Rickards: 'Unallocated Gold Is a Euphemism for No Gold.'

I think that Rickards is correct in his judgement, and joins many others including Kyle Bass, who because of their backgrounds are much harder to ridicule and dismiss by the creatures of the bullion banks.  And in some of their more recent remarks about this, one can almost feel the desperation.  And here and there, the rats seem to be leaving the ship.

When this pyramiding of bullion and price manipulation falls apart, which history suggests that it must, there will be many angry investors demanding explanations of officials and regulators and bankers who will be shuffling from one foot to another, trying to excuse their lack of good fiduciary judgement and responsibility.

I just wonder if they will try to wait for some 'big event' to disclose this, in the hopes that fewer questions will be asked, and will be more easily dismissed.

As Rickards notes, and again I think he is right, they will 'close the gold trading window' and force settlements for cash at one price, and then reopen the price for actual bullion at a price that will climb  shockingly higher, despite a determined PR campaign by their friends in the media.

Perhaps I am wrong about this, but to me it has seemed for some time to be all too similar to the improbable sustainability of the Madoff scheme, and other such arrangements that depend on large numbers of people accepting a proposition that is dangerously misconstructed, misrepresented, and therefore mispriced in terms of risks.

"If JP Morgan leases gold from the US Treasury it does not mean that they back up a truck in Fort Knox and drive the gold away. There is no need for that. It is just a paper transaction. The gold can sit in Fort Knox. JP Morgan can take a hypothecatable title. Now once JP Morgan has the gold what they do is they sell it at times 100 to gold investors who think they have gold but what they really have is what is called unallocated gold.

Unallocated gold is a euphemism for no gold. If I call up JP Morgan and I say, 'You know I wanna buy a million dollars worth of gold,' they will say, 'Fine. Here is our contract. Send us the million dollars.' I sign the contract. I send the million dollars. They send me a confirmation and it says I own a million dollars worth of gold subject to the contract.

Well, read the fine print in the contract. What it says is your gold is unallocated which means that they do not claim to have any specific bar with a serial number or your name on it. In reality they have taken the same bar of gold and sold it to a hundred different investors.

Now that is fine if we are happy with the paper contract, but if all 100 of us show up at JP Morgan and they have only got one bar of gold, the first person may get the gold. The other 99 people, they are going get their contracts terminated. They are going to get a check for the value of gold at the close of business yesterday, but they are not going to get today's price movement or tomorrow's price movement when super spiking going up to $2,000, $3,000, $4,000 an ounce. That is when you want your gold for the price protection when everything else is falling apart. That is when you are going to discover that you do not have gold."

Read the entire interview with Jim Rickards here.

Very unlikely you say? Do you remember what happend to those who were holding their bullion in these warehouses through MF Global? And this was a relatively isolated event. A more general break in the chain of cross ownership and counterparty risks at 100 to 1 leverage would create a market dislocation that would be quite memorable.

And as a reminder, here is what Kyle Bass had to say about unallocated and hypothecated gold, even that held within a 'fractional reserve' exchange structure.

'Claims Per Deliverable Ounce' Likely Soars to over 200:1 as JPM Pulls Another Large Tranche

JP Morgan, who as I shared last month tends to move large amounts of gold into the registered (deliverable) category on the Comex just in the nick of time, took another huge tranche of gold out of that category last Friday.

Registered (deliverable) gold is now down 202,000 troy ounces or a little over 6 tonnes,  a level which we have not seen there since Nick Laird started keeping track of the Comex warehouses in 2003.

A quick calculation that awaits the updated open interest figure shows that the 'claims per deliverable ounce' has now likely soared to over 200:1.  We have never seen a ratio that high.

I will put up the 'official calculation' from Nick when the official number becomes available.  We might not see the ratio climb if there has been a plunge in open interest, however unlikely that might seem.

Not just considering the Comex, which I consider to be a atavistic pricing mechanism, a conjunction of several things trouble me in the light of Ronan Manly's second article in his current series.

He does a meticulous estimate that indicates that the levels of unencumbered gold in the LBMA, which some of us have come to call 'the float' of physical bullion, are now so low that he calls it 'a game of musical chairs' to cover the unallocated gold accounts.

You may read Ronan's entire article here.

Things being what they are, I am now persuaded that 'the float' is tight enough so that the probability of a 'break' or dislocation in the physical bullion market is high enough to warrant some extra caution. Not panic, but caution, at least until the situation clarifies, particular with an eye to the historically significant month of December.

The other item that greatly concerned me is Jim Rickards assertion that in this type of situation the price of gold is not likely to go up gradually, but may suddenly rise step-wise, almost overnight, by more than a hundred dollars or so per step.  You may watch it here.

I do not claim to have the contacts or pull that some may have or claim to have.  But I have now seen enough to think that in terms of insurance and conservative investments that caution is warranted, now, rather than later.

So, IF you are an investor, not a short term trader, and are holding some percentage of gold in your portfolio as insurance, you may wish to reconsider any arrangements that you may have in which you cannot exercise reasonable control over your possession of bullion which you have purchased.

This is what I believe Kyle Bass referred to as fiduciary caution.

Particularly at risk of a forced cash settlement would be any leveraged or unallocated holdings with an indeterminate counterparty risk, or what some people refer to as 'paper gold.'

I am not saying that there will be a hard default, in terms of outright confiscation in a bankruptcy court, not at all.  Although that may happen.

But I would consider carefully any arrangements that offer guarantees or assurances that could be satisfied with a cash settlement at a price to be determined by someone else without your consent.  As we saw in 1933, they settled at one 'official price' and then allowed the price to resume some 40% higher.

If you are a short term trader, do what you will, but be mindful of your leverage, and take uncovered short positions at your own risk.  And if covered, carefully consider your counterparty risks, because the bigger players will be lawyered up and looking for patsies and victims.  Again, a hard lesson from MFGlobal.

This market may likely turn extremely volatile, even to the extent of a big down move followed by a sizable move higher.  This is how these jokers roll.  When the going gets tough, they tend to keep doubling down and running a bravura bluff.   This was the story of 'the London Whale.'

In the meanwhile, we will have to bear up as best we can with this ridiculous lack of transparency and secrecy and sound regulatory oversight in public markets in the age of crony capitalism.

I have included the latest silver Comex chart as well.   I have to admit that I do not feel I have the same grasp of silver that I hope to achieve in gold.   There seems to be a steady bleed in the inventories, and one huge difference is that with silver there is no great central pool of it to cover short term gaps in the physical markets through leasing as there is with gold.

So, I will keep an eye on silver, because the premiums there are acting more oddly on the retail level than gold is, and its market structure is such that a festering problem can become a big and obtrusive problem rather quickly, and the central banks would be in a poor position to do anything about it.

I would tend to exercise the same caution with silver investments as insurance as I would with gold.  And so I am.

Margin Call: Ted Butler Wonders About the Real Cause of Bear Stearns' Collapse

Ted Butler has put one of his newsletters into the public domain.

It raises some interesting points.  As you may recall Bear was suffering losses in a number of financial instruments at the time.  But there has not been serious discussion about their precious metal positions.

At the time of the MF Global collapse it appeared that JPM had their fingerprints all over the squeeze and margin call that put them down.   JPM, In the City of London, With a Margin Call.

But I had never thought about it happening in the case of Bear Stearns.

Goldman may be the vampire squid, but JPM may be Mack the Knife.

And is MF Global Jenny Towler, and Bear Stearns Schmul Meier?   And if so, who then is Tiger Brown?

Mackie, what price did you pay?

Times may change, but the song remains the same.

What Really Happened To Bear Stearns?
By Theodore Butler
February 17, 2014

Six years ago the well-known investment bank Bear Stearns imploded. In February 2008, Bear Stearns stock traded as high as $93; by mid-March the insolvent company agreed to be taken over by JPMorgan for $2 a share (later raised to $10 after class-action lawsuits). In the annals of Wall Street, there was hardly a more sudden demise than the fall of Bear Stearns. The cause was said to be a run on the bank as nervous investors pulled assets from the firm. Bear Stearns was said to be levered by 35 times, meaning it had equity of $11 billion and total assets of $395 billion. This is a very small cushion if something negative suddenly appears.

Something negative did hit Bear Stearns in the first quarter of 2008; although there are remarkably few details of what went wrong. Since Bear had a significant presence in sub-prime mortgages and that market was in distress, it is assumed the fall of the firm was mortgage related. That may be true, but there was no general stress in the stock market through mid-March 2008 reflecting a credit crisis. Was there instead some specific trigger behind the company’s sudden collapse?

I believe that sudden and massive losses and margin calls of more than $2.5 billion on tens of thousands of short COMEX gold and silver contracts were the specific triggers that killed Bear Stearns. Let’s face it – Bear was so leveraged that a sudden demand of more than $2.5 billion in immediate payment for any reason could have put them under. Bear Stearns’ excessive gold and silver shorts on the COMEX are the most plausible reason for the sudden demise.

Bear Stearns did fail and due to a sudden cash crunch was acquired by JPMorgan for a fraction of what it was worth two months earlier. Bear Stearns was the largest short in COMEX gold and silver at the time. The day of Bear Stearns’ demise coincides precisely with the day of the historic high price points in gold and silver. That is also the same day the biggest COMEX gold and silver short would experience maximum loss and a cumulative demand for upwards of $2.5 billion in cash deposits for margin. It was no coincidence the music stopped for Bear Stearns that same day...

Read the entire article here.

New Twists In MF Global Scandal Focus On the CFTC - A Bastille of Deceit

Mark Melin has been doing an excellent job of covering the MF Global scandal and cover up. With a few notable exceptions like Forbes, the mainstream media has been silently complicit. Investigative journalism is far less safely profitable than staged debates amongst commercially endorsed opinionators. The news gives way to spectacle.

This is an excellent example of the credibility trap. That blatant theft occurred and no indictments and prosecutions have resulted seems so unbelievable that most tend to ignore it.   You don't understand, it takes time, it takes time. Yes, to cover things up, to kick the can down the road, and hope that the people lose interest.

And yet this is just one instance of the distortions that are plaguing the global commodity and financial assets markets. The long delayed investigation into the silver market is most likely another.

The most urgent problem facing the US and the Western nations is not a 'fiscal cliff.' It is the pernicious corruption in the financial system that has captured the politicians of both parties, and distorted the public conversation through influence in the media and directing the opinions and buying the research of 'experts' through the power of big money.  The people are held hostage in a Bastille of deceit.

What a condemnation it is, that so few love the truth for itself, and willfully turn from it, being led in their choice by the lies that favor their particular flavor of greed, and rotten self-interest.

New Twists In MF Global Mystery Focus on CFTC
By Mark Melin

A delay in a Congressional report set to outline details surrounding MF Global findings was announced at the annual Futures Industry Association (FIA) conference just as insight regarding likely criminal behavior that damaged commodity market integrity moves into plain view.

Over the past weeks Dan Roth, president of the National Futures Association, a primary front line regulator for the futures industry characterized the actions leading to missing MF Global funds as theft. Mr. Roth has pointed to the fact it matters not if the illegal funds were transferred to the benefit of an individual, as in the case of PFG, or if the illegal transfer of customer assets was due to meet operational needs of the company.

Any such transfer is considered legally theft. In fact, could the argument be made that Russ Wassendorf, founder of PFG, had transferred customer funds to support ongoing company operations? If Mr. Corzine is allowed to transfer customer funds to cover firm operational expenses, is Mr. Wasdendorf allowed the same courtesy?

While the primary focus is on the initial criminal acts leading up to the firm's bankruptcy, the potential cover-up that occurred afterwards, like Watergate, could be more troubling.

Highlighted are two points of potential criminality: the initial phase, when illegal money transfers were hidden by false segregation reports; and the cover-up phase, where the CFTC was in possession of potentially criminal information and knowingly withheld this information. CFTC's inaction and withholding of critical information, particularly in court, resulted in significant damage to the integrity of the segregated account.

The Initial Offense:
The first phase of likely criminality has been documented by both regulators and industry participants:

1. On Wednesday, October 26 2011 MF Global was given clear instructions from regulators not to transfer assets.
2. After this order, MF Global transferred assets from customer accounts so it could cover its in house trading losses.
3. The illegal asset transfers were initially hidden by false segregation reports submitted to regulators. These segregation reports were known to be false on Sunday, October 30, 2012, as the customer shortfall was the reason for inaction to sell MF Global to Interactive Brokers.

The Cover-up Offense:
The second phase, the little known aspect of misrepresentations that diminished the rights of MF Global customers and damaged market integrity, occurred after the now infamous Halloween weekend of 2011:

1. On Tuesday, November 1, 2012, MF Global went to court with the express purpose of providing testimony relative to the bankruptcy of MF Global holdings. In testimony, an MF Global legal representative represented that funds were accounted for, but did not mention known contradictory information, some of which is considered criminal in nature.
2. This testimony was delivered to the court while MF Global and the CFTC where acknowledged to possess information that a shortfall in customer assets existed, the asset transfer occurred after MF Global was given orders by a regulator not to transfer assets and reports provided by MF Global contained false information.
3. Perhaps most egregious, a CFTC lawyer, in attendance on directions from Washington, D.C. did not object when the agency possessed information contradictory to MF Global's testimony.
4. Had the CFTC objected or otherwise reported to the court at any time what it is documented to have been known, a fraud investigation would have likely ensued, MF Global customers would have retained their rights and the segregated account would have been defended.

(For details and documentation, see the article below entitled "Who Knew What and When Did They Know It?")

Delay in Congressional Report on MF Global Announced

The keynote speaker at the FIA event was Congressman Randy Neugebauer. Congressman Neugebauer is Chairman of the House Financial Services Subcommittee on Oversight and Investigations, which held critical MF Global hearings over the past year. The goal of the Congressional report, like the Giddens Trustee report, is not to identity potential criminal behavior but rather spotlight areas of concern.

It was set to release the report on the one year anniversary of the MF Global affair, but has been delayed...

"The MF Global affair is not complicated," was one message communicated to Congressman Neugebauer. "Are you aware of what occurred in court on November 1, 2011 and what the CFTC did NOT do?" was another question asked by this reporter, to which Congressman Neugebauer responded "MF Global had weak risk controls." Congressman Neugebauer is Chairman of the House Financial Services Subcommittee on Oversight and Investigations, which held critical MF Global hearings over the past year.

"The significant point is MF Global willfully ignored CME's order not to transfer customer funds," notes attorney and Customer Commodity Collation President James Koutoulas. "If the transfers were proper, why wouldn't they just ask for CME Group's approval?" The CME Group was MF Global Designated Self Regulatory Organization (DRSO) and had front line regulatory authority over MF Global.

Read the entire story with links here.

PFGBest: F to the R to the AUD - Wasendorf 'Faked Bank Records For Years'

"The commercial world is very frequently put into confusion by the bankruptcy of merchants, that assumed the splendour of wealth only to obtain the privilege of trading with the stock of other men, and of contracting debts which nothing but lucky casualties could enable them to pay; till after having supported their appearance a while by tumultuary magnificence of boundless traffic, they sink at once, and drag down into poverty those whom their equipages had induced to trust them."

Samuel Johnson: The Rambler, January 7, 1752

The regulators are clueless and conflicted, the self-regulators are careless and complicit, the industry is enmeshed in cronyism, and fraud is broadly tolerated as way of doing business, a droit du seigneur of the elite over customer funds and assets, pricing and all other forms of news and information.  It has every character of an advanced form of control fraud.

And as for the politicians, one might conclude as the Parliament had done with Mr. Bob Diamond, that they are either incompetent or indirectly complicit as well, in the manner of a credibility trap.   It seems hard to explain it any other way.

The culture of privilege and corruption through the mispricing of risk and outright fraud in the Anglo-American financial system is pervasive, stuffed with phony paper. No outrage seems too extreme, too great, and therefore nothing can be said to be safe.

Reuters
Exclusive: Iowa futures broker forged bank records for years - source
By Ann Saphir

Jul 10, 2012 7:23pm EDT

CHICAGO (Reuters) - Russell Wasendorf Sr., the sole owner and chairman of stricken futures broker Peregrine Financial Group, Inc., intercepted and forged bank documents for more than two years to cover up hundreds of millions of dollars in missing money, a person close to the situation told Reuters.

The National Futures Association on Monday froze the funds of the Iowa-based brokerage, which does business as PFGBest, after discovering an estimated $220 million shortfall in PFGBest's customer accounts. The NFA had said in an affidavit that Wasendorf "may have falsified bank records."

Wasendorf, 64, is reported to be in a coma after a suicide attempt Monday morning, according to a complaint filed by the Commodity Futures Trading Commission on Tuesday that accuses Wasendorf and Peregrine of fraud.

The source offered new details on how Wasendorf allegedly carried out the deceit, which involved the forging of confidential documents that the NFA uses to verify a broker's cash balance with its depository institution.

Wasendorf intercepted these documents after they were mailed by the NFA, the broker's first-line regulator, to U.S. Bank, where PFGBest had said it had well over $200 million on deposit, the person said. The NFA has said the account actually held just $5 million this week.

Wasendorf had set up a post office box in Cedar Falls, Iowa, according to a second person involved in the matter. It was to that post office box that NFA sent the documents, which were addressed to the bank.

The post office box was neither in Wasendorf's name nor registered to the bank, the second person said.  (That is, it was a 'blind PO box, something that would not be acceptable to even eBay. - Jesse)

Wasendorf then forged signatures and fabricated bank balances on the documents and simply mailed them back to the Chicago-based NFA, the person said.

Calls to spokespeople for PFGBest and NFA were not returned. A woman who answered the phone at the home of Wasendorf declined to comment...

Read the rest here.

Just Between Friends: The DOJ's Handling of MF Global and America's Culture of Cronyism

It has all the hallmarks of a Third world banana republic. The economic hitmen have truly come home.

MF Global is a prime example of crony capitalism at work, and the capture of the political process by the easy money of the Fed supported financial system.

Perhaps capture is not the right word anymore. It is more like a marriage of corruption, sealed with a credibility trap of mutual self-destruction should the naked truth appear.

MFGFacts
Just Between Friends
By Nick Knight
July 7th, 2012

When facts, data and information are gathered, dots can be connected to reveal relationships and new information as patterns emerge.

There is a pattern. Scratch just below the surface of who is who and we find the intricate network of power players and patterns of events circling the MF Global crimes. I am not talking about Governor-Senator Jon Corzine, but Eric Holder, Edith O’Brien and Reid Weingarten. Who is Reid Weingarten? “Defense attorney Reid H. Weingarten is a Washington fixture,” Brook Masters of The Washington Post writes.

Weingarten, a long time close freind of Eric Holder is also Edith O’Brien’s defense attorney. O’Brien is apparently seeking immunity from Holder’s Department of Justice because she, and she alone, holds the threads in the investigation of the illegal use of customer funds at MF Global, Inc. and Holdings. To date, after eight months, she has not received immunity. (Yet notably the DOJ has already granted Barclay’s Bank immunity from prosecution for cooperating in its Libor-gate investigation.)

With time, evidence becomes stale to a prosecution. The longer she is kept off any witness stand and the longer DOJ waits to uncover all evidence, the weaker discovery becomes. Putrefying the evidence through delays and time decay is a tried and true practice. So it is reasonable to ask if there even a desire by the DOJ to uncover all the facts of the plundering of over 1.6 billion of private funds and build a case of wrong doing?

O’Brien can blow open the investigation

It was Edith who clarified to CFO Christine Serwinski that a shortfall of over $1 billion (depending on how it is counted) resulted from messy and hastily carried out transactions in the days before the bankruptcy filing. O’Brien made the transactions, she knew where the money came from and where it went. Very early on, it was known that an-mail from O’Brien noted that one major transfer was done “Per JC’s [Jon Corzine's] direct instructions.” Yet to date, we hear nothing from her, nor are there charges against her.

It was Edith O’Brien who was asked by MF Global general counsel, Laurie Ferber, to sign a letter to JP Morgan confirming that no customer funds were being sent to the bank. Even under pressure of Executive staff, she refused to sign the overly-broad, bogus statement Ferber asked her to sign. It is of note to remember that JP Morgan’s chief risk officer, Barry Zubrow personally called Jon Corzine asking him to verify that no funds transferred belonged to customers. Barry did not call Edith O’Brien.

Recall that under oath, Corzine pinned O’Brien by name as the one who provided assurances to him that all transfers were legal.

Eric Holder’s friendship with Edith’s attorney is very close, goes back years

When the DOJ is on your back, friendships and access goes a long way.

The personal and professional relationship between Holder and Weingarten go back decades: As young attorneys, they worked together in the Public Integrity section of the DOJ in the late 1970’s. There, as reported in Main Justice, they became “best friends.” In the 1980’s, Reid left the DOJ for the rich pastures of partnership with Steptoe & Johnson.

In 1997, Weingarten and Holder raised money together to launch a non profit foundation in the District of Columbia. Weingarten’s bio states that “He is the chairman and co-founder, along with US Attorney General Eric Holder, of a non-profit program, See Forever Foundation, which is designed to assist juvenile offenders in rehabilitation to prevent recidivism.”

As Weingarten was in the private sector, Holder remained with the DOJ only to come under investigation in 2001 for what was determined to be his inappropriate influence on the final approval to pardon fugitive, Marc Rich. Here, it is agreed by many that Holder massively blundered when he overstepped White House legal counsel opposition and gave a DOJ seal of support for the pardon. This was said to have “significant impact” for the final green light on the Marc Rich pardon fiasco.

When Holder came under investigation for his heavy hand in the Rich’s pardon, Reid Weingarten was his personal and strong-armed defense attorney as reported by Eric Lichtblaue and David Johnson of the New York Times in 2008.

More recently, and shortly after Holder took over the reins of the Department of Justice, he hired Weingarten’s son, Ross Weingarten for a job with the DOJ as a press staffer...

Read the rest here.

PFGBest Is MF Global All Over Again: Gambling and Living High With Customer Funds

And another failure of self-regulatory industry groups and the inept CFTC.

Once again I must turn to Lauren Lyster on RT for the in depth look into US financial fraud coverage.

The mainstream financial news networks in the States are an extended infomercial for Wall Street. And their coverage of economic news and issues might make even Rupert Murdoch blush.

And so many watch these official Wall Street channels with the volume turned low, for just the numbers and any headlines, and turn to alternative sources for the real news, judging from the ratings reports.

Increasingly surreal, as life imitates Orwell.

The Loophole That Placed MF Global Customers At Risk Was Still Being Used

Apparently the 'loophole' that allowed MF Global to use customer assets for their own purposes and not set aside sufficient funds to cover them is still in place and still being used by some brokers.

The CFTC has sent a letter this month to all futures brokers telling them to stop using this loophole, and intends to close it through additional formal actions.

Change occurs, but slowly.

NY Times
A Loophole Big Enough To Lose a Billion
By James B. Stewart
24 June 2012

If nothing else, the collapse of MF Global has made one thing clear: The notion that customer assets were safe was a sham.

MF Global’s customers, who discovered that the firm had plundered $1.6 billion of their property, learned that the hard way. But they aren’t the only potential victims. The loophole that allowed MF Global to convert more than $1 billion in customer property to its own reckless bet on European debt is still in effect — although the Commodity Futures Trading Commission, which regulates futures and commodities brokers, said it had since pressured other firms to stop using it.

The CME Group, which is both the largest commodities and futures exchange and also regulates many brokers, told me this week that when MF Global collapsed last year, four of the 40 firms it oversees were still using an “alternative” calculation of customer assets that vastly understates what firms actually owe. A spokeswoman declined to name them, saying such information was confidential. In my view, they should all be identified publicly so their customers can demand reassurances that the practice has stopped — and that their assets are safe.

Since the Depression, when thousands of customers were wiped out by failing brokerage firms, the idea that customer assets are protected has been sacrosanct, embodied in laws and regulations that require the assets to be safely segregated. Violating these requirements is a crime.

The rules require a firm to put aside the amount it would owe if its customers’ accounts were liquidated. This would seem simple common sense: if a brokerage firm closed or failed, customers should expect to get the full value of their assets.

But the rules apply only to accounts in the United States. In 1987, the commodity commission approved a series of rules governing foreign futures and options transactions, one of which provided an alternative calculation of how much firms needed to put aside for accounts that traded on foreign exchanges.

The alternative calculation almost always resulted in a lower amount — sometimes much lower — that needed to be segregated in foreign accounts, because it covered only options and futures. Cash and securities held in customer accounts didn’t count. So if a customer held only cash and securities, the firm had no segregation requirement at all...

To its credit, the commodity commission is taking action. This month the commission sent a letter to all regulated futures brokers telling them the agency expects them to use the net liquidating calculation — and not the alternative calculation — for all accounts, American and foreign, “pending adoption of the new rules.” It said those new rules would include “the elimination of the Alternative Method.” The letter also said that all firms still using the alternative method had agreed to discontinue using it...

Read the rest here.

Some Additional Questions For Jamie Dimon, Empereur de la République

“When a government is dependent upon bankers for money they, and not the leaders of the government, control the situation, since the hand that gives is superior to the hand that takes."

Napoleon Bonaparte

Interesting questions, but unlikely to come up at Mr. Dimon's next team building session with the Congress. They forgot to ask about this area while they were fawning all over the man, asking him advice on how to run the country.

I would like to see some elected official with the guts and the public concern willing to ask the pampered princes of the monied aristocracy these types of tough questions.

Alas, the likelihood of such a confrontation seems as whimsical and unlikely as the set pieces that Mad Magazine used to run when I was a young boy titled, Scenes We'd Like to See...

Futures
Additional questions for Jamie Dimon
Questions for Jamie Dimon that no Member of Congress had the Courage to Ask
By Stanley Haar
21 June 2012

The Golden Rule of government, “Whoever has the gold makes the rules,” was on full display in Washington over the past week as JPMorgan’s Jamie Dimon appeared at hearings held in both the Senate and the House to answer questions about the bank’s recently reported trading loss.

I am in full agreement with the argument that it is actually none of the government’s business when the shareholders of a private bank lose money due to the bad decisions of management, as long as the loss was incurred legally and does not threaten the integrity of the financial system.

However, the Congressmen and Senators missed an excellent opportunity to ask Mr. Dimon about any number of financial scandals (Madoff, Jefferson County, robo-signing, etc.) in which JPMorgan Chase has been involved, including the on-going MF Global scandal.

In our representative democracy, where Senators and Congressmen are supposed to serve the public interest, not the interests of big campaign bundlers, it is sad to report that not one member of Congress had the courage to ask Jamie Dimon the following questions:

1) It is reassuring to hear that JP Morgan has more than enough of its own capital to cover the trading losses that triggered this hearing. But suppose for the moment that under some circumstances the size of the loss were to grow to a substantially larger amount than you now anticipate. If you didn’t have enough capital to cover the loss, would you ever consider taking money from your customers’ accounts to cover the losses? That would be illegal, wouldn’t it?

Permit me to ask you one more not-so hypothetical question: If you were standing in the lobby of a JPMorgan Chase branch, and you saw through the window that one of your customers was robbing the candy store across the street, and the customer then ran into your bank with a bag of cash, would you let that guy pay off his car loan with the cash in his bag?

Isn’t that in essence exactly what happened last October with your customer, MF Global? According to the very detailed report released on June 6 by Trustee Giddens, the infamous transfer of $175 million from MF Global to your bank on October 28 to pay off an overdraft was a transfer entirely between JPMorgan accounts: From the segregated customer trust account to the MF Global Treasury house account to a JPMorgan London account. All of these moves were completely transparent on your blotter.

Your own employees, Donna Dellosso and Barry Zubrow, witnessed those transfers and were so concerned about them that they immediately requested a letter from Jon Corzine and Laurie Ferber, basically stating that they were not stealing customer money. You never got that letter, but kept the money anyway. Weren’t you concerned about receiving stolen property, and potentially being an accessory to the looting of customer accounts? Did you call the CFTC or SEC to report your suspicions?

[Mr. Dimon told the Senate Banking Committee that his bank received verbal assurances that the transfer was legitimate; however the Giddens report directly contradicts this………see page 134: MF’s in-house attorney, Dennis Klenja, “advised that he made no assurances of any kind to JPM”.]

JP Morgan was MF Global’s primary banker. You knew that they were scrambling to come up with cash to stay alive, day-by-day, hour-by-hour. Did you really think that they suddenly found a couple of hundred million dollars of excess cash in the segregated account? Or did you watch them steal customer money for a JPMorgan account, and then ask for the letter as a CYA in case they got caught?

That is the first question. Read the next six questions here.

MF Global Customers "Get the Chance" To Auction Off Hopes For the Full Return of Stolen Funds

Great news for customers who had their money stolen by Wall Street!

No need to worry about its return, now they can sell their claims at a discount to -- Wall Street!

Perhaps we can get rid of the FDIC and cumbersome banking regulation and let people auction off their looted savings deposits and CD's when the Bankers lose their money by gambling on derivatives.

And as for education, well, children do have a lot of time and energy that might be better utilized in manual labor by privatizing schools in the model of privatized prisons, and dedicate them to learning through work.

Free market! Assymetry of information! Predatory finance! Innovation!

It's got something for everyone -- well, everyone that counts, that is.

This has to be considered with the other headline that was released about the same time by Gary Anderson at The Business Insider:  Did Dimon and JP Morgan Steal MF Global Funds?  Chris Whalen Thinks So.

"If Whalen's opinion is true, no account at a broker/dealer is safe from the investment bank that determines to get money from a bankruptcy proceeding. There is a loophole that allows a margin call, even from companies that are bankrupt, and the bank can accept money that comes from protected accounts. They do not have to wait for the bankruptcy proceeding and then no one is left to protect the account holders! Wow, I say."

Of course we still do not know who did it yet, but there is no doubt that the money, and some precious metal and Treasury bond assets held on account, were stolen. And it is an old axiom 'that Caesar's wife must be above suspicion.' And in this case, she is at least caught outdoors in her nightie.

Perhaps it is just an overdeveloped sense of justice, but I find this to be particularly repugnant.   Wall Street is taking advantage of people's fears of not receiving their money back in the face of a blatant theft by some undisclosed financial parties, and of course an overwhelming show of legal force and slick maneuvering in the bankruptcy process by JPM.

Especially when those fears have been created by some of the very institutions that stand to further benefit from the lack of justice in how this is being handled by their bought and paid for regulators and politicians. Slobbering Senators Woo Dimon While They Gut Dodd-Frank- Bloomberg.

Financial Times
MF Global clients get chance to auction claims
By Tracy Alloway in New York
June 19, 2012

Former customers of MF Global will have the chance to auction off their claims, giving them another opportunity to recoup money from the failed broker-dealer.

SecondMarket, a trading platform for bankruptcy claims and other specialised investments, on Tuesday began an auction process for MF Global customers wishing to sell their recovery rights in the company once run by Jon Corzine, a former Goldman Sachs chief executive.

MF Global collapsed in October, leaving $1.6bn worth of missing customer funds and triggering a series of complicated and continued cross-border bankruptcy proceedings. Clients of the failed broker-dealer who are owed money can choose to sell their claims to the bankruptcy estate in an effort to recoup their funds earlier.

Such claim trading is common after big bankruptcies, such as Lehman Brothers’ 2008 collapse or Hostess Brands’ early 2012 filing.  (Note that NO Customer Accounts had to be auctioned off at less than par in these cases - Jesse)

Buyers – including hedge funds and some large investment banks – are essentially punting on the ultimate recovery values of the claims.

MF Global claims already trade on SecondMarket, but the new auction system is meant to make it easier for sellers to find buyers. Former MF Global customers will be able list their claims for sale on a centralised platform, and potential buyers will be able to conduct due diligence and then make their bids....

Read the rest here.

MF Global: Follow the Customer Money - The Economics of Demagogues

One of the key facts, which ought to have been apparent in the first week or so after its collapse given the tracking mechanism of wire transfers, is 'who got the customer money' and 'who received a preferential return of funds in the last weeks when the brokerage was failing?'

That we still do not know who 'got the money,' although recent admissions show that JPM did in fact receive about $768 million or so which they have recently and quietly returned, claiming that they were just waiting for someone in authority to ask for it back. MF Global's Banker Returns $600 Million - WSJ 6/1/12

It raises serious questions about what the Trustees are not disclosing and why. But since JPM has voluntarily returned the 600 million at this late date, after having earlier returned $168 million, shows that these disclosures may be forthcoming. MF Global is the poster child for asymmetry of information and insider dealing, that flies in the face of any claims and fantasies about the natural efficiency and honesty of self-regulation of the markets.

I get it. I understand why people who are well paid to say these things and promote these public policies, or who directly benefit from this kind of unequal insider privilege, might oppose and seek to dilute and weaken effective regulation and push for more and larger free style fraud.  It is a transaction and their integrity is for sale.

And this becomes a particular problem in times and places where there are no real penalities for deceit.  That is the definition of 'moral hazard.'

What I don't fully understand is how some of the victims of this type of predatory arrangement can get carried away in supporting their own oppression and the ruin of their families, and are so easily led to parrot slogans specifically designed to lead them to destruction and despair.  

I have read about it in history, and have seen it in my own life, but I still do not understand it except to say that sometimes when faced with problems that are confusing and troubling it is easier to think what someone tells you to think, particularly something that touches a deep and dark nerve in your nature, rather than carry the burden and ambiguity of struggling with the facts and thinking for yourself.  Repeating a party line is a shorthand way of avoiding real thought.  And the predators are always there to take advantage of it.  They welcome trouble and often foment crisis in order to advance their agendas.

"The undeserving maintain power by promoting hysteria."

Frank Herbert

Anyone can be misled by a clever person, and no one likes to readily admit that they have been had.  It is a sign of character and maturity to realize this, and admit your were deceived, and to demand change and reform. But some people cannot do this, even when the facts of the deception are revealed.  It seems as though the more incorrect that the truth shows them to be, the louder and more strident they become in shouting down and denying the reality of the situation.   And anyone who denies their perspective becomes 'the other,' someone to be feared and hated, shunned and eliminated, one way or the other.

Although competition and even tribalism are a natural and sometimes surprising force in many aspects of society, as anyone who has attended grammar school atheletics can attest, they become difficult and conter-productive in their excess.  The more extremely held the views, left or right, the more ardent the self-deception and loss of individual identity.  Because at the extremes, it is no longer about justice, but about the objectification and irrelevance of the individual, and the dehumanisation and demonisation of 'the other.' 

"He who makes a beast of himself, gets rid of the pain of being a man."

Samuel Johnson

For whatever reason, extremists cannot easily let go of the lie, because it seems to give them a substance which they fear they cannot provide for themselves, because they cannot bear the uncertainty and loss of purpose.  Their very identity becomes intermingled with the lie.  This is the essence of the cult, and the stuff of demagogues, and the phenomenon of mass suicides and self-destruction when the lies come to an end: the bunker mentality.

I would hope that these disclosures shed some light on this aspect of the MF Global collapse that raises serious questions about the integrity of the regulators, the CME, and any pretensions to fairness on Wall Street.

"But perhaps the most stunning piece of news we're getting in the wake of the MF Global collapse is in the clients of the firm who managed to get away scot-free, with no freezing of accounts or capital -- particularly the accounts of the mega-cap independent oil company Koch Industries, run by the politically active Koch brothers.

A recent report in Reuters has described the billions of dollars of client accounts that were withdrawn from MF Global in the last few weeks before their collapse, including 8 accounts from Koch industries engaged in oil trade that were transferred to Mizuho Securities after years of a steady and profitable relationship with MF. The Reuters piece concentrates on the possibilities of legal "clawback" of client money if the bankruptcy does not allow remaining client accounts to be made whole.

The Reuters piece misses the point.

Both the Commodity Futures Trading Commission and the Chicago Mercantile Exchange were charged with overseeing MF Global, their clearing member. If we are to believe them, they had no idea of any difficulties within the firm before customer accounts went missing just a few days before the collapse. But someone clearly knew of the cratering positions and imminent collapse of MF Global, as billions of dollars of accounts were "coincidentally" withdrawn. And what do the Koch brothers say was the reason for these withdrawals? There's been no comment."

Daniel Dicker, MF Global and the Koch Brothers: Friends to the End, Huffington Post, Nov. 11, 2011

Francine McKenna raises this issue in this interview, and in particular, the large amount of money that were wired at the same time that customers were being denied wire transfer access to their funds.

Chris Whalen: Will Jamie Dimon Tell the Truth, Because He Hasn't Done So Yet

"Of all forms of tyranny the least attractive and the most vulgar is the tyranny of mere wealth, the tyranny of plutocracy."

John Pierpont Morgan

Oh you must mean the vaporized money...

Chris Whalen makes some interesting observations and cuts to the heart of the matter, although he sometimes falls into the morality of the income statement.

The reactions of the CNBC spokesmodels and Andrew Ross Sorkin are worth watching.

Still I give them credit for having these sorts of discussions at CNBC, as compared to Bloomberg TV which has become an extended, often arrogantly frivolous, infomercial bordering on propaganda for the one percent. At least the print version of Bloomberg maintains solid journalistic standards.

It is interesting that the argument keeps coming back to the defense that Wall Street firms 'write off big losses all the time.'

It is not so much the size of the balance sheet, but rather the leverage and risks that are stacked against those assets, and the likely outcomes of cascading losses in a deeply intertwined financial system.

The bank has come far from when its founder, J. P. Morgan, did business with a person based on their integrity and character, and not on the size of their balance sheet or cleverness of their accountants, lawyers, and attorneys.

Asked: "Is not commercial credit based primarily upon money or property?"
"No sir," replied Morgan. "The first thing is character."
"Before money or property?"
"Before money or anything else. Money cannot buy it...Because a man I do not trust could not get money from me on all the bonds in Christendom."

John Pierpont Morgan

We do not know if Jamie Dimon will tell the whole truth his testimony, but there is little doubt in my mind that he will at least partially hide behind the CEO defense, claiming ignorance of the situation which he helped to create and from which he profited enormously. He may apologize for it, but he will not own it. And it was his doing in order to circumvent the impending Volcker Rule, of this I have barely a doubt.

It seems that JPM was mispresenting and mispricing their risks, egregiously to the point of making false statements to the press, the public, and probably the regulators, and they were doing so with public funds and government guaranteed deposits in the pursuit of outsized income for their traders and management. And it may involve regulatory capture and accounting misrepresentations executed by offshoring portions of their trade book, and perhaps fraud.

There seems to be a pattern of behaviour here, of a firm taking very large positions in the markets and rationalizing them as 'hedges' in order to take undisclosed risks for short term profits and thereby presenting systemic risk.

This is precisely the genre of problems that led to the collapse of Lehman Brothers.

We ought not to forget that JPM was also sitting on over $600 million in stolen MF Global customer money for many months, and quietly returned it over a weekend not so long ago.

And that they have claimed that 'hedging' is the rationale for their enormously large and leveraged short positions in the silver market, although I doubt that the truth of that will ever be allowed to come to light with any consequence.

Have we learned nothing?

When a people declare that 'greed is good' is their overweening motto and principle of action, then they have already forsaken their liberty, and ensured themselves and their children nothing more than a miserable and despicable decline.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained growth and recovery.

MF Global Hid Risk To Avoid Capital Requirements While FINRA Regulators Looked On

One of the common elements in most of the great financial debacles seems, at heart, to involve accounting fraud that is tolerated and excused by all those entrusted with the safeguarding of the public interest and the innocent.

What characterizes the modern financial system, and its vast influence on the fabric of society, the political process, and the dialogues of public policy is the power of easy money, obtained through the mispricing of risk and brazen fraud, to corrupt the corruptible in every station of life, from the press corps to the politicians to the professors.

Truth, honor and goodness are collateral damage when everything has its price. Greed and selfishness abound, and the 'best lack all conviction, while the worst are filled with passionate intensity.'

NY Times
MF Global Dodged Capital Requirements, Report Says
By AZAM AHMED and BEN PROTESS

Under pressure from regulators last summer to increase its capital cushion, MF Global moved some of its risky European debt holdings to an unregulated entity in an effort to avoid having to raise extra money, according to a new report. The revelation raises new questions about MF Global’s actions in its last months — in particular, how it responded to regulators. The brokerage firm had previously disclosed that it had met the capital requirements, but never mentioned that it had transferred some bonds rather than raising additional money.

The shift was detailed in a report by Louis J. Freeh, the trustee overseeing the bankruptcy of MF Global. The report is separate from the one issued Monday by James W. Giddens, the court-appointed trustee charged with recovering money for MF Global’s customers.

“This strategy allowed the MF Global Group to transfer the economic benefits and risks,” thus reducing the “regulatory capital requirements,” the report by Mr. Freeh said.

Shifting the bonds to an unregulated entity to avoid capital requirements is unusual at financial firms, corporate accounting specialists say. Regulators expressed concerns about the maneuver, although ultimately they did not block it. The Financial Industry Regulatory Authority (FINRA), Wall Street’s self-regulator, said it lacked jurisdiction to pursue the matter further.

“It’s a shell game, and the problem is the regulators buy off on this stuff, and then when it implodes, they always look so stupid,” said Lynn E. Turner, the former chief accountant at the Securities and Exchange Commission. “Common sense says why would you accept these types of shenanigans..."

Read the rest here.

James Koutoulas Says JP Morgan Is Still Hiding Large Amount of MF Global Customer Money

I do not agree with Rick Santelli's throwaway line in the beginning that there was probably no illegality involved in JPM's trades in London, and certainly not with regard to Facebook where it appears that there was blatantly selective leaking of undisclosed negative financial information ahead of the IPO. And the corollary suggestion that any investigations there are a waste of time.

The trades themselves *may not* have been illegal, but as in most things, the felony is in the coverup and the deception for actions that may or may not themselves have broken but merely bent the law. After all, Watergate was all about 'a third rate burglary.'

Although I have been critical of Louis Freeh in the past for his stonewalling of financial information from MF Global claiming attorney client privilege, withholding it even from Federal investigators and regulators, I thought it was a bit unfair to criticize him for his $25 million in fees for managing the Chapter 11, without mentioning that James Giddens is also billing substantial fees for the MF Global bankruptcy for the brokerage portion of it.

Mr. Giddens billed $170 million for Lehman's bankruptcy for example. His fees for MF Global are not yet disclosed because he asked for an extension for filing them with the court to June 8. Bankruptcies, tort claims, and divorces are often rewarding ventures for the lawyers.

Interviews with Mr. Koutoulas are so rare that any deserve to be shared, even if the interviewer steps all over the interview with selective outrage. The extended corporate infomercial is what passes for financial journalism in the States these days, and in much of the 'straight news' as well unfortunately.

I enjoyed the suggestion that almost $800 million in customer money was transferred late in the game to JPM in London to satisfy margin calls. This was the personal conclusion I put forward about two weeks after the incident.

I also believe that JPM had deep knowledge of MF Global's finanical leverage, condition, and exposure as their banker, which they used before and after the fact.

And I agree that Obama's track record on Wall Street reform is shameful, and a continuation of the Bush policies without real reform. But the idea that Romney will somehow change that is, alas, a terrible fantasy. The torch of corruption is being passed from administration to administration now without regard to party affiliation. That is how bad it has become.

How about JPM's positions in the silver market Rick? Think we need an independent investigator there too in the face of four years of stone-walling by the CFTC? Or do we demand justice only where it might be embarrassing to the Democrats without really hurting Wall Street?

But as I have said before, my goal is to just get the MF Global customer money back for them. I have given up any hopes that justice will be done. So I am grateful for Mr. Santelli's attention. There is far too little of it being given to these gross injustices and violations of trust.

It seems as though ordinary people have few friends or champions these days, just various packs of vultures picking over their bones with fees, scams, and snares.

Max Keiser Interviews Francine McKenna On JP Morgan and MF Global

"In this respect England exhibits the most remarkable phaenomenon in the universe in the contrast between the profligacy of its government and the probity of its citizens. And accordingly it is now exhibiting an example of the truth of the maxim that virtue & interest are inseparable.

It ends, as might have been expected, in the ruin of its people, but this ruin will fall heaviest, as it ought to fall, on that hereditary aristocracy which has for generations been preparing the catastrophe.

I hope we shall take warning from the example and crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country."

Thomas Jefferson, November 12, 1816

Source

Francine McKenna's site re: The Auditors

PBS Frontline: MF Global's Six Billion Dollar Bet

PBS Frontline did an exceptionally good job putting this together.

Watch it if you can and pass it along.

Source

House May Call For Independent Counsel to Investigate MF Global

It is never the crime, but always the obstruction of justice that does them in. 

Obama may be fortunate.  The House Republicans may make noises about a truly independent investigation, but I doubt that it will happen. 

The credibility trap runs far and wide, and on both sides of the aisle.

Fox
House Republicans Expected to Call for Independent Counsel to Investigate MF Global Failure
By Peter Barnes
May 02, 2012

A Republican member of the House Financial Services Committee is circulating a letter in Congress that calls for the appointment of an independent counsel to investigate the failure of MF Global.

Investigators and a bankruptcy trustee are trying to locate and recover a $1.6 billion shortfall in MF Global customer funds. The firm filed for bankruptcy last October after making risky bets on European debt.

Rep. Michael Grimm (R-NY), a former FBI agent who investigated Wall Street for financial fraud, began circulating the letter today, according to sources familiar with the matter. Other House members, mainly Republicans, are expected to sign on, with formal release of the letter planned for next week when Congress returns from its current recess.

Among other things, sources said, the letter is designed to address allegations of conflict of interest in the ongoing investigations of MF Global, including one by the Commodities Futures Trading Commission.

CFTC chairman Gary Gensler is a former executive of Goldman Sachs where he worked with former MF Global CEO Jon Corzine. Gensler has recused himself from his agency’s probe into MF Global.

Also, President Obama’s re-election campaign disclosed last month that Corzine is a top fundraiser for the President, a so-called “bundler...”

Read the rest here.

MF Global: The Untold Story of the Biggest Collapse Since Lehman - Reckless Disregard

The question is not what the politicians and monied interests in Washington and New York will do to restore confidence in the financial system.

Rather, it is what they are willing to do, how far they will go, to save themselves and their cronies after the next financial collapse and disclosure of pervasive fraud and theft occurs. 

 From what we have seen at MF Global,  the answer is that not much, if anything, is off the table.

Alternet 
MF Global: The Untold Story of the Biggest Wall Street Collapse Since Lehman 
By Pam Martens
April 20, 2012

There are plenty of lessons to be learned from MF Global, all of which we can count on Congress to ignore at the behest of Wall Street money until the next financial crisis.

Only on Wall Street can you bankrupt a company; misplace $1.6 billion of customers’ money; lose 75 percent of shareholders’ money in two weeks; speed dial a high priced criminal attorney and get a court to authorize the payment of your multi-million dollar legal tab from the failed company’s insurance policies; have regulators waive your requirements to take licensing exams required to work in the securities and commodities industry; have your Board of Directors waive your loyalty to the firm; run a bucket shop out of the UK; and still have the word “Honorable” affixed to your name in a Congressional investigations hearing.

This is not a flashback to the rotting financial carcasses of 2008. This putrid saga has been playing out in five Congressional hearings since December with the next episode scheduled for Tuesday, April 24, before the Senate Banking Committee under the auspicious title: “The Collapse of MF Global: Lessons Learned and Policy Implications.” (The title might more appropriately be, “MF Global: Lessons Never Learned and Policy Implications of a Wild West Financial System Just One TradeAway from the Next Taxpayer Bailout.”)

There are plenty of lessons to be learned from MF Global and heart-pounding policy implications; all of which we can count on Congress to ignore at the behest of the Wall Street money and lobby machine until the next epic financial crisis – an eventuality that is growing more likely each day as Congress refuses to restore the Glass-Steagall Act, the depression era legislation that bars Wall Street securities firms from owning banks holding insured deposits...

Read the rest here.

"Fellas it's been good to know ya."

MF Global Customer Money Unvaporized: 'Substantial Portion Went to JP Morgan'

"The final $680 million or so was transferred to other financial institutions with which MF Global did business, including a substantial portion that went to JPMorgan. Giddens said his team has "a solid basis for seeking the recovery of some of the funds that were transferred to JPMorgan," and is engaged in ongoing talks on the issue."

As they say in the trade, Q. E. D.   (quod erat demonstrandum)

CNN Money
$1.6 billion in missing MF Global funds traced
By James O'Toole
April 24, 2012: 6:49 PM ET

NEW YORK (CNNMoney) -- Investigators probing the collapse of bankrupt brokerage MF Global said Tuesday that they have located the $1.6 billion in customer money that had gone missing from the firm.

But just how much of those funds can be returned to the firm's clients, and who will be held responsible for their misappropriation, remains to be seen.
James Giddens, the trustee overseeing the liquidation of MF Global Inc, told the Senate Banking Committee on Tuesday that his team's analysis of how the money went missing "is substantially concluded."

"We can trace where the cash and securities in the firm went, and that we've done," Giddens said.

MF Global failed last year after its disclosure of billions of dollars worth of bets on risky European debt sparked a panic among investors. About $105 billion in cash left the firm in its last week, Giddens said, as clients withdrew their funds and trading partners called for increased margin payments, leaving the firm scrambling to make good on its obligations.

It has since emerged that MF Global tapped customer funds for its own use during this crisis and failed to replace them, in violation of industry rules.

Roughly $700 million of the missing money is now locked up with MF Global's subsidiary in the United Kingdom, where Giddens and his team are engaged in litigation to have it returned to U.S. customers. Giddens said he is "reasonably confident" that these funds will be recovered, though he added that it will be a lengthy process with no guarantee of success.

Another $220 million was transferred inadvertently from the accounts of securities customers to those of commodities customers. That money is now in limbo amid a dispute over which customers it belongs to, said Kent Jarrell, a spokesman for Giddens.

The final $680 million or so was transferred to other financial institutions with which MF Global did business, including a substantial portion that went to JPMorgan.

Giddens said his team has "a solid basis for seeking the recovery of some of the funds that were transferred to JPMorgan," and is engaged in ongoing talks on the issue. JPMorgan did not immediately return a request for comment....

Read the rest here. 

"But please, to our friends in the Big Media, could we stop saying that we don't know the location of the missing $1.6 billion of client funds from MF Global? The money is safe and sound at JPM and other counterparties. As with Goldman Sachs et al and American International Group, the banks have been bailed out at the cost of somebody else. And the various agencies of the federal government are complicit in the fraud...

The effort by former New Jersey governor and MF Global CEO Jon Corzine to save his firm by stealing customer funds seems to warrant further discussion, yet instead we have silence...

So why is it that the Large Media have such trouble reporting this story? The fact seems to be that the political powers that be in Washington are protecting JPM CEO Jamie Dimon from a possible career ending kind of stumble with respect to MF Global."

Chris Whalen, Institutional Risk Analyst, February 2012

Senate Banking Committee to Hold MF Global Hearing Next Week

"How can people trust the harvest, unless they see it sown?"

Mary Renault

Here is the cast of players for the next Senate Hearing on MF Global as reported by the NY Times.

The problem that this hearing will seek to address is the lack of confidence in the markets and how to restore it.

The appearance of Mr. Freeh is new, and the characterization of it by the Times is interesting.

I doubt anything new will come of this hearing, however. The link in this scandal is Edith O'Brien.

The CFTC is a shadowy reflection of the Congress and the government, which maintains a complaisant tolerance of fraud and corruption as a means of doing business in the markets by powerful finacial interests, despite what they might say or pretend to do when they are pressured by their outraged constituents.

The reform of the markets is not rocket science. But accepting huge sums of money and attempting to please the donors, while merely appearing to reform the markets and enforce the law and doing little of substance, is what is complicated.

NY Times
Senate Banking Committee to Hold MF Global Hearing
By AZAM AHMED and BEN PROTESS
April 17, 2012

A former director of the Federal Bureau of Investigation who has come under fire as the bankruptcy trustee for MF Global will appear next week before a Congressional panel examining the collapse of the brokerage firm.

Louis Freeh, who has the responsibility of returning assets to creditors of the commodities brokerage firm, is expected to testify alongside regulators as well as another trustee responsible for the return of missing customer funds. The two trustees, whose missions in some ways are at odds, have been facing off over the privacy of documents and the distribution of assets.

The hearing, slated for April 24 before the Senate Banking Committee, will be the sixth Congressional inquiry stemming from MF Global’s bankruptcy and the disappearance of customer money. Nearly six months later, farmers, hedge funds and other customers of MF Global are still owed an estimated $1.6 billion.

Unlike previous hearings, which focused on the wrongdoing that may have led to the firm’s collapse, the Senate Banking Committee’s hearing will focus on ways to better protect customer money and improve regulatory oversight.

“As investigators seek to recover MF Global customer funds and hold accountable those responsible for any wrongdoing, Congress needs to focus its attention on preventing future abuses and the other critical public policy issues raised by the collapse of MF Global,” Tim Johnson, a South Dakota Democrat who is chairman of the committee, said in a statement. “This hearing will help us identify ways to restore market confidence for farmers, ranchers and investors through improved regulatory oversight and strengthened protections for customer accounts.”

The hearing will be the first time that the public hears from Mr. Freeh, who has faced pressure over his handling of the bankruptcy process. He initially declined to share certain documents with regulators and his fellow trustee, James W. Giddens. In addition, a furor arose when it emerged that Mr. Freeh had been contemplating awarding bonuses to MF Global executives who remained at the firm, a common practice in bankruptcies.

Mr. Freeh’s fellow panelists are all experienced in MF Global hearings. Mr. Freeh and Mr. Giddens, the trustee responsible for recovering customer money, will be joined by regulators, including Robert Cook, director of trading and markets at the Securities and Exchange Commission; Richard Ketchum, head of the Financial Industry Regulatory Authority, and Terrence A. Duffy, chairman of the CME Group, MF Global’s front-line regulator.

Jill Sommers, a commissioner at the Commodity Futures Trading Commission, will also appear before the committee. The trading commission was MF Global’s federal regulator and is leading the investigation into wrongdoing at MF Global, along with federal prosecutors and the F.B.I....

Read the rest here.