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XMFSinchiruna (27.09)

SIPC coffers will be emptied by Madoff ... and then some!

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December 16, 2008 – Comments (5)

A U.S. District Judge on Monday declared that victims of the Madoff scandal are eligible for protection under the SIPC. Since the Madoff empire included an in-house brokerage, the ruling seems to make perfect sense, so in that sense this is more an invocation of presumed federal insurance coverage than a bailout, per se. But, in effect, it's still a bailout. Here's why.

At the end of 2007, as per this financial statement, the SIPC had only $1.5 billion in assets!!

Without a major injection of funds, this Madoff event alone would more than empty the coffers of the SIPC, and so of course the Treasury will have to step in and provide further funding. The Madoff losses, then, will go directly on your bill! Does that make you Mad-off? :(

5 Comments – Post Your Own

#1) On December 16, 2008 at 12:23 PM, ClearEyez (28.81) wrote:

There is no way to know how much this would cost the SIPC at this point. However, It most definitely won't cost it the total amount lost and I doubt it will cost it 1.5 Billion as most of the investors were very large investors and they only cover up to 500K of losses. So anyone who had more then 500K will lose all that was above that...And that will be most of the investors.

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#2) On December 16, 2008 at 12:44 PM, XMFSinchiruna (27.09) wrote:

ClearEyez

True... we need to know the number of investors involved to estimate the SIPC's exposure here.

Regardless, the agency's $1.5 billion stash will prove woefully inadequate to cope with losses in 2009, and the FDIC will need some added funding as well as banks will continue to fail.

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#3) On December 16, 2008 at 12:49 PM, RVAspeculator (29.54) wrote:

Let’s just rename FDIC and SIPC "The Treasury" and get it over with already.

Got gold?

 

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#4) On December 16, 2008 at 3:31 PM, mandrake66 (42.45) wrote:

From the WSJ today:

The new court-appointed trustee for the U.S. arm of the Madoff firm, Irving Picard, will mail claim forms to customers of the firm, review their claims and determine how to satisfy them using a combination of firm assets and funds held by SIPC, the securities-industry nonprofit group helping to oversee the firm's liquidation.

SIPC is set up to provide as much as $500,000 per customer for claims of theft from a brokerage firm. With about $1.6 billion currently on hand, SIPC could satisfy claims of more than 3,000 customers, said its CEO, Stephen Harbeck.

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#5) On December 16, 2008 at 3:33 PM, mandrake66 (42.45) wrote:

The quote above ended with:

It's not clear how many customers Mr. Madoff's firm had. The process could take months, Mr. Harbeck said. "We'll proceed as quickly as we can."

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