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Getbig Main Boards => Politics and Political Issues Board => Topic started by: Soul Crusher on October 31, 2011, 06:43:11 AM
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He did the same thing to NJ that he did his firm.
http://www.huffingtonpost.com/2011/10/31/mf-global-to-file-for-bankruptcy_n_1066902.html
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MF Global: Likely Among the 10 Biggest Bankruptcies Ever.Article Comments (6) Deal Journal HOME
By Shira Ovide
MF Global, the brokerage run by former Goldman Sachs chief Jon Corzine, today filed for bankruptcy protection, becoming one of the highest-profile U.S. victims of bad bets on European government debt.
With the Chapter 11 filing, MF Global also is likely to be added to the ignominious list of the 10 largest bankruptcies in U.S. corporate history. Here is that list, according to research firm BankruptcyData.com, and based on the value of each company’s assets before its bankruptcy filing.
Based on MF Global’s disclosed assets in its bankruptcy filing, it is likely to slot in just ahead of Chrysler as the eighth-largest U.S. bankruptcy.
1) Lehman Brothers Holdings, September 2008: $691 billion in assets
2) Washington Mutual, September 2008: $327.9 billion
3) WorldCom, July 2002: $103.9 billion
4) General Motors, June 2009: $91 billion
5) CIT Group, November 2009: $80.4 billion
6) Enron, 2001: $65.5 billion
7) Conseco, 2002: $61.4 billion
MF Global: $41 billion (as of Sept. 30)
8) Chrysler April, 2009: $39.3 billion
9) Thornburg Mortgage May, 2009: $36.5 billion
10) Pacific Gas & Electric Co., 2001: $36.15 billion
Source: BankruptcyData.com; SEC filings for MF Global asset size
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What no tax payer bailout ???
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You Won't BELIEVE How Much Money Jon Corzine Could Walk Away With From the Bankrupt MF Global
Business Insider ^ | 10/31/2011 | Lisa Du
The big story of the day in finance is the bankruptcy of MF Global -- the futures trading house run by ex-Goldmanite Jon Corzine.
Even before filing for bankruptcy, the firm was suspended from dealing with the New York Fed, and two exchanges banned the firm's traders from accessing their trading floors.
A major contributor to the firm's downfall: Outsize risks taken by Corzine, as it bet heavily on European debt last year, something that obviously hasn't gone so well.
So what happens when the firm goes bust, Corzine leaves, and lots of other people lose their jobs?
DealBook reported that Corzine's severance package could allow him to walk away with around $12 million in the event of a sale.
That's $12 million for joining a company and, in two years, flying it into a mountain.
(Excerpt) Read more at businessinsider.com ...
SOUNDS EXACTLY LIKE EVERY DEMOCRAT POTUS AND GOV NO?
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Now Check Out All The Ways Jon Corzine Is Connected To Democrats And Obama
Joe Weisenthal | Oct. 31, 2011, 12:19 PM | 718 | 9
Jon Corzine, the man at the helm of failed MF Global.
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Jon Corzine’s Wall Street Firm, MF Global Has Filed For Bankruptcy. “Broker-dealer MF Global, headed by former New Jersey governor and Goldman Sachs chairman John Corzine, has filed for bankruptcy protection, apparently because of holdings of European debt.” (“Broker-Dealer MF Global Files For Bankruptcy,” USA Today, 10/31/11)
Corzine Is Expected To Receive A $12 Million Golden Parachute. “With a sale of MF Global, Mr. Corzine’s role at the firm will almost certainly end, though he is expected to receive a severance payment of nearly $12.1 million.” (Michael J. De La Merced And Ben Protess, “MF Global Said To Be In Deal Talks With Interactive Brokers,” The New York Times’ “Dealbook,” 10/30/11)
Corzine Has Bundled Over $500,000 For Obama’s Reelection Campaign. (Center For Responsive Politics, Opensecrets.Org, Accessed 10/31/11)
“Corzine Has Already Held A High-End Fundraiser And Organized A Secret Meet-And-Greet Between Finance Executives And Obama’s New Chief Of Staff.” (Peter Stone, Elizabeth Lucas, John Aloysius Farrell, Paul Abowd and Rachael Marcus, “Obama Campaign Reports More Than 350 Big Bundlers, Including Solyndra Figures,” Iwatch News, 10/14/11)
Corzine Co-Hosted A Wall Street Fundraiser For Obama In April. “President Obama's first New York event since he declared his reelection will be at the home of former New Jersey Gov. Jon Corzine, the former Goldman Sachs financier who will host a high-dollar, small dinner, an invitation to the event shows. Tickets to the event, which sources said Corzine is co-hosting with another financier, longtime Obama backer Orin Kramer and his wife, cost $35,800 per person.” (Maggie Haberman, “Obama Fundraiser At Corzine Home,” Politico, 4/5/11)
The Fundraiser Was Part Of Obama’s Efforts “To Soothe Frayed Relations” With Wall Street. “The choice of Corzine's home is notable, given his ties to the financial sector. The White House has made efforts in recent months to soothe frayed relations with the business community, after an election cycle during which some donors, unhappy with the push for Wall Street reform, claimed to be sitting on their hands.” (Maggie Haberman, “Obama Fundraiser At Corzine Home,” Politico, 4/5/11)
Corzine Attended Obama’s Blue Room Meeting With Wall Street Donors. (Josh Gerstein, “All At DNC Blue Room Meeting With Obama Were Donors, Politico’s “Under The Radar,” 6/26/11)
Just Before Announcing For Reelection, Obama Brought Two Dozen Wall Street Executives And Long-Time Donors To The White House For A Blue Room Meeting. “A few weeks before announcing his re-election campaign, President Obama convened two dozen Wall Street executives, many of them longtime donors, in the White House’s Blue Room.” (Nicholas Confessore, “Obama Seeks To Win Back Wall St. Cash,” The New York Times, 6/12/11)
The Meeting Was Organized By The Democratic National Committee To Try To “Win Back” Wall Street, One Of Obama’s Main Sources Of Campaign Cash. “The event, organized by the Democratic National Committee, kicked off an aggressive push by Mr. Obama to win back the allegiance of one of his most vital sources of campaign cash — in part by trying to convince Wall Street that his policies, far from undercutting the investor class, have helped bring banks and financial markets back to health.” (Nicholas Confessore, “Obama Seeks To Win Back Wall St. Cash,” The New York Times, 6/12/11)
Obama “Opened The Floor” For The Donors To Talk To Him “On Hot Issues.” “The guests were asked for their thoughts on how to speed the economic recovery, then the president opened the floor for over an hour on hot issues like hedge fund regulation and the deficit.” (Nicholas Confessore, “Obama Seeks To Win Back Wall St. Cash,” The New York Times, 6/12/11)
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Read more: http://www.businessinsider.com/check-out-all-the-ways-jon-corzine-is-connected-to-democrats-and-obama-2011-10#ixzz1cNhKXAoU
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Barak Hussein Osama is the 99%
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This whole time I was doing it all wrong. Appearantly you have to totally fuck things up to get ahead.
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This whole time I was doing it all wrong. Appearantly you have to totally fuck things up to get ahead.
Fail upwards.
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(Hypocritical Liberal Democrat) Corzine Crashes Like It’s 2008
ny times ^ | 11/1/2011 | Joe Nocera
Posted on November 1, 2011 7:01:28 AM EDT by tobyhill
When Goldman Sachs went public on May 4, 1999, Jon Corzine, who was then the firm’s chief executive, held a stake that was suddenly valued at $305 million. So, perhaps, it’s uncharitable to complain about the piddling $12 million severance he was poised to gain if he had managed to sell his current firm, MF Global Holdings, over the weekend.
But I’m going to complain anyway. The idea that Corzine, who single-handedly destroyed MF Global Holdings, was in a position to command so much as a penny in severance is horrifying. It suggests two things. The first is the extent to which “heads-I-win-tails-you-lose” remains the operative concept for Wall Street compensation. The second is that one’s politics doesn’t much matter when it comes to lining one’s pockets. Corzine is an avowed liberal who has decried income inequality and Wall Street pay — but right up until the end, he had his hand out for millions he didn’t deserve.
To read a recounting of Corzine’s tenure at MF Global Holdings is to wonder how he missed the 2008 financial crisis. Oh, yes! That’s right: he was the governor of New Jersey, a job he won in 2005 after one term in the Senate. Still, you would think that as a former Wall Street titan, he would have noticed that taking giant bets on shaky, long-term bonds while financing your operations with overnight loans that can be pulled at any second is not exactly a recipe for success.
But that’s exactly what Corzine did. After taking over the firm in March 2010 — just months after losing his re-election bid to Chris Christie — he decided to transform the derivatives broker into something sexier, something more like his old firm, Goldman Sachs.
(Excerpt) Read more at nytimes.com ...
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Someone Is Going To Jail For This: MF Global Caught Stealing Hundreds Of Millions From Customers?
ZeroHedge ^ | 10/31/11 | http://www.zerohedge.com/users/tyler-durden
Posted on November 1, 2011 2:02:18 AM EDT by Kartographer
What do you do? Do you go ahead and tell your superior that the firm is broke even though the co-opted media is trumpeting every 5 minutes that "MF Global is fine", knowing full well you will be immediately fired for being the bearer of bad news, or do you assume that courtesy of your uber-boss being the former head of the Vampire Squid, and thanks to infinite moral hazard which after Lehman made sure nobody would ever fail ever again, that there is simply no way that you will be left without some miraculous rescue, if only you can last one more day, and as a result proceed to "commingle" some client funds with the firm's cash. It turns out that at MF Global you do the latter... over and over... until you have literally stolen hundreds of millions from the firm's client accounts in hopes that the miracle rescue will come on Friday...
(Excerpt) Read more at zerohedge.com ...
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“That seems crazy,” said William Larkin, a fixed-income portfolio manager who oversees $500 million at Cabot Money Management Inc. in Salem, Massachusetts, and has 22 years of experience. “I’ve never heard of something like this.”
Corzine, the 64-year-old former governor of New Jersey, helped run Goldman Sachs Group Inc. (GS) from 1994 to 1999 and served in the Senate from 2001 to 2006. Since joining MF Global last year, he’s taken more risk with the firm’s money in a bid to remake the broker into a mid-size investment bank and has sought to alter its capital structure to reduce borrowing costs. The shares rose 9.5 percent in the past year under his watch, while the Standard & Poor’s 500 Financials Index fell 4.9 percent.
A Democrat, Corzine is among the biggest fundraisers for President Barack Obama’s 2012 re-election campaign. He has been the subject of speculation about administration jobs such as Treasury secretary or White House economic adviser, said Christopher Allen, an analyst at Evercore Partners Inc. in New York.
Retention Bonus
Jay Carney, the White House press secretary, said he had “no knowledge” that Corzine was being considered for an administration post. He declined to comment on the bond sale.
Corzine’s employment contract is written with a view to future government service. It stipulates that he’ll be paid his $1.5 million retention bonus on a pro rata basis if he leaves to work for any “U.S. federal, state or local government” before March 31, 2014.
Five senior Wall Street executives at rival firms, who declined to be identified because they weren’t authorized to comment, expressed amazement at the bond offering’s unique terms. Hedge funds sometimes allow investors to withdraw their money if a star manager or founder, designated a “key man,” leaves the company.
Diana DeSocio, an MF Global spokeswoman, said yesterday she couldn’t comment because the company is in the offering period for the bond. She couldn’t immediately be reached for comment today.
‘Extra Protection’
“I can’t say I’ve ever seen a provision similar to this one,” said Alexander Diaz-Matos, an analyst at New York-based Covenant Review LLC, which analyzes bondholder protections. “Apparently Corzine is a big enough deal to the company that if he leaves, potential investors demanded a little extra protection.”
Larkin said he was surprised that the interest-rate change on the bonds applies only if Corzine leaves for a government job and not in any other circumstance.
“To have it so specific makes it even more unusual,” said Diaz-Matos.
The notes pay a coupon of 6.25 percent, with proceeds to be used to repay a bank credit facility and for general corporate purposes, according to the statement. Jefferies & Co. managed the bond sale, the company said. MF Global initially offered $300 million of the debt, said a person familiar with the offering who declined to be identified citing lack of authorization to speak publicly.
Investor Concern
The idea for the Corzine step-up provision emerged from Jefferies bankers working on the deal, according to one person with direct knowledge of the discussions, who asked not to be identified because the talks were confidential. The Jefferies bankers indicated they wanted to head off any investor concern that Corzine might leave, the person said.
Moody’s Investors Service ranks MF Global Baa2, the second- lowest investment grade, while Standard & Poor’s rates it BBB-, one step lower. The interest rate will also rise if Moody’s or S&P cuts the company’s debt grade to junk, the regulatory filing shows.
A rate increase of 1 percentage point, or 100 basis points, is the least that bondholders should seek as protection against a Corzine departure, said Sean Egan, president of Egan-Jones Ratings Co., a credit-rating company.
“We believe Corzine is worth more than a 100 basis-point increase,” Egan said. “Corzine’s departure is a major risk and the bond step-up in rate is addressing the risk.”
The innovation reminded Egan of Michael Milken, who helped create a market for the debt of smaller and riskier companies by issuing high-yield securities in the 1980s.
‘Rock Star’
“Milken would be proud of the structure since it addresses a major concern,” he said.
Larkin, who said he owns bonds in Wall Street firms including Goldman Sachs, Morgan Stanley (MS) and JPMorgan Chase & Co. (JPM), said he doubts the idea will catch on at other companies. Corzine is a unique case, he said.
“I’m guessing this is a one-time thing -- he does have sort of a rock-star component to him because people believe in his ability to turn around the firm,” Larkin said. “The management should never be one person. If it’s one person that’s critically important, I tend to avoid the company just because I’m trying to establish stable income and return of principal.”
MF Global was named a primary dealer by the Federal Reserve Bank of New York and has hired more than 80 salespeople and traders this year.
Cutting Costs
Even with the additions, Corzine has cut costs by reducing the firm’s workforce by 5.5 percent and delivered unadjusted profit last quarter. Prior to that period, the firm was unprofitable on a generally accepted accounting principles basis in eight of the previous nine quarters.
Net revenue per employee has risen to $110,000 for the three months ended in June, compared with $93,000 a year earlier, the company said last week. At the same time, Corzine brought the ratio of employee compensation to net revenue down to 54 percent from 63 percent in the June quarter of 2009.
Net income climbed to $7.67 million, or 5 cents a share, in the period ended June 30, compared with $783,000, or 1 cent, a year ago, the company said July 28.
Last week, the firm said it planned to buy back $109.1 million of 9 percent outstanding convertible notes with the proceeds from a sale of $325 million of 3.375 percent securities maturing in August 2018.
The interest-rate increase under the key man provision will reverse if MF Global is upgraded to at least A3 by Moody’s or an equivalent A- by S&P after a departure by Corzine, according to the regulatory filing.
It’s no surprise that major MF Global investors would be nervous about the potential impact of a Corzine departure, said Niamh Alexander, a New York-based analyst at KBW Inc. “There aren’t that many former senators that are running public companies that are in the middle of a turnaround.”
To contact the reporters on this story: Tim Catts in New York at tcatts1@bloomberg.net; Matthew Leising in New York at mleising@bloomberg.net; Christine Harper in New York at charper@bloomberg.net
To contact the editors responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net; David Scheer at dscheer@bloomberg.net.
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How Jon Corzine’s Trades Imperiled MF Global.
As MF Global works to save itself through a possible sale in whole or in pieces, details are emerging about how the brokerage finds itself on the brink.
Jon Corzine, the former Goldman Sachs CEO and ex-governor of New Jersey, took the helm at MF Global last year, and he started making large bets on debt issued by European countries. As The Wall Street Journal recounts, the bets came amid concerns by others that Corzine was putting too much of MF Global’s money at risk.
Our colleagues write:
Mr. Corzine oversaw the European sovereign-debt trades largely on his own even after hiring a new trading chief earlier this year, a person familiar with the matter says. In one quarter where the trade worked well, it represented 12% of the firm’s revenues, according to Christopher Allen, an analyst with Evercore Partners Inc. Mr. Corzine regularly reviewed the positions with the company’s directors, and he was allowed by the board several times to increase MF Global’s exposure to Europe, these people said….
One person who has worked with Mr. Corzine at MF Global says he was uncomfortable that so much of the firm’s strategy essentially boiled down to a bet by Mr. Corzine on European bonds. “There was no one else at the firm who was helping him think about what to do on this trade,” this person says.
Read more at WSJ.com.
And the morons wanted this jerkoff for a second term over Christy?
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Panic Behind The MF Scenes As Company Refuses To Disclose Information To Regulators Even In Death
Submitted by Tyler Durden on 10/31/2011 18:35 -0400
Commodity Futures Trading Commission Erin Burnett Federal Reserve MF Global Reuters Securities and Exchange Commission Treasury Department
As in life, so in death. Reuters reports that "U.S. regulators are unhappy with the failure of MF Global Holdings Ltd to provide them with the required data and records, a source close to one regulator told Reuters on Monday. "So far they've been very disappointed with the cooperation in the fulsomeness of records and data from MF," the source said, noting regulators have been working with the firm since late last week. "They were supposed to be able to show us their books and they're supposed to be able to tell us what's what and where their customer funds are and how they've been segregated and protected and to date we don't have the information that we should have," the individual told Reuters." Seriously, as Erin Burnett would say, you are already bankrupt. Just how much worse is it if you even in death you still are hiding secrets? And at this point it should be obvious to everyone: whatever MF is hiding is not something that will hurt it or much less its stakeholders for which the management team obviously never cared one iota. After all the company is already dead. Whatever is on its books has huge impacts to those either behind the corporate veil, read Mr. Corzine, who may or may not have regulatory issues arising from 10(b)-5 "concerns", or more probably, to other banks and Primary Dealers. And with even one simple affidavit still to be filed in Bankruptcy Court, the panic behind the scene is palpable.
From Reuters:
MF Global, which filed for bankruptcy protection on Monday, is the biggest U.S. casualty of Europe's debt crisis, and the seventh-largest bankruptcy by assets in U.S. history.
Regulators had expressed "grave concerns" about the viability of MF Global, which filed for bankruptcy only after "no viable alternative was available in the limited time leading up to the regulators' deadline," the company's chief operating officer, Bradley Abelow, said in a court filing.
U.S. regulators held a series of calls on Monday related to MF Global.
The Financial Stability Oversight Council, which is headed by the Treasury Department, received "a series of oral reports" from the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Federal Reserve, according to one Treasury Department official.
No other details of the calls were provided.
So: just what secrets is the corpse of MF about to reveal? We, for one, can't wait.
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GASPARINO: There's No Surprise At MF Global, As Jon Corzine's Career Has Failure Written All Over It
Charlie Gasparino, The Daily Beast | Nov. 1, 2011, 7:31 AM | 1,336 | 9
Jon Corzine is many things: Erudite, down to earth, and well-meaning being chief among them, people who know him tell me. But is he a good businessman? Not even close, these same people openly admit.
In fact, based on his long years in the financial business, from CEO of Goldman Sachs to his current job as chief executive of the failing MF Global, Corzine is proof positive that on Wall Street you don’t have to be very good at your job to get paid a lot of money, which is why hatred of fat cats remains a bipartisan pastime—and will for the foreseeable future.
I say this as someone who both personally likes Corzine and who has covered his career from his days as a successful bond trader at Goldman Sachs, when it didn’t take much more than a balance sheet and a phone to make money—and Corzine did, a lot of it. So much in fact that people I know put his net worth at around $500 million, more than enough money to buy multiple elections in New Jersey as U.S. senator and then as governor.
But his record of achievement on Wall Street as someone who had to run something? Pretty poor and it goes beyond his latest flop at MF Global, which was forced to declare bankruptcy Monday morning following massive losses tied to its investments in sovereign debt.
In fact, Corzine’s career has failure written all over it. Yes, he made a lot of money trading bonds over the years, but also lost a lot of money managing people who trade bonds, which made his latest screw-up at MF Global all the more inevitable.
Even friends of Corzine say his management style is erratic at best. For all his affability, he consults with almost no one except a small coterie of advisers, and often makes decisions based purely on gut instinct.
Gut instincts might be good for a trader, but they are lousy in management; particularly when you’re the manager in charge of reining in risk-taking traders from losing so much money that it might imperil the franchise.
At Goldman, that’s exactly what happened. It was Corzine who led Goldman into its first major financial morass (its second one would come just 10 years later and nearly destroy the firm) in 1998, when as chief executive he approved money-losing trading positions along the lines of those committed by the faltering hedge fund Long-Term Capital Management.
Those trading losses were costing the firm nearly $500 million, and forced the delay of its long-awaited initial public offering, in which Goldman wanted to transform itself from a private partnership to a public company that enriched it partners to no end (Corzine included).
Goldman eventually would go public once the Long-Term Capital storm passed and the losses subsided, thanks in large part to a government-led bailout of the hedge fund. But Corzine wouldn’t survive the ordeal. He was ousted by his second-in-command, Hank Paulson, when it became clear that Corzine wasn’t just a lousy manager, he was lousy at the very skill you get paid big bucks at Goldman to possess—risk management.
With that, Corzine left Goldman with $500 million to indulge his second-biggest passion after making money on Wall Street: politics of the left-wing variety. A longtime liberal Democrat, Corzine used his Wall Street winnings to launch successful campaigns first as U.S. senator from New Jersey, and then as the state’s governor.
In 2009, when the voters of New Jersey had enough of him, as people did at Goldman, Corzine was back to where he started, looking for a job on Wall Street. At first, most of the big firms wanted nothing to do with him, particularly in the aftermath of the financial crisis, where risk-taking bond traders like Corzine were the cause of the collapse of Bear Stearns, Lehman Brothers—and absent the taxpayer bailouts, probably nearly every other major firm and bank, including his old one, Goldman Sachs.
But Corzine was undeterred. His friend, former Goldman executive and now-private-equity honcho Chris Flowers, owned a chunk of a midsize brokerage firm named MF Global, and persuaded the board that Corzine was the right guy to ramp up profits and the firm’s share price, mired in single digits after a trading scandal.
Corzine’s plan to remake the firm was to make it be like the old Goldman. He argued that because of the new Dodd-Frank financial reform, the big Wall Street firms were constrained as to how much risk they could take in trading stocks and bonds. Goldman, for instance, was about to disband its proprietary trading desk and other firms weren’t far behind.
MF Global could emulate Goldman’s success over the years in trading all sorts of things, from derivatives to bonds to plain old stocks—and make a lot money at it because of a huge loophole in the Dodd-Frank provisions in which the trading ban only covered large “systemically important” firms, not midsize players such as MF Global.
It all sounded good on paper, until you consider that all that money Goldman and the rest of Wall Street made over the years didn’t mean much in the fall of 2008, when risk-taking caused such massive losses that the entire financial system was on the brink.
Obviously Corzine didn’t consider any of this, and then oversaw one of the worst bets in modern financial history, buying into the teeth of the European financial crisis debt of Italy and Spain, two of the countries considered most likely to default after Greece.
Corzine’s spokeswoman didn’t return repeated calls for comment, but here’s what we know right now: MF Global has filed for Chapter 11 bankruptcy protection and is quickly heading for liquidation because Corzine can’t find buyers willing to pay enough money for those parts of the firm that don’t take risk.
Some 3,000 people stand a good chance of losing their jobs in the coming days. Investors are demanding answers about Corzine’s risk controls, and whether the firm’s board had any inkling what he was doing. Even worse, federal regulators are investigating whether the firm in its final hours used customer money to support its trading activities—when such funds are supposed to be kept separate. As this column goes to press, regulators still can’t locate hundreds of millions of dollars in client funds, making a messy situation even messier.
As for Jon Corzine’s future, fellow CEOs say MF Global will likely be his last job on Wall Street; that having left Goldman in a similar fashion, he really has nowhere else to go. But I doubt Corzine is through. Wall Street is one of the few places where failure of great magnitude is an accepted way of life: Almost no CEO of a major Wall Street firm was forced out over the events that led to the 2008 financial collapse.
So my bet is Jon Corzine will be back and people, from Tea Partiers to Occupy Wall Street protesters, will find common ground having even more reason to hate Wall Street.
Please follow Clusterstock on Twitter and Facebook.
Read more: http://www.businessinsider.com/gasparino-theres-no-surprise-at-mf-global-as-jon-corzines-career-has-failure-written-all-over-it-2011-11#ixzz1cSY4FR00
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that dude drove like he didn't respect others on the road, nor the rule of law.
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that dude drove like he didn't respect others on the road, nor the rule of law.
That piece of garbage was being hailed as the next Tres Sec after Geitner by your messiah.
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MF Global Acknowledged Diverting Customer Funds
Wall Street Journal ^
Posted on Tuesday, November 01, 2011 4:18:59 PM by Sub-Driver
MF Global Acknowledged Diverting Customer Funds By VICTORIA MCGRANE And JAMILA TRINDLE
MF Global Holdings Ltd. admitted to federal regulators that money had been diverted out of customer accounts, according to a federal official who said the move violated the law.
The Wall Street brokerage, which filed for bankruptcy protection Monday, acknowledged the shortfall amid mounting questions from regulators as they went through the firm's books while trying to facilitate a sale to Interactive Brokers Group Inc., the official said. Regulators still don't know where the customer funds went, who directed the move or how widespread the practice was, the official said.
Regulators are still working to determine whether MF Global had a continuing problem with handling customer funds or if executives diverted funds as the company's financial situation deteriorated and grew more desperate, the official said.
(Excerpt) Read more at online.wsj.com ...
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http://www.huffingtonpost.com/2011/11/01/mf-global-admitted-using-client-money_n_1069757.html#comments
Wow - what a pofs! ! ! !
Oh thats right - Obama wanted him for next Tres. Sec. after Geithner. LMFAO @ the liberal Madoffs !!!!
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This whole time I was doing it all wrong. Appearantly you have to totally fuck things up to get ahead.
:D
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http://www.nytimes.com/2011/11/01/opinion/corzine-crashes-like-its-2008.html
Where are the libs on this?
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FBI to investigate MF Global over missing funds: WSJ
Reuters ^ | Nov. 1, 2011
Posted on November 1, 2011 6:16:41 PM EDT by Free ThinkerNY
(Reuters) - The Federal Bureau of Investigation plans to examine MF Global Holdings Ltd amid concerns about missing client funds at the futures brokerage, the Wall Street Journal said Tuesday, citing a person familiar with the matter.
The FBI will examine whether money is missing, the person told the Journal, and whether any criminal laws were broken.
That decision is a preliminary step, the person said, but could lead to a criminal investigation.
(Excerpt) Read more at reuters.com ...
democrat crime wave.
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Source: NY Times
Federal regulators have discovered that hundreds of millions of dollars in customer money have gone missing from MF Global in recent days, prompting an investigation into the company’s operations as it filed for bankruptcy on Monday, according to several people briefed on the matter.
The revelation of the missing money scuttled an 11th hour deal for MF Global to sell a major part of itself to a rival brokerage firm. MF Global, the powerhouse commodities brokerage run by Jon S. Corzine, had staked its survival on completing the deal.
Now, the investigation threatens to tarnish the reputation of Mr. Corzine, the former New Jersey Governor and Goldman Sachs chief who oversaw MF Global’s demise, making it the first American victim of Europe’s debt crisis.
.....
But regulators are examining whether MF Global diverted some customer money to support its own trades as the firm teetered on the brink of collapse. If that was the case, it could violate a fundamental tenet of Wall Street regulation: Customers’ money must be kept separate from company money.
Read more: http://dealbook.nytimes.com/2011/10/31/regulators-inves... /
Wow!!!
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What kind of stupid fuck would invest in European sovereign debt right now? Greek 1-years are trading at 200% right now.
This is the kind of company Obama keeps! HAHAHAHAHA!
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http://www.marketwatch.com/story/mf-globals-risk-mismanagement-2011-11-01?link=home_carousel
Another liberal genius.
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With results like this, he's all but locked up being the next Sec. of Treasury.
Further proof that any jerk-off could have made it in easy money days. The real ballers make money in this type of economy.
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(RAT) Corzine's firm admits to using clients' money, fed says (FBI investigates missing $600 mil)
NH Register ^ | 11/02/11
Posted on November 2, 2011 7:12:41 AM EDT by Libloather
Corzine's firm admits to using clients' money, fed says
By Associated Press
Published: Wednesday, November 02, 2011
WASHINGTON — MF Global, the securities firm led by former New Jersey Gov. Jon Corzine, admitted using clients’ money as its financial troubles mounted, a federal official says.
An MF Global executive admitted that to federal regulators in a call early Monday, after regulators raised questions about the company’s books, according to an official familiar with the conversation.
It is not clear where the money ended up or what it might have been used for, said the official, who spoke on condition of anonymity because he wasn’t authorized to discuss an investigation by federal regulators.
**SNIP**
The investigation of MF Global Holdings Ltd. is preliminary. A formal investigation by the company’s main regulator, the Commodity Futures Trading Commission, requires a vote by its five commissioners.
It isn’t clear whether the violations could lead to criminal charges.
(Excerpt) Read more at nhregister.com ...
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Cohan: Others Pay Price for Corzine’s Revenge
By William D. Cohan - Nov 1, 2011
In the end, Jon Corzine was little more than an unsupervised rogue trader.
His disproportionately reckless $6.3 billion bet on the credit quality of a few European nations bankrupted MF Global Holdings Ltd. (MF) over the course of three dramatic days after the short-term credit markets quickly lost confidence in him and his firm. His gamble will cost MF’s shareholders and creditors billions of dollars and, virtually overnight, put the careers of MF’s almost 3,000 employees in jeopardy.
MF Global now has the distinction of being one of the largest bankruptcies in American corporate history, with almost $40 billion in liabilities. There is also the matter of the hundreds of millions of dollars of customers’ money that regulators have reported to be missing from the firm’s coffers.
In any case, it’s incredible how little Corzine and his associates learned from the collapses of Bear Stearns Cos., Merrill Lynch, Lehman Brothers Holdings Inc. and American International Group Inc. three years ago. And it now seems very hard to believe that just a few months ago Corzine was considered the front-runner to be the next U.S. Treasury secretary.
It didn’t have to be this way. The tragic element of Corzine’s MF Global is that Monday’s bankruptcy filing could have easily been avoided if Corzine’s ego and ambition had been held in check by someone -- anyone -- willing to stand up to the former New Jersey governor, senator and senior partner at Goldman Sachs Group Inc. (GS)
No One Watching
Where, for example, was J. Christopher Flowers, the billionaire founder of J.C. Flowers & Co.? According to MF Global’s most recent proxy statement, Flowers’s firm owned 6.8 percent of MF. But then Flowers had reasons to have blind faith in Corzine: It was Flowers who recruited the former governor to MF in 2010, and also made Corzine a partner in his private- equity fund. When the two men were at Goldman Sachs in the 1990s, they had a symbiotic relationship: As Flowers was head of the financial-institutions group, Corzine relied on him to make introductions to other Wall Street bosses so they could ponder strategic deals.
Where were MF Global’s other institutional shareholders, such as Fidelity Investments (which held a 14.8 percent stake, according to the proxy), Guardian Life Insurance Co. (7.4 percent), TIAA-CREF Investment Management LLC (6.6 percent) and Piper Jaffray Cos. (PJC) (6.3 percent)? Were they too dazzled by Corzine’s resume to take a serious look at how he intended to transform MF Global from a backwater to a major player on Wall Street? Where was MF Global’s auditor, PriceWaterhouseCoopers LLP, which managed to pocket almost $25 million in fees from the company over the past two years?
And where, for heaven’s sake, was MF Global’s eight-member board of directors -- a ragtag collection of mostly unknown Wall Street types who had the fiduciary responsibility on behalf of creditors, shareholders, counterparties and employees to make sure Corzine wasn’t taking irresponsible risks? Is it too much to ask a board of directors to take this responsibility seriously? Apparently it was at MF Global.
In granting Corzine a three-year extension of his employment agreement in 2011, the board’s compensation committee noted that his “performance has been exemplary since joining the firm just over one year ago,” according to the proxy statement. The board also noted that Corzine “accomplished key near-term building blocks, including significant improvements in the reputation of the firm as demonstrated by its ability to hire quality professionals, the company’s success in securing primary dealer status, its growing client balances and its improved posture with regulators.” One wonders if the board members still hold that opinion.
Other People’s Money
The collapse of MF Global points once again, in the strongest possible terms, to the importance of having a substantive, teeth-bearing regulatory regime charged with overseeing the kind of asynchronous risk-taking that gives people like Corzine the incentive to gamble with other people’s money in hopes of reaping financial windfalls. And yet, more than three years after the collapse of Lehman Brothers and the onset of the financial crisis, we don’t have in place anything close to necessary regulations to try to prevent companies like MF Global from exploding.
There is little question that from the outset of his tenure at MF Global, Corzine was swinging for the fences. He told me at the time that he saw MF Global as sleepy and risk-averse; he was determined to ratchet up exponentially the amount of risk the firm took using its creditors and shareholder money. Corzine himself had only a tiny fraction of his fortune invested in MF Global. His option-oriented compensation package encouraged him to take outsize risks in order to move MF Global’s stock price into “in-the-money” territory.
One also suspects that Corzine was looking for some serious redemption after the January 1999 coup he suffered at the hands of his fellow Goldman Sachs partners. Even though Corzine hadn’t sat on a trading desk in years, MF Global was his return ticket to the land of the Wall Street giants.
Corzine has always been a bit precocious and underestimated. In 1980, at the age of 33, he became a Goldman Sachs partner after just 4½ years at the firm. In 1986, he turned a wrong-way bet by Goldman Sachs on the direction of interest rates and Treasury securities -- a bet that looked like it was going to cost the firm $150 million -- into a $10 million gain after he personally took charge of the trade and worked it out. Many of his Goldman Sachs partners saw him as a bit of a hero afterwards, and the slope of his career trajectory angled dramatically upward.
In 1993, his future leadership of the firm was virtually assured after his trading group racked up impressive gains on the direction of various currencies against the dollar, helping Goldman Sachs to achieve record pretax earnings of $2.7 billion.
A Golden Boy
Corzine was the firm’s golden boy. But just after those earnings were paid out as partner bonuses, the trading environment in 1994 turned decidedly sour. In that year, the firm started losing almost $150 million every month and Corzine refused to give up on his trades --another wrong-headed bet on interest rates. In the end, the firm barely broke even in 1994, and some 40 partners left the company as they watched their capital accounts dwindle. Somehow, Corzine wasn’t held accountable.
In September 1994, despite the huge trading losses for which his fixed-income group was responsible, Corzine’s partners selected him to be the firm’s new senior partner. In 1995, the year after the worst annual performance in Goldman Sachs’s history, he exhorted his partners to try to make $10 billion in pretax income during the next five years. After first snickering at this goal, his partners accomplished it -- and more -- making the firm’s May 1999 initial public offering both inevitable and a huge success. By then, though, Corzine’s unilateral efforts to merge Goldman Sachs with a variety of other Wall Street titans - - from Salomon Brothers to JPMorgan to Mellon Bank -- had so alienated his partners that they colluded to oust him. He said he never saw it coming.
While the denouement of MF Global is still being written, one thing is crystalline: Behind Jon Corzine’s bearded, avuncular facade lies the soul of a stubborn, ambitious and aggressive risk-taking trader who in the end drove MF Global into the financial abyss. If only someone had had the guts to stop him.
(William D. Cohan, a former investment banker and the author of “Money and Power: How Goldman Sachs Came to Rule the World,” is a Bloomberg View columnist. The opinions expressed are his own.)
To contact the writer of this article: William D. Cohan at wdcohan@yahoo.com
To contact the editor responsible for this article: Tobin Harshaw at tharshaw@bloomberg.net
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Mr. Corzine’s Big Bet
http://www.nytimes.com/2011/11/02/opinion/mr-corzines-big-bet-on-mf-global.html?_r=1&ref=opinion&pagewanted=print
Why did Jon S. Corzine make the risky bets that have now plunged MF Global Holdings into bankruptcy court? We don’t know, but the likely explanations are disturbing.
Over the past year, most investors have been fleeing the sovereign debt of Spain, Italy and other euro-zone basket cases. Not Mr. Corzine. The onetime chief executive of Goldman Sachs and former New Jersey senator and governor who has run MF Global since early 2010, was all in, buying up $6.3 billion worth of discounted euro-zone debt.
As Azam Ahmed reported in The Times on Tuesday, Mr. Corzine appeared to be wagering that the European Union would come to the rescue of Europe’s troubled economies, averting a default. In other words, Mr. Corzine was betting on a bailout.
A euro-zone bailout may well come, but not in time for Mr. Corzine and MF Global. Concerns about Mr. Corzine’s big bet led two ratings agencies to downgrade the firm to junk last week, draining investor confidence — and cash — from the firm, and sending it spiraling into bankruptcy proceedings. The fact that Mr. Corzine built a strategy betting on a government (in this case, European) rescue should be a chilling reminder of how far the world has not come since the darkest days of the financial crisis. Europe is trying to bail out Greece, in part, to protect its big banks.
In fact, the financial system, on both sides of the Atlantic, is still dominated by too-big-to-fail banks and regulations intended to ensure that their collapse won’t bring down the financial system are still a work in progress.
It is progress that in Europe, at least, creditors are being asked to bear some of the burden. But the need for bailouts is clearly still very much with us.
Another reason that Mr. Corzine’s bets may have gone so wrong — and another echo of the financial crisis — is that American regulators did not rein in the firm. MF Global was highly leveraged, with liabilities at the end of June of $44.4 billion and equity of only $1.4 billion.
In a research note published on Tuesday, Steve Blitz, a senior economist with ITG Investment Research, pointed out that MF Global was one of the firms designated by the Federal Reserve as a primary dealer in United States Treasuries. After the havoc of high leverage in the financial crisis, how is it possible that the Fed allowed MF Global to operate with so much leverage? Are the Fed, the Securities and Exchange Commission and other relevant regulators fully monitoring the risks at other broker dealers?
Meanwhile, self-regulation is clearly not the answer. The Wall Street Journal reported on Monday that the Financial Industry Regulatory Authority, a self-regulatory agency for brokerages, recently warned MF Global to shore up its capital to cushion against its increasingly risky positions. Whatever the firm did, if anything, clearly wasn’t enough.
In the end, the American people are lucky that MF Global was small enough to fail, its riskiness and recklessness absorbed by the bankruptcy process. But with the devastating damage from the crisis still hobbling the economy, relying on luck is not enough.
MF Global is a warning that the system is still far too vulnerable and the work of regulatory reform far from finished.
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FBI Reportedly Investigates MF Global, Jon Corzine's Future Uncertain
ABC ^ | 11/2/2011 | Susanna Kim
The story of MF Global's downward spiral, with former New Jersey governor Jon Corzine at the helm, is only starting to unfold, though some may say it was a predictable one.
With news that federal regulators, including the FBI, are investigating whether the broker-dealer is missing customer money, the company's failure may have larger repercussions to the financial system.
"I think it will add to the complexity of the situation and will add to more skeletons," Jody Lurie, corporate credit analyst at Janney Capital Markets, said. "This won't be as much of an open-and-shut case as we would expect."
On Tuesday, the Associated Press reported that the FBI is expected to investigate whether customer money is missing and if criminal activity was involved.
The Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) said on Monday that MF Global "reported possible deficiencies in customer futures segregated accounts held at the firm."
The two agencies determined that a bankruptcy proceeding led by the Securities Investor Protection Corporation (SIPC), as opposed to a bankrutpcy trustee, "would be the safest and most prudent course of action to protect customer accounts and assets."
(Excerpt) Read more at abcnews.go.com ...
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$600 million missing at MF Global (Where's Occupy Wall Street? Company run by Liberal Democrat)
cnn money ^ | 11/2/2011 | James O'Toole
Posted on November 2, 2011 9:33:27 PM EDT by tobyhill
A government regulator said in court Wednesday that roughly $600 million is missing from the books of bankrupt brokerage MF Global.
The firm, headed by former New Jersey governor and Goldman Sachs CEO Jon Corzine, filed for Chapter 11 protection on Monday following a panic from investors over its holdings of risky European debt.
"MF Global has discovered a shortfall of segregated accounts of around $600 million," a lawyer with the Commodity Futures Trading Commission said, adding that this is a preliminary figure that could increase.
This past weekend, executives at MF Global had been scrambling to sell the firm to Interactive Brokers, but the missing money scuttled the deal and forced it into bankruptcy, regulators said this week.
(Excerpt) Read more at money.cnn.com ...
Bump for team Kenya.
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put him in prison, homeslice.
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put him in prison, homeslice.
Sorry , he is too busy bundling cash for Obama. Remember - he is Obamas wall street guy right now and potential next treasury sec after MaoBama.
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MF Global Client Theft Estimate Doubled To $1.5 Billion?
Zero Hedge ^ | Tyler Durden
Posted on November 2, 2011 4:55:22 PM EDT by tcrlaf
Even as we hear rumblings that the MF fire is spreading, and the associated auditor of the now infamous former Primary Dealer is about to get in serious hot water, the bankrupt company itself continues to dig itself an ever deeper grave.
Because according to a just filed motion by the MF Global liquidating trustee, it seems that the gross criminal activity by the company may have been orders of magnitude bigger than anyone has expected.
To wit: "As a result of the apparent segregation violations and the suspension of clearing privileges, more than 150,000 customer accounts essentially were frozen on October 31, 2011, of which more than 50,000 accounts were regulated commodities customer accounts. The CME estimates that MFGI’s current segregated funds requirement is approximately $5.45 billion.
Moreover, the total amount of MFGI customer segregated funds on deposit at the CME is approximately $2.5 billion, and the clearing-level segregated collateral is approximately $1.5 billion or approximately 60 percent of the MFGI customer segregated funds on deposit at the CME."
(Excerpt) Read more at zerohedge.com ...
Wow. Corzine the liberal scion turns put to be another madoff.
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Obama was set to make him tres sec after geithner and corzine is now obamas liason on wall street for donations.
Ad you far left fools have the balls to attackcain?
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Bump for straw. Hey straw do you like the fact that obamao and corzine are "one voice". ?????
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Source: Reuters
WASHINGTON, Nov 2 (Reuters) - President Barack Obama's re-election campaign would return the donations made by embattled MF Global chief Jon Corzine if he were charged with any wrongdoing, a campaign official said on Wednesday.
Corzine, who is at the center of a storm over the securities firm's bankruptcy this week, was a major fundraiser for Obama. The former Goldman Sachs chief has raised or "bundled" donations of at least $500,000 so far for Obama's 2012 re-election effort.
Corzine himself has donated the maximum that an individual can give for a presidential campaign, according to campaign finance records. He held a lavish $35,800-a-head fund-raising dinner for Obama at his home in April.
A campaign official, speaking on condition of anonymity, said Obama's campaign would return the donations from Corzine as an individual if civil or criminal charges are brought against him.
Read more: http://www.reuters.com/article/2011/11/02/mfglobal-fund...
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November 2, 2011 12:27pm
20 Comments
Jon Corzine for Treasury Secretary! byDavid Freddoso Online Opinion Editor
Follow on Twitter:@freddoso
With the sinking of MF Global, where he now serves as CEO, former New Jersey Gov. Jon Corzine, D, could well be remembered as the man who bet on a government bailout one time too many. (Don't forget, Corzine was CEO at Goldman Sachs during the infamous bailout of Mexican bonds in 1995, engineered from within the Clinton White House by his predecessor.)
But don't just think of Corzine as a bad governor who drove a multi-billion-dollar firm to bankruptcy. The Weekly Standard's Mark Hemingway reminded me on Twitter today of this lovely November 2008 essay on Corzine as Obama's prospective Treasury Secretary, in which The Nation's John Nichols called Corzine "change we can believe in." Note also the praise at the bottom from former SEIU boss Andy Stern:
Everyone is excited about the fact that President-elect Barack Obama is talking with New York Senator Hillary Clinton about the prospect that she might serve as Secretary of State. But the big news from inside the transition process is the speculation that New Jersey Governor Jon Corzine might be selected for the essential economic position of Secretary of the Treasury....
...Corzine is not your typical Goldman-Sachs man.
After he was elected to the US Senate from New Jersey in 2000, Corzine searched out Minnesota Senator Paul Wellstone. The new senator from New Jersey informed the iconic liberal Democrat -- who was often at odds with his own party's leadership -- that he hoped they could work together on social and economic justice issues.
Corzine, a very wealthy former Goldman-Sachs chairman and co-CEO, might have seemed like an unlikely economic populist. But he soon made the senator from Minnesota a believer. Indeed, when we were sitting in his office one afternoon in 2001, talking about the senators who could be counted on to stand up to the new Bush-Cheney administration, Wellstone said, "Put Corzine of the list. He's going to surprise people.
During his five years in the Senate, Corzine did, indeed, side with Wellstone (until the Minnesotan's death in 2002) and with the left wing of the Democratic Senate Caucus -- sponsoring the "Start Healthy, Stay Healthy Act" to expand access to health care for children and pregnant women and a proposal to lower the marginal tax bracket from 15 percent to 10 percent for low-income wage earners. Corzine worked with Wellstone and Massachusetts Senator Ted Kennedy to defend Pell Grants and entitlement programs that were under attack, he criticized schemes to privatize Social Security and played a critical role in passing legislation designed to crack down on corporate malfeasance.
The senator from New Jersey promoted regulation of major industries (chemical and nuclear power, in particular) and he was one of the few senators to question blank-check giveaways to the airline industry in aftermath of the September 11, 2001, attacks.
Corzine also voted against authorizing Bush to take the country to war with Iraq and got a whole lot of other issues -- not all of them, but a whole lot -- right.
It is rare that someone with Corzine's record even gets on a list of prospective Treasury officials.
Corzine may or may not be the perfect pick. But the fact that he is being considered is one more sign that a change -- maybe even a "change we can believe in" -- is coming to Washington.
After all, when was the last time that a potential nominee for the Treasury post was being talked up by the head of the Service Employees International Union. On Thursday, Andy Stern told reporters he thought the governor's strong economic credentials and government experience make Corzine an appealing prospect. Stern's right.
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Contentions Corzine: Poster Child for Liberal Hypocrisy
Jonathan S. Tobin | @tobincommentary
11.01.2011 - 5:45 PM
As Seth noted earlier, the collapse of former New Jersey Governor and Goldman Sachs co-chairman Jon Corzine’s latest financial venture is the end of his hopes for higher office. But it is more than that. The discovery that $700 million of the money investors put into his MF Global firm is missing is a shocking scandal that highlights liberal hypocrisy as much as it does the excesses of the world of Wall Street high finance.
Corzine is not just another high-flying investment ace that was shot down by bad bets — in this case by his firm’s decision to put customers’ money in European sovereign debt. Such figures are generally associated with the fat cats whom popular culture tells us are all Republicans who finance conservative causes. Corzine was, after all, not just a Democrat but one of the party’s bright hopes just a few years ago and a leading liberal advocate for bigger government as well as, in a touch dripping with irony, for reining in excessive compensation for Wall Street executives. More than just a stereotypical “limousine liberal,” Corzine was a major figure in mobilizing financial support for the Democratic Party, a role that he continued to play even after losing his try for re-election in 2009 to Chris Christie. The White House will try to distance itself from Corzine, but the disgrace of one of his leading bundlers will make it a little harder for Obama to spend the next year wandering the countryside complaining about Republican responsibility for Wall Street greed and income inequality.
Seasoned observers of both politics and finance already understood that scoundrels could be found in every political camp. But that’s not the song being sung by the president and his Democratic choir. Obama has sought to piggyback on the Occupy Wall Street protests and their inchoate demands for punishing the wealthy. The president has been inveighing against the avarice of financiers as well as the willingness of Republicans to oppose efforts to confiscate more of their income in the name of a loosely defined belief in lessening income inequality. But the fact that one of the leading pillars of his campaign appears to be guilty of all the sins generally associated by Democrats with the 2008 financial meltdown that helped elect Obama in the first place ought to cut the legs out from under the president’s populist pose.
The fact that Corzine’s financial skullduggery is linked with the impending default of Greece is also telling. Corzine’s reign of error in New Jersey was marked by fiscal profligacy that mirrors the breakdown in Athens and forced his successor to go to war with state unions in order to start the state back down the road to solvency. Like the Greek politicians who complain about the impact of austerity policies needed to pay for past spending sprees, Democrats now indulge in demagoguery aimed at portraying their opponents as the party of the rich while opposing genuine reform of government spending habits. That they do so while raking in contributions from Wall Street malefactors like Corzine just adds to their hypocrisy.
When Obama speaks about the political influence of a corrupt Wall Street establishment that victimized investors and ordinary Americans while reaping profits he will want us to associate those vices with his opponents. But Corzine proves that this self-serving sermon would be better served up to his own wealthy supporters than anyone else.
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MF Global Under SEC Investigation Over Prior Statements On European Bets
First Posted: 11/3/11 08:35 AM ET Updated: 11/3/11 08:35 AM ET
http://www.huffingtonpost.com/2011/11/03/mf-globals-claims-over-european-debt-sec-investigation_n_1073388.html
The Securities and Exchange Commission (SEC) has launched a probe into whether MF Global Holdings made misleading statements about the $6.3 billion bets that sank the company, the Wall Street Journal said, citing people familiar with the matter.
MF Global, the futures brokerage which collapsed on Monday after risky trades on European debt, faces a shortfall of $633 million in customer funds, according to an estimate from CME Group Inc.
A source familiar with the matter told Reuters that regulators are still not sure where the money is, and why they can't find it.
MF Global maintains that any shortfall is the result of money stuck at banks that handled its trades or unintentional bookkeeping problems, the Journal said, citing people familiar with the matter.
The securities firm's trades are usually cleared on the same day. But as MF Global's situation became more dire, the banks held on to the funds, one of the people told the WSJ.
MF Global and the SEC could not immediately be reached for comment by Reuters outside regular U.S. business hours.
(Reporting by Sakthi Prasad in Bangalore; Editing by Muralikumar Anantharaman)
Copyright 2011 Thomson Reuters. Click for Restrictions.
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George Soros Trader Involved in Bankrupt Firm Tied to Obama
Accuracy in Media ^ | November 2, 2011 | Cliff Kincaid
A major figure in liberal Democrat Jon Corzine’s bankrupt firm, MF Global, used to work for hedge fund operator and Democratic Party financial patron George Soros. MF Global Holdings Ltd., now under FBI investigation, had hired Munir Javeri as Global Head of Trading.
“He is no longer with the company,” a spokesman for the firm informed Accuracy in Media. The spokesman added that he had no contact information for Munir Javeri and couldn’t say when he left the firm. He had been Vice-President of Soros Fund Management from 2003-2004 and was given an “inducement award” in the form of stock options after being hired by MF Global.
Hundreds of millions of dollars are reportedly now missing from the firm’s customer accounts. The firm is said to have experienced major losses because of questionable investments in European bonds.
..The bankruptcy of MF Global is being described as the eighth-largest corporate bankruptcy in U.S. history. Steve Schaefer of Forbes says it is “the largest bankruptcy (by assets) of a public company this year, and by a huge margin.”
..To make matters worse, MF Global had close financial ties to the Federal Reserve. The firm was designated a primary dealer by the Federal Reserve Bank of New York, which means that it participated directly in Treasury auctions and provided analysis and market intelligence to trading desks at the New York Federal Reserve.
At his news conference today, however, Fed Chairman Ben Bernanke insisted the Fed was not the supervisor of MF Global and had never given the firm a “seal of approval.”
But a “seal of approval” for Corzine had come from Obama.
The New York Times reports that President Obama’s first major re-election fund-raiser in New York was held at Corzine’s Manhattan home, with tickets going for $35,800 each
(Excerpt) Read more at aim.org ...
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Its difficult reading this stuff sometimes. Makes your blood boil. If only the public paid attention to these kinds of things in numbers taht mattered.
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http://mafiatoday.com/bonanno-family/jon-corzines-drive... /
November 2, 2011
EX-N.J. GOV. Jon Corzine’s personal chauffeur was the victim of a Mafia shakedown in the meat locker of a Brooklyn butcher shop, the Daily News has learned.
Bonanno crime soldier Michael (Mike the Butcher) Virtuoso pleaded guilty last month to extortion in connection with a loan that had a 250% interest rate.
He is referred to only as “John Doe” in the Brooklyn Federal Court indictment .
The driver got a $1,000 loan from Virtuoso and made the payments in the amounts of $50 and $100 in the rear office of the mobster’s Graham Ave. Meats & Deli in Williamsburg — and on one occasion “inside a walk-in freezer,” according to court papers.
“Although I did not threaten him, it was understood that harm could be used if he did not pay,” Virtuoso told Judge Sandra Townes.
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MF Global Client Theft Estimate Doubled To $1.5 Billion?
Zero Hedge ^ | Tyler Durden
Even as we hear rumblings that the MF fire is spreading, and the associated auditor of the now infamous former Primary Dealer is about to get in serious hot water, the bankrupt company itself continues to dig itself an ever deeper grave.
Because according to a just filed motion by the MF Global liquidating trustee, it seems that the gross criminal activity by the company may have been orders of magnitude bigger than anyone has expected.
To wit: "As a result of the apparent segregation violations and the suspension of clearing privileges, more than 150,000 customer accounts essentially were frozen on October 31, 2011, of which more than 50,000 accounts were regulated commodities customer accounts. The CME estimates that MFGI’s current segregated funds requirement is approximately $5.45 billion.
Moreover, the total amount of MFGI customer segregated funds on deposit at the CME is approximately $2.5 billion, and the clearing-level segregated collateral is approximately $1.5 billion or approximately 60 percent of the MFGI customer segregated funds on deposit at the CME."
(Excerpt) Read more at zerohedge.com ...
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Regulator gave $10k to NJ Dems as Corzine ran (for Governor of Jew Jersey in 2005)
Yahoo ^ | 11/3/11 | Daniel Wagner - AP
WASHINGTON (AP) -- The regulator overseeing the investigation of Jon Corzine's collapsed securities firm, MF Global, gave $10,000 to the New Jersey Democratic Party in 2005 as Corzine ran for governor of that state.
Gary Gensler, chairman of the Commodity Futures Trading Commission, and Corzine had worked together for 18 years at Goldman Sachs Group Inc. and later collaborated to pass a law to combat corporate fraud.
Election records show Gensler gave the money in August 2005. Corzine, a Democrat, was elected governor later that year.
MF Global filed for bankruptcy protection on Monday. Gensler and other regulators are trying to find out what happened to hundreds of millions in clients' money that went missing last week.
Gensler's long history with Corzine poses an apparent conflict of interest that could taint the probe's findings, experts say.
"The appearance of a conflict is there, there's no question," said Jay Lorsch, a professor at Harvard Business School. "It might be wise for Mr. Gensler to recuse himself from this particular investigation."
Gensler rose to become Goldman's co-head of finance before leaving in 1997. Corzine left Goldman in 1999, after serving as chairman and CEO.
(Excerpt) Read more at finance.yahoo.com ...
________________________ ________________________ ___
Guess who appointed Gensler to that post? ? ? ? ?
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RNC calls on Obama to return Corzine contributions (Obama now connected to the missing $600 million)
cnn ^ | 11/3/2011 | Paul Steinhauser
Posted on November 3, 2011 6:42:09 PM EDT by tobyhill
The head of the Republican National Committee is calling on President Barack Obama to return half a million dollars in fundraising Jon Corzine raised on the president's behalf, now that the former one term New Jersey governor's bankrupt brokerage firm is under investigation by the federal authorities.
"In light of the FBI Investigation into Jon Corzine's company, President Obama should immediately return the $500,000 that Corzine raised on his behalf," said RNC Chairman Reince Priebus, in a statement released Thursday.
A government regulator said in court Wednesday that roughly $600 million is missing from the books of bankrupt brokerage MF Global, which is headed by Corzine, a former Goldman Sachs CEO and former Democratic governor of New Jersey and U.S. senator. Corzine's firm filed for Chapter 11 protection on Monday following a panic from investors over its holdings of risky European debt.
The FBI and federal prosecutors are now investigating how some $600 million of MF Global customers' money went missing, CNN learned Tuesday from sources close to the probe.
According to federal election records, employees of the company contributed more than $100,000 to the president's re-election campaign and the Democratic National Committee. And this year Corzine has contributed the maximum legal limit to both the Obama campaign ($5,000) and the DNC ($30,800).
(Excerpt) Read more at politicalticker.blogs.cn n.com ...
Lmfao.
Obama = Bernie madoff.
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Yet again, House reaffirms ‘In God We Trust’
Co-worker convicted in Lululemon killing
Influence Industry
Dan Eggen & T.W. Farnam
MF Global ties awkward for Obama campaign
View Photo Gallery — President Obama’s reelection campaign and DNC together raised $70 million in the third quarter of 2011.
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By T.W. Farnam, Published: November 2
The bankrupt financial company MF Global, now under federal investigation for possibly misusing clients’ money, is one of the top sources of contributions for President Obama’s reelection, complicating the campaign’s effort to turn public anger at Wall Street into a political advantage.
Employees of the company have given $108,650 to Obama’s campaign and the Democratic National Committee, according to federal records. MF Global’s chairman and chief executive, former New Jersey governor Jon Corzine, has raised at least $500,000 for the campaign and the DNC as a “bundler,” or volunteer fundraiser.
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Mitt Romney is the only other major presidential candidate who reports receiving money from an MF Global employee, listing a $2,500 check from a company trader based in Stamford, Conn.
MF Global declared bankruptcy Monday, becoming the first U.S. victim of the European debt crisis. The FBI plans to conduct a preliminary probe into reports that hundreds of millions of dollars are missing from client accounts, federal law enforcement officials said.
The situation shows the political risk of relying on big money bundlers who can collect checks from friends and colleagues. Trouble can often rub off on candidates when they’re getting help from powerful public figures. Obama’s campaign has released a list of 350 bundlers who have raised at least $50,000, including 40 who have raised more than $500,000 each.
MF Global did not return a request for comment. A company attorney said in a recent bankruptcy court hearing that the company was not aware of any missing funds.
Obama campaign spokesman Ben LaBolt said in a statement that the president has been tougher on Wall Street companies than the Republican opposition.
“While the president passed Wall Street reform to combat risky financial deals that put our entire economy at risk,” LaBolt said, “Mitt Romney and the Republican candidates would let Wall Street write its own rules again no matter what the consequences for middle class families.”
The Obama campaign said it would return contributions from any MF Global employees, including Corzine, if they are charged with crimes related to the company’s collapse.
A Romney spokeswoman declined to comment.
MF Global recently made a bond sale with an unusual clause, saying the interest rate on the bonds would rise 1 percent if Corzine ended up being appointed to a post in the Obama administration. There has been speculation that he could be in line for Treasury secretary if the president is reelected.
The president has voiced support for recent protests against the financial industry and his campaign aides have said they plan to use the Occupy Wall Street movement to help build momentum for his reelection.
“I think it expresses the frustrations that the American people feel,” Obama said in a news conference last month. “The protesters are giving voice to a more broad based frustration with how our financial system works…. The American people understand that not everybody’s been following the rules, that Wall Street is an example of that.”
Obama held his first New York fundraiser for the reelection campaign at Corzine’s home on Fifth Avenue in Manhattan, overlooking Central Park. Guests gave the maximum $35,800 donation to Obama and the DNC.
Obama’s links to financial companies don’t end with MF Global. The president has raised $15.6 million from the financial industry for his reelection effort and the DNC, according to a Washington Post analysis.
The third-largest source of cash for Obama is Chicago-based Chopper Trading, which employs a controversial high-frequency trading technique. The firm’s chief executive, Raj Fernando, held a fundraiser at his home with Vice President Biden and has raised at least $200,000 for the campaign and the DNC.
A federal study of the 2010 “flash crash,” when the stock market briefly lost $1 trillion in value only to recover shortly thereafter, placed the blame squarely on high-frequency trading technologies like those employed by Chopper. Other studies have cited high-frequency trading, which now accounts for more than half of all trades, as contributing to stock market volatility. A company spokesman did not return a request for comment, but defenders of the industry dispute those studies.
Obama has raised $48,572 from Credit Suisse employees. The bank’s Swiss parent company is under investigation for allegedly helping Americans avoid taxes with offshore accounts. The bank is at top funder of Romney’s campaign, with workers donating $180,250.
Hope n change.
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http://www.washingtonpost.com/politics/mf-global-ties-awkward-for-obama-campaign/2011/11/02/gIQA9w5ogM_allComments.html?ctab=all_&#comments
Not awkward at all, this is who Obama is!!!!
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Regulators dig in at MF Global in money pursuit
Yahoo ^ | 11/3/11 | Sarah N. Lynch and Christopher Doering - Reuters
Posted on November 4, 2011 12:00:26 AM EDT by NormsRevenge
WASHINGTON (Reuters) - U.S. regulators are launching a broad review into the business practices of failed futures brokerage MF Global Holdings Ltd as their hunt continues for over $600 million in missing customer money.
Round-the-clock shifts for examiners have become the norm as they sort through the collapse of the firm headed by former New Jersey Governor Jon Corzine. MF Global filed for bankruptcy on Monday after risky bets on European debt scared away clients and investors.
"We will look at every aspect of how the firm conducted business," Mary Schapiro, chairman of the U.S. Securities and Exchange Commission, told Reuters regarding the agency's review. She declined to discuss any potential action that the SEC's enforcement division may take.
Investor fears over European sovereign debt risks facing other investment houses hit shares of Jefferies Group Inc hard early on Thursday until it issued a statement saying it had no meaningful net exposure.
...
Both SEC's Schapiro and Gary Gensler, chairman of the Commodity Futures Trading Commission, painted a picture on Thursday of close teamwork between regulators to get to the bottom of why the firm collapsed and track down the funds.
...
So far, the long hours have failed to turn up much in terms of money -- and that may not be an accident. CME Group, .. has said that MF Global appeared to have made "transfers of customer segregated funds in a manner that may have been designed to avoid detection.
...
Brokerages like MF Global are required to keep their customers' money segregated from the firms' own cash. Questions about whether this took place at MF Global has attracted the Federal Bureau of Investigation in addition to regulators.
Neither MF Global nor Chief Executive Jon Corzine, who once ran Goldman Sachs, have been accused of any wrongdoing.
(Excerpt) Read more at news.yahoo.com ...
One voice!
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Corzine Hires Criminal Attorney
The New York Times ^ | November 4, 2011 | PETER LATTMAN
Posted on November 4, 2011 8:10:28 AM EDT by Second Amendment First
Jon S. Corzine has hired Andrew J. Levander, a leading white-collar criminal defense lawyer, according to three people briefed on the matter, as the former New Jersey governor deals with fallout from the collapse of MF Global, the brokerage firm he has run since last year.
Federal authorities including the Federal Bureau of Investigation and the Securities and Exchange Commission are investigating the $630 million in missing customer funds at MF Global.
Mr. Levander could not be reached as he is out of the country, according to his assistant. He did not return an email seeking comment. Daniel O’Donnell, the chief executive of his law firm, Dechert, declined to comment.
In Mr. Levander, the chairman of Dechert, Mr. Corzine has retained a New York lawyer who is no stranger to defending prominent Wall Street executives. He represented John Thain, the former chief executive at Merrill Lynch, in a government inquiry related his role in Merrill’s sale to Bank of America. Ezra Merkin, a hedge fund manager who invested with Bernard L. Madoff, hired Mr. Levander to defend him against a New York attorney general’s lawsuit connected to the Madoff case.
“Andy is not just smart but has a deep understanding of the investigative process,” said Steven M. Cohen, a defense lawyer at Zuckerman Spaeder in New York and the former top aide to Governor Andrew M. Cuomo. “He understands how cases are built and therefore how they are defended.”
(Excerpt) Read more at dealbook.nytimes.com ...
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'Yet again, House reaffirms ‘In God We Trust’'
great use of our tax dollars.
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'Yet again, House reaffirms ‘In God We Trust’'
great use of our tax dollars.
Yawn. More spin from you.
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Yawn. More spin from you.
i've said corzine is a crook that belong in jail. this is zero defense of him.
this is more "okay, dems suck - but why the hell can't you repubs stop wasting time with symbolic bills to be dicks?"
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i've said corzine is a crook that belong in jail. this is zero defense of him.
this is more "okay, dems suck - but why the hell can't you repubs stop wasting time with symbolic bills to be dicks?"
You mean like the 15 billios Reid REFUSES to even allow a vote on in the Senate you spinning idiot?
Is there any dumb leftist talking point you dont jizz to?
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You mean like the 15 billios Reid REFUSES to even allow a vote on in the Senate you spinning idiot?
Is there any dumb leftist talking point you dont jizz to?
i believe i said reid belongs in prison for wasting our tax dollars. remember?
you have a weak memory. what gives?
and the name calling - what's up with that? have a civil conversation bro.
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i believe i said reid belongs in prison for wasting our tax dollars. remember?
you have a weak memory. what gives?
and the name calling - what's up with that? have a civil conversation bro.
Hard to do with someone who claims to be a libertarian yet said in 2009 we needed a "lib agenda to
re-build the middle class", says he supports RP yet disagrees with almost everything he stands for, trashes Cain for lying yet sat silent about obamas lies from 2007-2010, and on and on and on.
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Hard to do with someone who claims to be a libertarian yet said in 2009 we needed a "lib agenda to
re-build the middle class", says he supports RP yet disagrees with almost everything he stands for, trashes Cain for lying yet sat silent about obamas lies from 2007-2010, and on and on and on.
we're at a point where it's so personal with you - that 240 irritates you so much - that debate isn't even something to do anymore?
it's just instant insult/namecalling reaction to anything I post? because of my beliefs 5 years ago?
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we're at a point where it's so personal with you - that 240 irritates you so much - that debate isn't even something to do anymore?
it's just instant insult/namecalling reaction to anything I post? because of my beliefs 5 years ago?
Because 99% of your posts are pure spin and dishonest bs. I mean really? WTF does Boehner have to do w Corzine?
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http://www.cnbc.com/id/45147239
Booooom ! ! ! ! !
Eat shit Betty Blanco! ! ! !
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As Regulators Pressed Changes, Corzine Pushed Back, and Won
Months before MF Global teetered on the brink, federal regulators were seeking to rein in the types of risky trades that contributed to the firm’s collapse. But they faced opposition from an influential opponent: Jon S. Corzine, the head of the then little-known brokerage firm.
As a former United States senator and a former governor of New Jersey, as well as the leader of Goldman Sachs in the 1990s, Mr. Corzine carried significant weight in the worlds of Washington and Wall Street. While other financial firms employed teams of lobbyists to fight the new regulation, MF Global’s chief executive in meetings over the last year personally pressed regulators to halt their plans.
The agency proposing the rule, the Commodity Futures Trading Commission, relented. Wall Street, which has been working to curb many financial regulations, won another battle.
Yet with MF Global in bankruptcy and regulators scrambling to find $630 million in missing customer funds, Mr. Corzine’s effort may come back to haunt him.
http://dealbook.nytimes.com/2011/11/03/as-regulators-pr...
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;)
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Insight: MF Global clients face day of reckoning as margins call
Reuters ^ | 11/3/2011 | Jeanine Prezioso and Karl Plume
Call it the mother of all margin calls: Up to 50,000 former customers of bankrupt broker MF Global must find some $1 billion in additional collateral almost overnight, or be forced out of their trades.
Come Friday, with the mass transfer of commodity trading accounts from Jon Corzine's fallen firm to six of its erstwhile rivals, margin clerks will be wrapping up a reckoning of how much additional money is needed to cover millions of positions. Clients who can't quickly meet their margin will have to liquidate, making for a tumultuous day's trade.
A court order to move the trades late on Wednesday brought only marginal relief to clients who have been essentially frozen out of their funds and positions since Friday. While accounts will now be transferred more quickly, only 60 percent of the collateral will be moved to the new brokers.
That figure may yet fluctuate as brokers scramble on Thursday to work out the details, but the net result is still likely to mean that customers will be forced to post a hefty sum within a day or two. Many of MF Global's mainly small-scale clients may fail, triggering a mass liquidation of both short and long positions that may roil markets.
(Excerpt) Read more at reuters.com ...
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;)
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RNC calls on Obama to return Corzine contributions
cnn ^ | 11/3/2011 | Paul Steinhauser
The head of the Republican National Committee is calling on President Barack Obama to return half a million dollars in fundraising Jon Corzine raised on the president's behalf, now that the former one term New Jersey governor's bankrupt brokerage firm is under investigation by the federal authorities.
"In light of the FBI Investigation into Jon Corzine's company, President Obama should immediately return the $500,000 that Corzine raised on his behalf," said RNC Chairman Reince Priebus, in a statement released Thursday.
A government regulator said in court Wednesday that roughly $600 million is missing from the books of bankrupt brokerage MF Global, which is headed by Corzine, a former Goldman Sachs CEO and former Democratic governor of New Jersey and U.S. senator. Corzine's firm filed for Chapter 11 protection on Monday following a panic from investors over its holdings of risky European debt.
The FBI and federal prosecutors are now investigating how some $600 million of MF Global customers' money went missing, CNN learned Tuesday from sources close to the probe.
According to federal election records, employees of the company contributed more than $100,000 to the president's re-election campaign and the Democratic National Committee. And this year Corzine has contributed the maximum legal limit to both the Obama campaign ($5,000) and the DNC ($30,800).
(Excerpt) Read more at politicalticker.blogs.cn n.com ...
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Corzine Out as Search for MF Global Funds Continues
New York Times ^ | Nov. 4, 2011 | BEN PROTESS and MICHAEL J. DE LA MERCED
Posted on November 5, 2011 9:22:37 AM EDT by libstripper
The missing customer money at MF Global is still missing.
On Friday, funds from the bankrupt brokerage firm suddenly surfaced at JPMorgan Chase. Washington and Wall Street, for a moment, were hopeful it was the money they had been searching for all week.
But then, just as quickly, nearly everyone agreed it was not the missing money, and the hunt was on again.
(Excerpt) Read more at dealbook.nytimes.com ...
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I hope Corzine goes to jail bigtime.....I can't see how he can get out of this unless there is bigtime proof that someone was trading without his knowledge
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From To Email Sent!You have successfully emailed the post.
UPDATE: Bonuses For MF Global US And UK Employees Processed Days Before Bankruptcy
Lisa Du | Nov. 8, 2011, 3:55 PM | 1,577 | 8
MF Global Trader: 'I'm Bewildered'$6.3 Billion, 19, 230, And More: Check Out The Numbers That Brought MF Global DownThree Of Corzine's Goldman Colleagues Are Getting Screwed After MF Global's Bankruptcy
ORIGINAL POST (UPDATES BELOW): Employees of MF Global's British offices may have received their quarterly bonuses last Monday, just hours before MF Global filed for chapter 11 bankruptcy in New York, The Telegraph is reporting.
It's an interesting development - because last Monday, Robert Preston at the BBC reported very early in the morning that London employees had been sent home. Maybe they were sent home with their bonuses?
It is unclear whether US employees had also received bonuses, though this seems rather unlikely from MF Global's chaotic last hours that Monday morning.
MF Global's bankruptcy was announced at around 10:30 a.m. EST last Monday - that was 2:30 p.m. London time. (England is usually five hours ahead of the US - but their daylight savings time occurs one week before the US, so London was only four hours ahead last Monday)
This news could add fire to the anger brewing among MF Global clients - some 50,000 accounts - who're still trying to get their money back after having their money frozen last week when the firm filed for bankruptcy. Yesterday, it was reported that over half of MF Global's 1.6 million open positions for UK clients still remained open as KPMG, the administrator for the UK operation, scrambled to close them.
Also - that $600 million of customer funds is still missing.
UPDATE: The Wall Street Journal is reporting that bonuses were also paid out to US employees, but the payments in both the UK and the US were part of a routine procedure and processed days before the company went bankrupt.
Please follow Clusterstock on Twitter and Facebook.
Follow Lisa Du on Twitter.
Read more: http://www.businessinsider.com/mf-globals-uk-staff-received-bonuses-hours-before-bankruptcy-2011-11#ixzz1d9RNZl97
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Nightmare For MF Global Customers: They Really Might Not Get Their Money Back
Julia La Roche | Nov. 9, 2011, 8:15 AM | 0 | A A A
This is certainly going to make a lot of people angry.
MF Global commodity customers hoping to retrieve their funds may actually have to share some of their cash with other clients unless the missing $600 million is found, Bloomberg reported.
After MF Global filed for bankruptcy it was revealed the broker-dealer was missing $600 million.
At first it was reported the missing funds were in an account at JPMorgan. However, JPMorgan denied those claims.
The latest clue to finding the unaccounted funds emerged yesterday when Reuters reported that federal investigators searching for the missing funds are looking at Chicago-based Harris Bank as a starting point.
So unless the missing funds are recovered, the broker-dealer's customers are probably going to have to take a haircut meaning they will not get 100 cents for every dollar.
Read more: http://www.businessinsider.com/mf-global-customers-money-2011-11#ixzz1dDJXt6vE
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Trustee Fires 1,000 Workers at MF Global's Broker Dealer
Written By Matt Egan
Published November 11, 2011
FOXBusiness
Just two weeks after MF Global filed for Chapter 11 bankruptcy, the trustee overseeing the failed futures brokerage disclosed plans on Friday to fire all of its broker dealer employees as it liquidates the business.
In a statement, the court-appointed trustee, James Giddens, said the broker dealer’s 1,066 employees were notified on Friday that their employment has been terminated, effective immediately.
However, the MF Global trustee said the liquidation and terminations don't apply to the parent company, MF Global Holdings, which listed 2,847 employees as of September.
The terminated broker dealer workers’ salaries will be paid through November 15 and between 150 and 200 former employees will be hired back to assist in the “wind down” of MF Global’s businesses and processing of bankruptcy claims.
The trustee also said it is “exploring ways to immediately vacate” MF Global’s midtown Manhattan offices to allow for the rental of smaller and less expensive offices for the trustee staff. The company’s Chicago office will continued to be rented, the trustee said, but for a “limited” amount of time as the business there is wound down.
The trustee said the firing of employees and closing of operations “is a necessary part of the court-ordered liquidation of MF Global and is consistent with the trustee’s obligations…to preserve assets.”
MF Global filed for the eighth-largest bankruptcy in U.S. history on October 31 after suffering a run on the bank caused by massive bets totaling $6.4 billion on risky euro-zone sovereign bonds. Led by former Goldman Sachs (GS: 101.96, +2.46, +2.47%) CEO Jon Corzine, MF Global has been criticized for being overleveraged and making undiversified bets.
A last-minute sale that would presumably have saved many of MF Global’s jobs was scuttled by the emergence of more than $600 million in missing client funds. Federal regulators have since opened an investigation into the missing funds and Corzine, the former governor of New Jersey, resigned and retained legal counsel.
The trustee said about 17,000 customer account positions and approximately $1.5 billion in customer funds have been transferred to other future commodities merchants so far. It also said it has retained Ernst & Young forensic accounts.
Read more: http://www.foxbusiness.com/industries/2011/11/11/trustee-fires-1000-workers-at-mf-globals-broker-dealer/#ixzz1dQJXqQCH
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http://www.zerohedge.com/news/mf-global-liquidation-everyone-gone
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An Unmitigated Disaster [MF Global and the failure of the CME]
Silver Seek ^ | November 10, 2011 | Ted Butler
Posted on November 12, 2011 3:46:08 PM EST by DeaconBenjamin
Oftentimes, the significance of truly historic events is not fully appreciated at the time they occur. I think we are at one of those times with the bankruptcy of MF Global. There’s no question that the news and overall circumstances of the demise of the large commodities brokerage is widely known, but the significance of the event is not yet fully understood.
The disaster is that for the first time in modern financial history, the main guarantee of the clearinghouse system has completely failed its most important constituent – the customer base. The underlying promise to every participant in the futures market is that your money and open positions are safe from theft and default. This is the very glue that holds the future market together, namely, that all market participants can depend upon strict regulation and oversight to safeguard against fraud and theft. That’s what has made the US organized futures exchange system the envy of the world. Until now. For more than a week, almost all of the 50,000 commodity customers of MF Global are in limbo as to the access and status of their funds on deposit and open positions. This is unprecedented and beyond bad. For these 50,000 customers, it’s the equivalent of discovering your bank just went out of business and there is no assurance all your funds will be returned. (In the interest of full disclosure, my background is in futures, having started as a commodity broker at Merrill Lynch some 40 years ago. But I have not traded futures for years and am no way personally involved in the MF Global mess; I’m strictly an outside observer and independent analyst).
Let me cut to the chase here and pinpoint the real problem – the CME Group. Yes, I would agree that the immediate cause of the MF Global bankruptcy was MF Global itself; but what turned it into a disaster of unprecedented proportions was the CME Group. The CME Group was the front line regulator for MFG, responsible for auditing and insuring the safety of customer funds and for guaranteeing those funds in a worst case scenario. The CME failed at every turn. Not only did its auditing fail miserably, the CME failed to step up to the plate to safeguard customer funds after it was discovered that $600 million was missing. This is like a case of paying premiums for years on an insurance policy only to be denied coverage when presenting a claim for the first time. I know that the federal commodity regulator, the CFTC, has been negligent in the case of MF Global as well, but that does not mitigate the CME’s failures.
Of the twin failures by the CME in the MF Global bankruptcy, clearly of more significance is its failure to stand up and guarantee that all MFG customers would be immediately made whole by the clearinghouse system run by the CME. The clearinghouse system, a consortium of financial firms whose collective finances stand behind every trade, has been the main backstop to all futures trading for many decades. It was widely understood by all market participants that if a clearing member failed, all the other clearing members and the exchange itself would step in to guarantee customer funds and prevent contract default. The CME boasts on its web site that anywhere from $8 billion to $100 billion in protection is available in the event of a clearing member failure. If it was telling the truth, it would seem $600 million should be no problem.
Instead, we all have a very big problem, thanks to the CME Group. Our financial and credit systems are based upon trust and belief. The word credit itself comes from the Latin word “credere” or to believe. What the CME Group has done by not immediately guaranteeing all MF Global customers and positions is to undermine belief in the futures market clearing system. So important is this issue that I am at a loss to explain how the CFTC hasn’t yet mandated that the CME do the right thing. And I have been somewhat dumbfounded that the analytical community and media haven’t been all over this, but there was an article in today’s NY Times that discusses the CME’s failures for the first time. In addition, there was a well-written article on the Internet that did describe the problem and the CME’s role. Please pay particular attention to the comments submitted on both articles.
Worst of all, even MF Global customers who held no open futures positions and only cash and unencumbered assets, like registered warehouse receipts for silver, gold and other commodities, have found those assets under the control of the bankruptcy trustee. If you do own warehouse receipts on silver or other commodities that are tied up in the MF Global bankruptcy, you must run, not walk, to a securities attorney to secure your legal rights to your property. This is not a matter of what is right or wrong, as the unauthorized appropriation of private property is never correct.
What needs to be done is that the CME Group must be stripped of any regulatory powers it has. There is a clear conflict of interest in having a for-profit entity set its own rules and regulations. The CME Group spends all of its energies encouraging artificial trading schemes, like High Frequency Trading, designed to increase trading fee revenue and not on market integrity and customer protection. The CME Group has just demonstrated to the world its contempt with its failure to stand behind MF Global customers even though it promised to do so beforehand.
One other small bonus that has emerged from this disaster is that the event has revealed as a lie all the nonsense that CME leaders have publicly proclaimed about the integrity of their markets. For the past few years, the smug and arrogant leaders of the CME have testified publicly before Congress and the media about how the exchange’s clearinghouse system withstood and avoided the failures of the non-clearinghouse financial system as typified by AIG. CME officials trumpeted the advantages of it being a Self-Regulatory Organization (SRO), quite capable of handling regulatory matters without the need for further government regulation. Unfortunately, even high officials of the CFTC were apparently sucked in by the appearance of financial strength and integrity portrayed by the CME’s clearinghouse system of guarantees and the wisdom of letting it continue to regulate itself. That has now all been shown to be a lie.
The CFTC must immediately force or persuade the CME Group to do what it has promised and should have done on its own, namely, immediately guarantee that all customers of MF Global are made whole. Let the lawyers battle it out as to who is ultimately liable after all the customers have been made whole. That the CFTC hasn’t done this yet is bizarre. If the Commission delays longer what is now clearly a primary failure at the CME will soon become primarily a CFTC problem. We need adult supervision right now. Clearly the CME Group is not up to the task. If the CFTC doesn’t take over responsibility and force the CME to do the right thing, God help us all.
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Staffers furious after 1,000 fired from Corzine's bankrupt firm MF Global
NEW YORK POST ^ | November 12, 2011 | KAJA WHITEHOUSE, ANTONIO ANTENUCCI
Posted on November 12, 2011 3:45:47 PM EST by george76
Screw you, Jon Corzine.
All 1,066 employees of the bankrupt trading house MF Global got the boot yesterday in a pre-holiday massacre that left workers without severance and benefits -- and they blamed only one man for their woes.
...
If Corzine were around, DiMatteo told Bloomberg News, “I would punch him in the face.”
...
Bankruptcy trustee James Giddens is still trying to find about $600 million in missing customer money. Forensic probers are trying to account for the brokerage firm’s assets, and federal agencies are investigating whether MF mixed company funds with money missing from customer accounts.
(Excerpt) Read more at nypost.com ...
This is obamas top fundraiser and next inbline for treasury sec!
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MF GLOBAL FALLOUT: 'I Will Never Do Business In The United States Of America Again'
Joe Weisenthal | Nov. 11, 2011, 2:20 PM | 9,269 | 57
A A A
inShare
8
Image: Business InsiderThis is a letter sent to bankruptcy judge Martin Glenn, who is handling the MF Global bankruptcy.
The money line is bolded below.
--------------
In Re: MF Global, Inc.
Case No. 11-02790 (MG) (SIPA)
Re: The reputation of the United States
Dear Judge Glenn:
Our firm is a registered introducing broker with the CFTC. I have written to you previously on behalf of our customers.
Here is a comment this morning from one of our former customers in Europe:
“I will never do business in the United States of America again.”
The system to protect futures accounts is broken. And the whole world knows it.
What started as a failure of one FCM that quickly gave a black eye to the CFTC and especially the CME has now made our United States of America a very bad joke to commodity futures traders all over the world.
The problem this morning is not just excess margin equity.
The problem this morning is the reputation of the United States of America.
Thank you very much for your time and for listening.
Very Truly Yours,
HL Camp Futures
Original Signed by HL Camp
HL Camp
Proprietor
HLC:me
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Tiny rule change sinks MF Global
Gulf News ^ | Nov. 17, 2011 | William D. Cohan
Posted on November 16, 2011 10:57:10 PM EST by JustTheTruth
Laurie: R. Ferber has quite a resume. She is currently the general counsel of MF Global Holdings, the New York-based futures and commodities brokerage that filed for bankruptcy on October 31, listing some $40 billion in liabilities.
Before joining MF Global in 2009, a year or so before Jon Corzine became its chairman and chief executive officer, Ferber was general counsel and chief regulatory officer at the International Derivatives Clearing Group LLC, which clears interest-rate swaps. Before that, she spent more than 20 years at Goldman Sachs Group, where first she was general counsel for J. Aron & Company, a commodities business that Goldman Sachs bought in 1981, and then was the co-general counsel of Goldman's principal business, known as FICC — for Fixed Income, Currency and Commodities — when J. Aron was merged into the rest of Goldman's fixed-income division.
But at the moment, her greatest significance may be as a long-time advocate for revisions to a little-known and vastly under-appreciated Commodities Futures Trading Commission rule called Regulation 1.25.
Before 2000, the rule permitted futures brokers to take money from their customers' accounts and invest it in a number of approved securities limited to "obligations of the United States and obligations fully guaranteed as to principal and interest by the United States [US government securities], and general obligations of any State or of any political subdivision thereof [municipal securities]." That is, relatively safe securities with high liquidity.
The banks, however, pushed the CFTC to expand the investment options that would allow firms to practice "internal repo". In this scheme, money is taken from customer accounts and invested short-term in a variety of securities, with the futures brokers reaping the not-insignificant financial rewards from their customers' money.
And, lo and behold, such efforts were successful. In December 2000, the CFTC agreed to amend Regulation 1.25 "to permit investments in general obligations issued by any enterprise sponsored by the United States, bank certificates of deposit, commercial paper, corporate notes, general obligations of a sovereign nation, and interests in money market mutual funds" — in other words, riskier investments that could make more money for Wall Street.
Then, in February 2004 and May 2005, Regulation 1.25 was further amended and refined to the liking of Ferber and the banks. In the end, the door was opened for firms such as MF Global to do internal repos of customers' deposits and invest the funds in the "general obligations of a sovereign nation".
This practice, of course, may well be the centrepiece of the MF Global disaster. We now know that Corzine — who was CEO of Goldman Sachs from 1994 to 1999 — bet $6.3 billion on the distressed long-term bonds of countries such as Italy and Spain, although it's unclear if clients' funds were used. Bart Chilton, a CFTC commissioner, told Bloomberg News on November 10 the loss to customers' accounts may have resulted from a "massive hide-and-seek ploy". While the CFTC's and the Federal Bureau of Investigation's probes into the missing money continue, it isn't too soon to pass judgment on how the too-close relationship between Wall Street and Washington can lead to seemingly innocuous changes in the obscure rules governing the securities industry, which, in turn, can result in financial disaster.
This danger is especially relevant now as hundreds of new regulations are being written that will govern the way Wall Street operates in post-crisis, post-Dodd-Frank world. Needless to say, Wall Street's lobbyists are looking to place a heavy hand on the regulators' keyboards and make sure the new rules are rewritten the way they want them to be.
Now, MF Global is gone, along with thousands of jobs and billions of dollars in creditor money — to say nothing of the still missing $593 million.
"I believe we have to tighten how investor funds can be used," Gary Gensler, the CFTC chairman and another former Goldman Sachs executive, said on November 7. "They're segregated and must be segregated at every minute of every day. And then if they are invested, they should be invested with good collateral with outside parties." That's the right idea; I hope this time the commission means it.
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The Entire System Has Been Utterly Destroyed By The MF Global Collapse
Zerohedge ^ | 11-17-11 | Tyler Durden
Presenting The First MF Global Casualty
BCM Has Ceased Operations (source) Posted by Ann Barnhardt - November 17, AD 2011 10:27 AM MST
Dear Clients, Industry Colleagues and Friends of Barnhardt Capital Management,
It is with regret and unflinching moral certainty that I announce that Barnhardt Capital Management has ceased operations. After six years of operating as an independent introducing brokerage, and eight years of employment as a broker before that, I found myself, this morning, for the first time since I was 20 years old, watching the futures and options markets open not as a participant, but as a mere spectator.
The reason for my decision to pull the plug was excruciatingly simple: I could no longer tell my clients that their monies and positions were safe in the futures and options markets – because they are not. And this goes not just for my clients, but for every futures and options account in the United States.
The entire system has been utterly destroyed by the MF Global collapse. Given this sad reality, I could not in good conscience take one more step as a commodity broker, soliciting trades that I knew were unsafe or holding funds that I knew to be in jeopardy.
(Excerpt) Read more at zerohedge.com ...
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"The Entire System Has Been Utterly Destroyed By The MF Global Collapse" - Presenting The First MF Global Casualty
Submitted by Tyler Durden on 11/17/2011 14:19 -0500
Barack Obama Bond Cronyism MF Global Reality
Presented without comment, merely to confirm that the market as we know it, no longer exists.
BCM Has Ceased Operations (source)
Posted by Ann Barnhardt - November 17, AD 2011 10:27 AM MST
Dear Clients, Industry Colleagues and Friends of Barnhardt Capital Management,
It is with regret and unflinching moral certainty that I announce that Barnhardt Capital Management has ceased operations. After six years of operating as an independent introducing brokerage, and eight years of employment as a broker before that, I found myself, this morning, for the first time since I was 20 years old, watching the futures and options markets open not as a participant, but as a mere spectator.
The reason for my decision to pull the plug was excruciatingly simple: I could no longer tell my clients that their monies and positions were safe in the futures and options markets – because they are not. And this goes not just for my clients, but for every futures and options account in the United States. The entire system has been utterly destroyed by the MF Global collapse. Given this sad reality, I could not in good conscience take one more step as a commodity broker, soliciting trades that I knew were unsafe or holding funds that I knew to be in jeopardy.
The futures markets are very highly-leveraged and thus require an exceptionally firm base upon which to function. That base was the sacrosanct segregation of customer funds from clearing firm capital, with additional emergency financial backing provided by the exchanges themselves. Up until a few weeks ago, that base existed, and had worked flawlessly. Firms came and went, with some imploding in spectacular fashion. Whenever a firm failure happened, the customer funds were intact and the exchanges would step in to backstop everything and keep customers 100% liquid – even as their clearing firm collapsed and was quickly replaced by another firm within the system.
Everything changed just a few short weeks ago. A firm, led by a crony of the Obama regime, stole all of the non-margined cash held by customers of his firm. Let’s not sugar-coat this or make this crime seem “complex” and “abstract” by drowning ourselves in six-dollar words and uber-technical jargon. Jon Corzine STOLE the customer cash at MF Global. Knowing Jon Corzine, and knowing the abject lawlessness and contempt for humanity of the Marxist Obama regime and its cronies, this is not really a surprise. What was a surprise was the reaction of the exchanges and regulators. Their reaction has been to take a bad situation and make it orders of magnitude worse. Specifically, they froze customers out of their accounts WHILE THE MARKETS CONTINUED TO TRADE, refusing to even allow them to liquidate. This is unfathomable. The risk exposure precedent that has been set is completely intolerable and has destroyed the entire industry paradigm. No informed person can continue to engage these markets, and no moral person can continue to broker or facilitate customer engagement in what is now a massive game of Russian Roulette.
I have learned over the last week that MF Global is almost certainly the mere tip of the iceberg. There is massive industry-wide exposure to European sovereign junk debt. While other firms may not be as heavily leveraged as Corzine had MFG leveraged, and it is now thought that MFG’s leverage may have been in excess of 100:1, they are still suicidally leveraged and will likely stand massive, unmeetable collateral calls in the coming days and weeks as Europe inevitably collapses. I now suspect that the reason the Chicago Mercantile Exchange did not immediately step in to backstop the MFG implosion was because they knew and know that if they backstopped MFG, they would then be expected to backstop all of the other firms in the system when the failures began to cascade – and there simply isn’t that much money in the entire system. In short, the problem is a SYSTEMIC problem, not merely isolated to one firm.
Perhaps the most ominous dynamic that I have yet heard of in regards to this mess is that of the risk of potential CLAWBACK actions. For those who do not know, “clawback” is the process by which a bankruptcy trustee is legally permitted to re-seize assets that left a bankrupt entity in the time period immediately preceding the entity’s collapse. So, using the MF Global customers as an example, any funds that were withdrawn from MFG accounts in the run-up to the collapse, either because of suspicions the customer may have had about MFG from, say, watching the company’s bond yields rise sharply, or from purely organic day-to-day withdrawls, the bankruptcy trustee COULD initiate action to “clawback” those funds. As a hedge broker, this makes my blood run cold. Generally, as the markets move in favor of a hedge position and equity builds in a client’s account, that excess equity is sent back to the customer who then uses that equity to offset cash market transactions OR to pay down a revolving line of credit. Even the possibility that a customer could be penalized and additionally raped AGAIN via a clawback action after already having their customer funds stolen is simply villainous. While there has been no open indication of clawback actions being initiated by the MF Global trustee, I have been told that it is a possibility.
And so, to the very unpleasant crux of the matter. The futures and options markets are no longer viable. It is my recommendation that ALL customers withdraw from all of the markets as soon as possible so that they have the best chance of protecting themselves and their equity. The system is no longer functioning with integrity and is suicidally risk-laden. The rule of law is non-existent, instead replaced with godless, criminal political cronyism.
Remember, derivatives contracts are NOT NECESSARY in the commodities markets. The cash commodity itself is the underlying reality and is not dependent on the futures or options markets. Many people seem to have gotten that backwards over the past decades. From Abel the animal husbandman up until the year 1964, there were no cattle futures contracts at all, and no options contracts until 1984, and yet the cash cattle markets got along just fine.
Finally, I will not, under any circumstance, consider reforming and re-opening Barnhardt Capital Management, or any other iteration of a brokerage business, until Barack Obama has been removed from office AND the government of the United States has been sufficiently reformed and repopulated so as to engender my total and complete confidence in the government, its adherence to and enforcement of the rule of law, and in its competent and just regulatory oversight of any commodities markets that may reform. So long as the government remains criminal, it would serve no purpose whatsoever to attempt to rebuild the futures industry or my firm, because in a lawless environment, the same thievery and fraud would simply happen again, and the criminals would go unpunished, sheltered by the criminal oligarchy.
To my clients, who literally TO THE MAN agreed with my assessment of the situation, and were relieved to be exiting the markets, and many whom I now suspect stayed in the markets as long as they did only out of personal loyalty to me, I can only say thank you for the honor and pleasure of serving you over these last years, with some of my clients having been with me for over twelve years. I will continue to blog at Barnhardt.biz, which will be subtly re-skinned soon, and will continue my cattle marketing consultation business. I will still be here in the office, answering my phones, with the same phone numbers. Alas, my retirement came a few years earlier than I had anticipated, but there was no possible way to continue given the inevitability of the collapse of the global financial markets, the overthrow of our government, and the resulting collapse in the rule of law.
As for me, I can only echo the words of David:
“This is the Lord’s doing; and it is wonderful in our eyes.”
With Best Regards-
Ann Barnhardt
Average:
http://www.zerohedge.com/news/entire-system-has-been-utterly-destroyed-mf-global-collapse-presenting-first-mf-global-casualty
ROT IN FUCKING HELL OBAMA -AND EVERY POFS WHO VOTED FOR YOU!
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HA!!!..Obama is president...and will be for another five years...you're already in HELL!!!! :D
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HA!!!..Obama is president...and will be for another five years...you're already in HELL!!!! :D
Obama is collapsing this nation day by day - and just because he is chocolate you agree w him.
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Obama is collapsing this nation day by day - and just because he is chocolate you agree w him.
I agree with him because he has mostly done a good job.....he has had some stumbles no question but not as bad as you guys try to present it.....you always descend into this type of talk....thats like me saying you only agree with Palin and trump because they are white...you make no sense
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Barnhardt Capital BCM Has Ceased Operations (Part 1)
Her own website ^ | Nov 17, 2011 | Ann Barnhardt
Posted on November 17, 2011 3:06:57 PM EST by Attention Surplus Disorder
BCM Has Ceased Operations (Part 1)
Posted by Ann Barnhardt - November 17, AD 2011 10:27 AM MST
Dear Clients, Industry Colleagues and Friends of Barnhardt Capital Management,
It is with regret and unflinching moral certainty that I announce that Barnhardt Capital Management has ceased operations. After six years of operating as an independent introducing brokerage, and eight years of employment as a broker before that, I found myself, this morning, for the first time since I was 20 years old, watching the futures and options markets open not as a participant, but as a mere spectator.
The reason for my decision to pull the plug was excruciatingly simple: I could no longer tell my clients that their monies and positions were safe in the futures and options markets – because they are not. And this goes not just for my clients, but for every futures and options account in the United States. The entire system has been utterly destroyed by the MF Global collapse. Given this sad reality, I could not in good conscience take one more step as a commodity broker, soliciting trades that I knew were unsafe or holding funds that I knew to be in jeopardy.
The futures markets are very highly-leveraged and thus require an exceptionally firm base upon which to function. That base was the sacrosanct segregation of customer funds from clearing firm capital, with additional emergency financial backing provided by the exchanges themselves. Up until a few weeks ago, that base existed, and had worked flawlessly. Firms came and went, with some imploding in spectacular fashion. Whenever a firm failure happened, the customer funds were intact and the exchanges would step in to backstop everything and keep customers 100% liquid – even as their clearing firm collapsed and was quickly replaced by another firm within the system.
Everything changed just a few short weeks ago. A firm, led by a crony of the Obama regime, stole all of the non-margined cash held by customers of his firm. Let’s not sugar-coat this or make this crime seem “complex” and “abstract” by drowning ourselves in six-dollar words and uber-technical jargon. Jon Corzine STOLE the customer cash at MF Global. Knowing Jon Corzine, and knowing the abject lawlessness and contempt for humanity of the Marxist Obama regime and its cronies, this is not really a surprise. What was a surprise was the reaction of the exchanges and regulators. Their reaction has been to take a bad situation and make it orders of magnitude worse. Specifically, they froze customers out of their accounts WHILE THE MARKETS CONTINUED TO TRADE, refusing to even allow them to liquidate. This is unfathomable. The risk exposure precedent that has been set is completely intolerable and has destroyed the entire industry paradigm. No informed person can continue to engage these markets, and no moral person can continue to broker or facilitate customer engagement in what is now a massive game of Russian Roulette.
I have learned over the last week that MF Global is almost certainly the mere tip of the iceberg. There is massive industry-wide exposure to European sovereign junk debt. While other firms may not be as heavily leveraged as Corzine had MFG leveraged, and it is now thought that MFG’s leverage may have been in excess of 100:1, they are still suicidally leveraged and will likely stand massive, unmeetable collateral calls in the coming days and weeks as Europe inevitably collapses. I now suspect that the reason the Chicago Mercantile Exchange did not immediately step in to backstop the MFG implosion was because they knew and know that if they backstopped MFG, they would then be expected to backstop all of the other firms in the system when the failures began to cascade – and there simply isn’t that much money in the entire system. In short, the problem is a SYSTEMIC problem, not merely isolated to one firm.
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These guys want Corzine in prison
By JOHN CRUDELE
Last Updated: 12:36 AM, November 17, 2011
Posted: 12:36 AM, November 17, 2011
Jon Corzine should go to jail.
Even though I’m the guy typing those words, I am not the one saying them. I met the other day with four commodities traders whose lives have been upended by the alleged misdeeds of Corzine’s firm, MF Global.
The former New Jersey governor, US senator and head of Goldman Sachs certainly has an impressive resume. The four traders would like felon added to the list.
“We aren’t rich guys,” says one of the traders I’ll call Moe because he, like the other three, didn’t want to be identified because they were afraid of reprisals from the CME Group, which handles the accounts of traders of the commodities firms.
Moe contacted me because he wanted the public to understand it wasn’t the Wall Street elite that got hurt by Corzine’s MF Global.
“We are just trying to eke out a living,” he added. Moe had to draw $75,000 from a line of credit on his house to stay in business after his firm’s money — which also happened to be his personal dough — disappeared into MF’s rat hole.
Two other traders I’ll call Meeny and Miney are middle-age guys, still paying for their kids’ college educations. Eeny, the fourth trader, is in his mid-30s and has two small children.
All of them were stung hard — not only because their money at MF disappeared overnight but also because they couldn’t even get on the floor of the exchange to conduct business.
Their IDs had been revoked.
Up to 30,000 of MF’s customers worldwide are said to be unable to access money they had in so-called “segregated” accounts at the company. And with the bankruptcy court and a trustee now involved, that money could be locked up for a long time.
“I want to see jail. I want to see one of these guys go to prison,” Moe said, with Eeny, Meeny and Miney nodding in agreement. “They destroyed lives because they wanted to make money. No more fines and Club Fed. People need to pay” with jail time.
Corzine, who took over the sleepy brokerage firm after being defeated for a second term in the statehouse, is the one they hold most responsible.
The traders are now passing around the hat — collecting $500 from anyone willing to pay so they can hire a lawyer. Meeny explained that this wasn’t money lent to MF; it was just on deposit there. So he shouldn’t be considered a “creditor” by the court.
“It galls me that we have to pay money to get our own money back,” Meeny added.
If you remember the children’s rhyme, Eeny, Meeny, Miney, Moe — usually chanted as part of a game of tag — someone is eventually “it.”
Right now the traders are “it.” But they’d like Corzine and his pals tagged pretty soon.
john.crudele@nypost.com
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Read more: http://www.nypost.com/p/news/business/these_guys_want_corzine_in_prison_jt4tlvhpSjeeE4yfLBZRlO#ixzz1e4GhKmhv
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The case of the missing $600 million at MF Global gets murkier
HotAir ^ | November 18,2011 | ED MORRISSEY
Posted on November 18, 2011 3:44:12 PM EST by Hojczyk
Nearly three weeks after $600 million in customer money went missing from MF Global, the search for the cash has been hampered by the bankrupt brokerage firm’s sloppy record-keeping, an increasingly worrisome situation that has left regulators frustrated and customers in the lurch.
The round-the-clock effort has consumed an alphabet soup of federal regulators and criminal investigators, with lawyers sleeping at open desks and each agency commandeering a different conference room at the firm’s offices. But as authorities comb through some 38,000 customer accounts, they are growing more suspicious about what went wrong at MF Global, the commodities powerhouse once run by Jon S. Corzine, the former Democratic governor of New Jersey.
“The lost money is sort of like a lost child,” said Bart Chilton, a Democratic member of the Commodity Futures Trading Commission. “Every day that passes is more and more concerning, and there’s less and less hope.”
MF Global improperly diverted customers’ cash for its own use in the days before its bankruptcy, an act that regulators believe may help explain why $600 million of customer funds remains missing, people briefed on the investigation say.
(Excerpt) Read more at hotair.com ...
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Insight: Anger rises as MF Global clients see billions frozen
IB Times ^ | 11/20/11 | David Sheppard and Jeanine Prezioso
Posted on November 20, 2011 6:58:47 PM EST by Libloather
Insight: Anger rises as MF Global clients see billions frozen
By David Sheppard and Jeanine Prezioso
November 20, 2011 3:28 PM EST
**SNIP**
MOUNTING ANGER
While customers were initially outraged at the thought that MF Global had tapped into their segregated funds, that rage has increasingly been targeted at the trustee and the bankruptcy court for the handling of an unprecedented collapse.
"The (bankruptcy) Trustee is creating new protected classes within a pool of segregated customer assets," said John Roe, a spokesman for the Commodity Customer Coalition, a group lobbying for the speedy release of funds representing 7,000 former MF Global customers.
"(This) has dangerous implications in future Future Commission Merchant (FCM) bankruptcies. How is this in the interests of customers, FCMs, bankruptcy creditors or the system as a whole?"
It is still unclear what happened to the $600 million of customer funds unaccounted for since MF Global's Chapter 11 filing, and whether MF Global might have illegally mixed customer funds with its own or used them for its own proprietary trading.
The Commodity Futures Trading Commission, federal prosecutors and the Securities and Exchange Commission are all investigating the bankruptcy.
(Excerpt) Read more at ibtimes.com ...
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Anger mounts as MF Global clients see $3 billion still stuck
Reuters/YahooNews ^ | 11/21/11 | David Sheppard and Jeanine Prezioso
Three weeks after MF Global's collapsed, furious former customers are still fighting for access to billions of dollars as they question why as much as two-thirds of their money is still stuck.
While authorities have touted the fact that they are returning 60 percent of the collateral and cash that had been frozen in the wake of the broker's October 31 bankruptcy, a closer look shows that in fact only about 40 percent of customers' total funds have been authorized for release so far.
The remainder, more than $3 billion, ostensibly remains on hand to cover a shortfall originally estimated by MF Global to regulators at just $600 million.
(Excerpt) Read more at ca.news.yahoo.com ...
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November 21, 2011, 11:26 amLegal/Regulatory
MF Global Trustee Says Shortfall Could Exceed $1.2 Billion
By MICHAEL J. DE LA MERCED
http://dealbook.nytimes.com/2011/11/21/mf-global-trustee-estimates-shortfall-could-be-more-than-1-2-billion
The court-appointed trustee overseeing the liquidation of MF Global’s brokerage now estimates that the shortfall in the firm’s customer funds could be more than $1.2 billion, double previous estimates.
The trustee, James W. Giddens, said in a statement on Monday that his office was continuing to search for the missing funds, in conjunction with regulators and the Justice Department. He added that the numbers were preliminary and could change.
•MF Global Is Said to Have Used Customer Cash Improperly (Nov. 17)
.Mr. Giddens’s office did not elaborate on what might have happened to the money, though investigators have been focusing on the possibility that MF Global improperly used customer money to cover trading losses in the days before its bankruptcy filing.
Separately, Mr. Giddens’s office said it had already distributed about $1.5 billion in customer funds meant to support trading positions, and that $520 million in additional cash would soon be paid out.
The trustee’s office still controls about $1.6 billion in customer funds, most of which could be distributed early next month.
Beyond the shortfall in customer accounts, Mr. Giddens’s office said it did not have access to money that was held in foreign subsidiaries of MF Global, which are under the control of bankruptcy trustees in those countries.
“While the trustee will pursue them vigorously, it has been his experience that recovery of these foreign assets may take more time,” the office said.
Wow!!!!
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Corzine's MF Global Pushed Regulators to Use Client Funds
The Sunlight Foundation | Nov 4, 2011 10:55 AM EDT
http://www.huffingtonpost.com/mobileweb/1969/12/31/_n_1074231.html
This post was written by Nancy Watzman, consultant for the Sunlight Foundation.
Late last year MF Global -- the failed investment firm headed by Democratic heavyweight Jon S. Corzine that can't account for as much as $900 million of its clients' money -- urged a federal agency to allow futures firms to invest funds from their customer segregated accounts in foreign sovereign debt.
In a December 2010 comment letter to the Commodities Future Trading Commission (CFTC), MF Global, along with another firm, Newedge, argued that the agency's proposal to disallow such investments "is unnecessary, and will eliminate a liquid, secure, profitable and necessary category of investment... no foreign country that actually defaulted on its debt resulted in any [futures commission merchant] being unable to return funds to its customers upon request."
MF Global filed for bankruptcy earlier this week after its exposure to the European debt crisis pushed it over the edge of solvency. The firm is also now the subject of investigations by several federal agencies, including the Federal Bureau of Investigation (FBI), which among other things are investigating whether or not the firm misused customer money.
In its proposed rule, the CFTC had noted "recent global financial volatility" caused the agency to reevaluate its policy of allowing certain investments in foreign sovereign debt. "The financial crisis has highlighted the fact that certain countries' debt can exceed an acceptable level of risk." The agency extended the comment period for this regulation through June and has not yet issued a final rule.
MF Global to CFTC: proposal to restrict investment in foreign sovereign debt is "unnecessary, and will eliminate a liquid, secure, profitable and necessary category of investment."
MF Global's comment letter is just one of numerous communications the firm had with federal agencies over implementation of the Dodd-Frank financial reform law, according to meeting logs maintained by federal agencies combined and posted on the Sunlight Foundation's Dodd-Frank Meeting Log tracker.
Corzine, a leading Wall Street fundraiser for President Barack Obama's 2012 reelection campaign, met personally with agency staff on at least four occasions, one of those a conference call that included CFTC chairman Gary Gensler. Overall, MF Global staff, including Corzine, met with agency officials ten times, all but one of those meetings with the CFTC.
Among the topics discussed at these meetings were Dodd-Frank provisions on "segregation and bankruptcy," which seek to protect customer funds in the event of a bankruptcy.
Corzine, a former Goldman Sachs CEO, spent $62 million of his own money to win election to the U.S. Senate from New Jersey. He resigned his seat to run for governor of New Jersey in 2005. In 2009, he lost his reelection bid to Republican Chris Christie, and became CEO of MF Global in 2010. While he is not registered as a lobbyist for the firm, the federal agency meeting logs show he personally was active in pressing the company's interests before agencies.
A former Corzine staffer, Steven Adamske, currently serves as the CFTC public affairs director.
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CNBC's Kaminsky Goes Off: MF Global Is Having A Devastating Impact On Psychology
Lisa Du | Nov. 21, 2011, 12:26 PM | 3,110 | 23
CNBC's Gary Kaminsky had some insight on the fallout of MF Global's bankruptcy this morning.
Kaminsky said the MF Global story is much bigger than the clients' missing funds. (Kaminsky spoke right before news broke that the client fund shortfall might be doubled at $1.2 billion.)
The biggest impact of MF Global is the long-term effect on investor confidence, which no one should underestimate, Kaminsky said. "When you cannot get access to your money, when you're frozen from getting to your account—if you have t-bills or some form of cash equivalent—that is the most significant and dangerous thing for anybody that knows how it is working with clients, whether institutional or retail," he said.
In addition, the fact that no one has been arrested or charged is also a serious issue following the discovery of the missing funds and the wrong-doing MF Global had engaged in.
Here's the video of Kaminsky:
Read more: http://www.businessinsider.com/cnbc-mf-globals-impact-2011-11#ixzz1eN2Ix1TQ
GREAT FUCKING JOB OBAMA/HOLDER/CORZINE!!!!
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MF Global trustee says $1.2 billion missing
http://www.nypost.com/p/news/business/mf_global_trustee_says_billion_missing_DKzWJV99kv7gz4Becqe5oO ^
Posted on Monday, November 21, 2011 3:23:57 PM by kcvl
The trustee overseeing the wind-down of MF Global Holdings Ltd.'s brokerage said Monday that more than $1.2 billion in customer funds could be missing from the failed firm, more than double the original estimate of missing cash.
Trustee James W. Giddens also added in a statement that he does not have access to funds beyond $1.6 billion already on hand and is "very close to exhausting the funds under his control."
Giddens said restoring customer accounts to 60 percent of their value -- a previously announced goal -- would require as much as $1.6 billion.
That next step still requires approval of the bankruptcy court and should occur in early December, Giddens said.
Regulators had previously said that approximately $600 million of funds in segregated accounts owned by former MF Global customers was unaccounted for at the time of the firm's bankruptcy filing on Oct. 31.
Giddens also said efforts to collect other funds from US depositories is continuing "around the clock," but the recovery is complicated by assets located in foreign depositories. Recovery of such assets could take more time, Giddens said.
Giddens has estimated that he is overseeing about 38,000 customer accounts, but that number -- and how much money those accounts contain -- has been fluid as the trustee has scrambled to sort through the brokerage's records.
To read more, go to MarketWatch.
(Excerpt) Read more at nypost.com ...
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Another liberal madoff.
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http://www.reuters.com/article/2011/11/22/us-mfglobal-futures-idUSTRE7AL06I20111122?feedType=RSS&feedName=topNews&rpc=22&sp=true
What a disaster. Corzine = liberal madoff.
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http://dealbook.nytimes.com/2011/11/21/mf-global-trustee-estimates-shortfall-could-be-more-than-1-2-billion
Incredible. This left wing liberal madoff should be executed.
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MF Global Revelations Keep Getting Worse
Janet Tavakoli, Tavakoli Structured Finance | Nov. 22, 2011, 8:06 AM | 953 | 12
When MF Global collapsed on October 21, it was the biggest financial firm to collapse since Lehman in September 2008. Then Chairman and CEO Jon Corzine is connected to the head of one of his key regulators, the Commodity Futures Trading Commission (CFTC), through his former protégé at Goldman Sachs, Gary Gensler. He also knows the Fed's William Dudley, a key member of the Fed's Open Market Committee, from their days at Goldman Sachs. The Fed approved MF Global's status as a primary dealer, a participant in the Fed's Open Market Operations, just before Jon Corzine took its helm and beached it on a reef called leveraged credit risk.
MF Global's officers admitted to federal regulators that before the collapse, the firm diverted cash from customers' accounts that were supposed to be segregated:
MF Global Holdings LTD. "violated requirements that it keep clients' collateral separate from its own accounts...Craig Donohue, CME Group's chief executive officer, said on a conference call with analysts today that MF Global isn't in compliance with the rules of the exchange and the Commodity Futures Trading Commission."
"MF Global Probe May Involve Hundreds of Millions in Funds," Bloomberg News - November 1, 2001 by Silia Brush and Matthew Leising
Cash in customers' accounts may be invested in allowable transactions, and MF was allowed to make extra revenue from the income. But what isn't allowed, and what MF Global apparently admitted to doing, is to commingle customers' money with its own and take money from customers' accounts to meet margin calls on MF Global's own allowable transactions. Even if all of the money is eventually clawed back and recovered, this remains an impermissible act. Moreover, full recovery--even if it is possible--is not the same as restitution. People have been denied access to their money, and businesses and reputations have been tarnished.
In layman's terms, you may buy a Rolls Royce with customers' excess cash, sell it at a profit, and pocket part of the profits. You may buy a Rolls Royce and try to resell it at a profit with your firm's cash. But you aren't allowed to take customers' money to make the car payments on your firm's Rolls Royce. If one engages in this impermissible activity, it becomes almost impossible to cover up if you have an accident driving your Rolls Royce.
Implausible Denial and an Ugly Surprise
On November 1, Kenneth Ziman, a lawyer for MF Global, relayed information from MF Global to U.S. Bankruptcy judge Martin Glenn in Manhattan: "To the best knowledge of management, there is no shortfall." If that sounded like a cover-up, it was, unless of course you prefer to believe that the "best knowledge" of management is actually no knowledge at all.
How long does it take to find more than $600 million to $1.2 billion of customers' money? MF Global's books seem so messed up that one person couldn't have created this chaos alone. A lot of people had to agree to throw away controls, standards, and procedures. I doubt this happened just in the final week or two before MF Global blew itself up.
"According to a U.S. official, MF Global admitted to federal regulators early Monday [October 31, 2011] that money was missing from customer accounts. MF Global acknowledged a shortfall in a phone call amid mounting questions from regulators as they went through the firm's books."
"MF Global's Collapse Draws FBI Interest," by Devlin Barrett, Scott Patterson, and Mike Spector, WSJ, November 2, 2011
The initial bankruptcy estimate was a shortfall of around $600 million. As of Monday November 21, MF Global's liquidating trustee believes the shortfall may be as much as $1.2 billion and possibly even more
"Repo-to-Maturity" is a "Total Return Swap-to-Maturity," A Type of Credit Derivative
If you call a total return swap-to-maturity a "repo-to-maturity," you are much less likely to freak out regulators. Many regulators still remember that Long Term Capital Management (LTCM) used total return swaps (among other things). Jon Corzine should remember, too, since he was closely involved with LTCM when he headed Goldman Sachs. In September of 2011, FINRA seemed to catch on that MF Global's transactions were riskier than it previously thought and asked for more capital against these trades.
Part of AIG's acute distress in 2008 was due to credit default swaps, another type of credit derivative, linked to the risk of shady overrated collateralized debt obligations. The basic problem was risk on fixed income assets that could only go down in value combined with lots of leverage.
I'd like to interject a side note. I understand that some pundits tried to say that the New York Times's Gretchen Morgenson was incorrect when she wrote MF Global was felled by derivative bets. She is correct. The pundits leaped to the conclusion that when she referred to credit derivatives and "swaps" that she meant credit default swaps, but she was referring to total return swaps, a type of credit derivative. (Later in the article she discussed a different topic, lack of transparency in credit default swaps, another type of credit derivative.)
MF Global's problematic trades were different from AIG's, but they were also derivatives, in fact, they were a form of credit derivative. The "repo-to-maturity" transaction was just a form over substance gimmick to disguise this fact. Specifically the transactions are total return swaps, a type of credit derivative, and the chief purpose of these transactions is leverage.
A total return swap-to-maturity includes a type of credit derivative. It allows you to sell a bond you own and get off-balance sheet financing in the form of a total return swap. Alternatively, you can get off-balance sheet financing on a bond with risk you want (but do not currently own so there is no need to sell anything) and take the risk of the default and price risk. (Price risk can be due both to credit risk and/or interest rate risk.) This is an off-balance sheet transaction in which the total return receiver (MF Global) has both the price risk and the default risk of the reference bonds. In this case, MF Global had the price risk and the default risk of $6.3 billion of the sovereign debt of Belgium, Italy, Spain, Portugal, and Ireland. As it happened, the price fluctuations of this debt in 2011 weren't due to a general rise in interest rates, they were due to a general increase in the perceived credit risk of this debt.
Repo transactions are on balance sheet transactions, but they don't draw as much scrutiny from regulators. There was just one little problem. MF Global wanted the off-balance sheet treatment of a derivative, a total return swap, but it didn't want to call it a total return swap, so it used smoke and mirrors. Even if MF Global engaged in a wash trade at the end (if there is no default in the meantime) to buy back the bonds, MF Global would receive par on the bonds from the maturing bonds. The repurchase trade at maturity is a formality with no real (or material) economic consequence.
In other words, the "repo-to-maturity" exploits a form-over-substance trick to avoid calling this transaction a total return swap. Accountants paid by the form-over-substance seekers and asleep-at-the-switch regulators will sometimes, at least temporarily, go along with this sort of relabeling.
The fact that MF Global was exposed in a leveraged way to default risk and liquidity risk because of these transactions and that the risk was- linked to European sovereign debt was disclosed in MF Global's 10K for the year ending March 31, 2011, a required financial statement filed with the SEC. The CFTC and other regulators had the information right under their noses, but it appears they didn't understand that they were looking at a leveraged credit derivative transaction that could lead to margin calls that MF Global would be unable to meet.
See Also: "Credit Derivatives and Leverage Sank Jon Corzine's MF Global," by Janet Tavkaoli, Huffington Post, November 4, 2011,
The result is that yet another large financial institution has been felled when it couldn't meet margin calls due to the credit risk of fixed income assets combined with high leverage in an off-balance sheet transaction. The ugliest part of this story, however, isn't that MF Global got in over its head, it's that the bankruptcy trustee estimates customers' money to the tune of $1.2 billion or more is still missing.
Probable Shortfalls Throughout 2011
MF Global reportedly employed 35:1 leverage--some reports are 40:1--against a portfolio comprised around 20% of European Sovereign risks including Belgium, Italy, Spain, Portugal, and Ireland. MF Global would have had several trading days in 2011 with moves of 5% to 10% on this sovereign risk. MF Global was so thinly capitalized that this trade alone could eat up half of its capital. Any of MF Global's other asset positions moving the same way in 2011's highly correlated markets would have put MF Global in a position of negative equity. From a risk management point of view, examiners have to consider the very strong possibility that MF Global had several negative equity days throughout 2011.
How did MF Global meet margin calls throughout 2011? It seems an investigation into money flows throughout 2011 is in order.
By the end of October, the combination of a $90 million August legal settlement against MF Global coming due, increased capital calls by FINRA, and margin hikes from counterparties worried about MF Global's credit made it impossible for MF Global to cover up its shortfall.
Regulators Waive Required Tests for Jon Corzine
Jon Corzine resigned as Chairman and CEO of MF Global on November 4, just days after the October 31 bankruptcy announcement. As a matter of corporate governance, holding the position of Chairman nad CEO meant that Corzine had a lot of concentrated power with little oversight. Many question the wisdom of a corporate structure that allows officers to hold this dual position. (Ken Lewis, the former Chairman and CEO that merged Bank of America into the poorhouse held this dual role, too. Lewis defended this practice at the Federal Reserve Bank of Chicago's Bank Structure Conference in 2003.) Corzine was the former governor of New Jersey and had been out of the active markets for twelve years. Prior to that, until 1999 he had been the CEO of Goldman Sachs.
The Financial Industry Regulatory Authority Inc. (FINRA) gave Jon Corzine a waiver from his Series 7 and Series 24 exams when he took the helm of MF Global in March 2010. The former is required for anyone involved in the investment banking or securities business including supervision, solicitation, or training of persons associated with MF Global, and that included Corzine. As an officer of MF Global the latter was required for Corzine, since he had been out of the business for around 12 years or more than six times the 2 year expiration date for reactivating these qualifications.
Jon Corzine to Credit Derivatives Head: Next Time "Double Up" (See note below)
The test waiver by regulators seems to be blatant cronyism, because Corzine not only hadn't been involved in the day-to-day markets for more than a decade, his responsibilities at MF Global included active decision making. The waiver wasn't justified. Corzine reportedly authored the strategy for the MF Global killing trades, and he also had authority on the trading floor.
Jon Corzine pushed traders to increase their risk. According to an MF Global employee, Corzine knelt down beside Jim Parascandola, head of credit derivatives trading, and told him that next time he should "double up" on his winning protection bets on brokerages. Traders loved Corzine, because he pushed them to increase risk. Now the traders aren't lifting offers, they're pounding the pavement.
Update: Subsequent to this report Jim Parascandola told me that he was never told to increase the size of any position, albeit his trades were profitable.
MF Global Becomes a Primary Dealer Unregulated by the Fed: How Did That Happen?
MF Global's financials were shaky ever since Man Group spun it off in 2005 and saddled it with a lot of debt. Yet MF Global was added to the Fed's list of 22 primary dealers in February 2011, just before former Goldman CEO Jon Corzine officially came on board. Primary dealers buy and sell U.S. treasuries at auction and are a counterparty to the Fed's Open Market operations.
William C. Dudley is the president and chief executive officer of the FRBNY. He is also vice chairman of the Federal Open Market Committee (FOMC) and VP of the Markets Group, which oversees open market and foreign exchange trading operations and provisions of account services to foreign central banks and manages the System Open Market Account. Dudley is a former partner at Goldman Sachs (1986-2007), and he was Goldman's chief economist.
David Kotok of Cumberland Advisors has raised important questions about the fact that the Fed has dropped its role of surveillance of primary dealers, and his commentaries are available here.
Besides trading treasuries, the big benefit to primary dealers is the perception that the Fed will provide funding to primary dealers during a systemic liquidity crunch. Just before Bear Stearns imploded, the Fed changed the rules so that non-U.S. banks, along with brokers that were primary dealers (as MF Global later became), were allowed to borrow through a program called a Term Securities Lending Facility (TSLF) to finance mortgage backed securities, asset backed securities, and more. TSLF's start date was too late to help Bear Stearns, and the program has now been discontinued, but the perception of a Fed safety net has precedence.
Why did the Fed award prestigious primary dealer status to a shaky operation like MF Global, an entity it does not regulate?
MF Global Stalled and Wrote Rubber Checks: Did Some Customers Get Better Treatment?
The week before the bankruptcy, when customers asked for excess cash from their accounts, MF Global stalled. According to a commodity fund manager I spoke with, MF Global's first stall tactic was to claim it lost wire transfer instructions. Instead of issuing an electronic check or sending an overnight check, MF Global sent paper checks via snail mail, including checks for hundreds of thousands of dollars. The checks bounced. After the checks bounced, the amounts were still debited from customer accounts, and no one at MF Global could or would reverse the check entries. The manager has had to intervene to get MF Global to correct this, and still hasn't gotten the entries corrected. Reuters's Matthew Goldstein reported more in "MF Global and the Rubber Check."
I thought that was bad enough, but on November 10 I was a guest on Stocks & Jocks, a Chicago radio show, when Jon Najarian said that a large broker he knows got a $400,000 electronic check from MF Global the Friday before that bankruptcy, and the check cleared. If that's accurate, MF Global treated some customers differently than others.
Tip-Offs for Some Customers?
In August, customers started pulling billions of dollars out of their segregated accounts with MF Global. It was the biggest outflow of funds since January 2009. The bankruptcy trustee may clawback transfers of funds from MF Global as it was teetering, because it is likely that employees within MF Global were well aware of the problems and tipped off key customers.
Yet Gary Gensler, head of the CFTC, did not investigate or begin transferring accounts out of MF Global before the bankruptcy, and that is unprecedented for the CFTC. Given that Gary Gensler was a protégé of Jon Corzine at Goldman Sachs, one should question why Gary Gensler didn't act and why he should be allowed to remain head of the CFTC.
CFTC's Gary Gensler Didn't Act
Gary Gensler, Jon Corzine's former Goldman Sachs colleague and current head of the Commodities Futures Trading Commission (CFTC), had reason to be concerned about MF Global's risk management. In early 2008, a rogue trader racked up $141.5 million in losses in unauthorized trades that exceeded his trading limits. It seems he accomplished this in under seven hours. In August of this year, MF Global and the underwriters of its 2007 initial public stock offering (IPO) agreed to pay around $90 million to settle claims by investors that they were misled about MF Global's risk management prior to the rogue trader's actions. Since 2008, MF Global's financial condition has been nothing to brag about. Now the settlement is in jeopardy due to the bankruptcy. [Michael Stockman, the chief risk officer of MF Global as of January 2011 (after the previous mentioned incident) was in my Liar's Poker training class lampooned by another classmate, Michael Lewis.]
In the past, the exchanges and CFTC "always" moved customer positions before a Futures Commission Merchant (FCM) declared bankruptcy. The CFTC had ample reason to have contingency plans for MF Global based on publicly available information. Yet the Gensler-led CFTC hasn't followed this historical precedent when an FCM led by his former Goldman colleague teetered on the edge of bankruptcy. Gensler has recused himself from the CFTC's probe of MF Global.
The exchange-traded futures markets have been shaken to the core. The Bankruptcy Code apparently conflicts with the Commodity Exchange Act, so customers of MF Global have less protection than one might expect. The Securities Investor Protection Corporation (SIPC) is not the FDIC. Account holders have no idea how long it will take to get back all of their money, if it is there to be recovered, and right now, it appears a lot of it cannot be found. This is why many traders sweep all of the excess cash out of their accounts each day, and only put in cash when required.
MF Global Debacle Damages a Key Global Market
The "risk wizards" of Goldman Sachs once again look like market wrecking balls. The futures market is a globally connected market and it is a key mechanism for farmers, metals miners, and metals fabricators (among others) to hedge their risk. Confidence in the futures market has been shaken. No one knows if their money is safe, but what is more disturbing is the appearance of crony capitalism once again giving favored treatment, lax regulation, and absent oversight to a crony capitalist that abused all of these perks to blow up a large financial firm and damage a key global market.
This commentary is available in pdf form by clicking this link.
Read more posts on Tavakoli Structured Finance »
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Read more: http://www.huffingtonpost.com/janet-tavakoli/mf-global-revelations-kee_b_1107097.html#ixzz1eRoPPJbq
GENTSLER AND CORZINE - TWO OBAMA CRONIES AND MINI-MADOFFS
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Dismal Futures With MF Global -Global Heist
Myinvestorsplace.com ^ | 11/22/2011 | Kathy Cuthbert
This was forwarded to me by a colleague…Great letter
To: James W. Giddens, Trustee, SIPA Liquidation of MF Global, Inc. and Martin Glenn, United States Bankruptcy Judge
From: Cathy Cuthbert
RE: MF Global Heist
I am a lucky, former MF Global client. Unfortunately, I’m not a multi-billionaire who got the memo. I had a modest account that was supplying me with a modest livelihood, when suddenly one Monday afternoon, my account was frozen, my livelihood was essentially gone and four years worth of trading profits vanished into cyber space. You might be interested to know that sitting on my desk as I write is an application for a part-time, seasonal position stocking shelves at the local Rite-Aid. Then again, maybe not…
Let’s try a thought experiment. Suppose I worked at a little bank in Anywhere, USA and it just so happened that I had a few peccadilloes I needed to clean up. So I borrowed just a tad of money from a few clients’ accounts without it showing on their statements or anything – don’t want to alarm the little tykes – intending all along to of course return the money ‘cause ya know, I’m good for it, but somehow I just couldn’t come up with the bucks fast enough and somebody found out. Do you suppose I could just resign, go home and suck a sore paw while someone else looked high and low, under my desk, in my filing cabinet, maybe pieced together my shredded docs hoping to find out where, oh where the money went?
Don’t be ridiculous. Not only would I immediately be tased, hand cuffed and thrown into the slammer, hard evidence or no, but the money would be very quickly found since there is not one thin dime that passes between accounts in all of the entire USA that isn’t thoroughly and incessantly tracked anywhere and everywhere it goes. Not one thin dime. You fellas know it, I know it, but worse for you, the whole world knows it and I don’t have to tell you they are all watching.
Should I remind you that the key factor in any financial market is the belief of all the participants that the market is mostly fair? Oh, please, don’t call me naïve. I am well aware that futures trading is a negative sum game, and that there are plenty of shenanigans going on with bad fills, running stops and the like. That’s ok, though, since it is petty theft and we can figure out ways to stay in the game regardless. But what everybody needs to know is that nobody is going to clean out our accounts. We need to be assured that flagrant grand theft is simply out of the question. If the idea were to become credible that anyone’s account – or, as in this case, everyone’s accounts – can be stolen with impunity and with no recourse for the aggrieved, nobody in his right mind would be in the futures market.
You can obfuscate with legal mumbo jumbo about how depositing money into a futures account makes me an unsecured creditor, but I can assure you that you don’t want to go in that direction. Here’s why. If you use that excuse to pay off the Big Boys by letting them cut ahead of us clients in bankruptcy due to our status as unsecured creditors, what does that mean for my account at the friendly, neighborhood Bank of America? Steal from us MF Global clients, and the hoi polloi, who are already slowly but surely waking up to the banking scam, just might figure out that they, too, are unsecured creditors every time they deposit their paychecks.
Yes, Jimmy and Marty, you are staring in the face of not just a run on the futures markets, but a run on the banks.
Let’s stop pretending that you don’t know where the money is. Corzine got a margin call from the Big Boys and paid it. So claw it back. Yes, it’s that simple. A mere $600 million is not going to solve their multi-billion dollar problems, anyway. While you’re waiting for the clawback, you can make all the clients’ accounts whole with funds from SIPC if you have to. Forget this pathetic 60% recovery of collateral. Nothing less than 100% will do. And don’t forget to order Corzine his orange jump suit. Either he bunks with Madoff or no one will believe that this can’t happen again.
So here’s the deal. You can be the heroes or you can be the goats. You can take the high ground, convince the Big Boys that they have gone too far for their own good and return the futures markets to some semblance of reliability, or you could be the ones to kick the last prop out from under the vestiges of capitalism and send the world spiraling at an ever accelerating pace into a fascist future.
Sounds like a no-brainer to me.
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Getting Worse: $1.7 Billion Customers' Money Missing
Fox News ^ | November 22, 2011 | Mark Duell
MF Global's missing money mystery has taken a twist after a bankruptcy trustee said the figure is double what the firm reported to regulators.
James Giddens said up to $1.2 billion is missing from customer accounts at the broker, which filed for bankruptcy protection three weeks ago.
He said his plans to release $520million from accounts that have been frozen will mean nearly all the assets under his control will be distributed.
Court-appointed trustee Mr Giddens has been going through the accounts and finances of MF Global since it filed for bankruptcy protection.
But an investigation source told the New York Times his figure may be too high if he double-counted a $220million figure transferred between units.
Regulators are investigating whether MF Global tapped money from clients' accounts as its own financial condition worsened.
This would be a violation of Wall Street rules. The FBI is now investigating whether New York-based MF Global violated any criminal laws too.
It is believed MF Global’s original lower estimates of missing money were down to poor bookkeeping, reported the New York Times.
The firm was led by former Goldman Sachs chief and New Jersey governor Jon Corzine. It collapsed after making a disastrous bet on European debt.
Investigators are looking at whether MF Global used to the cash to cover trading losses. But nobody has been accused of doing anything wrong.
Mr Giddens's office said that ‘the apparent shortfall’ was as much as $1.2 billion or more, but noted that the figure could change.
A bankruptcy judge last week approved his request that 60 per cent of the funds in about 23,300 frozen cash-only accounts be returned to clients.
(Excerpt) Read more at nation.foxnews.com ...
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It's Time For Jon Corzine To Come Clean At MF Global's Congressional Hearing
Lisa Du | Nov. 22, 2011, 3:42 PM | 165 | 3
MF Global Keeps Getting Into Trouble
Brand New Problems For MF Global Clients, Who Still Can't Access Their Money Even After $520 Million Is Released
MF Global Revelations Keep Getting Worse
A house hearing on the MF Global bankruptcy has been set for December 15, and former CEO Jon Corzine has been called in to testify, Bloomberg reported.
The hearing will be conducted with the House Committee on Financial Services.
Bear in mind that Corzine is allowed to plead the fifth and refuse to testify on grounds that he could incriminate himself. Several federal authorities are investigating MF Global following their bankruptcy, and there could be criminal charges pending on the outcome of the how the $1.2 billion in customer segregated funds came to be missing.
MF Global COO Bradley Abelow, federal regulators and representatives from ratings agencies are also expected to testify, according to DealBook and Bloomberg.
Besides Corzine's testimony, hearing from the ratings agencies will be particularly interesting. Bloomberg is reporting that Fitch, Moody's and Standard and Poor's all reviewed MF Global prior to the firm's bankruptcy. Both Moody's and Fitch lowered MF Global to below investment grade, but Standard and Poor's kept its MF Global rating at BBB-, a notch about investment grade.
There have been talks of a congressional hearing on MF Global since last week, when Michigan Senator Debbie Stabenow requested one in a letter to the CFTC
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Read more: http://www.businessinsider.com/jon-corzine-will-have-to-explain-himself-at-mf-global-hearing-2011-11#ixzz1eTDq4yRG
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What a disaster. Corzine = liberal madoff.
Are you giving conservatives "credit" for Madoff?
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Are you giving conservatives "credit" for Madoff?
No, not at all - Madoff was a huge liberal demo, just like most of the wall street mafia.
,
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No, not at all - Madoff was a huge liberal demo, just like most of the wall street mafia.
,
cause you said corzine was a liberal madoff. Isn't that repetitive? That's like saying "unprepared Cain" when I could just say "Cain".
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cause you said corzine was a liberal madoff. Isn't that repetitive? That's like saying "unprepared Cain" when I could just say "Cain".
;D
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Latest Updates
Citizens United Sends FOIA Request To Treasury Department
Posted by David N. Bossie
11/22/2011 3:05:04 PM
Citizens United sent a FOIA request to the Treasury Department today to see how much influence Jon Corzine has had in shaping our country’s economic policy under President Obama and Secretary Geithner. Please see all letters here. Full letter below: Citizens United sent a FOIA to the Treasury
http://www.citizensunited.org/latest-updates.aspx?article=4057
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Other people’s money
Corzine & ‘Wall St.’ financing
Last Updated: 3:17 AM, November 23, 2011
Posted: 10:18 PM, November 22, 2011
More Print Steven Malanga
The meltdown of MF Global is a striking lesson in the degree to which our finance firms and our elected officials often do business in the same way — regardless of claimed ideology. It’s particularly telling because of the way MFG head Jon Corzine moved from Wall Street to government and back.
Back when Corzine ran for governor of New Jersey, he promised to bring fiscal stability to state finances and reduce the crushing property-tax burden on homeowners. Banking on a reputation for financial wizardry from his Wall Street days, he also boasted that he could expand access to health care, fund universal pre-kindergarten in public schools and pump billions into subsidized housing.
Bloomberg
Always expecting a bailout: Corzine, here calling for tax hikes in his 2008 State of the State speech, wrought disaster in New Jersey and on Wall Street.
That platform made Corzine a darling among big-government types, who found it astonishing that a former Goldman Sachs chief could preach such “unabashed, old-fashioned liberalism,” as The New York Times put it. Once he became governor, however, the only way that Corzine could live up to his promises was through sharply higher taxes on some residents and accounting gimmicks of the sort that 21st century Wall Street and government often share in common.
After all, Corzine now has to explain not just the collapse of MF Global, thanks to his series of risky bets on European bonds, but also how some $1.2 billion in MF Global’s customer accounts, which are supposed to be kept separate from the firm’s own capital, seem to have disappeared. If the firm misused the money, someone is likely to go to jail.
Of course, in New Jersey, candidates typically make it into office by planning to spend other people’s money — that is, by making lots of expensive promises to special interests.
As governor, Corzine hiked sales taxes $1.1 billion to pay for popular property-tax rebates; later, the rebate program disappeared for most taxpayers but the sales tax stayed. He also instituted a 2.5 percent fee on all commercial development to subsidize his affordable-housing plans at a time when the state’s private economy was already collapsing. And, as the state’s budget foundered in 2008, he slapped a tax surcharge on higher incomes.
But in the end, Corzine also needed a little financial manipulation in order to keep paying the bills in Jersey. Beholden to public-sector unions who helped elect him, he did nothing to solve the state’s huge pension problem. Instead, he simply pushed billions of dollars in yearly pension costs the state should have been paying into the future. In doing so, Corzine taxed future Jersey residents, who had no say in the matter, by ballooning the state’s long-term liabilities.
Whether in government or finance, he seemed to always believe there’d be a bailout. He destroyed MF Global by betting that the European Union wouldn’t let some of its troubled governments default because they were, of course, too big to fail. In Jersey, he simply ignored one of the worst pension crises in the country because the idea that we’d let hundreds of thousands of government workers lose their pensions is also unthinkable.
In the worlds where Corzine operates, the next bailout is always just around the corner if you are big enough and daring enough.
Sadly, even politicians without time on Wall Street seem to share that faith. After all, other states collectively have accumulated $3 trillion in liabilities for pension promises that they haven’t funded. And outstanding state and local debt has soared from $1.3 trillion to $2.5 trillion in a decade.
Some of that money, recent press reports suggest, is being misused by politicians to plug current budget holes when it was raised for other purposes.
You can do such things in politics and suffer no consequences. You may even get re-elected. Corzine was safer back in New Jersey politics, where he could use other people’s money liberally and engage in shady accounting practices without worrying about the kind of dire consequences he may now face. Nobody’s going to occupy Trenton.
Steven Malanga is a senior fellow at the Manhattan Institute.
Read more: http://www.nypost.com/p/news/opinion/opedcolumnists/other_people_money_bnv7Yjd8IAli3dAJfSbK7M#ixzz1eXHgQB9B
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Obama and MF Global: Corzine prosecution improbable as President has fundraiser with insider
Written By Kenneth Schortgen Jr on Tuesday, November 8, 2011 | 8:04 AM
With the growing scandal for Job Corzine grows in his work at bankrupt MF Global, the question of whether the Obama Administration would actually seek prosecution against his former campaign contributer seemed unlikely despite the growing evidence.
Now it almost appears improbable. Especially with the news that after the bankruptcy hit last week, President Obama is holding a fundraising dinner at the behest of the primary lawyer for the MF Global bankruptcy.
Monday night, Obama will attend a private fundraiser hosted by Dwight Bush, president of Urban Trust Bank, and his wife Antoinette, a partner at the international law firm Skadden, Arps, Slate, Meagher, and Flom. Skadden is the firm hired to handle the bankruptcy of MF Global, the large Wall Street firm headed by Jon Corzine, former governor of New Jersey and a strong ally of President Obama.
Tickets for the event are at least $17,900 per person.
The Center for Responsive Politics calls Skadden “a clearinghouse for donors to the Democratic Party.” – Daily Caller
Hey Occupy Wall Street... it's about time to move over to 1600 Pennsylvania Avenue if you truly want to find the 1%er who is keeping the rich safe and secure from the same justice system that puts you in jail.
http://www.thedailyeconomist.com/2011/11/obama-and-mf-global-corzine-prosecution.html
________________________ ____________
This is the most corrupt Admn of all time.
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Corzine's Fraud
Townhall.com ^ | November 23, 2011 | Jeff Carter
MF Global committed fraud. The purpose of this short post is to delineate a couple of things that have been circulating, and to try and provide a bit of clarity.
MF didn’t default on the $CME or anyone else’s clearing house. The phrase, “no one has lost a penny due to default of our clearinghouse” still applies.
However, MF did screw over its entire customer base. By doing that, it threw into question every client/firm relationship in the industry. Is your money safe with your clearing firm? Brokerage?
I haven’t gotten a letter from my broker telling me their practices regarding segregated funds. Am I supposed to trust them after this?
As far as the legal ramifications, only time will tell. Right now it looks like the exchanges will be in the clear legally. They will most definitely get sued. Lawyers from both sides will go on fishing expeditions to try and pry any useful information they can and to bring in as many parties as they can to try and extract as much money as they can from the situation. That’s how the sharks work. They smell blood and are in a frenzy right now.
Traders have been crushed by this. They can’t get to their money. Money is the lifeblood of the marketplace. Without it, markets stop. So far, volume is pretty good. Certain pockets have been affected. However, because there is so much going on with Europe and the SuperCommittee, there is a lot of risk and positioning that needs to happen so people are trading. If this would have happened in a non volatile year like 1994, volume might have been a lot different.
CME has mishandled the public perception of the crisis. Instead of talking, they shut up. They released legalese documents. This is the time to get out in front of your customers. They needed to be very aggressive and proactive. The best thing they could have done was send their employees and representatives out and simply listened. Collect information. Show that they care. Instead, they are left with a situation where each customer feels like they are on an island and they will fight with MF, Lawyers, CME and everyone else for a fixed piece of pie.
Corzine committed fraud in my opinion. It was a cardinal sin. The one thing you don’t do is touch your customers' money. What he did is no different than bank robbery.
Lots of people are saying insider trading is blameless. It happens, and the market isn’t really changed because of it.
My significant other had a thought. What about the people or funds that bought? Say Spencer Bachus, Nancy Pelosi or Dick Durbin walked out of a meeting and shorted stock, or sold out of their holdings.
They had to sell them to someone. There was a buyer. Trading isn’t done in a vacuum. The buyers of their position may have been you, or your pension fund, or your government body. They screwed over the entire market place.
Trading supposedly entails a little risk. The Congresspeople took the risk right out of the trade. They were guaranteed winners as soon as they logged into their account, picked up the phone and placed the order.
But, because the theft (that’s what insider trading really is) is a faceless crime, we tend to not want to punish it like a burglar.
MF Global seems faceless to. The number is so huge. But, as Peter Brandt correctly states Corzine and the CFTC undermined the entire market mechanism and the public trust. They should be in jail without bail.
John Corzine and the people that conspired with him at MF have stolen people’s money. No different than the insider trading. How can you trust any clearing firm again? ($CME, $ICE, $NYX) All of a sudden, counter party risk has been injected into the system.
Ponder that as you watch the budget super committee fail to get a deal and Obama fail to lead-all the while the value of your savings tank with the market.
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I can't wait for Corzine to surface and explain this whole thing.....he is definitely going to jail
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Chris Dodd’s wife, Jackie Clegg is on the board at CME (Chicago Mercantile Exchange).
http://latimesblogs.latimes.com/money_co/2010/03/chris-dodds-wife-and-her-strange-entanglement-with-derivatives-trading-.html
...and there’s this...(today)
The trustee searching for missing customer money in the bankruptcy of MF Global will investigate how well the Chicago futures markets monitored the brokerage before its collapse, a spokesman said Wednesday.
Kent Jarrell, a spokesman for Trustee James Giddens, said the quality of a late October audit of MF Global by CME Group Inc. will be part of a broader inquiry. CME owns the Chicago Mercantile Exchange, the Chicago Board of Trade and the New York Mercantile Exchange, where MF Global was among the largest trading firms.
CME has said its audit showed the brokerage was complying in late October with rules about keeping customer funds apart from its other investments. After the audit was finished, MF Global drained money from customer accounts in violation of federal rules, CME has said.
http://latimesblogs.latimes.com/money_co/2010/03/chris-dodds-wife-and-her-strange-entanglement-with-derivatives-trading-.html
From 2001-2004, Jackie Clegg Dodd served as an “outside” director of IPC Holdings, Ltd., a Bermuda-based company controlled by AIG.
http://www.realclearpolitics.com/articles/2009/03/dodds_wife_a_former_director_o.html
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Dodd strikes again.
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Skip to comments.
Lawmakers to look at Corzine, rating firms’ ties
Reuters via OO ^ | Reuters
Posted on November 24, 2011 8:30:15 PM EST by Enosh
(Reuters) – U.S. lawmakers plan to look into the relationship between bankrupt mid-size brokerage firm MF Global Holdings Ltd’s former CEO Jon Corzine and the major credit-rating agencies, The Wall Street Journal reported on Thursday, citing a person familiar with the matter.
MF Global’s credit ratings were cut to junk in the days before its October 31 bankruptcy.
A U.S. congressional subcommittee plans a December 15 hearing with regulators and top MF Global officials to review the firm’s collapse. The House Financial Services Subcommittee for Oversight and Investigations has invited Corzine and Bradley Abelow, the firm’s chief operating officer.
The Journal, citing its source, said the committee’s members plan to look into the interactions between Corzine and rating agencies like Moody’s Investors Service, Standard Poor’s and Fitch Ratings and whether their judgment was clouded by the prominence of the former New Jersey governor and one-time head of Goldman Sachs.
Lawmakers haven’t yet asked any firm to attend the hearing, the Journal’s source said.
Representatives for Moody’s, SP, Fitch and MF Global did not immediately respond to requests for comment.
A representative for Corzine could not immediately be reached.
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Corzine has hired Andrew J. Levander, a leading white-collar criminal defense lawyer. He'll need him.
There are actually good reasons for allowing brokerages invest in "safe instruments" such as sovereign debt (Treasuries etc.) or CDs etc or "loan" the money at interest to another institution in exchange for a "safe" collateral. It's simple - money is "swept" daily in and out of interest-bearing "cash" and "margin" customers accounts, because the only way the brokerage can pay customers interest is if they can get a higher rate of interest on their money. Brokerage earns an interest on this cash from Treasuries or CDs or other "safe" instruments and passes some of the profit to you as the interest.
If brokerage couldn't earn [and pay back] some interest on customers' "cash" in the account, the only way for the brokerage to finance the cost of the account would be for customers to pay the brokerage a fee to hold the "cash" prior to making a transaction. That's a situation similar to the "free" checking accounts and debit cards "swipe fees" — when Dodd-Frank / Durbin clause reduced the profit the banks could make on debit card transactions where the "swipe fees" and overdraft financed the accounts, the formerly "free" services suddenly became not so "free".
The CFTC Regulation 1.25 allows segregated funds to be used for other purposes including '…general obligations of a sovereign nation' for the purposes of brokerages earning the interest on parked customers "cash" accounts. However, it doesn't, in any way or under any circumstances, allow commingling of "segregated" customer accounts for brokerage's own / trading accounts or leverage, so MFGH couldn't legally do what it did, even if they might try to hide behind Reg 1.25.
(Ref: The case of the missing $600 million at MF Global gets murkier - FR, post #64, 2011 November 19)
After CFTC audited MFGH, it requested that MFGH increased collateral, due to heavy exposure to EU debt and credit markets, via repo-to-maturity strategy. In effect, this served as a "margin call." If customers' accounts were not used for leverage before that, they certainly started moving from customers accounts to accommodate collateral requirements, and Corzine and J.D. Flowers started looking at selling the company. They almost had a deal with Interactive Brokers Group (IBG) when the news of "money missing from customers accounts" hit and the deal fell through.
(Ref: Jon Corzine and J. Christopher Flowers Friendship Tossed in MF Global Storm - WSJ, by Gina Chon, 2011 November 10
Customer accounts usually insured against these kinds of specific malfeasance or theft (not against trading losses) or brokerage going bust; e.g., Interactive Brokers Group and Fidelity's accounts are insured with Society of Lloyd's / Lloyds of London. FMR / Fidelity, in addition, is also insured by Minich Re and Axis Specialty Europe. Other brokerages usually use Llloyd's, Aon, Marsh & McLennan, Willis Group or other risk insurers, specifically for the "excess of SIPC insurance" liabilities.
Either way, it's going to take a while until customers will get all their cash unfrozen due to forensic, insurance and criminal investigations going on simultaneously. For open trades, time is of the essence, but many accounts have already been transferred to other brokers, and there is a pressure on the judicial system and SIPC to accommodate segregated brokerage account-holders as soon as possible, possibly getting someone to become a DIP on MFGH "receivables" in exchange for money upfront, to disburse to retail customers. If civil lawsuits start coming (there is at least one already) it may complicate such disbursement scheme.
FTA: Yes, Jimmy and Marty, you are staring in the face of not just a run on the futures markets, but a run on the banks.
Yes, there is now a run on Jefferies, about the same size outfit as MFGH... just like Lehman Bros. and Morgan Stanley and Merrill Lynch were next in line of attack after Bear Stearns.
From Jefferies lashes out at 'lies' - NYP, by Kaja Whitehouse, 2011 November 22
Jefferies Group is the victim of lies, rumor and innuendo.
That's according to Rich Handler, chief of the besieged investment bank, who fired off a six-page letter to clients yesterday blaming “rumors, half-truths and outright lies" for creating doubt about the firm's financial health.
“We are writing so that every one of our key constituencies receive the facts and reality directly from us, instead of being misled by half-truths, false rumors and lies being disseminated with malice by a group whose interests are absolutely opposed to yours and ours," Handler said in the unusual letter, which hints that Jefferies is the target of a so-called short-and-distort scam. ..... < snip >
..... Jefferies has been battling comparisons with collapsed brokerage firm MF Global for several weeks. Handler has tried to quell fears by detailing Jefferies' exposure to European debt.
For those who think that the TARP / "bank bailout" / "Wall Street bailout" was unnecessary and there would be no problem if we just "let the banks fail" — look how much angst and pain has been caused for the Main Street by the fall of the relative "flea" MF Global. Lehman Bros. alone had accounts and "assets under management" 17 times larger than MFGH, and Lehman was much smaller than the investment, commercial and integrated banks with trillions of dollars in business and retail customers' money.
Imagine the pain when the companies couldn't borrow against or access their money to meet payroll, because their repos, ARS, ABS and other collateralized accounts that are used as "cash and cash equivalents" were essentially "marked to zero" - that's what the "market" would pay for collateral at the time... Yes, that really happened, quite a few medium-size companies had to file for bankruptcy, others saw their valuations go down well below cash on hand, in the weeks that Congress was dithering and sitting on TARP legislation.
TARP injected temporary liquidity to solvent banks (domestic and foreign with sizable domestic business or interconnectedness), to prevent ongoing "run on the banks," which was a proper function of federal banking system and central bank, not a "bailout"; if we want to call it a that, it still would be a "bailout" of the Main Street, not the Wall Street where the Main Street's money was kept. Some on "Wall Street" and foreign "Wall Streets" were actually making money shorting banks and hoping for as much damage to Wall Street / banks as possible. TARP did stop the panic and the run on the banks - really, an attack on the U.S. and worldwide banking system.
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Let's posit... Corzine faced a criminal trial, is convicted, and sentenced, as it is proven that he directly ordered the funds moved. Can he be sued personally for the lost $$?..civil suit...or can the feds force him to make restitution in return for leniency?..he's reported to be worth several hounded million.
In short, yes, if his culpability in transfer of accounts funds is established.
From 7 banks sued over MF Global collapse - NYP, 2011 November 21
< snip > ..... The lawsuit was filed Friday afternoon in Manhattan federal court against units of Bank of America Corp, Citigroup Inc, Deutsche Bank AG, Goldman Sachs Group Inc, Jefferies Group Inc, JPMorgan Chase & Co and Royal Bank of Scotland Group Plc. Other defendants include several officials associated with MF Global, including former Chief Executive Jon Corzine.
Friday's lawsuit may be one of the earliest efforts for investors to recover money from relatively deep-pocketed defendants that they believe may share in responsibility for MF Global's Oct. 31 bankruptcy. ..... The lawsuit was brought by the IBEW Local 90 Pension Fund in Connecticut, and the Plumbers' and Pipefitters' Local #562 Pension Fund in Missouri, and seeks class-action status. ..... < snip >
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The Game Is About Done (Denninger)
Market Ticker ^ | 11-23-2011 | Karl Denninger
Posted on Friday, November 25, 2011 7:26:50 AM by blam
The Game Is About Done
Karl Denninger
November 23, 2011
It's pretty-much over at this point....
This morning Germany had a failed Bund auction. That's not particularly noteworthy; it happens from time to time.
But what's noteworthy is what happened to bond yields everywhere through Europe in response: They blew out.
The Greek and Italian "problem" is no longer about Greece and Italy. It has been creeping into Spain and more-recently France, but this morning jumped into Germany and everywhere else "all at once."
Capital has said "no more" to the lies in Europe. While this does not mean an instant implosion it does mean one important thing: The willingness of capital holders to continue to permit deficit spending is coming to an end, and with it the false "GDP" that this lie has "supported" will also come to an end.
Our lawmakers, for their part, continue to sing a happy song about how we'll get it done -- but not today, since the supercommittee was an abject failure. Covering up the failure was the fact that there were departments that had 10, 20 even 30% increases in the funding found in the appropriateions bills that were passed in the House even while the "committee" was trying to find a way to "cut" spending.
Folks, this political game of lie, lie and lie some more cannot go on forever. Eventually the waiter appears with the check and you either pay it, wash dishes, or get arrested for theft. In the political world that "arrest" comes in the form of capital holders saying that they no longer believe you will ever pay and borrowing costs go up -- way up.
The Fed cannot "print" out of this and neither can the ECB. If either try that they will engender an all-on revolt, never mind that as purchasing power falls the fixed costs of staying alive go up relative to incomes and the war is lost anyway.
Reality must eventually be faced. That day is here for Europe and it will soon be here in the US. We have permitted the lies and stealing -- both indirectly and now, as we've seen, it appears directly through MF Global -- to go on for too long.
To those Seniors (and soon-to-be-Seniors) and others who say "but we were promised!" and "I vote damnit - you better give me what you said I'd get" respond: The till is empty and your check is going to bounce.
Occupy Wall Street? Well sure, but while you're at it, why aren't the Seniors encircling the Capitol and refusing to leave? Why isn't the underlying truth being discussed and why aren't the jackals that led to this happening being forced from office and run out of town on a rail?
I'll tell you why: Because everyone thinks that they can manage to somehow "get theirs" while "someone else" will take the hit.
I'm sorry to tell ou that it isn't going to work out like that.
There's no point in continuing to play this game. MF Global showed us -- you're right, you hedge or you place your bet, you still lose your money! How many farmers, airlines, industrial producers and other legitimate entities using the market for risk management got screwed by that little game and why is it that Corzine is not in handcuffs? FINRA? What's that -- it appears Corzine didn't have a valid (and required) securities license. Self-regulation not only failed so has any resemblance of actual law enforcement.
The same game was run over in Europe with sovereign CDS. You hedge, you bet right, the ISDA declares that you were "voluntarily" exchanging your bonds and the hedges you bought were worthless. Your "exchange" was as voluntary as is handing over your wallet when there's a gun up your nose, but that doesn't matter -- the word "is" can be redefined any time the people in charge want, and they want.
Your money, that is.
It will not be long ladies and gentlemen, when the bulk of the folks running the algorithms deduce that they're exposed to the same risks - they have to post margin too, you know, and if it can be stolen then their capital isn't safe either. These deposits aren't supposed to be "at risk" when there's no position actively open -- that's a performance bond against possible failure to pay, but is supposed to be exactly as safe as a bank deposit in a checking account under FDIC limits.
Well, it wasn't. The CDS you bought on Greece wasn't. And it will only take another event like this or two before people conclude that everything is unsound as the jackals running the game will redefine the meaning of words to suit themselves and, failing that will simply steal the money.
30+ years of lawless behavior has now devolved down to blatant, in-your-face theft. They don't even bother trying to hide it any more, and Eric "Place" Holder is too busy supervising the running of guns into Mexico so the drug cartels can shoot both Mexican and American citizens.
What am I, or anyone else, supposed to do in this sort of "market" environment? Invest in.... what? Land titles are worthless as they've been corrupted by robosigning, margin deposits have been stolen, Madoff's clients had confirmations of trades that never happend and proved to worthless pieces of paper instead of valuable securities and while Madoff went to prison nobody else has and the money is still gone!
Without enforcement of the law -- swift and certain -- there is no deterrent against this behavior.
There has been no enforcement and there is no indication that this will change.
It will take just one -- or maybe two -- more events like MF Global and Greek CDS "determinations" before the entire market -- all of it -- goes "no bid" as participants simply stuff their hands in their pockets and say "screw this."
It's coming folks, and I guarantee you this: Whatever your "nightmare" scenario is for such an event, it's not bearish enough.
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Got a great deal on a gun safe this morning at Dicks as 5 a.m. heavy as a mofo!!
Funny thing is that the store was completely empty except the firearms department.
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MF Global's Jon Corzine may decide silence is golden
Pleading the Fifth could serve Corzine well, as shown after other high-profile corporate collapses.
Next month, the House financial services committee will publicly quiz Corzine for the first time about the collapse of MF Global, the brokerage he headed until it went bust. Government lawyers and private investors will be hanging on his every word as Corzine is called upon to explain what went wrong in what could be one of the most worrying bankruptcies since the collapse of Lehman Brothers.
Regulators and the court-appointed trustee looking for MF Global's missing money are now searching for somewhere between $600m and $1.2bn (£773m) in missing funds.
The case is gaining more attention as farmers who used the firm to hedge against losses have begun to press politicians and regulators for action as they fret about their missing money. In relative terms MF Global is small fry but the problems its collapse exposes could end up being anything but.
The hearings come as federal investigators continue to try to work out what happened at MF Global. So far Corzine has said nothing publicly about the broker's spectacular collapse. He could refuse to testify, in which case the panel could subpoena him. Corzine faces a tough choice as he faces a committee that, in its own words, will focus on "the decisions and events leading to the collapse of MF Global, the effectiveness of regulators in overseeing MF Global's activities and the impact MF Global's bankruptcy will have on its customers".
http://www.guardian.co.uk/business/2011/nov/25/jon-corz...
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I can't wait for Corzine to surface and explain this whole thing.....he is definitely going to jail
Obama will pardon him, Christmas 2012, just to piss off republicans.
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The face of Wall Street arrogance
By JOHN CARNEY
Last Updated: 3:42 AM, November 28, 2011
More Print Jon Corzine’s unbelievably swift fall is a classic story of Wall Street arrogance.
Just a few months ago, the Obama administration was considering Corzine as a possible successor to Treasury Secretary Timothy Geithner. Investors in the bonds of his firm, MF Global, demanded the right to an extra percentage point of interest if he left as its CEO and chairman.
Nobody else on Wall Street makes a promise like that to buyers of its bonds. Not even JPMorgan Chase, run by Jamie “King of Wall Street” Dimon. Corzine had come to be regarded as a demigod, a divinity in the mortal world. Hercules with a trading desk.
And no one believed the myth of Corzine as much as Corzine himself. When explaining to associates and investors that he wasn’t preparing to leave to become treasury secretary, he never for a moment let on that he had any doubts that he could — and probably should — be running the highest economic office in the land.
Meanwhile, Hercules was pushing his firm to take on more Euro-debt risk — even as most Wall Street firms were shrinking their exposure to the sovereign bonds of troubled nations on Europe’s periphery. In filings with the Securities and Exchange Commission, MF Global claimed that the market was wrong about Europe — and MF Global knew better.
“Volatility in the European sovereign debt markets created occasional dislocations in the cash and repurchase markets for certain short-dated securities, providing more trading opportunities in the quarter ending June 30, 2011,” MF Global said in what turned out to be its final quarterly report.
Except those “trading opportunities” turned out to be deadly. To paraphrase the British economist John Maynard Keynes, the market in European government bonds stayed dislocated longer than MF Global could stay solvent.
Corzine & Co. thought they’d developed a genius method of investing in the European sovereign bonds. In a trade called a “repo-to-maturity” on Wall Street, MF Global would borrow money from big banks, use that cash to buy bonds coming due in the next year or so, then use those very bonds as collateral for the loan. The bonds and the purchase loans matured at exactly the same time, so there was no risk of having to find new financing for the positions. In Wall Street parlance, there was no “refinancing risk.”
The trade was also supposedly free of what Wall Street calls “credit risk” — the risk that a borrower will not repay its loans. All of the bonds were protected by the European Financial Stability Facility, which wasn’t due to expire until after the bonds were paid off.
In fact, the EFSF lacked the funds to make good on this promise. Arrogant European bureaucrats had simply assumed that merely making the promise would put a halt to the “dislocations” — and Corzine seems to have assumed exactly the same thing.
This works great — until it doesn’t. As part of the repo-to-maturity deals, Corzine’s gang had to promise to put up more collateral for the loans if the prices of the bonds fell too far. And, despite the EFSF, prices did keep falling — requiring MF Global to pony up ever-larger sums to its trading partners.
(The firm’s books are a mess, but it now seems that it actually resorted to secretly using $1.2 billion in customer funds to cover its shortfalls — an illegal and appalling violation of its fiduciary duties.)
Investors, customers, and regulators grew anxious about MF Global’s financial health, shattering the Corzine myth. This wasn’t the son of Zeus at the head of a trading desk. It was a guy who’d put his trust in financial engineering (still, even after the lessons of 2008) and the ill-conceived bailout plans of European governments. The mortal blow for MF Global was the realization that Corzine was just a mortal man.
It’s tempting to blame “Wall Street greed” for Corzine and MF Global’s missteps, but something deeper was at work. Corzine has described himself as an “unabashed liberal.” His liberalism included a faith in the effectiveness of government and a suspicion that the best and the brightest know better than markets.
The ancient Greeks would have recognized this as hubris — thinking that you are equal to or greater than the forces of nature and the Gods. For the authors of the Greek tragedies, hubris always ends in ruin.
The collapse of MF Global and the ruin of Corzine’s reputation have taught us that the old lessons of the ancient Greek playwrights are still true — even on Wall Street.
John Carney writes CNBC’s Wall Street Web site, netnet.CNBC.com.
Read more: http://www.nypost.com/p/news/opinion/opedcolumnists/the_face_of_wall_street_arrogance_8XAZ7crBF3ZbQFUEr5SyPK#ixzz1f0WImaa6
Former Head Of FBI To Probe MF Global Collapse
Submitted by Tyler Durden on 11/28/2011 14:17 -0500
FBI MF Global
The judge in the MF Global disaster just got real. The assignment of Louis Joseph Freeh, former Director of the the FBI no less, somewhat assures that Corzine and crew will get their day in court - or at least be vilified enough that someone pays the real price for the wrongdoings. He is the perfect man for the job having investigated, among others, mob connections to Italian pizza joints.
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http://www.zerohedge.com/news/former-head-fbi-probe-mf-global-collapse
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Watch Live As A Recusing Gary Gensler Tries To Explain Why The CFTC Failed Massively In Its MF Global Oversight
Submitted by Tyler Durden on 12/01/2011 11:11 -0500
Commodity Futures Trading Commission Consumer protection MF Global
Nothing like watching one Goldmanite explaining why he failed to prevent another Goldmanite from (allegedly) stealing hundreds of millions in customer accounts. Linked below is the live hearing by the "Continuing Oversight of the Wall Street Reform and Consumer Protection Act" in which Schapiro and Gensler are held to account for their epic failure with MF Global oversight.
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http://www.zerohedge.com/news/watch-live-recusing-gary-gensler-tries-explain-why-cftc-failed-massively-its-mf-global-oversigh
Gentsler Obama Corzine Geithner = Axis of corruption
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Pollock: So that's why you're calling Jon Corzine a chicken on CNN? Koutoulas: Yes, where's the money, Jon?
Submitted by EB on 12/01/2011 14:18 -0500
MF Global
http://www.zerohedge.com/contributed/pollock-so-thats-why-youre-calling-jon-corzine-chicken-cnn-koutoulas-yes-wheres-money-jo
Reposted from our blog at EconomicPolicyJournal.co m
Today's Senate hearings into the MF Global debacle demonstrate that conflicted Chairman (and ex-Goldman Sachs CEO) Gary Gensler is unwilling to provide anything more than mere lip service to the beleaguered customers whose funds remain inaccessible more than one month from the bankruptcy filing. Further, the issue of just why exactly SIPC, a securities resolution agency, is "managing" a futures commission merchant liquidation is among the more salient issues being completely ignored--except by various customer advocacy sites, such as MFGFacts and MyInvestorsPlace.
However, MF Global customers can take a bit of solace knowing they have a voice in front of Judge Glenn in the liquidation proceedings in the form of the Commodity Customer Coalition (#CCC) and its team of hard working attorneys (working largely pro bono, we might add). The synoganists remain Trustee James W. Giddens, earning $891 per hour and seemingly doing his best to drag out the proceedings, along with JP Morgan's attorneys, who are "dictating the agenda", according to CCC attorney James Koutoulas. [Update: for an expose of the conflicts of interest arising from Giddens' firm, Hughes Hubbard, vis a vis JP Morgan Chase, MF Global's largest creditor, see this excellent piece by MFGFacts.]
Is it too little too late? We hope not, as continuance after continuance increases the odds that looting of customer funds continues to this day. In a brief but compelling video (below), Warren E. Pollock of Inflection Points goes head to head with a few journalists outside the bankruptcy court in lower Manhattan, then conducts a candid, must-watch interview with Mr. Koutoulas [if you don't see the video embedded, click the link to the left]:
A few choice excerpts:
at 3:30 in:
Koutoulas: We were the first group to object to JP Morgan's use of the cash collateral. I think over the weekend, three or four other parties have joined our objection. And they keep continuing it...I'm going to get up and say, "Judge, there are some issues we have to talk about. We can't just keep continuing this ad infinitum." One of those is--you probably saw on ZeroHedge--the way that Order is written, it makes it possible...if these [repo-to-maturity] trades are still on, we have to know about it.
Pollock: You don't know if the trades are on right now--normally they'd have to wind down positions. But they could still be tapping into customer money at this very moment and there's no way to...recognize that.
Koutoulas: And if they did do that...that is the ultimate epitome of enabling someone to fall in love with their trade....These trades bankrupted MF Global, and the fact that there's even a possibility that they could still be on and still be using customer money to back them, it's beyond the pale.
at 5:25 in:
Koutoulas: The problem here is JP Morgan's lawyers are running the show...and they're running the agenda...Judge, the fox is in the hen house. JP Morgan cannot be dictating the agenda.
at 5:50 in:
Pollock: So that's why you're calling Jon Corzine a chicken on CNN?
Koutoulas: Yes...stand up...where's the money, Jon?
The Outcome:
In the course of the hearing that followed, the Judge asked the CCC to file a motion to formally make its case against the JP Morgan super priority status and the continued trading of customer funds. A hearing was set for December 7, 2011. Let's hope there's still money left by then.
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http://www.zerohedge.com/contributed/mf-global-looting-can-continue-missing-funds-and-fees-likely-go-higher-guest-post-mfgfac
From Bad to Worse
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Where in the World Is Jon Corzine?
CNBC ^ | December 1,2011
Posted on Thursday, December 01, 2011 4:52:59 PM by Hojczyk
When was the last time anybody saw Jon Corzine?
For several days following the bankruptcy of MF Global, Corzine was regularly appearing in the office. Sources at MF Global told me he spent his days in conference rooms with teams of lawyers and accountants. Then he abruptly resigned as chief executive.
And for his next act, he vanished.
Corzine is not an ordinary chief executive. As a former US Senator and former Governor of New Jersey, he is a public figure. He was even under consideration to be the next Treasury Secretary.
As one of the few people who can answer questions about what happened to MF Global-how it went from a healthy midsized commodities brokerage to a fatality-Corzine should be in front of the public offering explanations. He used publicity to climb his way to the top of America's power-structure, and now he's trying to hide. This seems unfair.
The explanation, no doubt, is that his lawyers have told him to keep quiet. They realize that there is a very high risk that civil and criminal cases may be filed against Corzine. As they say on the cop shows, anything he says can and will be used against him.
This strategy may protect Corzine legally. But it won't save his reputation.
Every day of silence, every day of invisibility, just adds to the public impression that Corzine is not an honorable man.
The legal system may have to presume people innocent until proven guilty. It may have to promise not to hold silence against the accused. But ordinary thinking people are under no such constraints.
Corzine may be able to hide from cameras. Perhaps even from the Senate's panel investigating the collapse of MF Global. But he can't hide from public suspicion. And silence will never save his reputation.
(Excerpt) Read more at finance.yahoo.com ...
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House Committee Votes to Subpoena Corzine on MF Global
AP ^ | 12/02/11 | AP
Edited on Friday, December 02, 2011 11:07:59 AM by Admin Moderator. [history]
WASHINGTON – A congressional panel has subpoenaed former Sen. Jon Corzine to testify next week about his role leading MF Global, a brokerage firm that collapsed this fall after a disastrous bet on European debt.
The House Agriculture Committee voted Friday to issue the subpoena. Committee Chairman Rep. Frank Lucas, R-Okla., said his testimony is "essential to fulfill our objectives." Lucas said the subpoena was necessary because Corzine hadn't answered an informal request to testify at the Dec. 8 hearing.
(Excerpt) Read more at foxnews.com ...
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can't we just seal the documents ala F&F?
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can't we just seal the documents ala F&F?
why?
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http://www.financialsense.com/financial-sense-newshour/guest-expert/2011/12/01/ann-barnhardt/entire-futures-options-market-destroyed-by-mf-global-collapse
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MF Global proves Enron-era (off-balance-sheet) accounting lives on
Yahoo ^ | 12/02/11 | Nanette Byrnes
Posted on December 2, 2011 9:45:46 AM EST by Libloather
MF Global proves Enron-era accounting lives on
By Nanette Byrnes | Reuters – 2 hours 14 minutes ago
REUTERS - The off-balance-sheet accounting methods that Enron and Lehman Brothers made famous in their epic failures years ago have a modern-day poster child: MF Global .
Like its predecessors, the bankrupt brokerage formerly run by Jon Corzine took advantage of an accounting maneuver to keep certain financial obligations off its books, making the firm look less indebted and thus less a risk than it really was.
On Thursday, Mary Schapiro, chairman of the Securities and Exchange Commission, told a committee of Congress the SEC was investigating the accounting treatment that helped mask MF Global's exposure to risky foreign sovereign debt.
The fact that MF Global was able to use the technique highlights how off-balance-sheet moves are evolving as quickly as new accounting rules intended to stop them. Earlier this year, the Financial Accounting Standards Board changed its rules to bar an off-balance-sheet loophole that had helped Lehman Brothers get into trouble in 2008.
(Excerpt) Read more at in.news.yahoo.com ...
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Exclusive: MF Global mixed funds, transferred abroad
Credit: Reuters/Shannon Stapleton
By Christopher Doering
WASHINGTON | Fri Dec 2, 2011 8:42pm EST
WASHINGTON (Reuters) - Regulators investigating the collapse of MF Global have determined that the firm combined money between securities and futures accounts owned by customers, and transferred funds outside the country to at least one entity, a source said on Friday.
"The further we get into (the investigation) the more complex it is ... but we're making progress," the source said, adding that the commingling and transferring of money is making it harder for regulators to determine what money belongs where.
MF Global took futures segregated money and put it into the account for customer securities, essentially mixing futures and securities that were both owned by customers, said an official familiar with the matter.
Until now, it was believed that only customer futures accounts were affected.
The source also told Reuters that MF Global had been using customer funds for "several days if not weeks" rather than just a few days before the firm collapsed.
Regulators had previously thought the firm was using customer funds on the Thursday and Friday before it filed for bankruptcy on October 31.
CME Group, the Chicago exchange where MF Global traded, said it had reviewed the company's books a week before the bankruptcy and found no issues with the customer money.
If MF Global started improperly dipping into its customers' accounts long before the firm's collapse, the allegation would raise questions of why the regulators and auditors failed to spot such behavior.
Congress has already started asking questions about potential lapses in regulatory oversight of MF Global. The pressure on regulators would only increase if MF Global turns out to have misused customer funds over an extended period of time.
"Establishing the specifics of what happened is key to figuring out how the system failed and how to fix it going forward," Republican Senator Chuck Grassley of Iowa said in a statement on Thursday. "Congress will need to keep drilling down."
MF Global collapsed in late October after the firm was forced to reveal that it had made a $6.3 billion bet on European sovereign debt.
An effort to sell the firm failed, partially due to the revelation that hundreds of millions of dollars in customer money were not where they should have been.
Investigators such as the Commodity Futures Trading Commission have been scouring the company's books, described as messy and unorganized, for the fund shortfall that has been estimated as much as $1.2 billion by the liquidating trustee.
However, regulators have been at odds with the trustee, believing that figure is too high.
(Additional reporting by Philip Shishkin; Editing by Gary Hill)
http://www.reuters.com/article/2011/12/03/us-mfglobal-funds-idUSTRE7B203J20111203
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Gary Gensler: A U-Boat Sent into the CFTC?
Submitted by EB on 12/04/2011 10:26 -0500
www.zerohedge.com
Alan Greenspan Ben Bernanke Bernie Sanders Citigroup Commercial Paper Commodity Futures Modernization Act Commodity Futures Trading Commission Credit Default Swaps default Enron ETC Fail Free Money Goldman Sachs goldman sachs Moral Hazard New York Times Nomination Robert Rubin Transparency
Although we would substitute "loophole expansion" for the term "de-regulation", inasmuch as the number of financial regulations has more than doubled over the last decade and a half and we have not had anything approaching free markets for well over a century (the received wisdom perpetuated by your oligarchs, notwithstanding), and would finger state-sponsored moral hazard along with free money handed out by the Fed as the primary driver of our financial predicament, the following exposes a number of important facts about the conflicted ex-Goldman Sachs alum that now runs (or did he recuse himself?) the US Commodity Futures Trading Commission, a government chartered institution, whose legacy should one day earn the dubious destinction of that which has institutionalized the trampeling of customer rights (see here for a most egregious example). - EB
Guest Post Submitted by MFGFacts.com
Who was Gary Gensler?
When Gary Gensler was nominated to head the CFTC, most Americans had never heard of him. Yet he had been cruising the inner Beltway of D.C. and halls of influence for years under the radar of most. Genlser succeeded Brooksley Born who was given a very rough time by the club of Summers, Rubin, Greenspan et. al when she sounded the alarm bell on the rapid and unregulated growth of off-exchange derivatives. Born sought at least transparency as they “could pose potentially serious dangers to our economy.” Although appointed by Clinton, she never got his support and resigned from her post. For more on her prescient warnings, view this fascinating PBS documentary. As more collapses happen, the failure to regulate off exchange derivatives from CDO’s to re purchase agreements are increasingly understood to be a prime source of financial collapse.
Lobbying for Loopholes
Back to U-boat Gary. While still at Goldman Sachs brought Robert Rubin (yes, also from GS) recruited Gensler in 1997 to join him as Assistant Secretary for Financial Markets. Later he was promoted to Undersecretary for Domestic Finance in 1999. Here he worked on the changes to regulation assuring that credit default swaps and other off exchange derivatives were free from regulation. During the Enron disaster these were called “The Enron Loophole.”
In 2000 Congress passed the Commodity Futures Modernization Act, sponsored by Senator Phil Gramm (and John McCain’s campaign Economic Adviser). This act was written to keep off exchange derivatives unregulated and, as many are now discovering, opening “Mac Truck sized loopholes” allowing expanded access to customer funds for off exchange, but rated instruments beyond US Treasuries. Gary Gensler was the Treasury’s under secretary for domestic finance and it was his job to assure lobby that the CFMA got through Congress and signed into law.
Cheering the Confirmation
Gensler’s confirmation flew through Congress in 2009, but it was not cheered by all, especially the informed public. The New York Times named it “troubling” at the time and Salon came out with a damming article, “The Oligarch’s President." Senator Tom Harkin, of the Agriculture Committee, at the time released a statement of “concerned about the de-regulatory orientation in this nominee’s past.” Senator Bernie Sanders tried to block it and was one of the two votes against Gensler with the strong statement:
… I cannot support his nomination. Mr. Gensler worked with Sen. Phil Gramm and Alan Greenspan to exempt credit default swaps from regulation, which led to the collapse of A.I.G. and has resulted in the largest taxpayer bailout in U.S. history. He supported Gramm-Leach-Bliley, which allowed banks like Citigroup to become “too big to fail.” He worked to deregulate electronic energy trading, which led to the downfall of Enron and the spike in energy prices. At this moment in our history, we need an independent leader who will help create a new culture in the financial marketplace and move us away from the greed, recklessness and illegal behavior which has caused so much harm to our economy.
Like Brooksley Born, Sander’s lone and prescient voice was ignored by the cheering mob in Congress. Gensler’s nomination was approved.
So how did a guy like this who was a key member of the Washington Beltway Demolition Derby get appointed as Chair of the CFTC? How did this happen after it was known that the loopholes Gensler had a hand creating and defending known loopholes in regulation that were pivotal to the mortgage banking collapse? Those things do not matter in Washington. Independence has no value.
Gensler served as senior economic adviser to the Hillary Clinton in the 2008 campaign. When her campaign closed shop, he jumped into the Obama camp as a fundraiser and adviser. Once elected, the Obama transition team then charged him with charge of the reviewing the SEC.
Prior to this Gensler was active in Democratic party politics, appointed treasurer of the Maryland Democratic Party in 2003. He emerged as a major donor contributing more than $220,000 to Democratic party candidates and committees from 2002. This figure includes the more than $72,000 in 2008 shortly before his appointment.
Washington D.C. is filled with souless hacks. Such men and women reduce themselves to be nothing more than instruments of others. We saw that on display at the hearing this week called by the Agriculture Committee where Chairman Gensler was asked to testify. His prepared statement did not address the purpose of the hearing, but instead offered more about the Swaps market concluding with meaningless platitudes, “This is why the CFTC is working so hard to ensure that swaps-market reforms promote more open and transparent markets, lower costs for companies and their customers, and protect taxpayers. Thank you, and I would be happy to take questions.”
As questions were asked, more than once Gensler replied he could only speak only as allowed by his legal council…
Mr. Gensler talked much, but said little. On Monday, the CFTC will finally, and after much delay, vote on rule a required under the Dodd-Frank act removing a brokers’ ability to use their clients’ excess margin, or collateral for future trades, in corporate notes, bonds and commercial paper. The very changes to CFTC rule 1.25 that Gensler worked so hard to put in place 12 years before. The changes John Corzine and Laurie Ferber, MF Global’s general counsel, lobbied hard in recent months to protect and keep in place.
Expect Mr. Corzine to say nothing when he appears to answer to the American people. Such are the the government servants delivered to us.
* * *
For our own presentation of Gensler as giddy-as-a-schoolgirl power-hungry regulator (indeed, he said he was "tickled pink" by his new authority, and had autographed copies of Dodd-Frank by Bernanke, Shapiro, Geithner, etc. on his desk) and the CFTC's directive as soon-to-be price fixer in chief, see our article from November, 2010: Ex-Goldmanite Gary Gensler "Tickled Pink" as CFTC Ramps Up for Price Fixing. -EB
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Claim: Clinton Collected $50K Per Month From MF GlobalFormer president's new firm Teneo Strategy was hired to boost Corzine.
by Neil W. McCabe12/05/201167
Comments William J. Clinton (left) and Jon S. Corzine
A former MF Global employee accused former president William J. Clinton of collecting $50,000 per month through his Teneo advisory firm in the months before the brokerage careened towards its Halloween filing for Chapter 11 bankruptcy.
Teneo was hired by MF Global’s former CEO Jon S. Corzine to improve his image and to enhance his connections with Clinton’s political family, said the employee, who asked that his name be withheld because he feared retribution.
“They were supposed to be helping Corzine improve his image as a CEO—I guess you can tell how that went,” he said. Corzine resigned as CEO and chairman November 4.
Before Corzine joined MF Global in May 2010, the firm was a smart and well-run commodities broker, a culture that was turned upside-down by his leadership style, he said.
“The traders would be shaking their heads,” he said. “They would come back to their desk and say, ‘Well, I thought we were going to do this—but Corzine would come by and do something else all by himself,’” he said.
The Teneo contract with MF Global lasted at least five months, he said. “The board cancelled it after Corzine resigned.”
The source, who is no longer associated with MF Global, said Teneo is a dual-track company with one side devoted to merchant and investment banking and the other side set up to provide image and strategy consulting services.
Clinton is the chairman of the company’s advisory board. His duties and compensation have not been released. The other member of the board is former British prime minister Tony Blair.
Two of the three founding partners are very close to the former president and his wife, Secretary of State Hillary R. Clinton. They are Douglas J. Band, who is the former president’s counselor and has served on his personal staff since 1995 and Declan Kelly, who earned the “Hillraiser” status in the secretary’s 2008 run for president for bundling more than $100,000 for the campaign.
Another prominent member of the Clinton political family is Tom Shea. Shea is a senior vice president for Teneo Strategy and served as Corzine’s chief of staff, when Corzine was the governor of New Jersey.
Kelly sold his public relations firm Financial Dynamics in 2006 to FTI for $340 million, and stayed with that company until July 2009, when he joined the State Department as the Economic Envoy to Northern Ireland.
The source said, “Kelly was given a job they created out our whole cloth.” The job did not exist previously.
“He basically got to ride around developing a book of business, while he waited for his non-compete clause to run out,” he said.
Kelley and the former president traveled together networking and making introductions at international conferences and events, he said.
The Secretary of State also traveled with Kelly, including the October 2010 U.S. – Northern Ireland Economics Conference, which Kelly organized and at which the secretary was the featured speaker.
The secretary announced that she accepted Kelly’s resignation May 11.
Teneo landed its first major client June 1, when the Rockefeller Foundation gave Teneo a $3,447,150, six-month contract to help plan the foundation’s 2013 centennial.
The foundation is another member of the Clinton’s extended family. It gave Clinton its Lifetime Innovation Achievement Award July 27 and the foundation is listed as a between $1 to $5 million contributor to the William J. Clinton Foundation, along with several members of the Rockefeller family who are listed as individual contributors.
[In the preparation of this story, several emails and phone calls were placed to Teneo, MF Global and the State Department for comment. In each case, there was no response.]
http://www.humanevents.com/article.php?id=47938
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Congress subpoenas Corzine on MF Global collapse
Jon Corzine, chairman and chief executive officer of MF Global Holdings, speaks during the Sandler O'Neill + Partners global exchange and brokerage conference in New York June 9, 2011.
Credit: Reuters/Lucas Jackson
By Alexandra Alper and Charles Abbott
WASHINGTON | Fri Dec 2, 2011 1:53pm EST
WASHINGTON (Reuters) - A U.S. House committee voted to subpoena Jon Corzine to testify before Congress about the collapse of MF Global, after the former CEO refused an earlier invitation.
The move intensifies pressure on Corzine, who has been largely absent from public view since he resigned as chief executive early last month. His lawyer had previously told the committee that the former New Jersey governor would be unable to attend a hearing set for December 8, the panel's chairman said on Friday.
The House Agriculture Committee is holding the hearing to examine the collapse of the futures brokerage and the search for hundreds of millions of dollars in missing customer funds.
"It is this committee's responsibility to shed light on the facts and circumstances surrounding the bankruptcy," said Frank Lucas, the Republican chairman of committee.
A spokesman for Corzine and his lawyer, Andrew Levander, declined immediate comment.
MF Global filed for bankruptcy on October 31, after $6.3 billion in risky bets on European sovereign debt spooked investors and an effort to sell the company failed.
Investigators are searching for as much as $1.2 billion in missing customer money, which regulators said the company may have diverted for its own needs.
It is in Corzine's best interest to invoke his right to avoid self-incrimination under the Fifth Amendment of the U.S. Constitution, said Barry Pollack, a criminal defense attorney at Miller Chevalier.
But Pollack said public figures "are genetically predisposed " to give their side of the story.
"His best case scenario in testifying is that they use him as a punching bag. His worse case scenario is that he provides testimony that can subsequently be used by law enforcement authorities putting together a criminal case against him," Pollack said.
U.S. regulators are investigating MF Global's business practices, including its accounting and disclosures. The FBI also has shown an interest in the missing funds.
Congress is holding a series of hearings examining whether regulators and company insiders could have done more to prevent the failure and protect investors, traders and farmers who may be out hundreds of millions of dollars.
The Senate Agriculture Committee and a House Financial Services panel have also called on Corzine and others to testify later this month.
In addition to governor, Corzine served as a U.S. senator from New Jersey and, before that, CEO of Goldman Sachs in the late 1990s. He took over as head of MF Global last year after failing to win reelection as governor.
Lucas told reporters on Friday that the House Agriculture Committee had requested that Corzine appear and received a letter from Corzine's attorney saying he would not be available on December 8, the requested date.
"We are putting the pieces in place to compel testimony," Lucas said. "It is too important to let slide."
Friday's vote to issue a subpoena was unanimous with bipartisan backing.
"I am in full support of the endeavor we are undertaking today," said Representative Collin Peterson, the committee's top Democrat. "It is imperative that we hear directly from all those involved."
The House Agriculture Committee also expects to hear from the Commodity Futures Trading Commission and the Financial Industry Regulatory Authority, two of the many regulators responsible for overseeing MF Global.
A committee aide said the panel last issued a subpoena in 1996.
Neither MF Global nor its executives has been charged with wrongdoing.
(Reporting by Alexandra Alper and Charles Abbott in Washington, additional reporting by Grant McCool in New York; Editing by Steve Orlofsky and Dave Zimmerman)
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http://www.reuters.com/article/2011/12/02/us-mfglobal-missing-account-idUSTRE7B12AD20111202
Incredible. Corzine/gentsler/Obama/biden all should be sent to jail for this.
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Dec 5, 7:06 PM EST
2 ex-MF Global employees sue Corzine, other execs
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WASHINGTON (AP) -- Two former employees of failed brokerage MF Global have sued its top executives and directors, including ex-CEO Jon Corzine, the former governor and senator from New Jersey.
The two employees say the executives lied about MF Global's finances and encouraged workers to put their retirement savings into company stock that later plummeted.
The two are Monica Rodriguez, who was MF Global's head of credit for the Americas, and Cyrille Guillaume, managing director of its commodities and stock division in London. Guillaume and Rodriguez are seeking class-action status for everyone who got company stock as a benefit of working for MF Global after May 2010.
A Corzine spokesman declined to comment on the suit, which was filed Monday in U.S. District Court in Manhattan.
MF Global failed after making a disastrous bet on European debt. It filed for bankruptcy court protection Oct. 31. Corzine resigned as chairman and CEO a few days later.
An estimated $1.2 billion or more may be missing from MF Global customer accounts. Regulators are investigating whether MF Global used money from customers' accounts for its own needs as its financial condition worsened. That would violate securities rules. The FBI is investigating whether the firm violated any criminal laws.
MF Global employees were required to take part of their compensation in company stock, the suit says. A separate plan also allowed them to buy company shares at a discount. If they had known the firm's actual financial condition, "they could have refused to buy in or insisted on compensation arrangements that were all cash," said Jacob Zamansky, one of the attorneys representing Rodriguez and Guillaume.
"Corzine encouraged MF Global employees to invest their retirement savings and compensation in company stock, and he destroyed their wealth with his risky and outsized bets on (European) debt," Zamansky said. "He should be held personally accountable for his actions."
After Moody's Investors Service downgraded MF Global's credit rating on Oct. 24, the company's stock dropped from $3.55 a share to $1.86 the following day. With MF Global in bankruptcy, the shares are nearly worthless; in May 2010, they traded around $8.
Several other class-action suits on behalf of MF Global shareholders also have been filed against Corzine and other top executives, and they are being consolidated by the court.
On Friday, the House Agriculture Committee voted to subpoena Corzine to testify at a hearing Thursday about his role leading MF Global. A committee spokeswoman said Corzine was served the subpoena.
Two other congressional panels announced plans to vote on subpoenas for Corzine.
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The Rise and Fall of MF Global Chief Jon Corzine
With the collapse of MF Global, Jon Corzine stands in the middle of the missing-billion-dollar crossfire. How the finance golden boy went from star governor to news-headline disgrace.
by Michael Daly (/contributors/michael-daly.html) | December 5, 2011 12:00 AM EST
Illustration by Jimmy Turrell for Newsweek
On other mornings, the leather upholstered chair at Esquires barbershop could have been a throne, from which Jon Corzine (/articles/2011/11/05/jon-corzine-s-sloppiness-dooms-mf-global-and-any-other-firm-he-touches.html) would rise to stride supreme up the street where he had made his name and his fortune. But on this gray, drizzly dawn just before Thanksgiving (/articles/2011/11/25/stop-rewriting-thanksgiving-and-the-rest-of-history.html) , the once mighty 64-year-old emerged from the shop at 14 Wall Street looking sunken and defeated. He moved up the block with a skittish quickness, his blue blazer hanging almost scarecrow-loose on his shoulders, as he nervously raised and lowered a coffee cup to his face, seemingly not so much to take sips as to conceal his face—lest somebody recognize him and maybe ask the big question:
“Where’s the money?”
The money being up to $1.2 billion in customer funds that had vanished after the implosion of the investment firm he ran, MF Global (/articles/2011/12/02/jon-corzine-subpoenaed-to-testify-before-congress-about-mf-global-s-collapse.html) . The immediate cause of the eighth-largest bankruptcy in American history was a $6.3 billion bet on European debt that Corzine had declared was a sure thing. He seems to have been blinded less by greed than by need, a need to elevate little-known MF Global into the league of Goldman Sachs, where this son of an Illinois tenant farmer had risen to become CEO, only to be deposed more than a decade ago.
Apart from a press release in which he announced his resignation as MF Global’s CEO and expressed “a great sadness” for “what has transpired,” Corzine has maintained a shamed and, in the view of many, shameful silence, so successfully avoiding the press and angry investors that CNBC jokingly put his face on the side of a milk carton.
That silence may end as early as this week with a bipartisan tar-and-feathering before Congress. The House Agriculture Committee has voted in a rare unanimous moment to subpoena Corzine to appear on Thursday, and he will also likely be called by a committee in the Senate, where he himself served before resigning to become the governor of New Jersey. Corzine in public office was the most progressive of politicians and often stuck to his principles at whatever the cost. But at MF Global, that same willful confidence and indifference to public opinion combined with an outsize sense of himself to create disaster. What made Corzine so admirable in the Capitol and the statehouse could conceivably land him in the big house with the likes of Bernie Madoff.
Corzine is either the worst of the good guys or the best of the bad guys. He does not seem to be a thief. The question is whether he allowed hundreds of millions in customer funds to be lost in a last-ditch effort to stave off MF Global’s collapse. One senior executive of the firm insists that nobody was more stunned by the money’s disappearance than Corzine himself.
“I can’t believe the fuck-up we just discovered,” the executive heard Corzine say in the hours after the collapse.
This same MF Global executive suggests that what is largely missing from press accounts of the firm’s demise is the condition MF Global was in when Corzine first became CEO last year. The firm has been described as a “bastard stepchild,” spun off by its parent the Man Group after it acquired the remnants of Refco, which had collapsed after its CEO stole hundreds of millions of dollars (Refco CEO Phillip Bennett pleaded guilty in 2008 to 20 counts of securities fraud and is serving a 16-year term). The new company had then been rocked when one of its traders lost $140 million in unauthorized wheat deals.
When Corzine arrived, MF Global was a losing proposition in dire need of new revenue streams and, according to one executive, leveraged an astonishing 50-to-1. The executive, who requested anonymity, says the rating agencies warned Corzine at the outset that they would downgrade the firm’s credit if he did not swiftly increase profitability.
Corzine set about cutting costs, laying off those he deemed unnecessary and bringing in new talent. He raised MF Global’s stature by persuading the Federal Reserve Bank of New York, whose president is his old Goldman pal William Dudley, to name it one of only 20 “primary dealers” authorized to underwrite U.S. government debt.
While he was building up his firm’s reputation at home, ironically his core strategy focused on Europe and buying burgeoning government debt in Italy, Spain, Belgium, Portugal, and Ireland.
He explained that the firm was taking advantage of “dislocations,” where seemingly irrational fears of government default resulted in comparatively high yields in short-term debt. Corzine believed there was absolutely no chance those financially troubled nations would go broke before the bonds reached maturity a year hence.
Thanks to a little magic called repurchased or “repo” agreements, the firm was able to take out loans to buy the bonds, using those same bonds as collateral—thereby incurring monumental debt to buy monumental debt. The interest on the loans was lower than the interest produced by the bonds, and the difference translated into what Corzine considered virtually risk-free profits: $47 million in one quarter and $38 million in the next, with much more promising to come.
Jon Corzine in 2009., Chris Hondros / Getty Iamges
Corzine was so convinced his bet was a sure thing that he failed to heed what he himself was preaching as a visiting professor at Princeton University. He gave a lecture in September 2010 on the importance of learning lessons from the financial disaster of 2008. “We need to address the accumulation of debt at every level of our society,” Corzine declared.
Corzine had then hopped in a car whose chauffeur happened to be a Mafia loan-shark victim, and returned to MF Global. By this point the company was betting $6.252 billion on European debt.
MF Global’s board repeatedly expressed concern about the size of the position, according to a published account by Bloomberg. And Corzine is said to have repeatedly reassured them that his strategy was foolproof. What made the looming disaster more perplexing was that Corzine is not a Madoff or some other type of Wall Street greedster. His friend and former fellow New Jersey senator Robert Torricelli figures Corzine remained haunted by his sudden fall from power at Goldman Sachs in 1998 and failed to understand how much Wall Street had changed since then.
“A split in him and a disconnect in time,” Torricelli says.
As for the rating agencies, which so famously abetted the subprime-mortgage insanity, the senior MF Global executive says they met regularly with Corzine and were aware of his strategy all along. Less pliable was the Financial Industry Regulatory Authority, which instructed MF Global to increase the amount of actual money it kept on hand to back up the loans. Corzine had better luck winning over the Commodity Futures Trading Commission, headed by another former Goldman buddy, Gary Gensler. The CFTC was considering a change in something called Regulation 1.25, which allowed a firm to borrow otherwise segregated customer money to buy short-term securities. The CFTC was poised to curtail the practice, and prohibit it altogether with foreign sovereign debt, when MF Global urged the CFTC in writing not to “fix something that’s not broken” and Corzine met personally with Gensler. The vote on the change was put off.
All seemed to be working in Corzine’s favor until the market turned on him this summer. MF Global reported a disastrous third quarter that, combined with further economic turmoil in Europe, prompted Moody’s to drop its rating on MF Global’s debt to a notch above junk on Oct. 24. Corzine held a conference call with investors the next day and spoke of “the most volatile period I’ve ever experienced,” adding, “I wasn’t around in 2008 because I took a time-out for other purposes.” He nonetheless told investors not to be alarmed. “We will be back on track,” he pledged.
Two days later, Moody’s and Fitch dropped MF Global’s rating to junk. Investors fled in the equivalent of a run on the bank, giving Corzine a real-life lesson in the principle formulated long ago by British economist John Maynard Keynes and taught in all business schools: “Markets can remain irrational far longer than you or I can remain solvent.”
By Oct. 30, Corzine seemed to have averted a catastrophe by passing the bastard stepchild onto another foster parent. A deal to sell MF Global’s assets to Interactive Brokers Group was all but finalized when auditors noticed that some $600 million of customer money was missing—an estimate that would eventually rise to as much as $1.2 billion.
The roots of Corzine’s rise and fall may go back all the way back to an 18th-century John Corzine of Dutch extraction who, according to the Historical Encyclopedia of Illinois, “at one time owned 60 acres in that portion of New York City known as Wall Street.” The 18th-century Corzine sought bigger and better things by heading west, and two generations later the Corzines had settled in Christian County, Ill. The most direct descendants became a well-to-do clan of merchants. Others stuck to agriculture, including Jon Corzine’s grandfather, who did well enough to establish a 2,500-acre farm. The grandfather began to hedge against the vagaries of weather and market by dealing in the commodities exchange. That led him into banking, and he became prominent in local politics, until it all came crashing down in the Great Depression.
Corzine’s father toiled as a tenant on a leased 120-acre farm in Willey Station, not a 20th the size of the one the grandfather had owned. Jon Corzine later told the writer William Cohan, author of Money and Power: How Goldman Sachs Came to Rule the World, “My father never had a credit card, was afraid of any kind of financial risk because he saw what happened to his father.” Corzine’s father moonlighted selling farmers’ insurance, and his mother taught at the elementary school in nearby Taylorville. Jon Corzine met his future bride, Joanne Dougherty, there in the first grade.
“She’s a super gal,” says childhood friend Jack Marzotti. “They were the perfect couple.”
In high school, Corzine was captain of the basketball team and starting quarterback of the football team. Marzotti recalls, “Everybody liked Jon. He was a hard competitor, and driven, but I don’t think Jon had an enemy anywhere. Nobody talked ill about Jon. He was just one of those guys you were glad to know.”
Corzine was not enough of a basketball star to get recruited by the University of Illinois, but he was scrappy enough to make the team as a walk-on. Under threat of the wartime draft, Corzine joined the Marine Corps Reserve, which kept him out of Vietnam.
The writer Cohan would note that the son of the man who never had a credit card would use one to get through business school. “That’s true of all this baby-boom generation,” Corzine recalled. “They learned to borrow early and big.”
He was soon at Goldman Sachs, and he made partner at 33. At one point he called his father to say he had earned $150,000 in a single year without tilling so much as a row of soybeans. “You ought to come home,” his father is supposed to have said.
Corzine stayed in New York, but maintained a folksy friendliness, sporting a beard and sweater-vests in a realm of clean shaves and suits. He was nicknamed “Fuzzy” and was known to greet his fellow traders with a peace sign. The partners who vied with him for leadership found that Fuzzy was also stubbornly willful and unrelentingly ambitious. He became head of the trading division, which racked up incredible profits. Those were followed by huge losses that in other circumstances might have threatened his career. But when the head of Goldman Sachs quit, taking dozens of partners with him, the firm needed somebody who understood how to extricate it from the bad trades, someone who was popular enough to keep more partners from departing.
At 44, Corzine became CEO. Fuzzy proved imperial in his convictions about the direction the firm should take, and his No. 2, a hyperambitious and fellow Illinois farm boy named Henry Paulson, became a fierce rival. Corzine was confident he controlled enough votes on the executive committee for his position as he set off for a Colorado skiing vacation during Christmas 1998. He returned to discover a presumed ally had turned on him and Paulson had seized control of the firm.
The deposed Corzine sat in his big house in Summit, N.J., with some $350 million and no place to go on Wall Street that could equal where he had been.
He decided just six weeks later to run for the Senate.
Political consultant Robert Shrum showed him an early poll indicating that his Wall Street reputation led voters to consider him a middle-of-the-road moderate. Shrum remembers Corzine replying, “This is not me; I’m not going to run on this ... I’m going to run as a progressive because that’s what I am.”
After spending $63 million of his own money, Corzine was elected, and he proved as progressive as he had described himself. He was among the 23 senators who voted against the Iraq War, the first to speak out against the genocide in Darfur, and a champion of universal health care and universal access to college. He wrote much of the Sarbanes-Oxley Act of 2002, and was accorded the honor of sitting in the presiding chair for the vote on this bill establishing new protections for investors in the wake of Enron. Corzine still bridled at being a junior member of a crowd of 100. He complained that he would have to “wait until I’m 80” to become a committee chairman and have the kind of sway he wanted. He had not yet finished his first term when he ran for governor of New Jersey and won.
Corzine never did believe the rules of risk applied to him, an indicator of which came in 2006, when he suffered near-fatal injuries in a car crash. He had not been wearing a seat belt, despite previous urging by staff members.
At the hospital, security guards were instructed not to admit under any circumstances a woman with whom Corzine had broken other rules at the risk of his marriage. Carla Katz was the head of New Jersey’s biggest public employees’ union. Corzine had met her when he was running for the Senate.
After the Corzines divorced, Joanne suggested that her husband’s affair with Katz was part of a moral lapse that began when he entered politics. He had kept his political principles, even his beard, but he was willing to use his Goldman connections to secure the support of New Jersey’s Democratic organization. “All day, people around him were telling him to do whatever he wants to do to get ahead, things that the Jon I’ve known since we were in high school would have never been comfortable with,” Joanne Corzine told a reporter after the divorce. “And I think it’s made him lose sight of anything but success, getting to where he wanted to get.”
Corzine may have come to feel he’d lost more with his family than he had intended to risk, and he cut things off with Katz, giving her what was estimated to be $6 million and forgiving a $470,000 loan. She seems to have continued to pursue him even as the state and her union were in contract negotiations, as suggested by emails that later appeared in the media.
“BTW, I had an over the top erotic dream about you last night. Bad boy!!” read one missive from her BlackBerry.
Complications in Corzine’s personal life still proved less of a hamper to his quest for a second term as governor than were the instances where he stood by his political principles. And the cost of political courage was exponentially compounded by his failure to understand how his actions are perceived. He seemed to imagine that commuters would be mollified by being told his turnpike toll hike was to be spread over 20 years, but the only number they heard was that the ultimate increase would be 800 percent. A senior aide terms Corzine “politically tone-deaf” and “the worst public-image manager you’ve ever met.”
“He just doesn’t get public opinion,” the aide says. “He never has.”
Corzine lost his bid for a second term to Chris Christie, 49 to 45 percent, and retired with no political future to his Hoboken penthouse, which overlooks the Hudson River and Manhattan.
He was then offered a chance for a new future in finance by an old Goldman friend. J. Christopher Flowers had struck out on his own to become a billionaire, and his investment firm was now a major stockholder in MF Global.
“Goldman was small when I joined it, too,” Corzine was quoted as saying.
As he renewed his life as a financial CEO, Corzine also remarried. He and his new wife, psychotherapist Sharon Elghanayan, look glowingly happy in the wedding photos, a perfect couple who had met not at the start of their lives, but were bound for a happy ending. In April of this year, the couple hosted a $35,800-a-plate fundraiser for President Obama in the elegant Fifth Avenue apartment she had received in her own divorce settlement. The guests were served chicken potpie, and the president spoke, saying, “Some of you know that Jon was a big supporter of mine in my first U.S. Senate race when nobody could pronounce my name.” There was talk of Corzine becoming the new Treasury secretary in the way of his old Goldman nemesis Paulson.
That dream vanished with MF Global’s collapse. Corzine would instead be returning to Washington as the subject of inquiries in both houses of Congress. Tea Party Republicans happily prepared to pillory a big-time Obama liberal from Wall Street. And the chairwoman of the Senate agriculture committee signaled that in the era of the 99 percent, Corzine should not expect any breaks from his former Democratic comrades. “The farmers, small-business owners, and others who trusted this firm are now facing tremendous hardship and may ultimately never recover all of their money,” Sen. Debbie Stabenow said. “Anyone engaged in wrongdoing in this matter must be swiftly held accountable, to help bring justice to victims.”
While preparing to defend himself, Corzine continues to pay regular visits to Wall Street—if only to sit in the throne-like chair at Esquires, as he has since the days when he gazed into the barbershop mirror and saw the CEO of Goldman Sachs reflected back at him. It bears noting that J. P. Morgan once kept an apartment on the uppermost floor of the 32-story building where Esquires is located, directly across the street from the New York Stock Exchange, which the tycoon singlehandedly rescued from itself during the Panic of 1907. For all his many virtues, Corzine had become the latest Wall Street sinner, the latest to have been blind to the lessons of the past.
With the help of his concealing coffee cup, Corzine was able to leave the barbershop and proceed up the block on that recent drizzly morning without being recognized. His driver was waiting in a black SUV with New Jersey plates, parked just down from Zuccotti Park and the Occupy Wall Street protesters. Corzine was no sooner in the front passenger seat than he was pulling away and riding down Broadway in the same direction as the famous bronze bull and federal bankruptcy court, where the big question is the missing money. He at least had on his seat belt.
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BOMBSHELL: Damning SEC OIG Audit of SIPC Raises Conflicts of Interest for MF Global Liquidation Trustee James. W. Giddens
Submitted by EB on 12/06/2011 08:27 -0500
Commodity Futures Trading Commission ETC Fee Application headlines Lehman Lehman Brothers MF Global Securities and Exchange Commission
While MF Global figurehead, Jon Corzine, has grabbed most of the headlines with respect to MF Global's demise, it is our hope that US Congressman investigating this debacle shine light on the racket that is SIPC--an organization that can appoint a crony insider who is unrestrained by bankruptcy laws on the amount of fees he can rack up. The looting of the MF Global customer funds by the liquidation trustee, James W. Giddens (who has no experience with a futures broker liquidation, by the way) must stop and not be allowed to be repeated. -EB
Guest Post Submitted by MFGFacts.com
The SEC Office of Inspector General published a damning audit of the Securities Investor Protection (SIPC) Activities just this past March. Yet most everything in it appears to have been ignored. Prominent among the ongoing grave accountability problems inside SIPC are that Trustee Fees are excessive, with practically no oversight and absolutely no recourse.
From the report:
Liquidations are similar to ordinary bankruptcy cases, it does not provide any limit on the amount of trustee fees in SIPA liquidations, unlike bankruptcy cases. Second, under SIPA, where payments are made out of the SIPC fund, courts have no discretion whatsoever to limit fees that SIPC has recommended for trustees or their counsel. Thus, even if a court finds the amount of fees awarded to the trustee to be excessive, it is required to approve such excessive fees if SIPC determines that the fees are reasonable. We found that in one case, a Southern District of New York bankruptcy judge deemed fees to be awarded to the trustee in a liquidation to be excessive, but found that he had no choice but to approve the fees.
Fees around the LBI liquidation are among those singled out as excessive, regardless the SIPC hired the same trustee for the MF Global, Inc liquidation.
According to the latest published report, the fees paid to the trustee and his counsels processing the Lehman claims for the period from September 2008 to September 2010 (24 months) totaled approximately $108 million. According to the fourth interim fee application, as of September 30, 2010, the entire administrative fees, including fees for accountants, consultants, etc., totaled approximately $420 million.
We hadn’t see anything yet. October 24th Bloomberg reported that LBH had spent “642 million on its liquidation, with most of the money going for professional and consulting fees. Trustee James Giddens and his law firm, Hughes Hubbard & Reed LLP, have earned about $169 million.”
No reviews of fees and a weak warning
An entire section of the OIG report is dedicated to the problem that “The SEC Does Not Review Fees SIPC Pays to Court-Appointed Trustees on a Periodicor Systematic Basis”
Remember, this is a government sponsored corporation, and in a time of the exploding bankruptcies in the financial sector we discover that there have been no reviews of fees paid to trustees since 2003 — almost a decade.
Disparagingly, the report continues that Unlike Chapter 7 or 11 bankruptcies “with respect to SIPA liquidations, there is no equivalent provision capping fees and, thus, there is no statutory limit on the amount of fees a trustee can earn in a SIPA case.”
This must be repeated: “no statutory limit on the amount of fees a trustee can earn in a SIPA case.”
So the the report is obliged to make a number of recommendations to try and deal with excessive fees by Trustees. But right now, even if SIPC complains (would they ever dare?) or seeks recourse on extreme fees, there is simply nothing a judge can do about it under current SIPC regulations
And with that, the audit report concludes with a weak warning that Congress might be called upon to get abusive conditions under control
“The Division of Trading and Markets, in consultation with the Commission, shall determine whether to request that Congress modify the Securities Investor Protection Act (SIPA) to allow bankruptcy judges who preside over SIPA liquidations to assess the reasonableness of administrative fees in cases where administrative fees are paid by the Securities Investor Protection Corporation.”
No Shame
If this is not bleak enough, note that the trustee for both Lehman Brothers and MF Global, Inc. has been also the SIPC “house lawyer” for decades. The SIPC is a private corporation and can hire whoever it wants. A private corporation, albeit with a government charter and vast public responsibility. The glaring conflicts for a corporation with this degree of accountability to the public, is beyond the pale by any standard of “good governance.” Gidden’s own public profile reports, “He has been involved with SIPC from the time of its creation in 1970, served as counsel to SIPC in a variety of matters and has served as Trustee or principal counsel in seven major SIPC liquidations, He has also served as a special funds administrator appointed by the Securities and Exchange Commission.” Giddens is a is a member of the SIPC Modernization Task Force. (Which means he is on the committee charged with things like updating the making of recommendations to Congress on any modifications to the Securities Investor Protection Act (SIPA) to fix things like lack of recourse due to excessive fees!)
Just as example of how a trustee get named by SIPC for the LBI liquidation two days before LBI filed for bankruptcy on on September 15th, 2008. The SIPC had already decided who would be hired. In a September 13th letter from Stephen Harbeck, head of SIPC tells the board “The situation is both very fluid and very “non-public”. Should it become necessary to take action, Jim Giddens of Hughes Hubbard and Reed will serve as trustee and counsel.”
There is no shame. In March we have a government report on lack of controls, accountability and the problems of Trustees gone wild. And on October 31st, obviously ignoring the implications of the published audit, the SIPC hands over yet another liquidation to their main man, likely in the same manner of the LBI assignment. MFG Facts and others continue to ask how is it that the CFTC abdicated their congressional mandate and pushed a Futures Commission Merchant into the jaws of SIPC who then with no competition, no regard of the recent OIG audit, and obviously no debate, immediately handed it to James W. Giddens of the firm Hughes Hubbard & Reed?
Today Bart Chilton of the CFTC called for an insurance scheme just like SIPC for the futures industry.
www.zerohedge.com
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Senator Shelby slams CFTC over MF Global
Yahoo ^ | 11/6/11 | Dave Clarke and Sarah N. Lynch - Reuters
WASHINGTON (Reuters) - The top Republican on the Senate Banking Committee on Tuesday criticized the Commodity Futures Trading Commission's handling of MF Global's meltdown and said its chief is "evading" questions about his role in overseeing the company.
Senator Richard Shelby said MF Global customers are waiting for their money to be returned while a "bewildered" CFTC searches for the funds.
"The victims of MF Global, I believe, deserve better," Shelby said.
Shelby made his comments at a Senate Banking Committee hearing on the implementation of the 2010 Dodd-Frank financial oversight law. CFTC Chairman Gary Gensler is testifying at the hearing.
Gensler said in early November that he was not participating in the investigation of futures brokerage MF Global so he would not become a distraction or risk creating an appearance of a conflict of interest.
Gensler and Jon Corzine, who resigned as MF Global's chief executive early last month, worked at Goldman Sachs at the same time and held prominent positions. They both left the investment bank in the late 1990s.
"Holding the CFTC accountable for its regulatory failures, however, will not be an easy task," Shelby said. "Already Chairman Gensler has been evading questions about his role in the regulation of MF Global."
Shelby has requested that the CFTC's inspector general look into the agency's oversight of MF Global including Gensler's decision to recuse himself from the investigation.
(Excerpt) Read more at news.yahoo.com ...
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MF Global fallout delays U.S. farm seed, land deals
By Tom Polansek
CHICAGO | Tue Dec 6, 2011 12:49pm EST
CHICAGO (Reuters) - For the first time in 25 years, Minnesota farmer Dean Tofteland has missed his deadline to buy seed for next spring's corn and soybean crops.
With $200,000 of his money yet to be returned from the accounts of MF Global, his former broker, the 49-year-old farmer has missed a $5,000 discount for early buyers, and is watching friends and neighbors snap up the best varieties of seeds.
In the latest sign of how MF Global's failure is continuing to cascade across the commodity industry, Tofteland and other farmers who have yet to recover more than a third of their money from the bankrupt broker now find themselves in a cash crunch that risks rippling far beyond the futures market.
Some farmers have had to postpone purchases of land or equipment. Tofteland still expects to sow his 1,000 acres in the southwest corner of the state, but may have to borrow money to do so.
Still, the delay in returning billions of dollars in customer funds more than a month after MF Global filed for bankruptcy is starting to affect actual decisions on the farm. This threatens to cloud the outlook for U.S. crops, warn farmers who have been ratcheting up pressure on the bankruptcy trustee to move faster to disperse any cash he secures.
"That's pretty serious when you're raising food for the country and the world," Tofteland said.
For most farmers, the fact that their broker may have taken as much as $1.2 billion of customer money for its own use is bad enough. But the seasonal business of farming is now being disrupted since regulators still can't account for the missing funds, or even agree how big the hole is.
The chief regulatory officer for CME Group said on Tuesday the exchange was confident after more investigations that some of the higher estimates of the shortfall in MF Global customer funds were inflated. CME was MF Global's main regulator at the exchange level.
"The amount of money that we have tied up is significant," Tofteland said. "Because of this I've been delaying my seed purchase decisions."
Tofteland normally would have made his purchases at least two weeks ago to take advantage of discounts for farmers who buy early. He has avoided borrowing money in order to do so because he does not want to take on more debt but says he will consider a loan if the delay persists.
Tofteland worries his harvest next fall will suffer because the best-performing types of seeds will likely be sold out by the time he makes his purchases. He still plans to plant his crop in the spring.
DAWNING IMPACT
Farmers are among the thousands of former MF Global clients who are missing money from the brokerage. The firm run by former New Jersey Governor Jon Corzine, an ex-CEO of Goldman Sachs, collapsed on October 31 after making bad bets on European debt.
The bankruptcy had an immediate impact on farmers' abilities to hedge their crops at grain exchanges. Many had to liquidate positions or put up additional cash to meet margin calls after their accounts were transferred from MF Global to other brokerages.
Now, the collapse has begun to impact farm decisions that can directly affect output.
In Montana, Marty Klinker, who grows wheat and barley, is missing about $275,000 from his accounts at MF Global. He said the shortfall caused him to delay buying more than $500,000 worth of farm equipment, including a tractor and combine, from manufacturer Case IH.
Klinker didn't know whether he would eventually buy the equipment, which would replace older models on his farm. He said he has to decide by the end of the year to take advantage of prices he previously negotiated with the company.
Case is a brand of CNH, a majority-owned subsidiary of Italy's Fiat SpA. A Case spokesman did not respond to a request for comment.
"We're right in the middle of year-end equipment decisions," Klinker said.
FARMERS CAUGHT OFF GUARD
MF Global's collapse has not completely halted farm purchases.
Stine Seed, which calls itself the largest independent U.S. seed company, has not seen a slowdown in sales, said Myron Stine, vice president of sales and marketing.
Yet, other agribusiness professionals confirm shockwaves from the bankruptcy have disrupted plans affecting crop production.
Diana Klemme, a broker for Midwest grain elevators and vice president of Grain Service Corp in Atlanta, said one of her clients was holding about $400,000 cash in an MF Global account at the time of its collapse. The client had to delay purchasing some land because the money had been frozen, she said.
Farmers were caught off guard by the disappearance of their money because it was held in segregated accounts considered to be immune from troubles at brokerages. Several farmers said they had felt it was safer to keep cash in the accounts than at local banks.
Congress is holding a series of hearings to examine whether regulators and company insiders could have done more to prevent MF Global's failure from hurting farmers and investors.
At a Senate Banking Committee hearing on Tuesday, Senator Richard Shelby criticized the Commodity Futures Trading Commission's handling of the meltdown, saying he thought former clients of MF Global "deserve better".
Farmers worry the cost of doing business could go up permanently due to the increased risk of keeping money in segregated accounts, making it more expensive to produce crops. For Klinker, whose oldest son is entering the family business, that could mean upgrading equipment less frequently than he has in the past.
"It impacts everything," he said.
(Reporting by Tom Polansek; Additional reporting by Jonathan Spicer in New York and Dave Clark in Washington; Editing by Dale Hudson)
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Jon Corzine to tell House panel he doesn’t know where customers’ money went
Washington Post ^ | 12/8/11 | David S. Hilzenrath
Jon S. Corzine, the former U.S. senator and New Jersey governor who presided over the collapse of the commodities brokerage MF Global, says he cannot explain what happened to “many hundreds of millions of dollars” that the firm was holding for customers. In testimony prepared for delivery to Congress on Thursday, Corzine says he was “stunned” to learn shortly before the firm sought bankruptcy protection at the end of October that MF Global could not account for the money. “I simply do not know where the money is, or why the accounts have not been reconciled to date,” the former MF Global chief executive says, according to the testimony.
(Excerpt) Read more at washingtonpost.com ...
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December 7, 2011, 4:07 pm Deal Professor
10 Questions for Jon Corzine
By STEVEN M. DAVIDOFF and PETER J. HENNING
Jon S. Corzine, the former chief of MF Global.Jon S. Corzine, the former chief executive of MF Global Holdings and a former Democratic senator from New Jersey, is being forced to return to Capitol Hill on Thursday morning.
The House Agricultural Committee subpoenaed Mr. Corzine after he resisted the committee’s request that he voluntarily answer questions.
It’s a reversal of fortune for the man once mentioned as a potential Treasury secretary. Mr. Corzine’s pain may be brief. Mr. Corzine is likely being advised by his lawyers to invoke his Fifth Amendment right against self-incrimination. We’ll soon find out if he listens to his lawyers.
If Mr. Corzine turns out to be more voluble, here are some questions the committee may want to ask:
1. You were chief executive of MF Global with day-to day responsibility for the entire operation. Yet, it appears that you were personally responsible for structuring and monitoring the $6.35 billion trade in sovereign European debt of Italy, Spain, Portugal, Ireland and Belgium — a bet that spooked investors and the ratings agencies, ultimately bringing down the firm.
You took on this responsibility despite the fact you had been a politician for more than a decade and were likely not as familiar with markets as you were when you were at Goldman Sachs. Why did you feel the need to personally trade for MF Global instead of having a trader or trading group do it? Who did you speak to structure and monitor this trade, particularly since you were preoccupied with running this entire business?
2. Your chief risk officer, Michael Roseman, warned you against this bet on troubled sovereign European debt, according to The Wall Street Street Journal. Mr. Roseman reportedly thought that the trade was too risky because MF Global did not have sufficient liquidity to sustain its positions if the firm was downgraded by the ratings agencies. Can you tell us what Mr. Roseman told you, whether his concerns were relayed to the board of directors and why you ignored his warnings?
3. As a follow-up, MF Global was heavily leveraged. After the experience of the financial crisis, when firms with high leverage ratios failed, why did you undertake a trade that appeared to consume more than half of your remaining capital?
4. MF Global was largely a brokerage firm when you took over. It did not regularly trade in sovereign debt for its own profit, at least not in the manner you did. Why did you feel the need to enter into large trading positions that the company had previously never taken, and do you think trading the firm’s capital in this manner was appropriate and expected by shareholders?
5. You apparently had significant contact with the Commodity Futures Trading Commission and its chairman, Gary Gensler, about whether the agency should adopt regulations restricting broker use of client money to trade. Helped in part by your opposition, these rules were not adopted until after the collapse of MF Global.
Mr. Gensler worked for you at Goldman Sachs, and he has now recused himself from the investigation of MF Global. stating that he did not want to become a “distraction.” Can you describe your earlier conversations with Mr. Gensler, and do you believe that you had special access to the agency because of your history with Mr. Gensler?
6. There is still as much as $1.2 billion estimated to be missing in client money entrusted to MF Global. Were you aware that client money was being used to support MF Global’s trades, and if so, why did you not stop it? Who do you think is responsible for this misuse of client money?
7. Another follow-up. As MF Global’s chief executive, you had to sign off on its quarterly financial statements and attest to the firm’s internal controls. How could so much client money apparently be missing, and the records be described by a C.F.T.C. commission as a “disaster,” when you said the internal controls met all legal requirements?
8. Your board reportedly signed off on these trades. In fact, it appears that the board had sole oversight of these investments. What did you tell the board about this trade and do you think directors comprehended the risks?
9. Some 3,000 people have lost their jobs at MF Global, and customers will likely lose significant money. You resigned from MF Global, passing up a pay package of $12.1 million, but if Interactive Brokers Group had acquired your firm, you would have automatically received this amount. Your pay package appears to be a case of heads I win, tails I break even. Do you think that your compensation was appropriate in terms of incentives?
10. This trade was only a multiyear one but could have generated up to $750 million in profit. MF Global lost almost $79 million in 2010. Was it your intent to continue to engage in large trades like this one again to generate MF Global’s profits and, if not, what was your business plan for MF Global?
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Steven M. Davidoff, writing as The Deal Professor, is a commentator for DealBook on the world of mergers and acquisitions.
Peter J. Henning, who writes White Collar Watch for DealBook, is a professor at Wayne State University Law School.
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Jon Corzine "I Simply Does Not Know Where The Money Is" -- Complete Testimony To Congress
Zero Hedge ^ | 12/08/2011 | Tyler Durden
Posted on Thursday, December 08, 2011 10:18:41 AM by SeekAndFind
Probably far more anticipated than the monetary announcements out of BOE (which just announced it is keeping rates at a record low of 0.5%, but no more QE), or even the ECB, and certainly far more than the latest and not greatest European summit which begins today, is the 9am testimony out of the House Agriculture Committee by one "Honorable" Jon S. Corzine, as well as the Q&A that will follow.
Naturally the Q&A will be the focus, but as for the prepared remarks, they have just been released and are presented below.
The choice selection:
"Obviously on the forefront of everyone’s mind – including mine – are the varying reports that customer accounts have not been reconciled. I was stunned when I was told on Sunday, October 30, 2011, that MF Global could not account for many hundreds of millions of dollars of client money. I remain deeply concerned about the impact that the unreconciled and frozen funds have had on MF Global’s customers and others. As the chief executive officer of MF Global, I ultimately had overall responsibility for the firm. I did not, however, generally involve myself in the mechanics of the clearing and settlement of trades, or in the movement of cash and collateral. Nor was I an expert on the complicated rules and regulations governing the various different operating businesses that comprised MF Global. I had little expertise or experience in those operational aspects of the business."
(Excerpt) Read more at zerohedge.com ...
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Corzine sorry, puzzled by missing MF Global money
Yahoo Finance ^ | December 8,2011 | Sarah N. Lynch
Former MF Global chief Jon Corzine apologized to customers, employees and investors who have suffered because of the brokerage firm's collapse, but said he does not know where missing customer money is.
"Their plight weighs on my mind every day -- every hour," Corzine, a former U.S. senator, said in 21 pages of remarks prepared for delivery on Thursday before the House Agriculture Committee.
"I simply do not know where the money is, or why the accounts have not been reconciled to date," he said.
Corzine's contrite but defensive remarks are his first since MF Global's October 31 bankruptcy and his resignation days later. Revelations of massive bets on European sovereign debt caused markets to lose confidence in the firm.
The search for hundreds of millions of dollars in missing customer funds has sent reverberations through the farm belt and trading floors, and has attracted the attention of the FBI and federal prosecutors. Thousands of customers have had their money frozen.
"It appears to me that nobody has learned a thing from what's gone on here. Wall Street is operating as if 2008 never happened," said Collin Peterson, the top Democrat on the Committee, referring to the recent financial crisis.
In separate testimony, a top executive of futures exchange operator CME Group Inc said MF Global misused hundreds of millions of dollars of customer funds by moving the money to its own accounts, the strongest accusation yet against the bankrupt futures brokerage. "Transfers of customer funds for the benefit of the firm constitute serious violations of our rules and of the Commodity Exchange Act," CME Executive Chairman Terrence Duffy said in prepared remarks. CME, the biggest U.S. futures exchange operator, was a hands-on regulator of MF Global.
(Excerpt) Read more at finance.yahoo.com ...
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Corzine blames predecessors for MF Global's fall
Google ^ | 12/8/2011 | DANIEL WAGNER / AP
Jon Corzine will tell a House panel Thursday that he doesn't know the location of client money that went missing when MF Global failed. And he will argue that he inherited a firm doomed by the risks his predecessors took.
Yet Corzine says he accepts responsibility for the firm's risky bets and says its customers' losses weigh on his mind "every day — every hour."
The former U.S. senator was subpoenaed to explain how MF Global, which he led for about 20 months, collapsed into the eighth-largest bankruptcy in U.S. history and why an estimated $1.2 billion in client funds remains unaccounted for.
In prepared testimony for the hearing before the House Agriculture Committee, Corzine apologizes to "all those affected" by MF Global's failure. The company filed for bankruptcy protection on Oct. 31 after making disastrous bets on European government debt.
(Excerpt) Read more at google.com ...
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LOL. Typical - blame someone else.
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MF Global and the great Wall St re-hypothecation scandal
12/7/2011 COMMENTS (0)
By Christopher Elias (UK)
(Business Law Currents) A legal loophole in international brokerage regulations means that few, if any, clients of MF Global are likely to get their money back. Although details of the drama are still unfolding, it appears that MF Global and some of its Wall Street counterparts have been actively and aggressively circumventing U.S. securities rules at the expense (quite literally) of their clients.
MF Global's bankruptcy revelations concerning missing client money suggest that funds were not inadvertently misplaced or gobbled up in MF’s dying hours, but were instead appropriated as part of a mass Wall St manipulation of brokerage rules that allowed for the wholesale acquisition and sale of client funds through re-hypothecation. A loophole appears to have allowed MF Global, and many others, to use its own clients’ funds to finance an enormous $6.2 billion Eurozone repo bet.
If anyone thought that you couldn’t have your cake and eat it too in the world of finance, MF Global shows how you can have your cake, eat it, eat someone else’s cake and then let your clients pick up the bill. Hard cheese for many as their dough goes missing.
FINDING FUNDS
Current estimates for the shortfall in MF Global customer funds have now reached $1.2 billion as revelations break that the use of client money appears widespread. Up until now the assumption has been that the funds missing had been misappropriated by MF Global as it desperately sought to avoid bankruptcy.
Sadly, the truth is likely to be that MF Global took advantage of an asymmetry in brokerage borrowing rules that allow firms to legally use client money to buy assets in their own name - a legal loophole that may mean that MF Global clients never get their money back.
REPO RECAP
First a quick recap. By now the story of MF Global’s demise is strikingly familiar. MF plowed money into an off-balance-sheet maneuver known as a repo, or sale and repurchase agreement. A repo involves a firm borrowing money and putting up assets as collateral, assets it promises to repurchase later. Repos are a common way for firms to generate money but are not normally off-balance sheet and are instead treated as “financing” under accountancy rules.
MF Global used a version of an off-balance-sheet repo called a "repo-to-maturity." The repo-to-maturity involved borrowing billions of dollars backed by huge sums of sovereign debt, all of which was due to expire at the same time as the loan itself. With the collateral and the loans becoming due simultaneously, MF Global was entitled to treat the transaction as a “sale” under U.S. GAAP. This allowed the firm to move $16.5 billion off its balance sheet, most of it debt from Italy, Spain, Belgium, Portugal and Ireland.
Backed by the European Financial Stability Facility (EFSF), it was a clever bet (at least in theory) that certain Eurozone bonds would remain default free whilst yields would continue to grow. Ultimately, however, it proved to be MF Global’s downfall as margin calls and its high level of leverage sucked out capital from the firm. For more information on the repo used by MF Global please see Business Law Currents MF Global – Slayed by the Grim Repo?
Puzzling many, though, were the huge sums involved. How was MF Global able to “lose” $1.2 billion of its clients’ money and acquire a sovereign debt position of $6.3 billion – a position more than five times the firm’s book value, or net worth? The answer it seems lies in its exploitation of a loophole between UK and U.S. brokerage rules on the use of clients funds known as “re-hypothecation”.
RE-HYPOTHECATION
By way of background, hypothecation is when a borrower pledges collateral to secure a debt. The borrower retains ownership of the collateral but is “hypothetically” controlled by the creditor, who has a right to seize possession if the borrower defaults.
In the U.S., this legal right takes the form of a lien and in the UK generally in the form of a legal charge. A simple example of a hypothecation is a mortgage, in which a borrower legally owns the home, but the bank holds a right to take possession of the property if the borrower should default.
In investment banking, assets deposited with a broker will be hypothecated such that a broker may sell securities if an investor fails to keep up credit payments or if the securities drop in value and the investor fails to respond to a margin call (a request for more capital).
Re-hypothecation occurs when a bank or broker re-uses collateral posted by clients, such as hedge funds, to back the broker’s own trades and borrowings. The practice of re-hypothecation runs into the trillions of dollars and is perfectly legal. It is justified by brokers on the basis that it is a capital efficient way of financing their operations much to the chagrin of hedge funds.
U.S. RULES
Under the U.S. Federal Reserve Board's Regulation T and SEC Rule 15c3-3, a prime broker may re-hypothecate assets to the value of 140% of the client's liability to the prime broker. For example, assume a customer has deposited $500 in securities and has a debt deficit of $200, resulting in net equity of $300. The broker-dealer can re-hypothecate up to $280 (140 per cent. x $200) of these assets.
But in the UK, there is absolutely no statutory limit on the amount that can be re-hypothecated. In fact, brokers are free to re-hypothecate all and even more than the assets deposited by clients. Instead it is up to clients to negotiate a limit or prohibition on re-hypothecation. On the above example a UK broker could, and frequently would, re-hypothecate 100% of the pledged securities ($500).
This asymmetry of rules makes exploiting the more lax UK regime incredibly attractive to international brokerage firms such as MF Global or Lehman Brothers which can use European subsidiaries to create pools of funding for their U.S. operations, without the bother of complying with U.S. restrictions.
In fact, by 2007, re-hypothecation had grown so large that it accounted for half of the activity of the shadow banking system. Prior to Lehman Brothers collapse, the International Monetary Fund (IMF) calculated that U.S. banks were receiving $4 trillion worth of funding by re-hypothecation, much of which was sourced from the UK. With assets being re-hypothecated many times over (known as “churn”), the original collateral being used may have been as little as $1 trillion – a quarter of the financial footprint created through re-hypothecation.
BEWARE THE BRITS: CIRCUMVENTING U.S. RULES
Keen to get in on the action, U.S. prime brokers have been making judicious use of European subsidiaries. Because re-hypothecation is so profitable for prime brokers, many prime brokerage agreements provide for a U.S. client’s assets to be transferred to the prime broker’s UK subsidiary to circumvent U.S. rehypothecation rules.
Under subtle brokerage contractual provisions, U.S. investors can find that their assets vanish from the U.S. and appear instead in the UK, despite contact with an ostensibly American organisation.
Potentially as simple as having MF Global UK Limited, an English subsidiary, enter into a prime brokerage agreement with a customer, a U.S. based prime broker can immediately take advantage of the UK’s unrestricted re-hypothecation rules.
LEHMAN LESSONS
In fact this is exactly what Lehman Brothers did through Lehman Brothers International (Europe) (LBIE), an English subsidiary to which most U.S. hedge fund assets were transferred. Once transferred to the UK based company, assets were re-hypothecated many times over, meaning that when the debt carousel stopped, and Lehman Brothers collapsed, many U.S. funds found that their assets had simply vanished.
A prime broker need not even require that an investor (eg hedge fund) sign all agreements with a European subsidiary to take advantage of the loophole. In fact, in Lehman’s case many funds signed a prime brokerage agreement with Lehman Brothers Inc (a U.S. company) but margin-lending agreements and securities-lending agreements with LBIE in the UK (normally conducted under a Global Master Securities Lending Agreement).
These agreements permitted Lehman to transfer client assets between various affiliates without the fund’s express consent, despite the fact that the main agreement had been under U.S. law. As a result of these peripheral agreements, all or most of its clients’ assets found their way down to LBIE.
MF RE-HYPOTHECATION PROVISION
A similar re-hypothecation provision can be seen in MF Global’s U.S. client agreements. MF Global’s Customer Agreement for trading in cash commodities, commodity futures, security futures, options, and forward contracts, securities, foreign futures and options and currencies includes the following clause:
“7. Consent To Loan Or PledgeYou hereby grant us the right, in accordance with Applicable Law, to borrow, pledge, repledge, transfer, hypothecate, rehypothecate,loan, or invest any of the Collateral, including, without limitation, utilizing the Collateral to purchase or sell securities pursuant to repurchase agreements [repos] or reverse repurchase agreements with any party, in each case without notice to you, and we shall have no obligation to retain a like amount of similar Collateral in our possession and control.”
In its quarterly report, MF Global disclosed that by June 2011 it had repledged (re-hypothecated) $70 million, including securities received under resale agreements. With these transactions taking place off-balance sheet it is difficult to pin down the exact entity which was used to re-hypothecate such large sums of money but regulatory filings and letters from MF Global’s administrators contain some clues.
According to a letter from KPMG to MF Global clients, when MF Global collapsed, its UK subsidiary MF Global UK Limited had over 10,000 accounts. MF Global disclosed in March 2011 that it had significant credit risk from its European subsidiary from “counterparties with whom we place both our own funds or securities and those of our clients”.
CAUSTIC COLLATERAL
Matters get even worse when we consider what has for the last 6 years counted as collateral under re-hypothecation rules.
Despite the fact that there may only be a quarter of the collateral in the world to back these transactions, successive U.S. governments have softened the requirements for what can back a re-hypothecation transaction.
Beginning with Clinton-era liberalisation, rules were eased that had until 2000 limited the use of re-hypothecated funds to U.S. Treasury, state and municipal obligations. These rules were slowly cut away (from 2000-2005) so that customer money could be used to enter into repurchase agreements (repos), buy foreign bonds, money market funds and other assorted securities.
Hence, when MF Global conceived of its Eurozone repo ruse, client funds were waiting to be plundered for investment in AA rated European sovereign debt, despite the fact that many of its hedge fund clients may have been betting against the performance of those very same bonds.
OFF BALANCE SHEET
As well as collateral risk, re-hypothecation creates significant counterparty risk and its off-balance sheet treatment contains many hidden nasties. Even without circumventing U.S. limits on re-hypothecation, the off-balance sheet treatment means that the amount of leverage (gearing) and systemic risk created in the system by re-hypothecation is staggering.
Re-hypothecation transactions are off-balance sheet and are therefore unrestricted by balance sheet controls. Whereas on balance sheet transactions necessitate only appearing as an asset/liability on one bank’s balance sheet and not another, off-balance sheet transactions can, and frequently do, appear on multiple banks’ financial statements. What this creates is chains of counterparty risk, where multiple re-hypothecation borrowers use the same collateral over and over again. Essentially, it is a chain of debt obligations that is only as strong as its weakest link.
With collateral being re-hypothecated to a factor of four (according to IMF estimates), the actual capital backing banks re-hypothecation transactions may be as little as 25%. This churning of collateral means that re-hypothecation transactions have been creating enormous amounts of liquidity, much of which has no real asset backing.
The lack of balance sheet recognition of re-hypothecation was noted in Jefferies’ recent 10Q (emphasis added):
“Note 7. Collateralized Transactions
We pledge securities in connection with repurchase agreements, securities lending agreements and other secured arrangements, including clearing arrangements. The pledge of our securities is in connection with our mortgage−backed securities, corporate bond, government and agency securities and equities businesses. Counterparties generally have the right to sell or repledge the collateral.Pledged securities that can be sold or repledged by the counterparty are included within Financial instruments owned and noted as Securities pledged on our Consolidated Statements of Financial Condition. We receive securities as collateral in connection with resale agreements, securities borrowings and customer margin loans. In many instances, we are permitted by contract or custom to rehypothecate securities received as collateral. These securities maybe used to secure repurchase agreements, enter into security lending or derivative transactions or cover short positions. At August 31, 2011 and November 30, 2010, the approximate fair value of securities received as collateral by us that may be sold or repledged was approximately $25.9 billion and $22.3 billion, respectively. At August 31, 2011 and November 30, 2010, a substantial portion of the securities received by us had been sold or repledged.
We engage in securities for securities transactions in which we are the borrower of securities and provide other securities as collateral rather than cash. As no cash is provided under these types of transactions, we, as borrower, treat these as noncash transactions and do not recognize assets or liabilities on the Consolidated Statements of Financial Condition. The securities pledged as collateral under these transactions are included within the total amount of Financial instruments owned and noted as Securities pledged on our Consolidated Statements of Financial Condition.
According to Jefferies’ most recent Annual Report it had re-hypothecated $22.3 billion (in fair value) of assets in 2011 including government debt, asset backed securities, derivatives and corporate equity- that’s just $15 billion shy of Jefferies total on balance sheet assets of $37 billion.
HYPER-HYPOTHECATION
With weak collateral rules and a level of leverage that would make Archimedes tremble, firms have been piling into re-hypothecation activity with startling abandon. A review of filings reveals a staggering level of activity in what may be the world’s largest ever credit bubble.
Engaging in hyper-hypothecation have been Goldman Sachs ($28.17 billion re-hypothecated in 2011), Canadian Imperial Bank of Commerce (re-pledged $72 billion in client assets), Royal Bank of Canada (re-pledged $53.8 billion of $126.7 billion available for re-pledging), Oppenheimer Holdings ($15.3 million), Credit Suisse (CHF 332 billion), Knight Capital Group ($1.17 billion),Interactive Brokers ($14.5 billion), Wells Fargo ($19.6 billion), JP Morgan($546.2 billion) and Morgan Stanley ($410 billion).
Nor is lending confined to between banks. Intra-bank re-hypothecation is also possible as evidenced by filings from Wells Fargo. According to disclosures from Wachovia Preferred Funding Corp, its parent, Wells Fargo, acts as collateral custodian and has the right to re-hypothecate and use around $170 million of assets posted as collateral.
LIQUIDITY CRISIS
The volume and level of re-hypothecation suggests a frightening alternative hypothesis for the current liquidity crisis being experienced by banks and for why regulators around the world decided to step in to prop up the markets recently. To date, reports have been focused on how Eurozone default concerns were provoking fear in the markets and causing liquidity to dry up.
Most have been focused on how a Eurozone default would result in huge losses in Eurozone bonds being felt across the world’s banks. However, re-hypothecation suggests an even greater fear. Considering that re-hypothecation may have increased the financial footprint of Eurozone bonds by at least four fold then a Eurozone sovereign default could be apocalyptic.
U.S. banks direct holding of sovereign debt is hardly negligible. According to the Bank for International Settlements (BIS), U.S. banks hold $181 billion in the sovereign debt of Greece, Ireland, Italy, Portugal and Spain. If we factor in off-balance sheet transactions such as re-hypothecations and repos, then the picture becomes frightening.
As for MF Global’s clients, the recent adoption of an “MF Global rule” by the Commodity Futures Trading Commission to ban using client funds to purchase foreign sovereign debt, would seem to suggest that it was indeed client money behind its leveraged repo-to-maturity deal - a fact that will likely mean that very few MF Global clients few get their money back.
Written with contributions from Jack Bunker and Nanette Byrnes.
(This article was first published by Thomson Reuters’ Business Law Currents, a leading provider of legal analysis and news on governance, transactions and legal risk. Visit Business Law Currents online at http://currents.westlawbusiness.com. )
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Corzine 'stunned' that MF Global couldn't find missing funds
December 8, 2011 | 11:40 am 6414
As the first former U.S. senator to be subpoenaed by Congress in more than a century, Jon Corzine testified Thursday about the “last chaotic days” of MF Global, the trading firm that declared bankruptcy under his watch.
Corzine said he was “stunned” to learn that the firm could not locate hundreds of millions of dollars in client money in the days before the firm’s collapse, and said he had no idea where the money had gone.
Corzine was chief executive of MF Global when the firm filed for bankruptcy protection Oct. 31. He resigned from his post five days later.
“I simply do not know where the money is or why the accounts have not been reconciled to date,” he said in testimony before the House Agriculture Committee.
Client money should have been held in segregated accounts separate from those involving the firms’ own trading activity. The disappearance of the money has led to speculation that MF Global used customer funds to shore up risky bets on European sovereign debt.
“I never intended to break any rules,” Corzine said when asked whether he had ever authorized a transfer of customer funds from segregated accounts.
“There were an extraordinary number of transactions during MF Global’s last few days, and I do not know, for example, whether there were operational errors at MF Global or elsewhere, or whether banks and counterparties have held onto funds that should rightfully have been returned to MF Global,” Corzine said.
Corzine said he “strongly advocated" the trading strategy that led MF Global to accumulate more than $6 billion in holdings in European sovereign debt. But he said the company’s sovereign debt positions were not the cause of the firm’s collapse.
The sovereign debt was “a concern to the marketplace, make no mistake about that,” Corzine said. But he said customers’ confidence in the firm also was rattled by ratings downgrades and a failure on the part of MF Global management to communicate the reasons for the company's struggles.
“It often got conflated with Euro-sovereign positions, which there actually were no losses in,” he said.
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http://www.zerohedge.com/contributed/corzine-mfg-fog-war
Great article. Love this site.
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The Suits Commence: Two Former MF Global Employees Sue Jon Corzine
Submitted by Tyler Durden on 12/05/2011 12:37 -0500
Goldman Sachs goldman sachs MF Global
While the US Attorney General's office, presided by a very much embroiled in the Fast and Furious scandal Eric Holder, who at last check was spending 90% of his time frozen in carbonite, may believe that Jon Corzine is the homo sapiens equivalent of holy water, others appear to not share the sentiment. And as of today, two former employees have proceeded to sue Jon Corzine as fins.com reports. "Two former employees of MF Global have filed a class-action lawsuit against the firm's former Chief Executive Jon Corzine, other senior executives and board directors on behalf of themselves and current and former employees who acquired stock in the company while Corzine led the firm. The lawsuit, filed in the United States District Court for the Southern District of New York, alleges that the defendants provided false information regarding the company's financial condition and made statements that artificially inflated the stock price." Jon Corzine and the board breached their fiduciary duty to their employees and destroyed their careers and retirement savings," Jacob Zamansky, lead counsel for the plaintiffs, said in an email. The plaintiffs are Monica Rodriguez, the New York-based head of credit for the Americas, and Cyrille Guillaume, the London-based managing director of the commodities and stock division....If employees had known MF Global's true financial state, Zamansky said, "they could have refused to buy in or insisted on compensation arrangements that were all cash." And here is why Corzine's life is about to get very difficult now that the precedent has been set: "The employees did not file suit against MF Global, the company itself, because it is currently undergoing bankruptcy proceedings." One wonders how much more various Attorneys General need to see to perhaps consider to at least question the former CEO of Goldman Sachs, pardon, MF Global.
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Corzine: I didn’t tell my company to use customer dollars, and if I did, I didn’t mean it
Hotair ^ | 12/09/2011 | Ed Morrissey
I don’t know. Maybe he should have stuck with the Fifth Amendment:
CLICK ABOVE LINK FOR THE VIDEO
Jon S. Corzine, the former U.S. senator and governor who presided over the collapse of the commodities brokerage MF Global, told lawmakers Thursday that he never intended to authorize a transfer of customer funds to the firm’s accounts and that if he did “it was a misunderstanding.”
Under pointed questioning by members of the House Committee on Agriculture, the New Jersey Democrat would not rule out the possibility that someone at the firm misinterpreted him as suggesting that the struggling firm tap into investors’ funds.
In his prepared testimony submitted before the hearing, Corzine said he could not explain what happened to “many hundreds of millions of dollars” that the firm was holding for customers. He said he was “stunned” to learn shortly before the firm sought bankruptcy protection at the end of October that MF Global could not account for the money.
“I simply do not know where the money is, or why the accounts have not been reconciled to date,” Corzine said, according to the testimony.
The firm was required to keep clients’ money separated from its own. But more than $1.2 billion might be missing, the trustee overseeing the firm’s liquidation said last month. An attorney for the trustee confirms that assessment in testimony submitted for for hearing.
Well, what could Corzine have said that would have contributed to a potential “misunderstanding”? “Gee, guys, wouldn’t it be great if we had another billion or so dollars we could tap to back up our play on Euro debt”? Or maybe,”Do you think anyone would notice if a billion or so in customer assets went missing”? This is the kind of statement that a competent cross-examiner would seize in an effort to drill into Corzine’s testimony.
This gets to the heart of the puzzling easy ride that Corzine has received from the media thus far. Thanks to the public outrage over the Enron fraud (and MCI and others as well), Congress passed the clumsy and costly Sarbanes-Oxley regulations that presumes that CEOs know about all of the fiscal moves a company makes. Corzine’s statement that “Other questions, given my specific role in the company, will be questions for which I have no personal knowledge,” would be rejected entirely in any other context. So far, the media has treated Corzine as more of a victim of circumstance than a man who ran an enterprise that absconded with $1.2 billion of his customer’s assets.
Give the Washington Post credit for mentioning that Corzine is a Democrat and a fundraiser for Barack Obama, two points that often get neglected in other reports. However, they resist connecting the dots as much as possible. For instance, they report on Corzine’s assertion that his lobbying against tougher enforcement that would have caught MF Global’s fraud did not amount to “undue influence”:
In his prepared testimony, Corzine also recounted that he lobbied against regulators’ effort to tighten restrictions on how brokerages such as MF Global could invest clients’ money.
The proposed rules change was championed by Gary Gensler, chairman of the Commodity Futures Trading Commission and a fellow alum of Goldman Sachs. Corzine said he argued against the change in a July conference call with Gensler. Gensler has recused himself from the agency’s probe of MF Global.
At the hearing, Corzine told lawmakers that he “did not exert undue or improper influence on regulators.”
However, with the exception of a single reference to Corzine as a New Jersey Democrat, there isn’t anything preceding this in the article which puts Corzine’s influence in the administration in any context at all — and nothing appears for eleven more paragraphs:
He used the personal fortune he built at Goldman to fuel his ascent to the U.S. Senate, where he served on the Banking Committee. He later won the New Jersey governorship. In 2007, he was badly injured in a car crash.
He ran for reelection as governor of New Jersey in 2009 but was defeated by Republican Chris Christie. As Corzine receded from the public eye, Christie gained national prominence and recently considered jumping into the presidential race.
At MF Global, Corzine was returning to his Wall Street roots. The job could have served as a step toward a political comeback. As recently as last spring, he hosted a fundraiser for President Obama.
Er, yeah — and as recently as this summer, Obama made Corzine his liaison between Wall Street and his re-election campaign. That’s the context in which Corzine’s pushback against the regulators took place, a fact that Washington Post readers won’t know unless they read about it somewhere else.
It’s not quite “name that party,” but it’s close.
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Corzine’s ‘clueless’ confession
By CHARLES GASPARINO
Last Updated: 9:50 AM, December 9, 2011
Jon Corzine says he has no idea of the whereabouts of up to $1.2 billion in customer money that disappeared amid the implosion of the firm that he ran, MF Global. His “Sgt. Schultz” defense yesterday before a congressional committee would be pretty funny — if it weren’t a major Wall Street CEO and Obama economic adviser who was playing the goof from “Hogan’s Heroes.”
In fact, Corzine was booted from Goldman Sachs in the late 1990s for precisely the same reasons his MF Global is now bankrupt — his inability to manage risk. When he left Wall Street, he became a US senator and governor from New Jersey — whose already dodgey finances only got worse on his watch.
After Jersey voters fired him, he went to MF Global and vowed to make it a money machine, not unlike Goldman. He made big bets on troubled European sovereign debt — the bets that sank the firm when they were disclosed to investors.
What’s really striking is that Corzine, in changing the firm’s business model, appears to have had absolutely no idea what he was doing. The firm’s “books and records” were a mess, according to people I know involved in the bankruptcy. Others close to the firm tell me it didn’t have the infrastructure to adapt to a new business model that transformed it into something closer to a hedge fund than its traditional business as a broker of commodities.
The fault begins and ends with the Corzine, whose job as CEO is to make sure the firm’s plumbing actually works, particularly in times of crisis.
Yet Corzine was clueless during MF Global’s crisis, at least according to his testimony yesterday.
Keep in mind, losing any customer money, not just the massive amounts that seem to have vanished here, is fairly unprecedented among major Wall Street firms. Bear Stearns and Lehman Bros. were far bigger outfits, yet not a single penny of investor cash went missing when they imploded amid the 2008 financial crisis.
By law, those funds must be kept separate from the firm’s own operations — and keeping them that way is among the most fundamental duties of any Wall Street firm and its management.
But here’s how Corzine described what he knows about MF Global’s now missing customer accounts: “I simply do not know where the money is, or why the accounts have not been reconciled to date. I do not know which accounts are unreconciled or whether the unreconciled accounts were or were not subject to the segregation rules.”
He stuck to that story during the Q&A. Or as Sgt. Schultz would say, he knows nothing.
Some will say this is just a smart ploy to deflect blame to others and save his own skin. Maybe so. Certainly, taking the Fifth would have been a disaster.
But, based on what I know about Corzine, I really think he didn’t have a clue — bad news that MF Global’s shareholders and employees have already received.
In fact, if you want to understand why this administration has been so inept at managing the US economy — from its failed stimulus package to its huge investment in the unproductive “green economy” — it’s because it listens to “smart” guys like Jon Corzine.
Vice President Joe Biden called Corzine “the smartest guy I know in terms of the economy.” President Obama, after accepting some $500,000 in bundled campaign contributions from Corzine, is said to have placed him on his short list to head Treasury.
The silver lining for America in Corzine’s public cluelessness is that Obama now can’t screw up the economy even more by giving him that job.
Charles Gasparino is a Fox Business Network senior correspondent.
Read more: http://www.nypost.com/p/news/opinion/opedcolumnists/corzine_clueless_confession_YldpOm0oriHc1gVHHoyreO#ixzz1g3Ja0HV0
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JON'S SPIN MACHINE: How Corzine Dodged The MF Global 'Fraud' Question
Janet Tavakoli, Tavakoli Structured Finance | Dec. 9, 2011, 12:47 PM | 37 | A A A
Here's What Happened At Jon Corzine's MF Global House Hearing Today
CORZINE IS ON CAPITOL HILL: Expect Him To Testify In Just A Few MomentsThese Are The Four Most Brutal Moments Of Jon Corzine's Testimony We Saw Today
It's as if Jon Corzine's PR machine is in top spin mode. You'll recall Jon Corzine is the former head of Goldman Sachs and former CEO of MF Global that appeared in front of Congress yesterday to answer questions about an estimated $600 million to $1.2 billion in missing money from the segregated accounts of customers of MF Global.
Yesterday and today, I heard confusion about whether or not MF Global's diverting customer funds was allowable and the possibility that customers will eventually get the money back.
Let me be clear. The diverting of customer funds from segregated accounts is not legal or allowable, and even if the money is later "found" it is fraud.
Jon Corzine was a bond trader in his past life and he says he doesn't know where the money is and that he didn't understand the details of the operations of MF Global, which appear to be a mess due to negligence or intent.
Corzine Knew or Should Have Known About an Alleged Federal Crime
Corzine may truthfully say he doesn't know exactly where the money is at the moment, but as head of MF Global and as the proponent of risky leveraged sovereign bond trades, he knew or should have known that MF Global didn't have enough cash (or collateral) to support those trades.
Instead of unwinding the trades, it appears that MF Global illegally wired money from customer accounts to satisfy margin calls on MF Global's trades. If that illegal activity happened, Corzine as a bond trader aware of risk and as the head of MF Global, knew it or should have known it. This should be the focus of Congress's investigation. Wire fraud is a Federal Crime
"Finding" Money Doesn't Excuse Fraud
Let me address the implication of the potential to "find" the money. The money may indeed be "found." If the bonds mature and pay off one hundred cents on the dollar, it may be possible to claw back money from MF Global's trading partners without much of a fight. Otherwise there may be a legal battle for money that as creditors of MF Global, they were never entitled to in the first place.
The rights of MF Global's customers are superior to the claims of these creditors. But eventually replacing the filched funds is not the same as restitution, since reputations and businesses have already been ruined. Damage has also been done to the trust in the global futures market and Futures Commission Merchants (FCMS).
Never Allowable to Filch Customers' Funds
The key issue is that it is never allowable to divert money from customers' segregated accounts. CFTC Commissioner Jill E. Sommers did a good job of stating that in her testimony yesterday. Moreover, if any trades mimicking Corzine's were done on behalf of the tiny minority of customer accounts that could engage in this trade, the trades would have to be segregated and credits or losses would show up in the relevant customers' accounts.
That still doesn't explain the missing funds in most customer accounts. Most customer accounts would not even be eligible for the "Corzine sovereign bond trade." Why is that? Here's an excerpt from Sommers' testimony: "Under Section 4d of the CEA, customer segregated funds may be invested in: general obligations of a sovereign nation (to the extent the FCM holds customer funds denominated in that sovereign nation's currency)." Most MF Global customers now missing money did not hold foreign currency accounts.
Pushing the idea that this trade was "allowable" for some customer is a distraction trick to avoid the question of whether MF Global impermissibly wired money from customers' accounts to satisfy margin calls for its own trades. Wire fraud is a Federal crime.
At Issue is Massive Fraud
The issue under investigation is what appears to be a bold and massive fraud, and Jon Corzine offered no alternative explanation, in fact it seems he cannot explain anything about the firm he ran to anyone's satisfaction.
Jon Corzine may not know where the money is right now, but as head of MF Global, he knew or should have known his trades needed collateral and that customers' money went missing to satisfy part of that need. If it is proved that fraud occurred--and money missing this long is a very suspicious sign--it's not plausible to me that Jon Corzine was unaware it was happening at MF Global.
It seems Jon Corzine would have Congress believe he's hopelessly incompetent, because it is better to have them believe that than the business for which he was responsible was breathtakingly wrong.
See also:
Corzine Testifies in MF Global Investigation, C-Span, December 8, 2011.
MF Global Revelations Keep Getting Worse - by Janet Tavakoli, Huffington Post - November 21, 2011
Read more posts on Tavakoli Structured Finance »
Please follow Clusterstock on Twitter and Facebook.
Read more: http://www.huffingtonpost.com/janet-tavakoli/jon-corzine-dodges-the-fr_b_1138625.html#ixzz1g3qQx6T4
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Corzine's testimony is 'height of disbelief,' says Congressman
Legal News Line ^ | 12-9-11 | MIchael P. Tremoglie
Jon Corzine, the former CEO of the bankrupt brokerage firm MF Global, has testified before Congress about his role in the company losing nearly a billion dollars.
His responses were tentative, claiming ignorance of events. This prompted committee member, Rep. David Scott, D-Ga., to remark that it was the "height of disbelief" for Corzine ....
(Excerpt) Read more at legalnewsline.com ...
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Its really weird and creepy how you're even trying to link THIS to Obama...wow..you are desperate
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Its really weird and creepy how you're even trying to link THIS to Obama...wow..you are desperate
LMFAO!!!!
Andre - I know you are a 95%er and are a typical racist idiot who would happily enjoy a golden shower from obama, but fuck dude - can you humor me for once and look up a guy named Gary Gentsler and get back to me.
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LMFAO!!!!
Andre - I know you are a 95%er and are a typical racist idiot who would happily enjoy a golden shower from obama, but fuck dude - can you humor me for once and look up a guy named Gary Gentsler and get back to me.
if I humor you, this thread will go to 25 pages.....I'm hoping it will die down once people see your idiocy
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Mr. Corzine Goes to Washington, With No Pull: William D. Cohan
By William D. Cohan Dec 11, 2011 7:00 PM ET 0 Comments Q.
William D. Cohan is the author of the recently released "Money and Power: How Goldman Sachs Came to Rule the World" and the New York Times bestsellers "House of Cards" and "The Last Tycoons."
More about William Cohan
.When it comes to shining a light on the cozy relationships between Wall Street and Washington, and how the rich and powerful get access to things the rest of us don’t, there can never be too many juicy examples.
Last month, thanks to Bloomberg Markets magazine, we were treated to the excellent story about how former Treasury Secretary Henry Paulson met with a bunch of bankers and hedge fund managers in New York during the summer of 2008 and shared with them some of his early thinking on the futures of the mortgage behemoths Fannie Mae and Freddie Mac.
Then, last week, Jon Corzine, the former chief executive officer of the defunct MF Global Inc. with a gold-plated resume -- he was also a senior partner of Goldman Sachs Group Inc. and a U.S. senator and governor of New Jersey -- testified before the House Agriculture Committee about his often-successful campaign to thwart the efforts of Washington regulators to enact rules that he and MF Global didn’t like.
The proposed rules that Corzine helped quash would have made the capital markets a safer place for everyone, to say nothing of MF Global’s customers -- who are still wondering what the firm did with $1.2 billion of their money. Bending regulators around Wall Street’s fingers, while not illegal, should make all Americans’ blood boil.
In late 2010, the Commodity Futures Trading Commission -- one of MF Global’s regulators -- proposed changing one of its regulations, known as rule 1.25, to limit the kinds of investments that firms like MF Global could make using their customers’ idle funds, including risky debt of sovereign nations. The rule change would also have prevented MF Global from engaging in so-called repo transactions -- short-term secured financings with institutional investors -- with other Wall Street firms.
Corzine, and other futures brokers, didn’t like the proposed rule changes because they would reduce potential profit. Investing customer money in high-yielding, risky securities such as Spain’s sovereign debt was more profitable than investing in safer U.S. Treasury securities.
Not only did MF Global’s general counsel, Laurie Ferber, write a letter to the CFTC opposing changes to rule 1.25, Corzine also took his case to the commissioners themselves.
On July 20, 2011, Corzine said, he “took part” in a conference call with CFTC Chairman Gary Gensler in which MF Global executives made clear their opposition to any changes in rule 1.25. On the call, Corzine said, he argued that the repo transactions with other broker-dealers should be permitted “because such transactions could be beneficial to” firms like MF Global.
Later that same afternoon, he and Ferber called a CFTC commissioner, Bart Chilton, and reiterated their view that rule 1.25 should be left alone. Corzine met with Gensler in May 2010 and again in December 2010. Gensler gave a guest lecture to Corzine’s class at Princeton University on Nov. 22, 2010. (Disclosure: At Corzine’s request, I spoke to his Princeton class a few weeks before Gensler.) Lo and behold, the CFTC decided not to change rule 1.25.
Until earlier this month, that is -- five weeks after MF Global filed for bankruptcy. The changes enacted to rule 1.25 -- largely barring investments of customer money in the sovereign debt of foreign nations -- is known as the “MF Global Rule.”
Thanks to last week’s hearings, we also know now that Corzine used his Washington connections to try to thwart regulators’ efforts to get MF Global to increase its capital after Corzine’s big bet on European sovereign debt became known. At the beginning of August 2011, Corzine said, he “became aware” that the Financial Industry Regulatory Authority, the securities industry’s self-regulating body, wanted MF Global to increase its capital because of Corzine’s sovereign-debt bet.
On Aug. 15, Corzine went to a meeting at the Securities and Exchange Commission in Washington, where he tried to get the SEC to make Finra back off the idea of forcing MF Global to raise more capital. “We met with Michael Macchiaroli, the associate director in the Division of Trading and Markets, and others from the SEC, and presented our argument that the capital treatment of [MF Global’s bet] involving European sovereign debt securities should not be changed in the way that Finra proposed,” Corzine testified.
But this time the lobbying didn’t work. Finra refused to change its position about MF Global’s need to raise new capital. Corzine, though, kept trying to get the SEC to thwart Finra. “I thereafter made a telephone call to Mr. Macchiaroli who told me, in substance, that there was no further appeal and that MF Global had to comply with Finra’s direction,” Corzine testified.
“He noted, however, that other companies in similar positions had sent letters of objection to the SEC, although he was clear that such a letter would make no difference to Finra’s or the SEC’s position,” Corzine said.
Despite this setback, no one was questioning Corzine’s pull in Washington. In April 2011, he held a fundraiser for President Barack Obama at his Manhattan apartment and he is one of Obama’s biggest bundlers, having cobbled together more than $500,000 from his Wall Street friends.
Such was Corzine’s standing in the capital that when rumors surfaced last summer that Treasury Secretary Timothy Geithner might resign and return to New York to be with his family, Corzine’s name was at or close to the top of the list as a possible replacement. Indeed, as hard as it is to believe now, on Aug. 2, when MF Global issued publicly $325 million in five- year senior notes, it had to promise investors that the interest rate paid on their bonds would be increased by 100 basis points should Corzine leave the firm and take a job with the administration.
You can’t make this stuff up.
(William D. Cohan, a former investment banker and the author of “Money and Power: How Goldman Sachs Came to Rule the World,” is a Bloomberg View columnist. The opinions expressed are his own.)
To contact the writer of this article: William D. Cohan at wdcohan@yahoo.com.
To contact the editor responsible for this article: Tobin Harshaw at tharshaw@bloomberg.net.
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http://www.businessinsider.com/jon-corzine-cowardly-2011-12
Obama - Corzine - Gentsler - Axis of Corruption
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The Collapse Of MF Global Basically Started On Corzine's Day 1
TBI ^ | 12-12-2011 | Ben Walsh
The Collapse Of MF Global Basically Started On Corzine's Day 1
Ben Walsh
Dec. 12, 2011, 8:36 AM
Image: AP
MF Global Client's Counsel Blasts Jon Corzine Calling His Prepared Testimony 'Cowardly' And A 'Cop-Out' Five Reasons Why Wall Street Enjoyed Today's Corzine HearingMF Global's Bankruptcy Trustee Finally Pinpointed The Shady Trades In Customer Accounts
When Jon Corzine, on a visit to MF Global's Chicago office shortly after becoming CEO in 2010, Dealbook reported that he discovered that a young trader was successfully using a small account to trade the firm's capital, he was enthralled.
With widening eyes, Corzine suspended his meet and greet tour to talk to disect the broker trades for an hour.
This anecdote is yet another in a string details that paint Corzine as more focused on the minutiae of individual trading tactics than on his broader responsibilities as Chief Executive. It is not uncommon for financial executives to review trading strategies and potential market opportunities with other senior executives, but Corzine's behavior while visiting the Chicago office was far from the norm. And such behavior continued:
Mr. Corzine compulsively traded for the firm on his BlackBerry during meetings, sometimes dashing out to check on the markets. And unusually for a chief executive, he became a core member of the group that traded using the firm’s money. His profits and losses appeared on a separate line in documents with his initials: JSC.
As the firm's position's in European sovereign debt increased, the board became concerned and Corzine responded by making it clear that he intended to proceed with the trade or leave MF Global:
“If you want a smaller or different position, maybe you don’t have the right guy here,” he told them, according to a person familiar with the matter.
(snip)
(Excerpt) Read more at businessinsider.com ...
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MF's Corzine said to know of customer fund misuse (Obama's friend and fundraiser lied to Congress)
reuters ^ | 12/13/2011 | Alexandra Alper and Aruna Viswanatha
Posted on December 13, 2011 11:11:38 PM EST by tobyhill
The regulatory arm of CME Group has turned over interviews to the Justice Department that allege former MF Global chief Jon Corzine knew that the now-bankrupt brokerage firm used customer money to lend to a European affiliate, a CME executive said on Tuesday.
The information is fourth-hand but is the strongest statement yet from a regulator that Corzine may have personally known customer funds were diverted for firm use.
Federal investigators are probing why hundreds of millions of dollars in customer funds are missing, and whether the futures brokerage raided customer money to try to counter a liquidity crisis, a major violation of industry rules.
Corzine, who resigned as chief executive of MF Global early last month, has given sworn testimony that he does not know where the money is, but it is unclear if this latest revelation will legally harm him.
(Excerpt) Read more at reuters.com ...
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Jon Corzine Said To Have Known About Misuse Of MF Global Customer Funds
First Posted: 12/14/11 08:25 AM ET Updated: 12/14/11 08:25 AM ET
(Alexandra Alper and Aruna Viswanatha) - The regulatory arm of CME Group has turned over interviews to the Justice Department that allege former MF Global chief Jon Corzine knew that the now-bankrupt brokerage firm used customer money to lend to a European affiliate, a CME executive said on Tuesday.
The information is fourth-hand but is the strongest statement yet from a regulator that Corzine may have personally known customer funds were diverted for firm use.
Federal investigators are probing why hundreds of millions of dollars in customer funds are missing, and whether the futures brokerage raided customer money to try to counter a liquidity crisis, a major violation of industry rules.
Corzine, who resigned as chief executive of MF Global early last month, has given sworn testimony that he does not know where the money is, but it is unclear if this latest revelation will legally harm him.
CME Executive Chairman Terrence Duffy, testifying to the Senate Agriculture Committee, on Tuesday said a CME auditor participated in a phone call during which an MF Global employee indicated that Corzine knew of the loan.
During an internal CME interview, the auditor also revealed that the loan was for roughly $175 million to a European affiliate of MF Global and was likely made in the last couple of days prior to the firm's October 31 bankruptcy, Duffy said.
The CME is a front-line regulator for MF Global.
"A CME auditor ... participated in a phone call with senior MF Global employees wherein one employee indicated that Mr. Corzine knew about the loans that had been made from the customer segregated accounts," Duffy said.
A spokesman for Corzine and his lawyer, Andrew Levander, declined comment.
Duffy said his company has provided this information to the Justice Department and the Commodity Futures Trading Commission, which are investigating the matter.
The Senate Agriculture Committee's hearing on Tuesday was the second to feature both Duffy and Corzine, among others, as lawmakers seek answers about the missing funds.
Corzine told lawmakers: "I simply do not know where the money is, or why the accounts have not been reconciled to date."
Barry Pollack, a criminal defense attorney at Miller & Chevalier, said it is uncertain if the CME auditor's claims could hurt Corzine.
But he said that by testifying, Corzine knowingly opened himself up to the potential for charges beyond his conduct while MF Global CEO - from perjury to obstruction of justice.
"It absolutely could be nothing more than a classic game of telephone," Pollack said. He also noted, "Mr. Corzine is sophisticated enough that he knew going into this that if he gave testimony, he was going to open the flood gates."
'WHERE'S THE MONEY?'
Corzine appeared during a panel that preceded Duffy's testimony, dressed in a somber dark suit and closely watched by his attorney seated behind him.
He used his opening statement to try to correct comments he gave the prior week before the House Agriculture Committee.
At that hearing, Corzine said that while he "never intended" to break rules, an employee may have misinterpreted instructions to try to save the firm, a comment he sought to clarify on Tuesday.
On Tuesday, Corzine said: "I want to be clear, I never gave any instructions to misuse customer funds, I never intended anyone at MF Global to misuse customer funds."
Also testifying to the Senate panel on Tuesday were two top-ranking Mf Global executives - Chief Operating Officer Bradley Abelow and Chief Financial Officer Henri Steenkamp - who said they, too, lacked answers about the money.
Senators became agitated about the testimony, frequently asking the executives and Corzine "Where's the money?" and "What happened?"
Senator Pat Roberts, the top Republican on the committee, raised his voice, asking, "How many heads do we have to have around here before we finally drill down and find somebody's name that knows what the heck is going on?"
CME's Duffy provided the most answers.
He not only revealed the allegations about Corzine's knowledge about customer-backed loans, but also stated that $950 million dollars was moved out of the customer segregated accounts to MF Global's broker dealer.
Typhon Capital Management CEO James Koutoulas, who is helping MF Global customers recover their funds, was at the hearing on Tuesday and said Duffy's testimony was a breath of fresh air after the panel with Corzine and the executives.
"We'd listened to the three stooges say they knew nothing and it wasn't their responsibility and then somebody like Duffy came in. The reaction was great. He dropped a total bombshell," he said.
'BREAK THE GLASS'
Senator Roberts also pressed the executives and Corzine about an internal report, asking whether it was "an actual plan that would break the glass and tap into your customers' segregated accounts, perhaps described as a loan."
Corzine admitted there was such a "break the glass" report, but he said it did not involve raiding customer money.
"To my knowledge and understanding of that report it was not ever the intent to recommend tapping into segregated customer funds."
According to a copy of the document obtained by Reuters, the contingency plan did not contain explicit recommendations to tap customer funds.
It did, however, lay out emergency methods for drawing down lines of credit and for exiting complex investments.
The document, which was undated but appeared to be drafted before October 20, estimated that under tested scenarios, "there is sufficient liquidity to manage through one month under a severe stress event."
'CALLED STEALING BACK ON MAIN STREET'
Farmers who became collateral damage from the collapse of MF Global got a chance to air their frustrations, telling lawmakers that their confidence in the markets has been shaken.
Dean Tofteland, a corn and soybean farmer from Minnesota, said when he heard news that MF Global was having problems, he talked to his broker, who told him, "No customer has ever lost a penny in customer segregated accounts."
But three days later his $253,000 account was frozen and he could not adjust his short positions.
Tofteland's positions were transferred to a new broker with only 15 percent of the required collateral, and he was forced to liquidate the hedges, he said. Since then, prices dropped and he lost another $100,000 without having the hedge.
Tofteland said he has not returned to the futures market.
"What they call 'unlawful comingling' on Wall Street is called 'stealing' back on Main Street," he told lawmakers.
(Reporting by Alexandra Alper, Aruna Viswanatha, Christopher Doering and Lily Kuo, with additional reporting by Josephine Mason in New York; Writing by Karey Wutkowski; Editing by Tim Dobbyn, Gary Hill)
Copyright 2011 Thomson Reuters. Click for Restrictions.
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Check out the lead attorney for MF Global and his connections
New World Capital ^ | 12/14/11 | Bradley Abelow
Bradley Abelow, President, MF Global Inc., is a Senior Advisor at the Firm. Mr. Abelow was a Partner at NewWorld before joining MF Global, where his long-time associate Jon Corzine is CEO. Prior to co-founding NewWorld, he was Chief of Staff to Jon Corzine, then Governor of the State of New Jersey, where he oversaw state-level environmental programs, and earlier served as Treasurer of New Jersey.
Before that, Mr. Abelow was a General Partner and Managing Director of The Goldman Sachs Group, where he held a variety of senior leadership positions. Mr. Abelow has been active in environmental matters for many years. In 2005, he led the effort to create an Environmental Policy Framework for Goldman Sachs, which resulted in a dedicated effort on the part of Goldman to invest in environmental opportunities and also led to the creation of the Goldman Sachs Center for Environmental Markets.
Mr. Abelow serves as Chairman of the U.S. Environmental Protection Agency's Environmental Finance Advisory Board.
Mr. Abelow graduated from Northwestern University with a BA in Political Science and holds an MA in Public and Private Management from the Yale School of Management.
(Excerpt) Read more at newworldcapital.net ...
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Exclusive: Regulators know where MF Global funds went (George Soros sweating bullets?)
Reuters ^ | 12/14/11 | Christopher Doering
Posted on December 14, 2011 8:47:41 PM EST by jimbo123
Regulators now have a more complete picture of money transfers in the final days of bankrupt brokerage MF Global, but must sort out which transactions were legitimate before more money can be released to customers, a top official told Reuters on Wednesday.
Jill Sommers, who is heading the Commodity Futures Trading Commission's review of MF Global, said regulators "are far enough along the trail" that they know where the money went.
"Now it's just finding out which ones of those transactions are legitimate and which ones of them are illegitimate," Sommers said.
(Excerpt) Read more at reuters.com ...
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Cash & burn
By JOSH MARGOLIN
Last Updated: 8:25 AM, December 16, 2011
The Democratic senator who savaged Jon Corzine at a high-profile Capitol Hill hearing this week had another reason to go hard on her former colleague — she recently pressed him for campaign contributions but didn’t get any.
“She would literally call once every two or three weeks,” one Corzine intimate said of Sen. Debbie Stabenow (DMich.).
“She called all the time.”
Stabenow, chair of the Senate Agriculture Committee, had blasted the former senator and New Jersey governor Tuesday for his failure to explain what happened to $1.2 billion in missing customer money from his bankrupt firm, MF Global.
“This isn’t the Dark Ages,” she lectured. “MF Global didn’t keep their books with feather quills and dusty ledgers.”
Sources in Corzine’s inner circle said they were “stunned” and “amazed” by Stabenow’s attack.
The two had served together in the Senate, but Corzine hasn’t delivered with contributions in some time.
So far this year, Corzine’s name has not appeared on Stabenow’s campaign finance reports.
Records show he last donated to her in 2006, contributing $2,000. Corzine and his then-wife, Joanne, each gave Stabenow $1,000 in 1999.
Stabenow defended her criticism.
“Senator Stabenow’s committee is holding hearings and subpoeaned Mr. Corzine in order to get at the truth and hold wrongdoers at MF Global accountable. It doesn’t mater who the CEO of MF Global is,” said spokesman Cullen Schwarz.
Corzine weathered his third Capitol Hill grilling yesterday, denying to a House committee that he was told that MF improperly transferred $175 million in customer money out of the firm just before it went bust in October.
josh.margolin@nypost.com
Read more: http://www.nypost.com/p/news/national/cash_burn_SltMlpSnU1sS17SC3q8l0H#ixzz1gj1E0Jkd
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Liquidation Of Customer Stored Gold And Silver Bullion From MF Global
TMO ^ | 12-17-2011 | Jesse
Posted on December 17, 2011 11:38:03 PM EST by blam
Liquidation Of Customer Stored Gold And Silver Bullion From MF Global
Commodities / Gold and Silver 2011
Dec 17, 2011 - 12:27 PM
By: Jesse
The bottom line is that apparently some warehouses and bullion dealers are not a safe place to store your gold and silver, even if you hold a specific warehouse receipt. In an oligarchy, private ownership is merely a concept, subject to interpretation and confiscation.
Although the details and the individual perpetrators are yet to be disclosed, what is now painfully clear is that the CFTC and CME regulated futures system is defaulting on its obligations. This did not even happen in the big failures like Lehman and Bear Sterns in which the customer accounts were kept whole and transferred before the liquidation process.
Obviously holding unallocated gold and silver in a fractional reserve scheme is subject to much more counterparty risk than many might have previously admitted. If a major bullion bank were to declare bankruptcy or a major exchange a default, how would it affect you? Do you think your property claims would be protected based on what you have seen this year?
You always have counter-party risk if you hold gold and silver through another party, even if they are a Primary Dealer of the Federal Reserve. As Ben said, the Fed offers no seal of approval.
If a Bankruptcy Trustee can pool your bullion into the rest of the paper assets and then liquidate it at prices that are being front run by the Street, you will have to accept whatever paper settlement that they give you.
The customer money and bullion assets are not lost, or rehypothecated or anything else. This is a pseudo-legal fig leaf, a convenient rationalization.
The customer assets were stolen, and given to at least one major financial institution by MF Global to satisfy an 11th hour margin call in the week of their bankruptcy, even as MF Global was paying bonuses to its London employees. And now that powerful financial institution does not want to give the customer money back. And they are so powerful that the Trustee and the Court is reluctant to try and claw it back. And so in the great Wall Street tradition they are trying to force the customers and the public to take the loss. The regulators and the exchange are aghast, and are trying to imagine how to resolve and spin this to preserve investor confidence and prevent a run on the system.
'Let them eat warehouse receipts.'
For many this would have been unthinkable only a few months ago. They had been cautioned and warned repeatedly, but chose to trust the financial system. And now they are suffering loss and anxiety, frozen assets, and the misappropriation of their wealth.
How more plainly can it be said? The US financial system as it now stands cannot be trusted to observe even the most basic property rights as it continues to unravel from a long standing culture of fraud.
Get your money as far away from Wall Street as is possible. And if you want to own gold and silver, take delivery and store it in a secure private facility outside the fractional reserve system.
Barrons
The Silver Rush at MF Global
By ERIN E. ARVEDLUND
December 17, 2011
It's one thing for $1.2 billion to vanish into thin air through a series of complex trades, the well-publicized phenomenon at bankrupt MF Global. It's something else for a bar of silver stashed in a vault to instantly shrink in size by more than 25%.
That, in essence, is what's happening to investors whose bars of silver and gold were held through accounts with MF Global.
The trustee overseeing the liquidation of the failed brokerage has proposed dumping all remaining customer assets—gold, silver, cash, options, futures and commodities—into a single pool that would pay customers only 72% of the value of their holdings. In other words, while traders already may have paid the full price for delivery of specific bars of gold or silver—and hold "warehouse receipts" to prove it—they'll have to forfeit 28% of the value.
That has investors fuming. "Warehouse receipts, like gold bars, are our property, 100%," contends John Roe, a partner in BTR Trading, a Chicago futures-trading firm. He personally lost several hundred thousand dollars in investments via MF Global; his clients lost even more. "We are a unique class, and instead, the trustee is doing a radical redistribution of property," he says.
Roe and others point out that, unlike other MF Global customers, who held paper assets, those with warehouse receipts have claims on assets that still exist and can be readily identified.
The tussle has been obscured by former CEO Jon Corzine's appearances on Capitol Hill. But it's a burning issue for the Commodity Customer Coalition, a group that says it represents some 8,000 investors—many of them hedge funds—with exposure to MF Global. "I've issued a declaration of war," says James Koutoulas, lead attorney for the group, and CEO of Typhon Capital Management.
At stake is an unspecified, but apparently large, volume of gold and silver bars slated for delivery to traders through accounts at MF Global, which filed for bankruptcy on Oct. 31. Adding insult to the injury: Of the 28% haircut, attorney and liquidation trustee James Giddens has frozen all asset classes, meaning that traders have sat helplessly as silver prices have dropped 31% since late August, and gold has fallen 16%. To boot, the traders are still being assessed fees for storage of the commodities...
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Obama to return Corzine cash
Politico ^ | 12/23/11 | MAGGIE HABERMAN
Posted on December 23, 2011 7:06:04 PM EST by ColdOne
President Barack Obama and the DNC plan to return $71,600 donated by disgraced former MF Global head Jon Corzine and his wife, a source confirmed to POLITICO.
The money was split between the DNC Victory Fund and the reelection effort.
But Corzine was not just a donor but also a bundler, including from other MF Global employees.
The source said the other donations from employees will be looked at case by case and, if the facts warrant it, returned.
The news came late on the Friday before Christmas, generall
(Excerpt) Read more at politico.com ...
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Farmers Sue (Democrat) Jon Corzine Over Missing Millions (Obama supporter and campaign financier)
abc ^ | 1/9/2012 | CINDY GALLI
Posted on January 10, 2012 7:26:11 AM EST by tobyhill
Montana farmers have filed a class action suit against former New Jersey governor Jon Corzine, charging that the failed financial firm run by Corzine stole millions from their accounts to pay off its spiraling debts, and that Corzine's "single-minded obsession" with making MF Global a big player on Wall Street led to the firm's collapse.
MF Global's clients included 38,000 wheat farmers, cattle ranchers and others who "hedged" their crop prices by placing millions in MF Global accounts. Those accounts were supposed to be "segregated and secure," according to the federal suit, meaning MF Global could not draw on those funds.
The lawsuit, filed on behalf of all 38,000 customers, alleges that when MF Global made a series of bad investments -- notably in European debt -- it began "siphoning funds withdrawn from segregated client accounts" to cover its debts.
(Excerpt) Read more at abcnews.go.com ...
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How JP Morgan And George Soros Ended Up With MF Global Customer Money
January 8, 2012
http://www.clearingandsettlement.com/2012/01/how-jp-morgan-and-george-soros-ended-up-with-mf-global-customer-money
In recent testimony before a Congressional committee, MF Global’s former chief Jon Corzine as well as other MF Global executives said repeatedly the didn’t know where the failed brokerage firm’s $1.2 billion of missing client money was. In fact, MF Global executives knew exactly what happened to the money, as do the regulators who oversaw the firm’s bankruptcy. The so-called segregated customer funds were repeatedly, and legally (through re-hypothication), used as collateral for MF Global loans for 100:1 leveraged bets on European sovereign debt.
Rehypothication is the 800lb gorilla (Editor’s note: make that the 2,000 lb gorilla). In 2007 I was with another fund that was the first 2.5bln casualty of the l
A substantial portion of MF Global’s commodity clients cleared their transactions through the Chicago Mercantile Exchange and Comex, owned by CME Group (ticker: CME). The question now looming over CME’s stock is whether the company will be liable for customer losses, as the Commodity Customer Coalition, a group that says it represents some 8,000 investors—including many hedge funds–with exposure to MF Global are not going down without a fight.
Rather than being treated as a bankruptcy of a commodities brokerage firm under sub-chapter IV of the Chapter 7 bankruptcy law, MF Global was treated as an equities firm (sub-chapter III) for the purposes of its bankruptcy, and this is why the MF Global customer money in so-called segregated accounts “disappeared”. In a brokerage firm bankruptcy, the customers get their money first, while in an equities firm bankruptcy, the customers are at the end of the line, meaning MF Global’s creditors, namely J.P. Morgan and other trading counterparties, got their money first, just as AIG’s CDS (credit default swap) counterparties (mainly Goldman Sachs) got their money first when the U.S. government bailed out AIG.
To add further insult to injury for MF Global clients, the firm reportedly unloaded hundreds of millions of dollars’ worth of securities to Goldman Sachs, and others, who then reportedly flipped these securities within a day to George Soros funds.
What the debacle implies is that nothing has really been learned from the 2008 financial crisis, and that there really is no safety in any paper investment when push comes to shove. Brokers and investment banks are effectively running leveraged ponzi schemes running in the trillions of USD with your collateral then refuse to offer you liquidity on the collapse of the trade because they won’t face a brokerage This has very wealthy individuals as well as non-too-big-to-fail market participants seriously reconsidering the risks of regulatory malfeasance during such systemic “black swan” events. In such cases, be prepared for commodities and equity brokers, investment and commercial banks to “freeze” your funds, enforced by central banks or other regulatory authorities–i.e., a de facto banking holiday, while not only will your purchasing power be reduced by currency devaluations, but you will also be asked to again bail out the banksters with your tax money.
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http://www.cnbc.com/id/45973377
Unreal. Hope and change!
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Former MF Global Chief Risk Officer Sacked For Doing His Job, Disagreeing With Corzine
Submitted by Tyler Durden on 02/02/2012 13:43 -0500
Capital Markets Congressional Budget Office Goldman Sachs goldman sachs MF Global Reuters Sovereign Debt Testimony
Yesterday we noted how a CBO analyst may have been terminated for her conflicting views on model assumptions, especially when they veered away from the Wall Street-defined norm. Today, we find that the same approach to dissent may have been the reason why MF Global ended up taking inordinate risk, and ultimately blowing up, leaving over a billion in client money transitioning from liquid to gas phase overnight. According to Reuters, "The former chief risk officer at MF Global who raised red flags about the firm's aggressive trading bets told lawmakers that his warnings contributed to the firm's decision to let him go in early 2011. Michael Roseman, who was ousted in January 2011 from the now-bankrupt futures brokerage, said he rang alarm bells about the firm's exposure to European sovereign debt a year before the firm collapsed in late October of 2011." Roseman's statement on whether his skepticism to Corzine's get rich quick scheme was the reason for his termination? ""My views on risk certainly played a factor in that decision," Roseman told a House Financial Services subcommittee, about why he was asked to leave the firm." And so the status quo continues: any time anyone ever dares to disagree with broad misconceptions, whether it is regarding infinitely rising home prices, broad global compression trades, or the ability of European banks to onboard toxic CDOs in perpetuity is always promptly shown the door. The flipside to this complete lack of checks and balances? Why the bailout culture of course, in which finding one company responsible for gross complacency would mean all are guilty. Which is nobody will ever go to prison as it would set the "worst" possible precedent ever: that one is ultimately responsible for their own stupidity. Said otherwise: the best qualification one can hope to add to one's resume: "distinguished yes man with honors."
More from Reuters:
Before MF Global's collapse, then Chief Executive Jon Corzine pushed the firm to take on a more aggressive trading strategy, including a $6.3 billion dollar bet on European debt, executed through repo-to-maturity transactions.
Corzine, once CEO at Goldman Sachs (GS.N) and a former New Jersey governor and U.S. senator, also was pushing the futures brokerage to evolve into something closer to an investment bank.
Roseman said such a strategy required a lot of capital and a lot of liquidity, two things that ran out at the firm.
"I do think the strategy maybe exceeded the ability of the resources," he said.
At this point Roseman's replacement chimed in as well:
Lawmakers pressed Stockman if he was brought in as a "yes" man, after Roseman got ousted following his warnings to Corzine and the board.
"Did you ever think that maybe they ran off Mr. Roseman and brought you in to be kind of the guy that doesn't see, tell, know? Did that ever occur to you?" Republican Steven Pearce asked Stockman.
Stockman replied, "No sir."
Pearce also laid into Stockman about his testimony that he was "deeply saddened" by MF Global's collapse and its impact on shareholders and customers.
"Have you suggested that maybe you ought to give your pay back and put it into a scholarship fund for these kids that aren't going to go to college? Sitting out there, some hog farmer who is trying to make ends meet. My dad raised pigs. I know what it's like. He's trying to pay for the next sack of feed," Pearce said.
Stockman was reluctant to speculate on what specifically doomed MF Global.
Roseman, however, said MF Global would have been on a very different path if it had not ramped up its European debt exposure.
"In my opinion, they would still be here," Roseman said.
True. However, this would not allow "vaporize" to be in the running for most popular word to describe virtually every aspect of modern capital markets. And that trade off is surely not worth it.
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www.zerohedge.com
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Corzine Corzined - Congressional Panel Finds Former MF Global CEO Ordered JPM Fund Transfer
The Zero Hedge/ ^ | 03/23/2012 | Tyler Durden
Posted on Friday, March 23, 2012 4:31:40 PM by SatinDoll
Then only thing that could top today's epic market insanity and hilarity, would be that Corzine is himself about to be Corzined. And just released from Bloomberg:
•MF GLOBAL'S CORZINE ORDERED FUNDS MOVED TO JPMORGAN, MEMO SAYS •CORZINE'S `DIRECT INSTRUCTIONS' CITED BY CONGRESSIONAL PANEL •MF GLOBAL TRANSFER WAS USED TO COVER OVERDRAFT, PANEL SAYS •MF GLOBAL FINDINGS CITED IN MEMO OBTAINED BY BLOOMBERG NEWS
And so we can now add perjury to felony embezzlement. Which means we now have to wait to find just which MF'er (and JPM'er) will be given a promise of untold millions if they only get Fab Tourred for a few years, and spend 5-7 in minimum security state prison instead of brave Jonny.
(Excerpt) Read more at zerohedge.com ...
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http://www.politico.com/news/stories/0312/74419.html
Bbboooooommmmmmmmmm
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http://www.businessinsider.com/report-jon-corzine-ordered-200-million-of-mf-global-customer-funds-to-be-moved-before-bankruptcy-2012-3
Hey let worry about fluke rush or palin!!!
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http://www.bloomberg.com/news/2012-03-23/mf-global-s-corzine-ordered-funds-moved-to-jpmorgan-memo-says.html
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http://www.businessinsider.com/heres-the-memo-that-could-finally-send-a-wall-street-bigshot-jon-corzine-to-jail-2012-3
BBBBOOOOOMMMMMM
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Email Ties Corzine to Missing Funds
WSJ ^ | March 23, 2012 | MIKE SPECTOR, JULIE STEINBERG and AARON LUCCHETTI
Edited on Saturday, March 24, 2012 11:27:36 AM by Admin Moderator. [history]
Jon S. Corzine gave "direct instructions" to move $200 million from an MF Global Holdings Ltd. account containing customer funds three days before the securities firm collapsed, according to an employee email reviewed by congressional investigators.
The Oct. 28 email was disclosed in a five-page memo released Friday afternoon by a House Financial Services subcommittee. The panel is investigating what caused an estimated $1.6 billion shortfall in customer funds at MF Global, which collapsed into bankruptcy Oct. 31.
(Excerpt) Read more at online.wsj.com ...
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http://www.zerohedge.com/contributed/2012-16-18/mf-global-circus-new-senate-hearing-cftc-divulges-exclusive-emails-re-corzine
Incredible. How can any possibly give obama four more years with cronies like this?