Friday, July 31, 2009

CAPCO:Insurance Co. for Big-Money

Capco is virtually unknown even in financial circles, now thrust in spotlight. Creditors and former customers battling over who will get what and when from Lehman. Robert Menendez, Democrat of New Jersey, wrote the Treasury secretary, Timothy F. Geithner, in June to express his concern: “It has become clear that this entity is thinly capitalized,”

Pitch was that while Capco would not insure against investment losses, it would compensate them if firms failed. Capco provides virtually unlimited coverage above $500K offered by SIPC and British equivalent. Its members include Morgan Stanley and Goldman, JPMorgan Chase, Wells Fargo, Robert Baird, Edward Jones and Fido. Capco was initially registered in New York but later moved to Vermont, where state law enables it to operate without disclosing much. More than $32 billion of assets have been tied up in Lehman’s London prime brokerage unit. Untangling the mess could take years. Some former Lehman clients, which include big hedge funds, are looking to Capco for answers — and money. (Picture: Exploring Lehman 'Caves' in Great Basin National Park)

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