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On Corzine - MFG in the fog of war
I watched Jon boy. I didn’t hear any smoking guns. That doesn’t mean there weren't any. Keep in mind that Corzine has the best lawyer (for this) that money can buy. Andrew Levander has been advising the former CEO of MFG on every word he says.
I was surprised that there was no 5th Amendment stuff. I’m sure that Levander was pushing for that. But Corzine really didn't have much of an option. If the former Senator/ Governor pled the fifth he would have been convicted in the public’s eye.
So Jon talked, but he said nothing. You can be absolutely certain that Corzine spent many hours with his lawyers fielding question that might have been asked by the congressional committee. When Corzine seemed to stutter, pause, look up at the ceiling groping for the right words to use, it was just a very well orchestrated and practiced acting job.
Jon made one response that I thought was significant. He said several times:
"I never intended to break any rules.”
This could mean anything, but consider that this canned response was formulated word for word by Levander. I think what Corzine was saying was that he may have authorized some actions in the later stages of MFG’s existence that ultimately led to the expropriation and loss of customer funds. He is trying to establish that whatever he may have said (or signed), he did not understand the consequences. Whether this is true or not, I don't know.
We might find out at some point that some clown in the treasury department at MFG asked JC a question in the middle of the panic:
“We could re-hypothecate the seg accounts and plug the gap tonight! Should we do that?”
And Jon could have looked up and said:
“Do what you can!”
The problem with the “I never intended” defense is that it doesn’t work for a CEO who should have know better.
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I recently had a conversation with an individual (we'll call him Bob) who had three MFG accounts. He, like many other customers, smelled a rat with MFG as the stock price plunged and the FINRA issues with the Euro bond positions became known.
Bob voted with his feet. He closed off all open positions. He got back to cash. Then he requested a wire transfer for the balance(s). He left a small operating balance in the accounts in order to keep them open. This fellow was small potatoes. Two of the accounts were under $20k. The other was $215k.
Wire transfers to a bank were requested.
According to Bob, the wires went out on Wednesday, October 26 (four days before BK). All three wire transfers were received on Thursday October 27.
But on Friday, October 28, the bank that had received the funds reversed the wire transfer for the larger amount. The transfers for the two smaller amounts were not reversed.
This is highly unusual. It is extremely difficult to reverse a wire transfer. Wire transfers are considered to be Immediately Available Funds or “Good Funds”. Absent a court order, the only way to reverse a wire transfer is when the remitting bank provides a letter of indemnity ("LOI") to the receiving bank. I’ve written these letters. They would look something like this:
To: ABC Bank
From: XYZ Bank
Reference:Wire Transfer #123456 date 10/26/2011 for $215,000 for further credit to "Bob", Account #AB3355
We hereby request that you immediately debt the account of (Bob) for the full amount of the transfer and return the funds to us.
If you comply with this request we hereby agree to hold you free and harmless of any consequences that may arise as a result of this request.
XYZ Bank
Basically XYZ has to give ABC a blanket guarantee that they will not get hurt by the request.
Here’s the rub. I’m told that in the matter at hand, the "XYZ" bank operating on behalf of MFG was JPM.
If I’m right that a LOI was required to claw back a wire transfer, then - assuming my information is correct, and I think it is - it had to have been JPM that wrote the indemnity letter. (No one would have acted on a LOI from MFG on 10/28).
I'm speculating quite a bit. But it’s still worth considering. At this point, anything is worth considering. We are six weeks past the BK. As Corzine and all the others said today, they have no clue where the missing money is. There has been any army of forensic accountants (FBI & KPMG) toiling night and day. No one has found the money. That's crazy to me.
A possible daisy chain:
(1) MFG orders XYZ Bank to make a money transfer.
(2) XYZ makes the transfer.
(3) After the transfer has been made (or during the same day) XYZ issues a letter of indemnity (“LOI”) and obtains a refund of the transfer.
(4) The initial wire transfer is accounted for (correctly) at MFG as a reduction of the customer account liabilities (Segregated account).
(5) When the money comes back into XYZ (pursuant to the LOI) it is not credited back to the Seg./customer account. (The fog of war factor? Deliberate?)
(6) After the money has been returned to XYZ bank, it appears to be "unrestricted funds" of MFG. It gets commingled. Someone grabs the money to offset a claim. The Chinese Wall between the Seg. account and MFG corporate account has been broached. Once the money is commingled, it is impossible to figure out who owes what to whom.
A question for any of those many MFG account holders: Did any of you have a similar experience with wire transfers? If so, could you let me know? I’d love to get to the bottom of this mystery.
Bkrasting@gmail.com
Note: I'm aware that in the final days, MFG issued checks to customers that bounced. This is similar to the wire transfer issue I describe. But it is also a different kettle of legal fish. There are many reasons for a check to bounce. Checks, unlike wire transfers are not "good funds". To claw-back a wire transfer requires significant human intervention. Banks do not write LOIs without carefully considering the consequences. There's always a signature on an LOI......
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You would think by now all these leverage geniuses would remember not to leverage past their "margin call risk." That being the lesson of several recent bubble pops.
a) They're not geniuses, there's a reason they have special calculus classes just for biz majors
b) They don't believe they have risk (other people: give em money, bail em out, take the fall)
c) What good is remembering to the insane gambler? You think junkies don't know their fix is a dead end and do it anyway?
Put em down like diseased cattle that the world may move on without their lunacy.
To Corzine:
http://www.youtube.com/watch?v=cqJJwv_Caaw
what we have here is inflation:
Whatever the market will bear.......
.........divided by........
the lowest common denominator.
I'm waiting for them to blame it on hackers.
Teh again you never know.
I just don't know how someone as seemingly idiotic as Corzine seem to be runs anything.
It's hard for me to believe he graduated high school after today's display.
They just keep getting more and more brazen with each passing day!
Interview with Jim Willie, thought the quote was interesting re the Comes:
“Comex was ready to default on gold and silver in November, and rather than honor the notices for delivery, JP Morgan stole the funds in the accounts that were calling for delivery…notices for delivery were replaced by stolen accounts.” The evidence of this according to Jim is that, “JPM increased the amount of silver in their registered vaults by precisely the amount that was suppose to be delivered…JPM effectively averted both a Comex default and a European Sovereign Debt implosion.”
http://bullmarketthinking.com/exclusive-interview-jim-willie-the-public-will-not-wake-up-until-at-least-1-million-private-accounts-are-stolen/
If this is true it means that our government is criminal as well. The only way this could happen is if there is a wider conspiracy between the government, Comex, JPM, MFG, Corzine, Dimon, etc. That is so over the top that I hope to hell it's not true.
Yeah, I figure Corzine hired the high-powered attorney for appearance only. He just part of the scam. He could have walked in there with a public defender, he's not going to jail. But it is the explanation (silver/comex) that makes the most sense to me.
Hmmmm. So after several investigations and a congressional hearing, the official explanation is that $1.2 billion just vanished, is it?
I'd say Willie's explanation is a hell of lot better than that crock of shit.
MF GLOBAL CLIENT ACCOUNTS SEGREGATED OR NOT?
If as stated here in another ZH article http://www.zerohedge.com/news/why-uk-trail-mf-global-collapse-may-have-a...
MF Global’s Customer Agreement for trading in cash commodities, commodity futures, security futures, options, and forward contracts, securities, foreign futures and options and currencies includes the following clause:
“7. Consent To Loan Or Pledge You hereby grant us the right, in accordance with Applicable Law, to borrow, pledge, repledge, transfer, hypothecate, rehypothecate, loan, or invest any of the Collateral, including, without limitation, utilizing the Collateral to purchase or sell securities pursuant to repurchase agreements [repos] or reverse repurchase agreements with any party, in each case without notice to you, and we shall have no obligation to retain a like amount of similar Collateral in our possession and control.”
It would appear then that allowing rehypothecation of so called segregated accounts funds/collateral defeats the point of segregation. Were the accounts segregated or not? Were they subject due to the contract clause #7 to rehypothecation via the MFG London Subsidiary or not?
Further if via the rehypothecation clause position funding, MF GLobal proceeded to leverage their repo to maturity position several times, the daisy chain of repo positions would grow far longer than implied by the multiplier of MF GLobal's leverage since other counterparties too would leverage the collateral during their possession of it dragging in even more bonds into the mix(how repo works basically). And we are talking about sovereign bond daisy chains here. If it is also true (from the article above)as follows:
But on Friday, October 28, the bank that had received the funds reversed the wire transfer for the larger amount. The transfers for the two smaller amounts were not reversed.
This is highly unusual. It is extremely difficult to reverse a wire transfer. Wire transfers are considered to be Immediately Available Funds or “Good Funds”. Absent a court order, the only way to reverse a wire transfer is when the remitting bank provides a letter of indemnity ("LOI") to the receiving bank.
Then this reverse a wire transfer "clawback" was likely undertaken to in order not to trigger the attempt to resolve/reconcile the very long daisy chain that existed surrounding MF Globals position and all the positions of other parties leveraging the same collateral and other bonds tied in to the original trades by MF Global. The daisy chained leverage would far exceed 4x's or 30's leverage start with 4 x's 30... This is all complicated by the haircuts needed to be applied to all the securities involved if they lost value(likely) and the related margin calls for all the trades of this moibus daisy chain (sorry for the borrow). The agent of clawback may well have been under Federal Reserve orders or prudently surmised on their own it was better not to be the identified trigger finger that destroyed the European Banking System, the Euro and the world economy last week...
So you see, firing Corzine allows him to claim he doesn't know (this) what happened --keeping the cat in the bag.(Though he almost touched on it during the questioning today) And not intending to break the rules as he stated really means "we followed the rules right to the loophole - using our European subsidiary." Today the Agriculture Committee only asked stupid questions nothing about the subsidiary -- keeps the cat in the bag. And the abrupt bankruptcy of MFGlobal sealed for the moment the losses of the clients of MF Global to be resolved through bankruptcy proceedings to conceal the underlying financial disaster 'in waiting' by extended diversion.- keeping the cat in the bag.
The 'take back' to the clients for those congressional members needing one is "You saved the world from economic collapse - for a week or two - thanks." "Your money dissappeared into a black whole called "Europe" and is now considered something mysterious we call "dark money." Event horizon closed.
...Just an additional speculation of course, arising from an instinct the financial powers and government have no qualms about concealing or lying about what actually happens "in the interest of the common good" they cannot possibly save, nor intend to take responsibility for destroying, serving their own catastrophic short sighted interests, much like Mr. Corzine.
lol nostromo17, Dark Money! That is a keeper!! Undetectable by any means known to man. Perhaps it'll turn up in the Large Haydron Colider in another dimension?
thanx.
What I frankly do not understand is this. Why should we even bother with all these extremely complicated issues while, in fact , there is a very simple solution. It should be put in law that if any financial institution gambles with clients money and looses it, CEO automatically goes to jail for, say 20 years. This would immediately eliminate a lot of problems. And even jerks like Corzine would know where are the customers money (or better yet would never take a job like CEO of MF).
Watching this circus today was extremely painful. So many people shoud
have gone through motions just to accomodate these big fat Democratic cat who really should not have been allowed anywhere close to CEO job...
I just cannot believe that so much money could be lost without a lot of willful wrongdoing on someone's part. Whether anyone will be convicted is another question.
Clearly we need laws that prohibit brokers from trading on their own account. Whether we will get such laws is another question.
Corzine didn't intend wilfull wrong doing. A loophole is a loophole right? Only becomes wrong doing when you screw up the trade using the loophole provided to you by your very own law makers to use.
THe loophole is offshore subsidiaries used to park collateral and money and rehypothecation clauses as described in client contracts that what needs to be fixed law wise. And the London money center has to be brought in line with U.S. rules so its not an appealing venue to offshore funds. They are gonna love that...puts em outa business.
Especially when "their own account" is client's money.
"I have no idea what MFG is."
in German, it means "mit freundlichen Grüßen" = literally "with friendly greetings"
MF GLOBAL is what MFG, is sorta like MSG but not quite as tasty. --Sorry I hate acronyms too.
Bruce ;
It seems like there is still many people who has not panicked yet..
If your friend had listed the advice of Hugh Henry last year May 26th when he said:
'I would recommend you panic'He would have saved all his money..
He saw clearly everthing in europe and european banks having today...
http://www.youtube.com/watch?v=nuysYXlJ43I&feature=player_embedded#!
I agree if in fact the fiasco is being covered up then the game is already over and the panic starts as soon as the word gets out Europe blew up last week with the nudge from MF Global.
Democrat Jon Corzine, who is friends with the muslim and other MFW looter Bill Clinton, did the same thing in NJ. Corzine looted NJ for the unions and his Democrat politcian pals. Who is suprised?
off topic thanks for venting.
Isn't it nearly certain that the money went to the shadow banking institutions who provided the liquidity to MFG to buy the bonds? I suppose what he means is that those lenders, the other side of the re-hypothecations, rolled up MFG's positions without a word to Corzine, who at that point had his eyes closed and his hands over his ears.
Correct. Repo in Europe is where the money is.
WHAT IS SO FUC.KING HARD TO FIGURE OUT...!!!!!!!....THE BANKERS AT MFG AND OTHER BANKS STOLE ALL THE MONEY !
it shuda done that and it suda done this...ha....they took the cash baby and ran...!
The money did get stolen from the MF Global clients though so far. You are right about that. Only it wasn't exactly just MF GLobal doing the stealing...it was whoever reversed the wire transfer and their co-conspirators.
The didn't steal it. They did what the regulations allowed them to do and screwed up and lost it. Thats what there is to figure out.
The BOD should be held resp as they did not fire this gonif's ass back when the risk manager warned them. This gonif who was/is Dearest Leader's man on WS is part of the 1% and screwed many investors. The fish stinks from the head. If what you write is 1/2 true Bruce we are worse off than even the most pessimistic amongst can imagine. God help us all.
Geez who woulda known there would be margin calls when the collateral when south?
So, what I understand so far, is that is illegal to mix client money with company money....unless the company is mixing the money to use to purchase sovereign debt. And, from the WSJ -
"Investor George Soros's family fund bought about $2 billion of European bonds formerly owned by MF Global Holdings Ltd., the very debt that helped force the securities firm to file for bankruptcy protection Oct. 31, according to people close to the matter.
Under the direction of MF Global's former chief executive, Jon S. Corzine, the firm accumulated $6.3 billion of short-term debt issued by various European nations, mostly from Italy, in a bid to boost trading profits. Over the summer, this debt led to nervousness by investors, regulators and ratings companies, resulting in the firm's collapse just over a month ..."
If they rehypothecated the clients funds they did what they were allowed to more or less so they didn't really co-mingle anything.
It's a total contridiction. If the money is not allowed to be co-mingled then it definately can't be rehypothecated. And yet the client has specifically agreed to alowing MFG to rehypothecate their money. Therefore I would say the client is legally screwed here because their signed agreement to allow MFG to rehypothecate their funds overrides the principal that client funds should not be co-mingled. So unfortunately Corzine is in the clear and the clients are not. An expensive lesson in reading and understanding what you sign.
This is like a dead fish which just smells worse and worse as time goes on.
One more MFG could bring down the entire trading system. Are you willing to bet your life savings that there is not another MFG out there somewhere?
Many of the methods that the Fed used to contain the 07-08 crash were prohibited by Dodd-Frank. For example, the federal insurance of brokerage accounts was rescinded and prohibited.
Get physical assets and store them in a secure place outside the reach of the financial system while you still can!
I know there are more MF globals in the wings much more. Do you think that they are the only ones that have used client money for their bets, it's like free money to these guys. It's so suspicious about the wire transfers, I think we are going to find out alot more about what happened.
Bruce, I electronically wire employee net pays every week. I have ability to do a wire transfer reversal to an employee account. If the monies are there when the 'negative ACH' hits that account, it will be successful.
I'm not sure what the legal ramifications would be since I have never done it, but I know I can do an ACH reversal
I don't know if it means anything? but it's been my understanding that ACH and Wire Transfers are different - they go thru different systems etc.
It strikes me as highly improbable if not entirely impossible that such a vast amount of money would disappear without a paper trail.
The only conclusion that I can get my head around is that somebody (and the investigating bodies) knows exactly where this money went and/or is but are first trying to orchestrate some degree of damage control since Corzine is so connected on such high levels. What it also tells me is that the longer it takes, the bigger the problem actually is.
Lies come in a big, ugly, messy, bucket of fuck...the truth comes in a neat little package. Someone is trying to pack this big bucket of fuck into a neat little package...and it don't fit.
If this were some campaign related choreography, someone from the other side of the aisle could just pull out the small cash from under the sofa cushions, voila Corzine's stash, alas too little to compensate anyone.
Whats to stop them from stealing it all from the like of Scott Trade or any such house. Are they sound? Got some in WF and am counting down the days I can pull it. Scary shit...they are sitting on a ton of our $$$$
"I never intended to break any rules"
I never intended to hang Jon Corzine
The rope in my hand slipped easily around his scrawny criminal neck as I slid it through the main brace, hooked it up to my Chevy and drove off for some beer and cookies down the 7-11
Corzine just happened to get hung in this string of completely innocent events
So Bruce, if I've got this straight, you're saying that Linda Green signed the LOI?
City of London
Yes, not London of the Touristas, but that sacred square mile or so of the centre of finance. The one and same that the Brits are saying F.U., N.F.Way to the continent about harminization of financial regulations.
Nope, the UK will not loose the City, for the City controls the UK.
And the MFG trail runs to/from/through what domicile?
London.
The City of London.
Within which JPM is a very significant player. Banking, LBMA, etc.
Very Big.
And a domicile which rarely has ever given up information to any person, place or thing. They exist in their very own world of, The City.
Right on! World's biggest money laundery.
(Looking back and forth nervously)
Plus one and green arrows up the wazzooo, knukles.
That part was the most disturbing part of it today, for me, amongst the whole piece of poop was this sign labeling him honorable. It stuck out like this big neon sign of hypocrisy. sad.
Corzine is 'Honourable' amongst fellow politicians
Honour amongst Thieves
Ron Paul : "Where's the money Corzine? Where the fuck is the money, douchebag?"
Jon Corzine: "You got the wrong guy man. I'm not Corzine. I'm the dude, man"
BRUCE KRASTING FOR PRESIDENT!