By Siobhan Hughes and Sarah N. Lynch
Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- The head of the Securities Investor Protection Corporation on Monday suggested that the organization may need a bigger federal backstop or more funding, the latest to seek additional government support as the markets suffer.
SIPC President Stephen Harbeck told the House Financial Services Committee on Monday that SIPC has a $1 billion line of credit with the Treasury Department, which hasn't changed since 1970, and that if adjusted to reflect the increase in the size of the market, the line of credit would total $4.3 billion.
"That's certainly something we will look at as we determine how deep into SIPC resources" the alleged fraud by Bernard L. Madoff Investment Securities LLC "will take us," Harbeck said.
SIPC was created by Congress, but is a non-profit funded by brokerage firms and securities dealers who are members. Besides its line of credit, it has $1.6 billion in reserves. It steps in only when brokerage firms fail.
It isn't yet clear how much investors with Madoff's now-defuct firm will recover, though current statistics aren't promising. A court-appointed trustee in the Madoff case has managed to identify $830 million in liquid assets of the firm, Harbeck testified on Monday. Madoff, who has been charged with securities fraud in a massive Ponzi scheme, has estimated that the losses total $50 billion, according to federal lawsuits.
Rep. Mel Watt, D-N.C, pressed Harbeck on whether taxpayers could be on the hook over losses tied to the alleged fraud. "What will happen if the legitimate, documented claims exceed the assets that you have?" he asked.
"We will come to Congress," Harbeck replied.
"And so the taxpayers will end up being responsible for whatever the overage is on the claims -- is that correct?" Watt pressed.
"That would be the case if we did come to Congress," Harbeck replied.
-By Siobhan Hughes, Dow Jones Newswires; 202-862-6654; Siobhan.Hughes@dowjones.com
-By Sarah N. Lynch, Dow Jones Newswires; 202-862-6634; sarah.lynch@dowjones.com
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Publié le 05 janvier 2009 Copyright © 2009 Dowjones