupt through this two-party only system. The wealthy individuals and corporations control the laws and use their lobbyists and special interest groups to legally influence
"

Exactly what I was going to say so thanks for saying it first.

Two capitalist parties of different stripes will never work for the greater benefit of the masses of the working/middle class, that much has also been exposed by the fabricated "financial crisis". The USA needs multiple parties, of different economic persuasions, not just capitalists of slightly different persuasions.

We get diversity of thought, or the experiment in American civilization is finished, as it might yet as this "financial crisis" is playing itself out.

Related information below:
The Quiet (American) Coup - IMF insider (crony capitalism)
www.theatlantic.com/do...

Communism on rise in recession-hit Japan
news.bbc.co.uk/2/hi/as...

"The Fed's War on the Middle Class"
mises.org/story/2983

"How to Avoid Another Depression"
mises.org/story/3103

I include the link below for those readers which might think I'm some kind of "liberal" or even "leftist".
The Obama Deception Full Length
video.google.com/video...

Jul 06 10:28 PM