Reading on a cold Sunday evening.
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Although it is gonna take me a minute to get there.
Here's why the MF Global story matters to you.
Let's just suppose that you own one share of Apple and the caca having hit the fan, your brokerage firm goes upside down ... or boobs up, as my beloved partner used to say.
Here's the nasty suprise heading in your direction.
You don't really own that share of Apple as it has been purchased with your funds but is being held in your brokerage firm's name supposedly for your benefit.
What is even more interesting is that you have most likely given your brokerage firm permission to pledge that share of Apple as collateral for it's own purposes, be it trading or borrowing or whatever they might want it for when you signed that paperwork you didn't read.
Here's why the MF Global story double matters to you.
The customers of MF Global weren't trading stocks which were purchased in MF Global's name, they were holding segregated commodity accounts, US government treasuries and in some cases physical product most typically gold bars, all of which were held in their own name with MF Global being paid to provide secure housing.
This means that without specific authorization which it mostly never recieved, by law MF Global should not been able to pledge those assets for it's own purposes.
The law was ignored by MF Global but much more importantly, our government regulators who are supposedly in the employ of the victims of this crime actually abetted this theft in the following fashion:
Faced with the choice of the typical Chapter 7 liquidation for a commodities brokerage concern wherein customer assets are untouchable, the SEC deliberately approved the Chapter 11 reorganization of MF Global, the one of two bankcruptcy options that threw customers assets into the entire pot of stuff to be carved up among all of MF Global's creditors.
What's even more interesting is that the SEC did this secretly without contacting the Commodities Futures Trading Corporation which probably is the governmental entity that should have made this decision as it has handled most if not all previous commodity brokerage failures and had experienced people and proven systems in place that would have more likely protected customer accounts.
So to make a long story short federal regulators have abetted the theft of money from private citizens in favor of in this case ... as usual ... JP Morgan and Goldman Sachs, with the now addition of George Soros as the likely discount purchaser.
Not to beat a dead horse, but remembering the words of President Barack Obama.
Ok, so here's my first ... Ok, Ok second question,
Now for Chris Whalen's question from The Institutional Risk Analyst.
"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 Jaime Dimon from a possible career ending kind of stumble with respect to MF Global. By stuffing the commodity customers of the broker dealer via an equity bankruptcy resolution supervised dutifully by SIPIC, JPM and Soros apparently get to benefit at the expense of the commodity customers of MF Global. This situation stinks to high heaven and everyone on the Street we've spoken to about the matter knows it. As the article below notes:
"Rather than being treated as a bankruptcy of a commodities brokerage firm under sub-chapter IV of the Chapter 7 bankruptcy law, MF Global was treated as an equities firm (sub-chapter III) for the purposes of its bankruptcy, and this is why the MF Global customer money in so-called segregated accounts "disappeared".
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. Here's a question: When is Corzine going to be indicted for securities fraud and other high crimes and misdemenors? The answer seemingly is that the Obama Justice Department is afraid to go there. Thus the fraud at MF Global continues and Washington does nothing to inconvenience the banksters as customer funds are expropriated.
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."
Mr. Whalen's conclusion feels about right to us with regards to Fox and the Wall Street Journal who the other day "reported" that funds had "VAPORIZED".
But can you imagine The New York Times, MSNBC, CNN, CBS etc. ignoring this story in an election year with a Republican in the White House?
Ya can't ... can ya?
The following article referenced above is from Clearing and Settlement.com.
In recent testimony before a Congressional committee, MF Global’s former chief Jon Corzine as well as other MF Global executives said repeatedly the didn’t know where the failed brokerage firm’s $1.2 billion of missing client money was. In fact, MF Global executives knew exactly what happened to the money, as do the regulators who oversaw the firm’s bankruptcy. The so-called segregated customer funds were repeatedly, and legally (through re-hypothication), used as collateral for MF Global loans for 100:1 leveraged bets on European sovereign debt.
A substantial portion of MF Global’s commodity clients cleared their transactions through the Chicago Mercantile Exchange and Comex, owned by CME Group (ticker: CME). The question now looming over CME’s stock is whether the company will be liable for customer losses, as the Commodity Customer Coalition, a group that says it represents some 8,000 investors—including many hedge funds–with exposure to MF Global are not going down without a fight.
Rather than being treated as a bankruptcy of a commodities brokerage firm under sub-chapter IV of the Chapter 7 bankruptcy law, MF Global was treated as an equities firm (sub-chapter III) for the purposes of its bankruptcy, and this is why the MF Global customer money in so-called segregated accounts “disappeared”. In a brokerage firm bankruptcy, the customers get their money first, while in an equities firm bankruptcy, the customers are at the end of the line, meaning MF Global’s creditors, namely J.P. Morgan and other trading counterparties, got their money first, just as AIG’s CDS (credit default swap) counterparties (mainly Goldman Sachs) got their money first when the U.S. government bailed out AIG.
To add further insult to injury for MF Global clients, the firm reportedly unloaded hundreds of millions of dollars’ worth of securities to Goldman Sachs, and others, who then reportedly flipped these securities within a day to George Soros funds.
Ok so whose political party benefits when George Soros is flush with cash?
It all sort of comes together after a while don't it?
The following is the punch line to a white paper by John Roe, and James L. Koutoulas, Esq. concerning the disposition of stolen assets trapped in the MF Global fiasco.
Click anywhere on the excerpt below for a very short and well written paper which also serves as a primer on the how, the what, the who and the why of commodities trading.
Way super double highly recommended.
By subordinating customers with collateral in segregated funds to creditors of MF Global's estate, the Trustee is essentially making the creditors the beneficiary of a criminal act. If MF Global comingled segregated funds with corporate assets, it was a criminal act. Paying such a creditor's claim with a portion of those comingled funds would make them a beneficiary of that crime. Paying JP Morgan with an Iowa farmer's money is not only morally and legally wrong, it risks the future of the American economic model.
Commodities accounts were reputed to be regulated by an entity of the federal government known as the Commodity Futures Trading Commission.
It's true mission however is to assist large Wall Street Banks in their theft of middle class America's wealth.
Click this little gear here for our recent piece concerning former Goldman Sachs great, Democratic Senator from New Jersey (is that better Robert?), Democratic Governor of New Jersey, well known Democratic and Obama fundraiser, and MF Global CEO John Corzine who famously lobbied the CFTC in order to prevent the instituition of rules associated with the Dodd-Frank legislation that would have prevented MF Global from commingling client's money with it's own and thus would have prevented this 630 million dollar theft.
When somebody starts telling you the game is rigged in favor of the "Big Banks", this is exactly what they're talking about.
Click anywhere below for the entire Robert Lezner, Forbes article where you will learn that Former Goldman Sachs star trader, United States Senator, Governor of New Jersey, well know Obama bundler and MF Global CEO John Corzine met no fewer that 10 times with the Commodity Futures Trading Commission in order to see to it that this vile rule of the supposed government regulator, did not change as a result of Dodd-Frank.
After an intense day of investigation, I have just discovered that a CFTC (Commodity Futures Trading Commission) rule(1.29) allowed Jon Corzine’s MF Global to use the margin and cash in customers heretofore segregated accounts to amass a risky $6.3 billion investment in European sovereign debt that backfired. Nor did Corzine have the obligation to inform any of these customers he was gambling with their money. Or that he was intending to keep all the profits for himself and his troubled firm. Nothing for the customers.
The language of Rule1.29 allows “The investment of customer funds in instruments described in 1.29 shall not prevent the futures commission merchant (MF Global) or clearing organization so investing such funds and retaining as its own any increment or interest resulting therefrom.” Increment refers to any trading profits or gains.
The criminal division of the Justice Department in New York — as well as the SEC and the CFTC and members of Congress– are investigating whether any laws were violated and if so, whether any criminal charges can be brought. As of 3pm today, there has been no sign of the missing $633 million. My sources believe it was probably grabbed by the institutions that made the margin calls on MF Global as the European bonds sank in value.
This shocking loophole, which is available to all commodity traders, whether giant ones like Goldman Sachs or members of commodity exchanges, means that huge risks are being taken with money that does not belong to the trading firms– without the customers having any idea of the danger they are in. As Andy Abraham, a futures trader in Israel put it to me today; “this means they can take segregated funds and leverage them to kingdom come. It means nothing is safe.”
This rule, which has been in effect since 1974, is shocking and highly irregular since it allows any futures dealer to use customers money for its own selfish purposes– and never inform its customers it is doing so. What’s even more unfair is that the dealer(MF Global) gets to keep all the income and the trading profits, if any from a transaction that uses other people’s money– not its own house capital. That is unless some prior arrangement about sharing profits was made privately beforehand with the client. None of the MF Global clients I’ve spoken to today had the foggiest notion about this arrangement– which at minimum is outrageously unfair to the rule that the customer comes first. All losses must be made up by the dealer, which in this case may be totally impossible.
Just a small example of the rot that is our government.
The following is taken directly from the Resource Center at the Treasury Department.
Who/What is the Treasury Borrowing Advisory Committee (TBAC)?
The Treasury Borrowing Advisory Committee ("Borrowing Committee”) of The Securities Industry and Financial Markets Association (SIFMA) is an advisory committee governed by federal statute that meets quarterly with the Treasury Department. The Borrowing Committee’s membership is comprised of senior representatives from investment funds and banks. The Borrowing Committee presents their observations to the Treasury Department on the overall strength of the U.S. economy as well as providing recommendations on a variety of technical debt management issues. The Securities Industry and Financial Markets Association does not participate in the deliberations of the Borrowing Committee.
Treasury Borrowing Advisory Committee Members
Matthew E. Zames
JP Morgan Chase
383 Madison Avenue
New York, NY 10179
Goldman, Sachs & Co.
200 West Street
New York, NY 10282
Vice Chairman, CEO, Asset Mgmt.
One Wall Street
New York, NY 10286
Richard A. Axilrod
Moore Capital Management, Inc.
1251 Avenue of the Americas
New York, NY 10020
Ian G. Banwell
CEO & CIO
Round Table IMC
214 North Tryon Street
Charlotte, NC 28202
1776 I Street NW
Washington, DC 20006
Executive Vice President
Dodge & Cox
555 California Street
San Francisco, CA 94104
Paul Tudor Jones II
Co-Chairman & CIO
1275 King Street
Greenwich, CT 06831
Walter J. Muller III
Chief Investment Officer
Bank of America
600 Peachtree Street
Atlanta, GA 30308
Jeffrey S. Phlegar
1345 Avenue of the Americas
New York, NY 10105
Executive VP, CFO
New York, NY 10036
840 Newport Center Drive
Newport Beach, CA 92660
55 East 52nd Street
New York, NY 10055
Head of Fixed Income Sales, Americas
600 Washington Boulevard
Stamford, CT 06901
Stephen A. Walsh
Chief Investment Officer
Western Asset Mgmt. Co.
385 East Colorado Blvd.
Pasadena, CA 91101
Now, here's the question you gotta ask yourself.
Who's interests are being discussed when the Treasury Borrowing Advisory Committee meets with the Borrowing Committee.
Which of course, is what I keep sayin' ..... still.
If anyone can figure out the signature on the cartoon, I'd like to link it to the source.
This will become a lot more meaningful once you've slogged through the post below.
This one is a bit more complex.
You'd have to be a "Gold Bug" to have picked it up.
It has been percolating from site to site for the past week or so.
Simply put, people who think that they have acquired Gold that is being stored within some depositary somewhere have rather purchased only a promise of Gold to be paid upon demand, or have purchased a promise to pay in cash upon demand the value of some amount of Gold.
You think you own Gold, but you don't.
This time it's mostly J.P. Morgan.
But Scotia shows up.
And of course, the ubiquitous Goldman Sachs.
The following are some of the more notable quotes, each will link to the story from which it was obtained.
"Ponzimonium" a word coined by CFTC Commisioner (Commodity Futures Trading Commision) Bart Chilton makes a nice title, and since Nathan Lewis has already grabbed it, I'll quote his story first.
Goldman Sachs has just been charged with fraud for failing to advise customers to whom they were selling a particular investment that the firm had been paid by the John Paulson Fund to engineer the investment in a way that made it likely to go down in price.
Sorry about the way long post, I couldn't figure a way to shorten it.