Recently, 27 lawmakers sent a letter to the Securities Investor Protection Corp., which is funded by the brokerage industry and overseen by the government, demanding that SIPC cover investors for their losses. SIPC granted similar coverage to clients of Bernard Madoff and the recently bankrupted commodities trader MF Global.
The 23 Republicans and four Democrats threatened to convene hearings in Washington next week if SIPC didn’t act. That, apparently, is easier than living up to their own shortcomings.
Seven of the lawmakers who signed the letter received campaign contributions from Stanford. Only two – Rep. Michael McCaul, R-Austin, and Rep. Rep. Charles Boustany, R-La. – returned the money. Five others – Republicans Pete Sessions of Dallas, Lamar Smith of San Antonio and Vern Buchanan and Ileana Ros-Lehtinen of Florida, as well as Democrat Steve Cohen of Tennessee – owe Stanford’s estate money, according to the court-appointed receiver in the company’s bankruptcy.
The firm’s namesake, R. Allen Stanford, liked to spread cash around Washington. The receiver has been trying to recover political donations for almost two years. About $1.8 million remains outstanding, and only about $142,000, has been returned.
Even more disturbing, five committees of the two political parties – the Democratic Senatorial Campaign Committee, the Democratic Congressional Campaign Committee, the National Republican Congressional Committee, the Republican National Committee and the National Republican Senatorial Committee – have refused to return a combined $1.6 million. Check please the complete list of Political contributions here.
In other words, while lawmakers are quick to call on the brokerage industry to insure the losses of Stanford’s investors, they are far less willing to demand the same of themselves or their political parties.
Many of the elected officials who received campaign contributions from Stanford – including both Texas senators and Sessions – donated them to charity. That, however, doesn’t let the politicians off the hook.
If Stanford was a fraud as the government contends, then the money is stolen. Donating stolen money doesn’t eliminate the potential theft. Even if no theft is proved, the receiver is operating under a court order to recover money on behalf of investors, and donating it doesn’t absolve lawmakers of the court’s order.
Meanwhile, the Securities and Exchange Commission, which is charged with overseeing SIPC, ordered the fund to pay investors in June. So far, it hasn’t. As recently as last week, SIPC’s chairman sent a letter to one member of Congress saying SIPC disagrees with the SEC’s decision.
Sen. David Vitter, R-La., had been trying to arrange some sort of settlement between the SEC and SIPC. Those efforts apparently fell through.
“The SEC needs to take definite action before the end of the year, and I’m afraid that’s going to mean suing SIPC,” he told SEC Chairman Mary Schapiro.
The SEC, of course, is making up for past mistakes. Having bungled earlier investigations into Stanford, it then took more than two years to reach a decision on SIPC coverage.
It may be getting tough now, but suing SIPC means investors, who have been strung along for almost three years, must wait even longer to find out if their losses are covered. Sadly, in this case, that’s progress.