When Is QE Not Really QE, a Bailout Not Really a Bailout?

When the going gets tough, the sneaky take it off balance sheet.

Watch carefully what the Fed and the Treasury do, not so much what they say.

Times of India
IMF chief calls on US for more cash
3 April 2012

WASHINGTON: IMF managing director Christine Lagarde implored the United States to help back-stop debt-ridden European countries Tuesday, wading neck-deep into bubbling US political waters.

Speaking in the US capital, Lagarde said the 187-nation International Monetary Fund needed more firepower to tackle financial crises raging around the globe, arguing it was in the US interest to pitch in and help Europe.

"Americans might ask themselves: why should what happens in the rest of the world concern us? Don't we have our own problems?" she said, according to prepared remarks.

"The answer is simple: In today's world, we cannot afford the luxury of staying in our own mental backyards."

"If the European economy falters, the American recovery and American jobs would be in jeopardy. So America has a large stake in how Europe fare -- and how the world fares."

Lagarde's comments came 64 years to the day after president Harry Truman signed the Marshall Plan, an unprecedented loan to rebuild post-war Europe.

But her comments will be anathema to politicians in Washington, as the country hurtles toward elections this November.

US officials, including Treasury Secretary Timothy Geithner, have for months trod a thin line between supporting the IMF's efforts to bolster its resources and actually kicking in some more cash.

Washington has yet to ratify 2010 reforms which would see it send $63 billion more to the IMF's coffers, under a new quota agreement.

With the United States itself mired in high levels of debt, increasing IMF funding or shipping tens of billions of dollars abroad to help Europe could be tantamount to political suicide.

Unperturbed, Lagarde said Europe's recent efforts to shore up its own financial "firewall" must prompt the rest of the world to pitch in.

"The Europeans have moved first with their firewall, the time has come to increase our firepower.

"The ratio of Fund quotas to world GDP is significantly lower today than in the past. Sixty years ago, it was as much as three, four times higher. We've a lot of ground to make up."

Lagarde has asked members to give her $500 billion in extra funds to fight financial crises, including for possible future eurozone bailouts.

But at a fraught meeting of finance ministers and central bank chiefs in Mexico City in February, Group of 20 economies said they would only boost IMF funding if the eurozone first put its hand in its pocket.

After a month of wrangling and some German resistance, the eurozone Friday clinched a deal it claimed was worth more than one trillion dollars, putting the ball back in the IMF's court.

Trying to seal the deal, Legarde echoed a point frequently made by Geithner: that the IMF offers a solid bet.

"The IMF is a good investment for all our members, including the United States. Your money is not drawn upon until needed. Your money earns interest. Your money is used prudently -- our programs always carry rigorous conditions to ensure their effectiveness.

"No member country has ever lost money by contributing to IMF resources -- and I assure you that will not change on my watch."

More Evidence of Fraud: MF Global's Inscrutable Accounting Error - Who Shot Jon?

"The theory is that someone at the firm overrode internal controls that safeguarded customer funds and transferred money out of them to shore up the company's global liquidity position. Congress and federal investigators are particularly focused on the role of Jon Corzine, the former CEO of Goldman Sachs and governor of New Jersey, and whether he purposely directed his treasury department to use customer funds."

CFO.com


"Oh what a tangled web we weave,
When first we practise to deceive."

Sir Walter Scott

Like the WMD's in Iraq, the financial people at MF Global spent three days looking for an accounting error to explain how $1.6 billion in customer money went missing. And like the WMD's in Iraq, the chimerical accounting error never existed. The reason for the missing money was a deception with a purpose.

Edith O'Brien has the answers, certainly to at least the first phase of the fraud, which involved taking customer money from segregated accounts to meet margin calls.

The second phase of this scandal is external, involving the parties who hid the stolen customer money, most likely manipulated the post-collapse bankruptcy process to favor themselves over the victims, and may possibly have been involved in the takedown of MF Global in the first place.

 I wonder if there were CDS and stock options that paid off with their bankruptcy. Who benefited from the failure of one of the larger clearing brokers serving the retail customer? Who held the other side of MF Global's trades?

Besides Edith O'Brien and Jon Corzine, the parties with the greatest insight into MF Global's positions and financial structure were JP Morgan and Goldman Sachs based on the reports that I have read. As Francine McKenna has said, JPM knew MF Global 'all too well.'

This analysis by CFO.com helps to highlight the key issues in the first phase.

The spin that these were just simple 'accounting errors' and that the money 'simply vaporized' is pure fantasy, repeated by a servile and unambitious mainstream media, and the Wall Street demimonde of enablers and attendants.

Janet Tavakoli has produced a rather nice summary of the key facts and issues in the MF Global scandal provocatively titled, "MF Global: JPM Produces Smoking Gun."

It is not quite a smoking gun, in the irrefutable legal sense of evidence, but it certainly helps to narrow the possibilities in a system of discovery and justice. Oh that we still had one.

The more that I think on this whole situation, the more that I suspect, as a personal theory, that the genesis of the MF Global collapse resides in an attempt by a few financial industry participants, with some insider knowledge of the firm, to break Cozine's Euro debt trade by increasing his margin demands on an overleveraged 'sure thing' against an overly thin wallet.

The goal was to force Corzine to settle what ought to have been a good trade at a loss, and perhaps to be forced to surrender the firm, and in particular their important positions in the metals exchanges, in addition to a not insubstantial amount of bullion, to an acquisition at a very modest price to value in order to provide the liquidity. Instead, Corzine dipped into customer funds, and took it to a whole new level, spoiling any further thoughts of an easy acquisition. This of course does not absolve Corzine for his highly risky trade, even though he may have been privately assured that the European debt would be made good.

I might have to give too much credit to say it was like burning the farms and buildings before Stalingrad. Instead the whole city itself was burned and rendered uninhabitable.

But this theory may be a bit labored. Still, this is a well worn trading gambit on the Street of Thieves.

CFO.com
MF Global’s Inscrutable Accounting Error
By Vincent Ryan
April 03, 2012

The securities dealer’s finance department and its regulators were busy looking for a mysterious reporting glitch during the company’s final days – one they never found.

MF Global’s general counsel and the CFO of its broker-dealer unit appear to never have had any evidence that faulty reporting had caused a deficit in customer-segregated accounts. But they persisted in their belief for as long as three days, according to a timeline of the firm’s final days constructed by the Chicago Mercantile Exchange. The reason? The amount was so large “it was too big to be anything else.”


In turn, early on, the CME and the Commodity Futures Trading Commission were prevented from conducting a full audit of customer-account statements because they didn’t have all the necessary documentation from MF Global. The three-day delay in confirming the customer-account shortfalls combined with the inability of regulators to get timely information from MF Global personnel may have contributed to the “loss” of $1.6 billion in customer funds and the firm’s eventual demise.

The bankruptcy has stirred up a firestorm in the securities industry and among regulators because many of the customers who lost money were farmers and ranchers who used futures in nonspeculative ways to hedge against price volatility. The firm went from reporting a $192 million quarterly loss on October 24, 2011, to filing Chapter 11 on October 31.

The theory is that someone at the firm overrode internal controls that safeguarded customer funds and transferred money out of them to shore up the company's global liquidity position. Congress and federal investigators are particularly focused on the role of Jon Corzine, the former CEO of Goldman Sachs and governor of New Jersey, and whether he purposely directed his treasury department to use customer funds...

Read the rest here.

Gold Daily And Silver Weekly Charts - FOMC Minutes Trigger a Sell-Off

The FOMC minutes at 2 PM NY time set off a sell signal in gold of about 2.25%, and to a lesser extent stocks .90% and silver which was down 1.44%.

All three recovered somewhat into the close.

These are highly manipulated markets, so tread carefully. It is better for most non-professionals to be out of them, and to have their wealth stored in honest assets as far away from the Anglo-American banks as is possible.

Gold seems to be in a rather large symmetrical triangle which is normally a continuation pattern, in this case for the bull market. If it *works* the minimum measuring objective is somewhere north of $2100.

Fed Actions Speak Louder Than Words - Axel Merk

SP 500 and NDX Futures Daily Charts - Desperately Seeking Buyers for the Bernanke Bubble

The FOMC minutes precipitated a drop in the markets.

Gold and some of the miners were hit hard, with silver, bonds and stocks down to a lesser extent. The US dollar rallied.

The rationale was that there would be no QE and that perhaps the FED would raise rates. Given the recent data from income tax receipts and wages this appears to be more a fantasy than a sound fiscal policy.

I don't expect this to 'stick' especially in stocks. These moves have the appearance of perception management and the usual trading desk antics.

The spokesmodels were rather eager to twist this into an endorsement by the Fed of 'the recovery' and did the segway to 'buy stocks.'

Bernanke and the Fed have given themselves over to the monied interests. They are no true regulators, and serve only themselves. But the same could be said of those who have taken the oaths of regulators, who sit idly by while the people are cheated and their savings are stolen.

Wall Street is desperate to hand this rally off to the retail buyers. Without volume it cannot continue without becoming increasingly unstable.

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