OnWallStreetSince1974

Where's the Outrage at the Banks?

Read why mortgages are invalid contracts, and all subsequent contracts & agreements that emanate from them are invalid, non-enforceable ... makes the mortgage originators, owners, and hypothecators net worth capitalization significantly below $0.00, into at least the negative tens of $trillions on an aggregate basis.

SUBPRIME’ ‘SLIDE’ THAT MASKS FRAUDULENT FINANCE
www.worldreports.org/n...

Madoff Investors Deserve Sympathy, Not a Bailout

See:

"the Commission may, by rule, exempt any transaction in the over-the-counter markets or on any national securities exchange where necessary to provide for the assessment of fees on purchasers in transactions in such markets and exchanges on a comparable basis. Such fee shall be collected by the broker or dealer effecting the transaction for or with the purchaser, or by such other person as provided by the Commission by rule, and shall be paid to SIPC in the same manner as assessments imposed pursuant to subsection (c) of this section but without regard to the limits on such assessments, or in such other manner as the Commission may by rule provide."

www.law.cornell.edu/us...


On Jan 06 01:18 PM Matthew Rafat wrote:

> SJACOBS: read the first line of the article again:
>
> "A consistent 15% return over 25+ years, without any losses, is impossible
> without some illegal advantage..."
>
> On my own blog, the phrase, "without any losses," is emphasized.
>
>
> Last week, a letter to the WSJ talked about a plan similar to yours.
> You may want to read it and post a link here for everyone's benefit.

SIPC and the Madoff Victims

As created by Congress through the SIPA ACT of 1970, SIPC’s mission is to provide adequate insurance to investors in the form of cash or securities. It further provides for refunds in the event of fraud, with the money to be disbursed to victims in a timely manner. Maintaining appropriate balances to ensure all investors can be adequately protected is required through the appropriate levying and collection of fees from all private sector broker dealer members.

There has been a distinct failure to increase the maximum refund amount since 1978 when it was increased from $50,000 to $500,000 per account, that was 1,000% in eight years. That $500,000 adjusted for inflation, today, would be approximately $1.69 million in current dollars. The SIPA also provides for oversight by the Securities and Exchange Commission, which has been largely silent in the wake of the discovery of this fraud.

As for SIPC's legal obligation** to pay the last Madoff statement balance, that's a function of the law, as written, interpreted, and as actually practiced as per "reasonable expectations," wherein it is a bulwark to hold up the integrity of the marketplace FOR ALL ... and a “business trade” since 1970 when the SIPA was passed, wherein the investor permits his securities to be placed in "Street Name," and the broker dealer gets to trade it, hypothecate it, and earn money off of it for its own account and now as an asset of the broker dealer – with earnings totaling assuredly in the 100’s of $billions for the broker dealers since 1970 -- all in exchange for SIPC coverage that INCLUDES reimbursement for "reasonable expectations" as per documented statements sent to the customers. The fact that SIPC has ALWAYS been substantially underfunded to pay their contingent liabilities reminds one of another entity, a private one, in the same predicament, to the tune of an estimated $441 billion in default swaps written, AIG. Saying that, where was the SEC’s SIPC oversight … or rubber stamp?


**Excerpt from NY TIMES (July 7, 2009)

“Mr. Picard’s “money-in/money-out” interpretation of “net equity” (the amount of the allowable claim by a Madoff victim) is contrary to SIPA, contradicts 39 years of SIPC’s prior positions, and is unsupported by any legal precedent. Even a cursory review of SIPA’s legislative history, referenced in our papers, would have confirmed that Congress specifically intended that SIPA cover broker-dealer customers with “net equity” claims based on securities that were never purchased (just like in the Madoff accounts). Both the Senate and House reports on the 1978 amendments clearly reflect that a customer’s “net equity” claim is not dependent on the broker-dealer actually purchasing the security:

“Under present law, because securities belonging to customers may have been lost, improperly hypothecated, misappropriated, never purchased or even stolen, it is not always possible to provide to customers that which they expect to receive, that is, securities which they maintained in their brokerage account. … By seeking to make customer accounts whole and returning them to customers in the form they existed on the filing date, the amendments … would satisfy the customers’ legitimate expectations…”

S. Rep. No. 95-763, at 2 (1978)

“A customer generally expects to receive what he believes is in his account at the time the stockbroker ceases business. But because securities may have been lost, improperly hypothecated, misappropriated, never purchased, or even stolen, this is not always possible. Accordingly, [when this is not possible, customers] will receive cash based on the market value as of the filing date.”

H.R. Rep. No. 95-746, at 21.

Now that Madoff’s victims seek the very protection offered by SIPC, the Trustee is seeking to change the definition and application of the statute. This is an approach that contradicts SIPC’s own Rules, which state that a Claimant’s “legitimate expectations” are based upon the written confirmations sent by the broker-dealer to the customer. There is no ambiguity on this Rule, or the application of the statute. SIPC’s general counsel, Josephine Wang, confirmed this approach on December 16, 2008, just five days after the Madoff scandal broke. And, in fact, SIPC’s president, Stephen Harbeck, assured a federal bankruptcy court, in another massive Ponzi scheme, that customers would receive securities up to $500,000, including appreciation, even if the securities at issue were never purchased.

SIPC is a non-government membership group, which essentially acts as the insurance body for the brokerage industry. Formed in 1970, it is funded by members of the broker/dealer industry (Madoff was a member). Virtually all broker/dealers who are registered with the SEC are also members of SIPC and each pays membership dues. These dues are collected in a reserve fund, which is utilized to cover lost assets when a brokerage firm fails.

The SIPC website proclaims that “SIPC’s reserve funds will be used, if necessary, to purchase replacement securities (such as stocks) in the open market [or advance cash]. . . [even if] the securities may have increased in value.” In this instance, it is “necessary” to advance funds in the amount of up to $500,000 per victim, because as Mr. Picard has stated, the Madoff estate’s assets will not be sufficient to cover all creditor claims.



On Jul 15 05:56 PM RT90012 wrote:

> 2 issues here: #1 Were account held with Madoff SIPC insured? Is
> that reflected on client statements?
> #2 The SIPC insures for stolen securities and cash. In a fraud, nothing
> is stolen since the investments (and their "gains") were never made
> in the first place.

SIPC and the Madoff Victims

Inflation adjusted from the $500,000 1978 coverage would amount, today, to $1.69 million.

The Congressional Bailout of Madoff's Investors

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.

The Congressional Bailout of Madoff's Investors

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.

Madoff Investors Deserve Sympathy, Not a Bailout

To those who say that Madoff's returns were impossible, the annualized return of the S&P 500 Index from 12/12/88 through 12/11/2008 [20 years, similar to many of Madoff's investors' time duration] was 10.79% per annum, more volatile, yes, but don't pretend that such an annualized return is impossible and therefore a red flag for long term investors. Also, if some of the better annualized returns of some hedge fund managers, e.g., Paul Tudor Jones, Jim Simons, et al were deleveraged, the 10% per annum return would be easily achievable.

Furthermore, If the U.S. Gov't immediately paid each account a maximum of $5 million in settlement -- based upon each Nov 30, 2008 Bernard L. Madoff Investment Securities LLC end of month statement dollar value amount -- in exchange for look back taxes paid & walk forward theft deductions, this would save $billions, along with the cost and effort of the legal process, and, in particular and most favorably, the excessive legal fees and the decade plus time of the adversarial legal process. In addition, claw back rights should be extinguished.

This would be a matter of the benefit to public policy, as a whole, and the immediate amelioration in the life circumstances of thousands of the elderly who, and most reasonably so, thought that after so many years the SEC was watching out for their honest interests in terms of both the brokerage and investment advisory/power of attorney fiduciary responsibilities of Bernard L. Madoff and of Bernard L. Madoff Investment Securities LLC.

For example, if the average individual account had a $2 million balance a/o Novemeber 30, 2008 end of month statement, and there were 5,000 such accounts [the 8,000+ claim forms sent out by the SIPC Trustee includes many duplicates], the total amount paid by the U.S. Government to all account holders would cumulatively amount to $10 billion, which is an estimated $7 billion to $10 billion LESS than the total estimated $17 to $20 billion the U.S. Treasury will lose to tax refunds & theft deductions, not including the judicial resources that will be consumed by all forms of litigation.

I therefore recommend that my suggestions should be adopted as an alternative to years of questionable & costly civil actions, complaints, and cost to the U.S. Treasury.

This is not class warfare, just simple economics, wherein the ONLY choices are . . . "Pay the victims $10 bln today [my plan] or upwards of $20 bln in the near future [the IRS plan]."

Will COMEX Default on Gold and Silver?

The futures exchanges could declare an emergency action in the spot contract and force trading for liquidation only, not delivery, meaning that each long & short will offset each other as there is ALWAYS one contract offsetting another, known as the open interest. Saying that, a short squeeze is easily facilitated vs. the then failure of COMEX back in 1980 silver to decide same with the Hunt brothers until it reached the $50@oz level.

As for phony warehouse gold stocks, worst case scenario is that, as a matter of public policy, contract specs could be changed, ex post facto, to include both in-ground proven gold reserves and additionally designated "hidden/secret" refined mega amount gold depositories worldwide, e.g., particularly in the Philippines & some in Indonesia. [You didn't think the USA has so many military bases & facilities in the Philippines to PROTECT the Philippines, did you?]

Don't Be Scammed by Madoff Investor Sob Stories

Matthew,

Unfortunately, you are misinformed. Largely all of the Madoff accounts, in quantity of numbers, were held as segregated brokerage accounts with registered broker dealer Bernard L. Madoff Investment Securities LLC, no different than opening up an account with an E-Trade, Interactive Brokers, or Charles Schwab. Power of Attorney to only effect trades, not withdraw monies, was given to the individual person, Bernard L. Madoff. Daily P&S confirmations along with monthly activity & balance statements were sent to each account owner via first class U.S. Postal Service mail from Bernard L. Madoff Investment Securities LLC.

The trading occurred over a 20+ year period with never a substantive SEC or then NASD audit ever occurring. It's as if one took a prescription Rx over 20+ years and everyone taking it in year 20 developed cancer and, later, found out that, "Oops, the FDA never tested the Rx because they were, at the least, too busy, or, at the extreme, compromised to look the other way."

SEC, which is it?