Friday, July 10, 2009

Write Your Congressperson about H.R. 2798

It was only a matter of time--Madoff's investors have asked the 111th Congress for a bailout. The House of Representatives has obliged, and the House Committee on Financial Services is currently reviewing H.R. 2798. As of July 10, 2009, H.R. 2798 has not been submitted for a vote. You may write to the House Financial Committee using the following link:

Here is my letter:

Dear House members:

I am asking that you vote against H.R. 2798 or decline to submit the bill for a full House vote. The proposed bill seeks to bail out Madoff's investors under the guise of shoring up the SIPC. For example, SIPC members will only be expected to pay $1000 annually (up from $150 annually) into the SIPC fund. This amount is stunningly low, given that credit unions have had to pay millions of dollars to shore up their own version of SIPC, called the National Credit Union Share Insurance Fund (NCUSIF). Star One Credit Union, for example, will be assessed a $44.2 million charge to maintain adequate member protection. Thus, a revised annual SIPC fee of $1000 is laughable if consumer protection is the goal.

H.R. 2798 would be even more comedic if the money to expand SIPC protection wasn't coming from taxpayers. Unfortunately, because the SIPC has been woefully underfunded, if Congress passes H.R. 2798, the U.S. Treasury must issue loans to raise the SIPC fund's available credit from one billion dollars to $2.5 billion. As you know, the U.S. Treasury is basically the American taxpayer, so ordinary Americans and their children will be on the hook for this proposed bailout.

Most tragically, H.R. 2798's proposed penalties for white collar crime are too low at five years' jail time and a $250K fine. Such minimal deterrence will not protect the public against a future Madoff. Approving such low penalties post-Madoff may cause voters to wonder if white collar criminals have lobbyists. If I worked in Congress, I would not want my name associated with H.R. 2798 in its current form. Please vote "no" on H.R. 2798.


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