Testimony

Bernanke testimony before Senate will dominate the morning newsflow, with Greek headlines the usual risk of kneejerk reactions. Otherwise, we get JOLTs and Consumer Credit, hearing on a payroll tax-cut extension, and another GOP primary.

Bernanke's recognition of his penalizing savers with low rates as an 'issue for people' sparked an interesting note from the WSJ on how sensible and stoic savers are being herded (unsafely) into risky investments. Bernanke's insistence that "our savers collectively have to hold all the assets of the economy and a strong economy produces much better returns in general" must be juxtaposed with comments from a money manager that "I don't think that's a fair-trade" for money intended to be invested safely. By removing the last shred of hope for a rise in savings rates anytime soon, the Fed is once again creating the potential for major unintended consequences as the 30% drop in interest income for US savers from the 2008 peak forces them to extend duration (TSYs), lower quality (corporate bonds), and/or increase leverage/risk (equities). One only has to look at Treasury yields, Muni yields, investment-grade bond yields, and now high-yield bond yields for how tempted investors (retail and professional 'insurance/pension' assets) have become to take their safest net worth asset (low risk liquidity) and expose it to the business/credit cycle and all its myriad event risks. While reducing the rate of savings might seem sensible for the short-term from the Fed perspective, it leaves a wholly unsustainable recovery (or bubble in who knows which asset class next) and as Nordea notes this week, based on their models, a considerably higher savings rate will be needed going forward (for any sustainability) even as 'saved money' is rotated into risk or spent on quality-of-life maintenance. Perhaps it is time for many to listen to the sensibilities of the WSJ's last (75 year-old) interviewee who notes "At my age, I can't be a risk-taker anymore" as maybe it is time to consider the reality of the recent good US data in relation to coinciding elements such as inventory build-up, plummeting household savings, and lower gas prices when adding to that risky investment.

Daily news.

Yesterday we noted how a CBO analyst may have been terminated for her conflicting views on model assumptions, especially when they veered away from the Wall Street-defined norm. Today, we find that the same approach to dissent may have been the reason why MF Global ended up taking inordinate risk, and ultimately blowing up, leaving over a billion in client money transitioning from liquid to gas phase overnight. According to Reuters, "The former chief risk officer at MF Global who raised red flags about the firm's aggressive trading bets told lawmakers that his warnings contributed to the firm's decision to let him go in early 2011. Michael Roseman, who was ousted in January 2011 from the now-bankrupt futures brokerage, said he rang alarm bells about the firm's exposure to European sovereign debt a year before the firm collapsed in late October of 2011." Roseman's statement on whether his skepticism to Corzine's get rich quick scheme was the reason for his termination? ""My views on risk certainly played a factor in that decision," Roseman told a House Financial Services subcommittee, about why he was asked to leave the firm." And so the status quo continues: any time anyone ever dares to disagree with broad misconceptions, whether it is regarding infinitely rising home prices, broad global compression trades, or the ability of European banks to onboard toxic CDOs in perpetuity is always promptly shown the door. The flipside to this complete lack of checks and balances? Why the bailout culture of course, in which finding one company responsible for gross complacency would mean all are guilty. Which is nobody will ever go to prison as it would set the "worst" possible precedent ever: that one is ultimately responsible for their own stupidity. Said otherwise: the best qualification one can hope to add to one's resume: "distinguished yes man with honors."

Was the Chapter 11 Petition of MF Global Holdings filed fraudulently?

Federal Reserve Board Chairman Ben Bernanke will testify at House Budget Committee (Chairman Paul Ryan, R-WI) full committee hearing on "The State of the U.S. Economy." The highlight of today's hearing will be watching Bernanke face his nemesis runner up, Paul Ryan, who will surely grill Blackhawk Ben with questions that are far more intelligent than the press corps could come up with during the last FOMC canned remark presentation. Watch the full testimony live at C-Span after the jump.

Punxsutawney Ben, who just saw the printer's shadow, and predicts six more trillion of free money, will address the House Budget Committee later this morning. We will also get the latest BS from the BLS how thousands of mass layoffs every day result in a drop in initial claims.

Corruption is only possible if the benefits to the parties engaged in it far outweigh the potential consequences. However, as soon as the potential consequences become real, that’s when everything changes: people start talking/ confessing, and the corruption begins to come unraveled.

Because live is better than dead. And just in case he lets one slip just what his price target for the Russell 2000 (aka the US GDP) is and how much gold the Fed will secretly lease. As a reminder, from Alan Greenspan testimony to Congress in July 1998: "Central banks stand ready to lease gold in increasing quantities should the price rise."

When it comes to corruption, cronyism and general muppetry in Washington D.C., the only real question is 'where does one start?' Yet one has to start somewhere to conclude with a list of the ten most corrupt and despicable marionettes in D.C. Which is precisely what JudicialWatch has done in its annual compilation of the "Top 10 Most Corrupt Politicians in Washington D.C." for 2011. And confirming what everyone knows, that both the left and right are merely irrelevant names for the same general social affliction, or should we call it by its true name - wealth pillage - the split is even between democrats and republicans. In no particular order, the winners of 2011 are...

Following the gotcha moment from Tuesday, fully documented here and here, in which CME Executive Chairman Terry Duffy basically caught Jon Comminglerzine committing an act of perjury, or lying about the chronology of his knowledge of MF Global's commingled loans under oath, today we get the third and last (for the time being) testimony of the former CEO of Goldman and MF Global, this time to the House Financial Services Committee. Grab your popcorn, the hearing is live, and Jon Corzine is about to sound just like Hank Paulson because this time it will be a little more difficult to "recall" events that happened 6 weeks ago, now that the CME chairman has been kind enough to remind him.

Update: the three MF Global stoog... pardon, former executives, are now testifying

Even though he has had several days in which to "review his notes", the follow up testimony by former MF Global CEO Jon Corzine to the Senate Agriculture Committee starting momentarily will be replete with "I don't recalls" and "to the best of my knowledge" and will be largely devoid of all content, suffice to say it was not his intention to break the main law of broker dealers- no commingling. It will be even worse because today he will be joined by MF global's CFO and COO as well, all of whom will be completely clueless once again, and needless to say, shocked, SHOCKED, that they stole billions from their clients. Watch the full webcast below.

Session has resumed

And now the one we've all been waiting for...

Probably far more anticipated than the monetary announcements out of BOE (which just announced it is keeping rates at a record low of 0.5%, but no more QE), or even the ECB, and certainly far more than the latest and not greatest European summit which begins today, is the 9am testimony out of the House Agriculture Committee by one "Honorable" Jon S. Corzine, as well as the Q&A that will follow. Naturally the Q&A will be the focus, but as for the prepared remarks, they have just been released and are presented below. The choice selection: "Obviously on the forefront of everyone’s mind – including mine – are the varying reports that customer accounts have not been reconciled. I was stunned when I was told on Sunday, October 30, 2011, that MF Global could not account for many hundreds of millions of dollars of client money. I remain deeply concerned about the impact that the unreconciled and frozen funds have had on MF Global’s customers and others. As the chief executive officer of MF Global, I ultimately had overall responsibility for the firm. I did not, however, generally involve myself in the mechanics of  the clearing and settlement of trades, or in the movement of cash and collateral. Nor was I an expert on the complicated rules and regulations governing the various different operating businesses that comprised MF Global. I had little expertise or experience in those operational aspects of the business. Again, I want to emphasize that, since my resignation from MF Global on November 3, 2011, I have not had access to the information that I would need to understand what happened. It is extremely difficult for me to reconstruct the events that occurred during the chaotic days and the last hours leading up to the bankruptcy filing....I simply do not know where the money is, or why the accounts have not been reconciled to date. I do not know which accounts are unreconciled or whether the unreconciled accounts were or were not subject to the segregation rules. Moreover, there were an extraordinary number of transactions during MF Global’s last few days, and I do not know, for example, whether there were operational errors at MF Global or elsewhere, or whether banks  and counterparties have held onto funds that should rightfully have been returned to MF Global." Translation - he pleads da FIF.

Bernanke's prepared remarks to Senate in the second day of the bi-annual presentation monetary policy presentation will be identical to those from yesterday. The only difference will come in teh Q&A, which is not so much Q&A as political grandstanding by a bunch of muppets. For those who wish to listen as QE3 is priced in for the third time in as many days, and express other masochistic tendencies, tune in to the C-SPAN webcast below.