Trustee To Payout 80 Percent: Goldman and MF Global: Where the Customer Is Always Ripe

I have given up any hope that we will see justice in this scandal, but I remain optimistic that the poor customers will receive close to 90 percent of their money back over time.  And this seems to be the assumption behind the operations of the vulture funds, who have been recently supplied customer lists by KPMG.

While the Obama Administration and the Congress remain complacement about fraud and corruption, the risk of serious loss remains elevated across all markets in the US. I mean, it is foolish to expect anything else.  The financial press has told us so.  People who expect to be dealt with honestly with equal protection under the law are naive fools.

On related note, based on commentary from the financial demimonde in defense of Goldman Sachs with regard to the letter from Mr. Smith, and the obvious predatory nature of their relationship with their customers, I am wondering if there is just a problem in labeling, marketing wise. After all, as Mr. Bernanke will attest, it is all about managing expectations. And what we have here is a failure to communicate.

Perhaps Goldman can clarify the situation and change its slogan to:

"Goldman Sachs: Where the Customer Is Always Ripe."

If a restaurant placed a notice at their door saying that at every opportunity they will pad the check, shortchange the food orders, attempt to pick pockets in the lavatories, and turn a blind eye to the occaionsal mugging of customers by the wait staff, perhaps there would be less cause for complaint when the inevitable pilfering occurs.

And think of the possibilities for other businesses like automobile dealerships, food stores, and doctors offices.

Perhaps the Administration and the Congress can craft a blanket immunity in a settlement with Wall Street and all the corporations, and cover themselves as well it should be noted, by changing their nation's motto from 'E Pluribus Unum' to 'Trust No One.' That's a win-win.

At least the complaints would be more easily ignored than if these businesses pretended to honesty and adherence to the rule of law, much less aspirations to doing God's work.

The financial press seems to think that the true nature of the financial system is already well understood by sophisticated (read non-retail) banking customers. They always tend to blame the victims, don't they?

But perhaps some truth-in-advertising would alleviate the outrage of those unsophisticated rubes who foolishly maintain a misplaced confidence in the efficiency and honesty of the regulated markets and the US financial system.

Reuters
MF Global customers may see more payback
By Nick Brown
Thu Mar 15, 2012 1:43pm EDT

(Reuters) - The trustee liquidating MF Global's (MFGLQ.PK) broker-dealer is asking a bankruptcy court for permission to distribute an additional $600 million to U.S. exchange customers whose accounts were frozen when the futures broker collapsed.

Trustee James Giddens announced the plan in court papers on Thursday, saying he would also seek to distribute as much as $50 million to customers who traded on foreign exchanges, and $35 million to some customers who hold physical property such as gold bars.

Customers who trade on U.S. exchanges have already received payouts amounting to roughly $3.9 billion, or about 72 percent of the value of their accounts. The latest payouts, if approved by Judge Martin Glenn in U.S. Bankruptcy Court in Manhattan, would increase that recovery percentage to more than 80 percent, Giddens estimated.

The payouts would represent about a 10 percent payback for customers who trade on foreign exchanges, a group that has seen no recovery as of yet, Giddens estimated.

Distributions would go out on a rolling basis, the trustee said -- a departure from previous payouts, which were done in bulk. The latest round would be paid out as customer claims are processed and validated, a process that remains ongoing, Giddens said...

Here is a program based on a model implemented in several European countries, such as the UK and Ireland, with good effect.

The Official Customer Relations Guide for Wall Street's Retail Clients

If you know how to behave yourself, we won't have any awkward misunderstandings.

1. Know your place.

When your money is demanded, pay promptly and courteously, asking no needless questions or even worse, raising impertinent objections.

Real Estate 4 Ran$om: Role of Speculation in Financial Collapse - The Recurrency of Fraud

This is an Australian produced film, but the principles carry.

I would not focus on land to the exclusion of financial assets like stocks, and other vehicles for producing income and capital gains, that allow speculators to game the system.

The US internet bubble for example, had nothing to do with land per se. And the Florida land boom in the US preceded by several years the stock market boom that led to the Crash of 1929.

And it was financialization, the application of fraudulent valuation and securitization leverage, that gave the US credit bubble its kick.

Financialization permits the transmission of the speculation to a broader audience, in the most recent collapse a global audience, and widens the scope and duration of the Ponzi scheme through its interlocking web of counter party risks.

The most common thread in destructive bubbles is official complicity, often seen in regulatory capture, and the almost willful suspension of disbelief achieved through influence in the media and the steady application of messaging, often so intense that it borders on overt propaganda.

Certainly it does involve the silencing of whistleblowers and critics through access denial, ridicule, and other forms of soft censorship. And if it is followed by the obstruction of justice so that the perpetrators may go forward unimpeded, they will work their cons and carny magic on something else again.

If this simple explanation of speculation does not have a sufficient pedigree, perhaps this more refined and weighty pronouncement from the Bank of England may serve to persuade.

"Under one equilibrium, patience wins the day. When long-term investors start in the ascendancy, prices tend to correct towards fundamentals. The performance of untested investors pursuing momentum strategies falters, while those pursuing longterm strategies flourish. The fraction of long-term investors rises. The self-correcting tendencies of market prices are thus reinforced, further supporting long-term investors. The patience gene thrives, the impatience gene dies. Natural selection results in a self-improving cycle, as with dieting, happiness and exercise.

But there is a second equilibrium where this cycle operates in reverse gear. With a large fraction of momentum traders, prices deviate persistently from fundamentals. Among untested investors, momentum strategies now flourish while long-term fundamentalists fail. The speculative balance of investors rises, increasing the degree of misalignment in prices. The patience gene falls into terminal decline. Natural selection results in a self-destructive cycle, as with drug, alcohol and food addiction."

Andrew G. Haldane, Patience and Finance

And it is the government and the regulators, the Federal Reserve and the Bank of England, the FSA, SEC and CFTC for example, whose sworn duty it is to protect the financial markets from the ravages of rampant speculation and fraud.

And such a destructive condition cannot occur over a period of time unless they do not honor their oaths, for whatever reasons and rationales they may wish to provide.

The reliability of self-regulation is a fairy tale for dreamers and fools. Self-regulation requires an extraordinary moral nature, to hold itself virtuous against the temptation of concentrated power without impartial oversight. Quis custodiet ipsos custodes? It has NEVER worked, and is the guise assumed by wolves as they mingle with sheep. Trust us.

When speculation is allowed to flourish unchecked, whether through laxity or complicity or both, there is the inevitable and corrosive mispricing of risk that leads to disparity of fortune between the perpetrators and their marks, and the inevitable economic collapse as rude reality intrudes once again.

Didn't quite catch their trick that last two times? Watch as they do it again.

And for whatever it may contribute, speculation in land and other means of production is but a child's toy, as compared to the powerful engine of destruction, the destroyer of wealth, that is engaged by the systematic abuse and debasement of a nation's currency, much less the premier currency of the world.

While greed and gullibility act in partnership, the allure of easy money never gets old, and recurs again and again throughout history.

“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

Real Estate 4 Ransom from Real Estate 4 Ransom on Vimeo.

"No free government, or the blessings of liberty, can be preserved to any people, but by a firm adherence to justice, moderation, temperance, frugality and virtue, and by frequent recurrence to fundamental principles."

George Mason, The Virginia Declaration of Rights

Trustee Sells the MF Global Customers' Gold and Silver to Jefferies and Company

Who says that Wall Street does not take care of their customers.

The clients didn't have to do a single thing for themselves. They didn't have to decide when to sell, or to whom, or at what price. And they did not even have to hire a trustee to liquidate their assets.

This is what they call 'end to end' customer service.

WSJ
Jefferies to Buy MF Global Precious-Metals Assets
By PATRICK FITZGERALD
March 14, 2012,

Investment bank Jefferies Group Inc.'s commodities arm has agreed to buy the gold, silver and other precious-metals assets from the trustee liquidating MF Global Holdings Ltd.'s brokerage business.

James Giddens, the trustee overseeing the liquidation of MF Global's brokerage's commodities business, said in a court filing Monday that an offer from Jefferies Bache Financial Services Inc. is the "best available opportunity" to sell the remaining physical property under his control.

Jefferies is buying the warehouse certificates—not the actual gold and silver bars—of MF Global's former commodities customers. At current market prices, those customers would get about $14.5 million from the sale of the certificates, a value of more than 99% of the aggregate current futures value of the metals underlying the certificates.

The trustee, who worked with futures-market exchange CME Group Inc. to shop the certificates, said no other buyers stepped forward.

The sale therefore represents an "attractive opportunity" in a market environment in which other means of liquidating the certificates are unlikely or would be subject to a "far greater liquidation haircut," Mr. Giddens said in court papers.

A hearing on the sale, which requires court approval, is slated for April 2 in U.S. Bankruptcy Court in Manhattan...

CFTC Charges MF Global Trader With 'Banging the Close' - Four Years Ago

Bart Chilton and the CFTC have charged an MF Global Trader with 'banging the close' in the palladium and platinum markets, four years ago.

Four years is a long time. That is about the time they started their intense investigation into the silver market manipulation that has been slow cooking like a pork shoulder in a smoker. We can't hardly wait.

Not to appear too cynical, but this sounds like the local sheriff shaking the doughnuts off his shirt and arresting a graffiti artist when people start complaining about the wide open graft and corruption plaguing the county in drugs, gambling, prostitution, and murder.

Banging the close? A couple of the Big Banks have been banging the metals markets like rhinos in heat almost every day.

I am sure this action will frighten Wall Street into righteous compliance with the law. And the muppets may be heartened by it.

Or at least that is what those whose minds are in the Beltway culture think.

Reuters
Ex-MF Global trader charged with manipulation
By Christopher Doering
Mar 14, 2012 6:25pm EDT

(Reuters) - The U.S. Commodity Futures Trading Commission said on Wednesday it charged a former MF Global broker with attempted manipulation of palladium and platinum futures prices during a two-year period on the New York Mercantile Exchange.

The CFTC complaint alleges that Joseph Welsh, while working for the firm, used a manipulative scheme commonly known as "banging the close" between at least June 2006 through May 2008 on no fewer than 12 separate occasions to alter prices.

Banging the close occurs when a trader acquires a substantial position leading up to the closing period, and then offsets the position before the end of trading to try to manipulate closing prices.

"We have some new manipulation authority" under the Dodd-Frank financial reform law enacted in 2010, said Bart Chilton, a Democratic CFTC commissioner, speaking at the Futures Industry Association annual meeting in Boca Raton.

"We're looking at all our authorities, including our new manipulation authority, and we're going to use them as aggressively as we can," continued Chilton, who was not speaking directly about this case...