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."

PBS Frontline: Money, Power, and Wall Street

As promised, this has just become available.  You can watch the first two hours here:

PBS Frontline: Money, Power, and Wall Street

Episode One: Derivatives Spark a Credit Boom and the Mispricing of Risk

                      The Attempted Whitewash - "We never saw it coming."
                      Understates the extent of the fraud and Greenspan and others involvement in promoting a bubble.

Watch Money, Power and Wall Street: Part One on PBS. See more from FRONTLINE.

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

Missouri's Sound Money Bill

"I don't think this has any practical implications,” says David Rapach, associate professor of economics at St. Louis University. “This could be a combination of nostalgia toward both states' rights and the gold standard, but we moved away from those types of models for good reasons.”

Perhaps the good professor has never heard of Gresham's Law, or seen The Hunger Games.   But it does fit my model that most economists' understanding of current economic events has a lag of about ten years.   That is why so many of them missed the build up to the financial collapse.

I would not underestimate the ingenuity of the public and their preference for stable value, and their building resentment at being bullied and abused by pampered elites in a distant city. The Sound Money Bill may be a local protest, but so was The Boston Tea Party.  

Missouri's Sound Money Bill Is Really a Protest
By David Nicklaus
April 24, 2012

When the dreaded hyperinflation arrives, the Missouri House wants Missourians to be ready.

Last week, the legislative body passed the Missouri Sound Money Act of 2012, which declares U.S. gold and silver coins to be legal tender in the state.

That sounds a bit odd, especially since the federal government already recognizes its bullion coins as legal tender.  It's just that nobody's going to pull out a $50 gold piece to pay for snacks at QuikTrip, because the ounce of gold in the coin is really worth $1,600.

Backers of the Sound Money Act envision a system in which you could deposit gold and silver coins in a vault and get a debit card tied to their metal value. If the Federal Reserve debases the value of the dollar – a favorite prediction among the gold-bug set – gold and silver would rise in value, and prescient Missourians could brag about their enhanced purchasing power.

Utah passed a legal-tender law last year, and South Carolina's legislature is considering one this year.

Rich Danker, economics director of conservative lobbying group American Principles in Action, said a couple of institutions in Utah are working to create the gold debit-card system. Until that's in place, sound-money advocates have to spend out of bank accounts denominated in dollars, just like the rest of us.

Missouri's legal-tender bill would benefit precious metals investors by eliminating state capital gains taxes on U.S.-minted coins. A fiscal note says the state treasury could lose more than $370,000 a year.

That's a small price to pay, backers argue, for monetary freedom....


Read the rest here: Missouri's Sound Money Bill Is Really a Protest - St. Louis Today