28 February 2012

Tavakoli: The Great MF Global Comedy Cover Up

Powerful interests are involved. Too Big To Fail and Too Connected To Jail.

This brief piece by noted financial analyst and author Janet Tavakoli is the sharp edge of her incisive wit.

The coverage of MF Global by the financial print media has been laughable, with the notable exception of Forbes. MF Global was the eighth largest bankruptcy in the US, with thousands of customers victimized by theft, and yet one hardly ever hears about it.

I have had a few conversations with people knowledgeable about Fedwire, the most reliable system for wire transfers in the states for large transfers between financial entities, and the one that MF Global might have used. After all, they were one of the Fed's own Primary Dealers. If so, is the Fed withholding information about the transfers? The problems in finding out who received certain transfers in excess of $100 million left the people I discussed this with incredulous.
"The Fedwire Services are the premier electronic payments and securities transfer services that banks, businesses and government agencies rely on for mission-critical same-day transactions. When it absolutely matters, trust Fedwire Services to deliver transactions with certainty and finality."
I wonder which mainstream news media program will finally interview someone informed and honest on the MF Global story, and bring this injustice to the awareness of the public. I have heard that they will attempt to drag this investigation out until after the national elections in November, but if it comes out before that it will be wrapped up in a "don't ask don't tell admit no guilt" settlement.
"Our government...teaches the whole people by its example. If the government becomes the lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy."

Louis D. Brandeis
Someone like the maverick Jon Stewart might break ranks from the corporate allegiance and political partisanship of the major television outlets. Corzine is a powerful figure in the Democratic funding machine, and JPM is the biggest kid on the Street.

And where better to discuss the protection of the US public trust from well-connected financial predators than on Comedy Central, which is fast becoming the premier news outlet in post-corporate America.

Huffington Post
MF Global: Crime, Comedy and the Cover-Up
By Janet Tavakoli
2/28/2012 5:37 am

MF Global's October 2011 bankruptcy was the eighth largest bankruptcy by assets in the United States. James Giddens, the bankruptcy trustee, issued a press release on February 6 stating that his investigation found that money from customer accounts that was supposed to be segregated was improperly used to fund MF Global's daily activities. Improper transfers of customer money occurred regularly in amounts under $50 million before MF Global's bankruptcy. MF Global wasn't caught, because it put the money back before customers knew it was missing.

On January 30, 2012 the Wall Street Journal did a hilariously bad job of reporting when its front page article stated that a "person close to the investigation" said that as a result of chaotic trading in the week before MF Global's October 31 bankruptcy, customers' money "vaporized." Money doesn't vaporize. It's true that tracing money transfers can be tedious, but that's why we call it work.

As for the Wall Street Journal's article, the editor should have made it vaporize. I was having breakfast with several traders at Chicago's East Bank Club. One trader read the passage aloud. The entire table burst out laughing. Then he got up and ceremoniously threw the paper in the trash. The entire table applauded.

Fox Business News had people in stitches when it reported that federal investigators are saying that this wasn't criminal, it's just a matter of sloppy bookkeeping.

The habitual filching of customers' funds -- even if the funds are later replaced -- goes way beyond sloppy bookkeeping. It goes way beyond bad judgment. Just because MF Global got away with it for a long time before it blew up in its face doesn't mean one can call it sloppy bookkeeping and have any reasonable person believe it. If federal investigators and law enforcement people want to make public statements like this, one should investigate corruption in their ranks. They seem to be providing undeserved excuses as a trial balloon to see if it will fly. Nice try, but it's not working.

According to the bankruptcy trustee, money was repeatedly filched from customers' accounts. That goes way beyond sloppy bookkeeping.

Senior officials of the Chicago Mercantile Exchange and of MF Global's regulator, the U.S. Commodity Futures Trading Commission (CFTC), have already testified to Congress their belief that MF Global violated regulations -- it broke the law -- because using customers funds, money that was supposed to be in segregated accounts, to pay off MF Global's creditors or to use that money to fund MF Global's day-to-day operations is not permitted.

MF Global CEO Jon Corzine, a former head of Goldman Sachs, signed off on statements that said his internal controls were adequate. After Enron, the Sarbanes Oxley Act was meant to assure Americans that officers that signed such statements would be held accountable for their accuracy....

Read the rest here.