The Great MF Global Robbery: By the Regulators??!!

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The Great MF Global Robbery: By the Regulators??!!

Post by monster_gardener »

http://www.zerohedge.com/news/guest-pos ... ose-are-we

So first off, what happened with MF Global?

Simple: It went bankrupt—because it made bad bets on European sovereign debt, by way of leveraging positions 100-to-1. Yeah, I know: Stupid. Anyway, they went bankrupt—which in and of itself is no big deal. It’s not as if it’s the first time in history that a brokerage firm has gone bust. But to me, the big deal in this case was the way the bankruptcy was handled.

Now there are several extremely serious aspects to the MF Global case: Specifically, how their customers were shut out of their brokerage accounts for over a week following the bankruptcy, which made it impossible for those customers to sell out of their positions, and thus caused them to lose serious money; and of course how MF Global was more adept than Mandrake the Magician at making money disappear—about $1 billion, in fact, which still hasn’t turned up. These are quite serious issues which merit prolonged discussion, investigation, prosecution, and ultimately jailtime.

But for now, I want to discuss one narrow aspect of the MF Global bankruptcy: How authorities (mis)handled the bankruptcy—either willfully or out of incompetence—which allowed customer’s money to be stolen so as to make JPMorgan whole.

From this one issue, it seems clear to me that we can infer what will happen when the next financial crisis hits in the nearterm future.

Brokerage firms hold clients’ money in what are known as segregated accounts. This is the money that brokerage firms hold for when a customer makes a trade. If a brokerage firm goes bankrupt, these monies are never touched—because they never belonged to the firm, and thus are not part of its assets.

Think of segregated accounts as if they were the content in a safety deposit box: The bank owns the vault—but it doesn’t own the content of the safety deposit boxes inside the vault. If the bank goes broke, the customers who stored their jewelry and pornographic diaries in the safe deposit boxes don’t lose a thing. The bank is just a steward of those assets—just as a brokerage firm is the steward of those customers’ segregated accounts.

But when MF Global went bankrupt, these segregated accounts—that is, the content of those safe deposit boxes—were taken away from their rightful owners—that is, MF Global’s customers—and then used to pay off other creditors: That is, JPMorgan.


(The mechanics of how this was done are interesting, but insanely complicated, and ultimately not relevant to this discussion. To grossly simplify, MF Global pledged customer assets to JPMorgan, in a process known as rehypothecation—customer assets which MF Global did not have a right to. Needless to say, JPMorgan covered its ass legally. Ethically? Morally? Black as night.)

This was seriously wrong—and this is the source of the scandal: Rather than being treated as a bankruptcy of a commodities brokerage firm under subchapter IV of the Chapter 7 bankruptcy law, MF Global was treated as an equities firm (subchapter III) for the purposes of its bankruptcy.

Why does this difference of a single subchapter matter? Because in a brokerage firm bankruptcy, the customers get their money first—because after all, it’s theirs—while in an equities firm bankruptcy, the customers are at the end of the line.

In the case of MF Global, what should have happened was for all the customers to get their money first. Then everyone else—including JPMorgan—would have picked over the remaining scraps. And the monies MF Global had already pledged to JPMorgan? They call it clawback for a reason.

The Chicago Mercantile Exchange, which handled the bankruptcy, should have done this—but instead, the Merc was more concerned with making JPMorgan whole than with protecting the money that rightfully belonged to MF Global’s 40,000 customers.

Thus these 40,000 MF Global customers had their money stolen—there’s no polite way to characterize what happened. And this theft was not carried out by MF Global—it was carried out by the authorities who were charged with handling the firm’s bankruptcy.

These 40,000 customers were not Big Money types—they were farmers who had accounts to hedge their crops, individuals owning gold (like Gerald Celente—here’s his account of what happened to him)—

—in short, ordinary investors. Ordinary people—and they got screwed by the regulators, for the sake of protecting JPMorgan and other big fry who had exposure to MF Global.

That, in a nutshell, is what happened.

Now, what does this mean?

It means that nobody’s money is safe. It means that regulators care more about protecting the so-called “Systemically Important Financial Institutions” than about protecting Ordinary Joe investors. It means that, when crunchtime comes, central banks and government regulators will allow SIFI’s to get better, and let the Ordinary Joes get fucked.

So far, so evil—but here comes the really troubling part: It is an open secret that there are more paper-assets than there are actual assets. The markets are essentially playing musical chairs—and praying that the music never stops. Because if it ever does—that is, if there is ever a panic, where everyone decides that they want their actual asset instead of just a slip of paper—the system would crash.

And unlike with fiat currency, where a central bank can print all the liquidity it wants, you can’t print up gold bullion. You can’t print up a silo of grain. You can’t print up a tankerful of oil.

Now, question: When is there ever a panic? When is there ever a run on a financial system?

Answer: When enough participants no longer trust the system. It is the classic definition of a tipping point. It’s not that all of the participants lose faith in the system or institution. It’s not even when most of the participants lose faith: Rather, it’s when a mere some of the participants decide they no longer trust the system that a run is triggered.

And though this is completely subjective on my part—backed by no statistics except scattered anecdotal evidence—but it seems to me that MF Global has shoved us a lot closer to this theoretical run on the system.

As I write this, a lot of investors whom I know personally—who are sophisticated, wealthy, and not at all the paranoid type—are quietly pulling their money out of all brokerage firms, all banks, all equity firms. They are quietly trading out of their paper assets and going into the actual, physical asset.

Note that they’re not trading into the asset—they’re simply exchanging their paper-asset for the real thing.

Why? MF Global.

“The MF Global scandal has made it clear that the integrity of the system has disappeared,” said a good friend of mine, Tuur Demeester, who runs Macrotrends, a Dutch-language newsletter out of Brugge. “The banks are insolvent, the governments are insolvent, and all that’s left is for the people to realize what’s going on—and that will start a panic.”

He hit it on the head: Some of the more sophisticated people—like Tuur, like some of my acquaintances, (like myself, frankly)—have realized that the MF Global scandal means that there is no safety for any paper investment: The integrity of the systems has been completely shattered. If in the face of one medium-sized brokerage firm going under, the regulators will openly allow ordinary people to be ripped off for the sake of protecting the so-called “Systemically Important Financial Institutions”—in this case JPMorgan—what will happen if there is a system-wide run? What if two or three MF Globals happen simultaneously?

Will they protect the citizens’ money? Or will they protect the “Systemically Important Financial Institutions”?

I think we know the answer.

And I think we all know the answer to the question of whether there will be crisis flashpoint in the near-term future: After all, as Demeester pointed out, all the banks and all the governments are broke.

Thus it’s only a matter of time before they come for your money.

At SPG, we’ve been putting together Scenarios for other black swan events which are becoming increasingly likely: What to do if the eurozone breaks up, what to do if you have to leave America, what to do if there is an Israeli-Iranian war, what to do if there is forced dollar devaluation, and so on.

Now, because of this open kleptocracy and cronyism being shown by the financial authorities in the wake of the MF Global bankruptcy, we’ve been obliged to put together a new Scenario, devoted exclusively to preparing for a run on the markets: What to do in order to protect your assets from regulatory malfeasance, if there is a system-wide MF Global-type breakdown and a subsequent run on the entire financial system.

And there will be such a run on the system: It’s only a matter of time. In fact, the handling of the MF Global affair has sped up the timeframe for this run on the system, because the forward-edge players—such as Demeester, myself, and my other acquaintances who understand the implications of the bankruptcy—realize that the regulators will side with the banksters, and not the ordinary investors: So we are preparing accordingly.

Once there is a full-on panic, anyone with money in the system will lose at least a big chunk of it, in one of two ways, or a combination thereof:

• One, the firms—commodities brokerage firms, equity firms, investment banks and commercial banks—will not allow people to withdraw the totality of their money, and/or they will put a withdrawal cap of some sort, enforced by the central banks and other regulatory bodies. (Like they did in Argentina.)

• Two, the central banks will “provide liquidity”—that is, print money—while simultaneously declaring a banking holiday to, quote, “calm the markets”. During that bank holiday, the currency will be devalued by double digits—which will mean that your cash holdings will essentially be taxed to save the banksters—again. (Like they did in Argentina.)

Thus apart from proving that the United States really is Argentina with nukes, the MF Global bankruptcy has proven something crucial: The central banks and government regulators have completely fallen into the trap of confusing the welfare of the “Systemically Important Financial Institutions” with the welfare of the system itself. They don’t seem to realize that the SIFI’s are actors within the system—not the system itself.

We critics of the current, corrupt state of affairs also sometimes confuse the SIFI’s with the system itself, whenever we say, “The whole system is corrupt!”

But the system is not corrupt—it’s the regulators and SIFI’s who are corrupt. If nothing else, the handling of the MF Global bankruptcy has proven that, once and for all. That’s why we’re pulling out our money now—while we still can.

Because once the general public catches on to what we already know . . . oh boy.

Hoping the more financially astute posters here will comment: Mr. Perfect? Col. Typhoon??

FWIW If I understand this correctly, then Gov. John Corzine formerly of NJ & Goldman Sacks America :twisted: is NOT the real bad guy in this story.............. all of Hannity's snark to the contrary.............

Then again I could be wrong.....................


Hat tip to Booklady's Ghost at the Spengler board.
Last edited by monster_gardener on Fri Dec 30, 2011 4:00 am, edited 2 times in total.
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Re: The Great Global Crossing Robbery: By the Regulators!

Post by Typhoon »

No doubt there has been considerable behind-the-scence shenanigans regarding the MF Global incident.

However, how many imminent crashes has the ZH site predicted in the last year?
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Re: The Great Global Crossing Robbery: By the Regulators!

Post by Zack Morris »

Typhoon wrote:No doubt there has been considerable behind-the-scence shenanigans regarding the MF Global incident.

However, how many imminent crashes has the ZH site predicted in the last year?
ZH didn't predict the MF Global meltdown, did it? I'd be astounded if they predicted something this specific.
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Re: The Great Global Crossing Robbery: By the Regulators!

Post by Nonc Hilaire »

Zack Morris wrote:
Typhoon wrote:No doubt there has been considerable behind-the-scene shenanigans regarding the MF Global incident.

However, how many imminent crashes has the ZH site predicted in the last year?
ZH didn't predict the MF Global meltdown, did it? I'd be astounded if they predicted something this specific.
It isn't the MF Global meltdown that did the real damage. It was after the bankruptcy when JP Morgan got the bankruptcy trustees to seize ALL assets from all customers. This included not only capital put at risk, but simply held as cash or even bars of metal or equity shares - everything was seized.

JP Morgan successfully claimed they owned ALL CUSTOMERS ASSETS ON HAND because all brokerage customers (or CD/money market share owners) signed an agreement common to every single brokerage and bank account which allows the bank/broker to use the money as if it was their own (hypothecation/rehypothecation).

Holding deposits in "street name" has always been just a formality and a convenience for decades. If there was a bankruptcy, everything was transferred to a new company

Not any more. Anybody who has securities held in street name should register them and get the actual certificate of ownership.
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Re: The Great Global Crossing Robbery: By the Regulators!

Post by monster_gardener »

Typhoon wrote:No doubt there has been considerable behind-the-scence shenanigans regarding the MF Global incident.

However, how many imminent crashes has the ZH site predicted in the last year?
Thank you Very Much for your reply. Typhoon.

Don't know about the predictions but at this point what interests me is the facts: Was it the regulatory body that robbed the depositors??

This reminds me of similar incident years ago but in reverse where a grain elevator went bankrupt.

IIRC the news story was that the the law was that the farmers lost grain they had stored in the elevator but in this case the farmers banded together and forced their way into the elevator and removed their grain. It seemed that the farmers considered the elevator to be the equivalent of a bank and their deposits deserving the same protection as safety deposit boxes (mentioned in the zero hedge article) as they were PAYING the grain elevator to store their grain. Remember law enforcement trying to stop the farmers but they were just pushed aside.

I believe I have Found it: 1981 WoW! Maybe the Global Crossing investors should consult with/take a page from Wayne Cryts......... especially AIUI the law should be on their side IF the Zero Hedge story is accurate..........

http://www.semissourian.com/story/1136322.html


http://www.waynecryts.com/
"One Man With Courage" The Wayne Cryts Story
Jerry Hobbs, Author

A fifth generation farmer, Wayne Cryts finished harvesting his crop in the fall of 1980 and hauled more than 32,000 bushels of soybeans to a nearby grain-storage facility. That decision changed his life forever.

A few months later, the owners of the Ristine Grain Elevator filed for bankruptcy. A federal judge in Little Rock, Arkansas, got involved, declared it a federal bankruptcy case, and took control over the company’s elevators in both Missouri and Arkansas. He ordered all the grain stored in the elevators to be sold as part of the assets of the facility owners.

Wayne and other farmers immediately protested the decision, stating that the grain was their private property, and they had state-issued warehouse receipts to prove it. But when the judge refused to honor those receipts, it set the stage for a modern-day version of David versus Goliath.

More: from this and the next link, it appears the law has been changed to protect farmers if they use properly bonded Grain Elevators as opposed to ethanol plants.............
This is the 25th Anniversary of “Bean Day” when Wayne Cryts made national headline news on Presidents’ Day, February 16, 1981. This historic event eventually led to the members of the United States Congress changing the bankruptcy law to prevent American farmers from losing their private property in the event of a grain storage elevator going bankrupt. Wayne believes it is now time to reveal the untold story of events that happened behind the scenes in this historic moment in American history.

A federal judge of the Bankruptcy Court in Little Rock, Arkansas, ordered all the grain in the bankrupt Ristine Grain Elevators to be sold free and clear of all liens to pay the debts of the owners of the grain elevators. The grain in those elevators belonged to the farmers who were paying storage fees for the space. One of those farmers was Wayne Cryts who had warehouse receipts for over $350,000 in grain stored in those elevators and could not afford to lose it. So, he and his family decided that they had no choice but to remove their grain from the Ristine Elevators. Upon entering the Ristine Elevator property, they discovered that numerous Federal Marshals and FBI Agents had blocked the entrance to the elevator and were prepared to stop him. This set the stage for a modern day showdown of David versus Goliath, a farmer named Wayne Cryts versus the mighty Federal Government.

Wayne held a press conference a month prior to this event and thousands of people from two-thirds of the states in America decided to be there in support of their underdog and hero in his effort to retrieve his private property. Wayne and his family worked hard to plant, tend to, and harvest those beans to support the family farming operation. In addition, news media from across the nation were there to record history in the making.

Bill Clinton, former Governor of Arkansas and future President of the United States, visited Wayne when he was locked up in the Pope County Jail in Russellville, Arkansas. Bill Clinton supported Wayne’s battle to get the law changed to protect the American farmer. Finally, with the help of President Reagan, Senator Bob Dole, U.S. Representative Bill Emerson and many other U. S. Senators and Representatives, they were successful in changing an unjust law.

Mr. Cryts appeared on the major talk shows, radio programs, magazines, and newspapers during the early 1980’s. And, as a result of this book, Wayne has recently been featured on KOMU TV 8 in Columbia, Missouri, KWKZ and KFVS 12 in Cape Girardeau, Missouri. In addition, Wayne was featured on the nationally syndicated “Derry Brownfield Show” on January 11, 2006, and due to the overwhelming response to the show, he was asked to do an encore show the next day. Wayne has recently been the “Featured Guest Speaker” at the American Agriculture Movement National Conference and the Farmers Union National Conference.

One of Wayne’s most memorable interviews was with David Susskind in New York. He told Wayne that he was the first farmer that had ever appeared on his show. Wayne said he remembered Mr. Susskind saying that Paul Revere must have been his greatest hero when he went riding through the town warning everyone that the British were coming. Wayne said he thought about that for a little bit and said, “No, he wasn’t. For all I know, he was getting the hell out town. My heroes were the Minute Men who got up out of bed during the middle of the night to go fight the battle against the British.”

This is very comparable to the “Eminent Domain” issue that is dominating the political headlines today. Wayne has demonstrated that unjust laws can be changed through persistent, peaceful means. He encourages all Americans to get involved in their government.
Here is a 2007 case where an ethanol plant went bankrupt with similar problems............

http://www.soyatech.com/print_news.php?id=5982
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Re: The Great Global Crossing Robbery: By the Regulators!

Post by monster_gardener »

Nonc Hilaire wrote:
Zack Morris wrote:
Typhoon wrote:No doubt there has been considerable behind-the-scene shenanigans regarding the MF Global incident.

However, how many imminent crashes has the ZH site predicted in the last year?
ZH didn't predict the MF Global meltdown, did it? I'd be astounded if they predicted something this specific.
It isn't the MF Global meltdown that did the real damage. It was after the bankruptcy when JP Morgan got the bankruptcy trustees to seize ALL assets from all customers. This included not only capital put at risk, but simply held as cash or even bars of metal or equity shares - everything was seized.

JP Morgan successfully claimed they owned ALL CUSTOMERS ASSETS ON HAND because all brokerage customers (or CD/money market share owners) signed an agreement common to every single brokerage and bank account which allows the bank/broker to use the money as if it was their own (hypothecation/rehypothecation).

Holding deposits in "street name" has always been just a formality and a convenience for decades. If there was a bankruptcy, everything was transferred to a new company

Not any more. Anybody who has securities held in street name should register them and get the actual certificate of ownership.
Thank you VERY MUCH for your reply and the explanation.

WOW!

No wonder we/US Main Street/RFD folks are suspicious of the Were Wolves of Wall Street.

If this is allowed to stand, maybe some masked* Loan Rangers :wink: with silver bullets may be needed to deal with these

Evil Lycanthropic Bankster Killer Klowns from Financial Space.

http://en.wikipedia.org/wiki/Lone_Ranger

Image

Remember a while back where the Jamie Demon :twisted: :wink: :evil: oops I think I mean Jamie Dimon, head of J.P. Morgan was being touted as a great guy.

Really?

Not going to say B.S. because manure can have some value to farmers though I prefer compost.........

As far as clowns go, I prefer J.P. Patches to J.P. Morgan :lol: :twisted:

http://en.wikipedia.org/wiki/JP_Patches

Image

*Maybe with Anonymous OWS Guy Fawkes masks instead of the traditional domino.............

Image
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Re: The Great Global Crossing Robbery: By the Regulators!

Post by monster_gardener »

Nonc Hilaire wrote:
Zack Morris wrote:
Typhoon wrote:No doubt there has been considerable behind-the-scene shenanigans regarding the MF Global incident.

However, how many imminent crashes has the ZH site predicted in the last year?
ZH didn't predict the MF Global meltdown, did it? I'd be astounded if they predicted something this specific.
It isn't the MF Global meltdown that did the real damage. It was after the bankruptcy when JP Morgan got the bankruptcy trustees to seize ALL assets from all customers. This included not only capital put at risk, but simply held as cash or even bars of metal or equity shares - everything was seized.

JP Morgan successfully claimed they owned ALL CUSTOMERS ASSETS ON HAND because all brokerage customers (or CD/money market share owners) signed an agreement common to every single brokerage and bank account which allows the bank/broker to use the money as if it was their own (hypothecation/rehypothecation).

Holding deposits in "street name" has always been just a formality and a convenience for decades. If there was a bankruptcy, everything was transferred to a new company

Not any more. Anybody who has securities held in street name should register them and get the actual certificate of ownership.
Thank you VERY MUCH again, Nonc Hilaire for your post.....
(hypothecation/rehypothecation).
http://en.wikipedia.org/wiki/MF_Global
On Sunday, October 30, 2011, a unit of the New York-based brokerage first reported to the Chicago Mercantile Exchange (CME) and the Commodity Futures Trading Commission (CFTC) a “material shortfall” of hundreds of millions of dollars in segregated customer funds. The CME reports that early on Monday, October 31, 2011, officials of MF Global admitted transfer of $700 million from customer accounts to the broker-dealer and a loan of $175 million in customer funds to MF Global’s U.K. subsidiary to cover or mask liquidity shortfalls at the company. Customer accounts with $5.45 billion were frozen the same day and the parent company, MF Global Inc., filed the eighth-largest U.S. bankruptcy. MF Global reported the shortfall in customer accounts at $891,465,650 as of close of business Friday, October 28, 2011.[3][4] According to the trustee overseeing liquidation the shortfall may be as large as $1.2 billion or 22% of relevant funds.[5][6] MF Global mixed customer funds and used them for its own account for at least several days before the bankruptcy and transferred funds outside the country.[7]

The brokerage used a large number of complex and controversial repurchase agreements or "repos" for funding and for leveraging profit, many off their balance sheet.[8][9] Some of these complex repos have been described as a wrong-way $6.3 billion trade MF Global made on its own behalf on bonds of some of Europe’s most indebted nations. Failure of the repo positions helped cause the liquidity crisis at the firm.[10][11] The sudden disappearance of so much liquidity may indicate a scandal and crisis related to the widespread practice among US and UK brokers of Rehypothecation of customer collateral.[12]
Rehypothecation is not allowed in Canada and Canadian customers of MF Global were able to recover all their funds within 10 days.[13]
Kudos to the Canadians once more................. Maybe we/Us should go and do likewise/imitate/copycat..........

Or maybe we/US should ask them to annex us/US ;) :o :shock:

en.wikipedia.org/wiki/Hypothecation
Hypothecation is the practice where a borrower pledges collateral to secure a debt. The borrower retains ownership of the collateral, but it is "hypothetically" controlled by the creditor in that he has the right to seize possession if the borrower defaults. A common example occurs when a consumer enters into a mortgage agreement, in which the consumer's house becomes collateral until the mortgage loan is paid off.

The detailed practice and rules regulating hypothecation vary depending on context and on the jurisdiction where it takes place. In the US, the legal right for the creditor to take ownership of the collateral if the debtor defaults is classified as a lien.
Fair enough. Even I can understand it. This has been going on back to the times of the Old Testament/Tanakh............... A bit hard but it makes sense.........

Rehypothecation
Re-hypothecation occurs when banks or broker-dealers re-use the collateral posted by clients such as hedge funds to back the broker's own trades and borrowings.
WTD This sounds like potential fraud/fraud/bad magic to me.............
In the UK, there is no limit on the amount of a clients assets that can be rehypothecated,[3] except if the client has negotiated an agreement with their broker that includes a limit or prohibition.
Wow!
In the US, re-hypothecation is capped at 140% of a client's debit balance.[4][5][6]
In 2007, rehypothecation accounted for half the activity in the Shadow banking system. Because the collateral is not cash it does not show up on conventional balance sheet accounting. Prior to the Lehman collapse, the International Monetary Fund (IMF) calculated that US banks were receiving over $4 trillion worth of funding by rehypothecation, much of it sourced from the UK where there are no statutory limits governing the reuse of a client's collateral. It is estimated that only $1 trillion of original collateral was being used, meaning that collateral was being rehypothecated several times over, with an estimated churn factor of 4.[5]
Shadow Banking System...........

Sounds like trouble and it is...........

http://en.wikipedia.org/wiki/Shadow_banking_system

Bad magic: Werewolves of London ;) :twisted: and Wallstreet Werewolf Financial Wizards doing Alchemy Gone Wild ;) :twisted: :evil: .......... making fairy gold that vanishes in the light of the sun or at the touch of cold iron or most importantly when people lose confidence in these con men of the financial world.............

These Klowns could kill an economy.................
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Re: The Great MF Global Robbery: By the Regulators??!!

Post by monster_gardener »

Big Hat tip to Lzzrdgrrl ................

http://seekingalpha.com/article/316374- ... -disaster?

" I am getting repeated reports that farmers and other producers are turning increasingly to direct deals with the users of their products, eschewing the futures markets entirely.

These are not speculators. These are the people who grow the corn, wheat, soybeans and other products you wish to buy in "processed" form.

This is exactly what I warned might happen, and it appears that it is.

It is an extremely dangerous trend for consumer price stability and in fact for the stability of our nation's economy in general.

Futures markets in various forms are not new constructs. They literally date to the East India Tea Company with spice contracts. They are necessary lubricants for price stability and the even functioning of markets.

Some very ordinary transactions that we have all become accustomed to are at risk of disappearing entirely. Among them are airline tickets at a known price for travel six months from now. Reasonably-stable prices for a box of cereal are another example (corn has traded from 572 to 799 in the last year; a forty percent range over the last 12 months; soy and wheat have seen similar moves); indeed, virtually every food item in your store, from orange juice to bacon (pork bellies) is hedged off in these markets.

The move to direct transactions means that the reasonable stability we have enjoyed in these transactions, or even the ability to enter into them at all over a horizon of more than a month or two, is at risk of disappearing!

I warned when this story first broke that the danger was much more severe than being reported and that in fact the financial media was downplaying the importance of this fiasco. It was (and is) my expectation that if there is another event of this sort the entire futures market structure for hedging these prices would be likely to collapse....."
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Re: The Great MF Global Robbery: By the Regulators??!!

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LOL, a friend of mine has been doing PhD studies on Futures markets in 4th Century Roman Egypt. They predate the East India company.
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Re: The Great MF Global Robbery: By the Regulators??!!

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Enki wrote:LOL, a friend of mine has been doing PhD studies on Futures markets in 4th Century Roman Egypt. They predate the East India company.
Sounds fascinating. My thesis adviser has a data set with interest rate data going back to ancient Sumeria.
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Re: The Great MF Global Robbery: By the Regulators??!!

Post by Miss_Faucie_Fishtits »

Enki wrote:LOL, a friend of mine has been doing PhD studies on Futures markets in 4th Century Roman Egypt. They predate the East India company.
That is true, the present form may have been presaged by the East India company though the idea goes all the way back. Karl's point is that futures markets weren't created in the last generation or two for the sole benefit of speculators......
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Typhoon
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Re: The Great Global Crossing Robbery: By the Regulators!

Post by Typhoon »

Nonc Hilaire wrote:
Zack Morris wrote:
Typhoon wrote:No doubt there has been considerable behind-the-scene shenanigans regarding the MF Global incident.

However, how many imminent crashes has the ZH site predicted in the last year?
ZH didn't predict the MF Global meltdown, did it? I'd be astounded if they predicted something this specific.
It isn't the MF Global meltdown that did the real damage. It was after the bankruptcy when JP Morgan got the bankruptcy trustees to seize ALL assets from all customers. This included not only capital put at risk, but simply held as cash or even bars of metal or equity shares - everything was seized.

JP Morgan successfully claimed they owned ALL CUSTOMERS ASSETS ON HAND because all brokerage customers (or CD/money market share owners) signed an agreement common to every single brokerage and bank account which allows the bank/broker to use the money as if it was their own (hypothecation/rehypothecation).

Holding deposits in "street name" has always been just a formality and a convenience for decades. If there was a bankruptcy, everything was transferred to a new company

Not any more. Anybody who has securities held in street name should register them and get the actual certificate of ownership.
Quite right. I stand corrected with regards to this point.

However, my general comment about the ZeroHedge site still holds.
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Azrael
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Re: The Great MF Global Robbery: By the Regulators??!!

Post by Azrael »

So, according to what I've read on this thread, it sounds like JP Morgan just stole money from MF Global's customers, with a bit of assistance from MF Global and regulators.

I would imagine MF Global's customers may have grounds to sue JP Morgan.

My father was a Washington Mutual depositor who became a (JP Morgan) Chase depositor when the bank was taken over. He's already decided to switch banks. Here's yet another reason to do so. I would advise taking all deposits out of the big banks: Bank of America, Citibank, JP Morgan Chase, Wells Fargo, etc.

Credit Unions may be a better choice. And they tend to cooperate, so there are plenty of ATMs to use without fees.
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Re: The Great MF Global Robbery: By the Regulators??!!

Post by monster_gardener »

Azrael wrote:So, according to what I've read on this thread, it sounds like JP Morgan just stole money from MF Global's customers, with a bit of assistance from MF Global and regulators.

I would imagine MF Global's customers may have grounds to sue JP Morgan.

My father was a Washington Mutual depositor who became a (JP Morgan) Chase depositor when the bank was taken over. He's already decided to switch banks. Here's yet another reason to do so. I would advise taking all deposits out of the big banks: Bank of America, Citibank, JP Morgan Chase, Wells Fargo, etc.

Credit Unions may be a better choice. And they tend to cooperate, so there are plenty of ATMs to use without fees.
Thank you VERY Much for your post, Azrael.
Credit Unions may be a better choice. And they tend to cooperate, so there are plenty of ATMs to use without fees.
Absolutely correct. In my experience, Credit Unions are MUCH better.

Clark Howard, the consumer financial expert also agrees with you: 'Go with credit unions and small community banks. Big banks liKe Bank of America are brain dead when it comes to customer service'...............in addition to what is seen here.

Clark's radio show is excellent........ He gets one thing right that Dave Ramsey IMVVHO gets wrong: Debit cards are/can be WORSE than Credit: no protection if you are scammed or have card & ID stolen: with a debit card the money is gone............. with a credit card you have a chance to get most of it back.........

http://en.wikipedia.org/wiki/Clark_Howard
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Re: The Great MF Global Robbery: By the Regulators??!!

Post by Nonc Hilaire »

Credit unions and small banks are fine, but they must all deal with the big banks in the end. They do not hold their loans, they sell them off to the big banks but the customer gets a "buying in bulk" rate.

Look at the list of banks which have gone bankrupt over the past ten years or so. Almost all were small community banks.

No suing of JP Morgan because what they did was legal. A brokerage/bank/credit union does not hold or protect your money - you lend it to them as an unsecured loan and it is no longer your money for the duration. You are making a loan to them and your account statement is really only an IOU. The money is no longer yours to control.

They can then send your money to London and gamble it away at high leverage. The language allowing that is in that long contract you signed but did not read when you opened the account, and credit union and small banks have the same language in their contracts.
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Re: The Great Global Crossing Robbery: By the Regulators!

Post by Alexis »

Typhoon wrote:However, how many imminent crashes has the ZH site predicted in the last year?
What cannot continue forever, won't.
That being said, too many people want to believe they can predict the "won't" timing...


Tangentially, Japan chose the F-35 over the Typhoon.

... Is your new nickname related to this issue?
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Re: The Great Global Crossing Robbery: By the Regulators!

Post by Typhoon »

Alexis wrote:
Typhoon wrote:However, how many imminent crashes has the ZH site predicted in the last year?
What cannot continue forever, won't.
That being said, too many people want to believe they can predict the "won't" timing...

Tangentially, Japan chose the F-35 over the Typhoon.

... Is your new nickname related to this issue?
:lol: Not exactly.

Japanese politicians and esp bureaucrats kowtowing to American pressure.

Have to wonder about these so-called advanced fighters that spend far more time on the ground under repair than they do in the air.
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Re: The Great MF Global Robbery: By the Regulators??!!

Post by Typhoon »

More on the MF Global collapse.

Reuters | MF Global sold assets to Goldman before collapse
(Reuters) - MF Global unloaded hundreds of millions of dollars' worth of securities to Goldman Sachs in the days leading up to its collapse, according to two former MF Global employees with direct knowledge of the transactions. But it did not immediately receive payment from its clearing firm and lender, JPMorgan Chase & Co (NYSE:JPM - News), one of the sources said.

The sale of securities to Goldman occurred on October 27, just days before MF Global Holdings Ltd (Other OTC:MFGLQ.PK - News) filed for bankruptcy on October 31, the ex-employees said. One of the employees said the transaction was cleared with JPMorgan Chase.

At the same time MF Global, which was run by former Goldman Sachs head Jon Corzine, was selling securities to Goldman to raise badly needed cash, the futures firm was also drawing down a $1.2 billion revolving line of credit it had with JPMorgan, according to one of the former MF Global employees.
JPMorgan has fought aggressively in bankruptcy court to protect its interests, and received a lien on some of MF Global's assets in exchange for granting the firm $8 million to fund its bankruptcy costs. The lien puts JPMorgan's interests ahead of MF Global customers who have not yet received an estimated $900 million worth of money from their accounts, which remain frozen as regulators search for missing funds.

The hastily crafted transactions and the seeming inability of MF Global to recoup some of the money in the sale to Goldman may start to explain why so much money remains unaccounted for at the futures firm.

It is unclear what type of assets Goldman bought from MF Global, but the securities were worth hundreds of millions of dollars, the former employees said. The sources spoke on the condition of anonymity.
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Re: The Great MF Global Robbery: By the Regulators??!!

Post by Parodite »

Azrael wrote:So, according to what I've read on this thread, it sounds like JP Morgan just stole money from MF Global's customers, with a bit of assistance from MF Global and regulators.
Also trying to get this.

"Held in street name" means in simple english: "If necessary we will rob you (customer) from all your assets to save as much as possible of our ass if necessary, unless you sign a paper that we can't and that you own it.

Or, the marketing selling point:
"Give us your assets.. we will put it safely in our lockers protecting them against evil..."
And the reality:
"Give us your assets... Thanks! They are ours now. Unless you reclaim them officially. Which most people never do because they don't know or wanna know...and if they try we wrap it in a paper so sexy, so intelligent and totally incomprehensible..."
Deep down I'm very superficial
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