The SEC, acting more quickly than one would imagine under the Bush administration, has accused the Stanford Financial Group of Houston, Texas of "a massive ongoing financial fraud"
The SEC instituted a raid on the group's Houston offices and found that 8 billion in uninsured CDs. allegedly in a bank in Antigua, couldn't be accounted for. It seems that the Group was running something like a Ponzi scheme on its CDs, which most people identify with insured bank deposits, paying high interest on them and misinforming buyers concerning where the CD money was going.
The Stanford Group is also charged with violating a New Deal piece of legislation, the Investment Company Act of 1940, in that it failed to register as an investment company. In an interesting and humorous sidelight, the press reported that the Stanford Group lost 400,000 to Bernie Madoff, the state of the art swindler whom the SEC let get away with much more than 8 billion, but that is little comfort to those who bought CD's that they thought were relatively safe from a company that used them to invest in real estate and other risky ventures. Just as one capitalist, to paraphrase Marx, swallows up many, one crooked capitalist can rob many other crooked capitalists along with millions of people looking for a safe place to put their money like CD's.
This is further evidence that the people need a new National Banking Act and a new Security and Exchange Commission Act, legislation that will both repeal completely the deregulation of the last thirty years and modernize and make much more comprehensive the regulation of finance capital at all levels. Stanford Group executives had to surrender their passports and it is at this point very likely that they will face criminal prosecution. Creating preventive regulation that will stop such con men before they start, or at least relegate them to activities like trying to sell the Brooklyn Bridge or the Golden Gate Bridge to tourists, can be done and should be done.
