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MF Global Customer Funds Were Not "Vaporized" - Stanley Haar Takes WSJ to Task
by Stanley Haar
As a individual trader and CTA whose accounts are owed several million dollars by MFGI, I would like to express my shock and disappointment with [yesterday's] front page article; I expected better from the WSJ. Your article gives the appearance of having been ghost written by Andrew Levander and/or the JP Morgan legal department. Among the key errors/omissions:
• Client money in segregated bank accounts was not "vaporized"; it was stolen via illegal transfers to support MF's proprietary trading positions and to repay creditors such as JP Morgan. Those transfers are and always were illegal…….even "under rules at the time". Your use of that irrelevant and misleading phrase twice only serves to deflect attention from the criminal acts committed by Corzine, Abelow, Steenkamp and Ferber. Your own article goes on to state that "rules require customer funds to be set aside and kept safe". Even Gary Gensler and Jill Sommers have testified that customer funds needed to be segregated at all times. The failure to do so is a clear violation of the Commodity Exchange Act; "intent" is not an element of this criminal act.
• Although you correctly cite the difficulty in recovering the stolen funds, you fail to explain the main reason for this difficulty: the highly suspicious and irregular way in which the bankruptcies of MFGI and MFGH were implemented. Under a properly executed FCM bankruptcy process, customer segregated funds always have absolute priority over all other creditors. Instead, MFGI was placed under a SIPA liquidation, even though 98% of the accounts were commodity accounts not covered by SIPC protection. Compounding this bizarre step (apparently orchestrated by key general creditors such as JP Morgan and Goldman Sachs without resistance from the CFTC), the assets under the control of MFGH were not frozen and that entity was allowed to continue operating under Chapter 11 bankruptcy rules. This allowed unknown billions in assets to be dumped into the hands of George Soros, JP Morgan and various hedge funds at bargain prices (as reported by your newspaper), thereby locking in realized losses on those positions and moving assets out of the reach of the MFGI trustee.
• The bottom line is that customer funds were stolen twice: first by the illegal looting of segregated accounts by MF management, followed by the fraudulent way in which the bankruptcy was structured so as to circumvent the priority status of customers in the distribution of MF assets. This is the real story and scandal of MF Global, and perhaps one day your paper will decide to cover it.
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the beauty of it is that to those who are above the law there are no statutes of limitations.
I stopped reading the WSJ a longggggggggggggg time ago.
The WSJ is just a Rupert Murdoch rag.
It matters not who owns it. The WSJ is part of the lamestream media
That's for sure. Mainstream media = Ministry of Propaganda of the Corporate Dictatorship.
The question is not whether the money was stolen or vaporized: the very existence of that "money" was an illusion even thought it was supposedly in gold. About 95 percent of the "money" that exists in this world only exists as pure fantasy, there is no wealth that corresponds to the money. And, wealth is NOT gold on silver, wealth exists in the physical plant, equipment, human culture, social organization, etc. that allows one generation to exist, and reproduce another generation.
In one sense, we are very lucky that a good proportion of the world's non-existent wealth exist in London's City and its allied centers. Once, the illusion evaporates the greatest center of the world's evil loses its power. If it does not kill us all off first.
The existence of the illusion, the drive to maintain that existance, comes at the looting of the human population's ability to create actual wealth. This is not a legal, or a financial problem, or even a political problem (Is there a candidate qualified to be President?); it is existential - can the human population continue to exist?
I believe we will survive. It will be close, it will be tough, but it will be possible. The seed of our future exists today, as the the mammals existed among the dinosaurs, as the Christains existed among the Romans.
Well written with thoughts clearly expressed.
If only other zero hedge contributors could follow your lead.
Sorry for your loss and hopeful to see a frog walk one day.
Guess now we know WSJ is a sell out and a mere spin-whore.
The misdirection used is as good as Houdini's to hide illegal acts.
While we were busy working, the media got bought out or bullied. NPR and RollingStone are no better.
NPR is a total sell out now. They fear for their funding and as such, tread softly.
Don't know about sell out, but NPR is populist bull shit
indeed. Funny how Matt Taibbi's articles have covered much material that I already knew, he just had a far larger audience than my sources had.
I googled up Mr. Taibbi and was pleased to see him tearing a new one generally for TPTB. Perhaps RS is not a lost cause after all. God though could we use Hunter S bout now! Seven dwarfs indeed.........
starting to understand why Hunter S Thompson blew out his brains...
Now we know?
Did history just start today?
"Guess now we know WSJ is a sell out"
NOW? That was clear years ago: all mainstream media is owned by the big banks. (Or both are owned by the same entities).
1) The MF Global story reminds me of the caption of an old New Yorker Magazine, where the Banker says to his client something along the lines of "Your money was working for you unti this morning ... then it quit and is now working for me."
2) If the BK trustee were serious about recovering money for the clients and other creditors, they'd pierce the veil of MFG, as it was essentially Mr. Corzine's personal betting pot, and take the apartment and all his other assets.
"as it was essentially Mr. Corzine's personal betting pot, and take the apartment and all his other assets."
No shite, take it all back ( 400 million insider trading ) from the Angie Mazilo too while your at it. Take back the bonuses from all the TBTF Bankers, the 250 Million Hank walked away from Goldman with ( Tax free) before his tour of duty at Treasury. Take back the 23 million bonus last year for Dimon for his contribution to the collapse of housing and the financial system. These people should be in jail, crime pays bigtime, apparently.
The New Yorker reference reminds me of a comment that you can substitute "What an asshole." for the caption on any of their cartoons. Try it. It works.
Translation. " I got fucked, and I want my money back. You WSJ pornographic story spinners better back reality not fantasy, because the PTB you serve today are being flushed down the Ponzi toilet tomorrow. So, unless you all want to be shot, pissed on, rolled in flour, and deep fried along with them, get the fucking story straight. Now, I'm going to go curl up in the linen closet in a fetal position, and suck my thumb while I cry myself to sleep thinking of my lost fiat security blanket "
Silver, is the opportunity to benefit greater than the fear of loss? What motivates people more, fear or gain? Do Americans as a whole have a whole lot to lose or not? Backing the truth and having other standards comes at a price. Each man/woman must measure there own risk. Sucking a thumb in the corner doesn't usually make me especially bold about asking the hard, pertinant questions now does it?
Are you really asking if your alone on taking risks?
It's not "reporting" anymore. These useless phucks are nothing more than PUBLIC RELATIONS experts. AND THEY SUCK AT THAT, TOO...(but they do have impressive distribution.) Again: here's the Godfather anyone who works and claims to be a journalist in New York actually bows down to:
http://en.wikipedia.org/wiki/Edward_Bernays
this is the guy no less than Goebbel's himself called "his inspriration." And Bernay's is still inspiring fascist pig wannabes today! stick to Zero Hedge! I still believe in CNN as well...but i get confused with all their war mongering of late. very odd. Anywho...STOP LISTENING TO THE LOSERS! that's all these people who do this WSJ crap are. if it helps...try laughing at them! like this: "hahahahahaha."
Who can trust the Wall Street Jizz
MFG is a trial run and they seem to be getting away with it.
Round Two coming to a (supposedly) FDIC-insured checking or savings account near you.
We're all "investors" now, and our "funds" are 100% at-risk. It's all there somewhere in the 800 pages of fine print.
The law DOES NOT apply to the Plutocracy, you mean no one told you? Sorry
yeah, that's what gets me, money doesn't just disappear, someone got it
The GOP has been demanding cuts in funding for the SEC and other financial regulatory agencies, with every one of these made-up 'budget crises'. As William Black (guy who led prosecution says the S&L crisis, he was able to bring more than 2000 cases, because he had way more investigative personnel and prosecutors. The Bush admin used 9/11 as an excuse to move most of them out of financial oversight, and the GOP in Congress is finishing the job.
Holder is indefensible. But why should the Democrats keep put their necks out there, when clearly the voter just reacts to whoever has the most to spend on negative TV ads. Look what happened to Alan Grayson. The GOP has cleaned up, by playing the butt boy for WallSt. It strains belief that so many posters here ignore the plain obvious facts about who's to blame for the utter lack of any action on MFGlobal, or the fraudulent mortgage bundlers. The ONLY "no" votes on Gramm-Leech-Bliley, and on the Commodity Futures Modernization Act, were from Democrats. The GOP is leading the charge on turning over the govt to WallSt - and cleaning up in elections as a result.
Have to wake up folks, and do some critical, fact-based analysis on what's going on. Pull your heads out from between Roger Ailes buttcheeks.
So it's the Republican's fault that a democrat stole $1.2 billion and wasn't even charged with a crime by Eric Holder's DOJ. Ok, I think we can all agree on that.
Nevermind that the SEC, DOJ, FDIC budgets have actually been growing by leaps and bounds since 2008, but the mere demand of budget cuts by the GOP has caused a complete breakdown in law and order in the financial markets and banking system. Your logic is flawless
"...the SEC, DOJ, FDIC budgets have actually been growing by leaps and bounds since 2008,..."
On your planet? SEC's budget is flat/down, has been for years. and is less than half of the litigation budget of JPM alone.
FDIC: correct me if I am wrong, but FDIC's budget is a separate entity from the US govt, and it's budget (and whatever part of it is dedicated to enforcement) is not set by Congress. DOJ grew tremendously under Bush, as did all parts of the police state. Please let me know of ANY involvement they've had in prosecuting mortgage-backed security fraud, or any of the other broad-daylight WallSt crimes. Yet, I know they bagged Martha Stewart. Your comment is actually pretty bizarre in it's cluelessness - DOJ has been nearly entirely directed away from WallSt, and towards snooping on Americans.
http://www.forbes.com/sites/halahtouryalai/2011/02/17/10-wall-street-exp...
Excerpt:
If President Obama has his way the Securities and Exchange Commission will get a 28% budget increase for fiscal year 2012.
That would bring the SEC’s budget to $1.4 billion- a number SEC chair Mary Schapiro is happy with.
Republicans are probably not. In fact, Republicans in the House of Representatives proposed cuts on Friday that would slash the SEC’s current $1.1 billion budget by $25 million.
----
In contrast, here’s a list of some of the ways Wall Street banks have spent their billions.
Holy shit! Because they didn't get a 28% YOY budget increase, they can't do their job?
You forgot to mention the regulators at the OCC, FDIC, Federal Reserve and thousands of lawyers at the DOJ. For some reason, you seem to think that the SEC budget should be the same as that of entire banks.
Please let me know if the police state has shrunk or if the DOJ has lost so many attorneys that it does not have the ability to investigate the disappearance of $1.2 billion from customer accounts. If everyone on ZH can see that a crime has been committed, why can't the lawyers at the DOJ and SEC?
Conclusion - you're just another 0bama asswipe making excuses for his corruption and refusal to prosecute any Wall Street bankers during his THREE years in office. I never defended or made excuses for Bush's corruption, so why do you bring it up? Your Messiah is a corrupt asshole just like that Bush fella you don't like. Get your head out of his ass and face the facts.
Have any new info to add? The central point of your argument (you claimed SEC funding had been growing by leaps and bounds since 2008) was blown away. Screeching with your fingers jammed in your ears probably won't convince many people - but I suspect I'm not the first to tell you that.
Why should the Democrats stick their necks out for you? As I documented, it's the GOP that's leading the charge to neuter financial services regulation - consistently, on vote tally after vote tally - and racking up the bulk of the campaign donations in the process. Those donations buy TV ads to convince waterheads like you to vote for them. Anyone who stands up to WallSt, of either party, gets hammered in the next election (e.g., Alan Grayson), because sheep like you are unable to work out simple logic problems.
Obama is corrupt as hell. But the GOP (as documented) is at the lead. You have a choice between 1) bad and 2) worse. Politicans are nothing if not good at sensing changes in the wind. If Americans started voting based on support for financial regulation and prosecution, IMO we'd be out of this mess in no time.
Good synopsis by William Black on how the regulators have been ham-strung:
http://www.economics.arawakcity.org/node/881
Excerpts:
2. In the run up to the Enron era crisis, Congress limited the SEC's pay grades to levels materially below the banking regulatory agencies. This produced the same pattern of high turnover, staff shortages, and impaired quality. Republicans in Congress repeatedly sought to exacerbate the SEC's systems capacity crisis by reducing its budget – at a time when its regulatory duties were growing massively because of the extraordinary growth of finance.
3. In the run up to the current crisis the FDIC's leadership, over the course of 15 years, cut the FDIC staff by more than three-quarters.
---------------------
The SEC and the CFTC's budgets are not provided by the federal budget. The agencies, as with the federal banking regulatory agencies, are funded by user fees. None of these agencies' budgets contribute to the deficit. When these agencies fail to stop epidemics of “control fraud” the result can be a Great Recession and trillions of dollars in increased deficits. The asymmetry is so stark that anyone serious about deficits would make ensuring the effectiveness of the SEC, CFTC, and the banking regulatory agencies among their greatest priorities. Supposed deficit hawks in the House are also among the strongest proponents of cutting the SEC, CFTC, and banking regulatory agencies' budget even though this cannot have any positive effect on deficits and is exceptionally likely to produce the next financial and economic crisis that will produce the next sharp increase in the federal deficit. This is significantly insane, and it is even more insane that no one seems to call them on their insanity.
'The Assault on the Already Crippled SEC and CFTC Will Increase "Control Fraud" ' William K. Black UMKC, Berzinga Submitted by admin on Tue, 03/15/2011 - 08:49The SEC and the CFTC's budgets are not provided by the federal budget. The agencies, as with the federal banking regulatory agencies, are funded by user fees. None of these agencies' budgets contribute to the deficit. When these agencies fail to stop epidemics of “control fraud” the result can be a Great Recession and trillions of dollars in increased deficits. The asymmetry is so stark that anyone serious about deficits would make ensuring the effectiveness of the SEC, CFTC, and the banking regulatory agencies among their greatest priorities. Supposed deficit hawks in the House are also among the strongest proponents of cutting the SEC, CFTC, and banking regulatory agencies' budget even though this cannot have any positive effect on deficits and is exceptionally likely to produce the next financial and economic crisis that will produce the next sharp increase in the federal deficit. This is significantly insane, and it is even more insane that no one seems to call them on their insanity.
The purported logic for slashing the SEC and CFTC budgets represents another form of insanity. The logic is that the SEC and the CFTC failed to prevent the epidemic of accounting control fraud that drove the current financial crisis, the Great Recession, and the growing budget deficit. That is true, but proves the opposite. The SEC and the CFTC failures were self-fulfilling prophecies by kindred ideologues of those now seeking to slash the SEC and CFTC budgets.
Deregulation was part of the story. The Commodities Futures Modernization Act of 2000 deliberately created two regulatory black holes. The Act's primary goal was to block Brooksley Born's efforts to protect the public from the risks of credit default swaps (CDS), but the subsidiary goal was Enron and its fellow cartel members' desire to manipulate energy derivatives in order to produce the California energy crisis and reap monopoly rents. I have written previously about the SEC farce of supposed “comprehensive” regulation of the largest U.S. investment banking firms (designed explicitly to exempt them from comprehensive regulation by the European Union).
The larger part of the story, however, was desupervision and de facto decriminalization. My prior columns have detailed how our anti-regulatory leaders were selected precisely because they opposed vigorous enforcement of the nation's securities and banking laws.
Collectively, the three “des” – deregulation, desupervision, and de facto decriminalization – created a crippling “systems capacity” crisis that achieved its goal of eliminating effective financial regulation in the U.S. for roughly a decade. The result of removing the regulatory system's capacity to deal effectively with accounting control fraud was an epidemic of such fraud that caused the worst financial and economic crisis in 75 years. There is something outright obscene for the ideologues that gutted regulatory effectiveness to claim that their “success” in causing the regulatory failures justifies exacerbating those failures by budgetary cuts.
Deliberate, crippling limitations on financial regulatory budgets, staffing levels, and pay have played important roles in causing systems capacity problems in prior crises. Consider six recent financial regulatory staffing crises and the House's ongoing attempts to worsen the SEC and the CFTC's systems capacity problems.
1. In the savings & loan debacle, the Reagan administration froze the hiring of examiners and OMB refused to allow the agency the authority to hire any material increase in staff. Congress limited the Federal Home Loan Bank Board's pay authority to levels materially less than its sister regulatory agencies. This mandatory pay disparity caused the Bank Board to suffer from excessive turnover, staff shortages, and inadequate staff quality. Bank Board Chairman Gray's innovative use of the Federal Home Loan Banks to hire staff at competitive pay levels and his personal recruitment of senior banking regulators with a track record of vigorous regulation proved essential to the successful reregulation and supervision of the industry that contained that debacle before it could cause an economic crisis.
2. In the run up to the Enron era crisis, Congress limited the SEC's pay grades to levels materially below the banking regulatory agencies. This produced the same pattern of high turnover, staff shortages, and impaired quality. Republicans in Congress repeatedly sought to exacerbate the SEC's systems capacity crisis by reducing its budget – at a time when its regulatory duties were growing massively because of the extraordinary growth of finance.
3. In the run up to the current crisis the FDIC's leadership, over the course of 15 years, cut the FDIC staff by more than three-quarters. The FDIC often used “early outs” to shed its most expensive staff, i.e., its most experienced staff. The combined effect was that the FDIC's remaining staff was so grossly inadequate that it could not examine the banks. It responded to its systems incapacity by greatly reducing its non-safety and soundness examinations (particularly examinations of compliance under the Community Reinvestment Act (CRA)), by virtually ending the use of its “backup” examination authority of banks for which the FDIC was not the primary regulator, and by adopting the infamous MERIT examination system for safety and soundness examinations. MERIT was a travesty. It achieved its purported “maximum efficiency” by directing examiners not even to review a sample of bad loans. Again, this was insane – failing to examine loan quality makes examination a farce. The FDIC gutted its staff even as the need for examination and supervision grew dramatically due to the profusion of fraudulent liar's loans and the hyper-concentration of smaller banks in commercial real estate lending.
4. The Office of Thrift Supervision (OTS) also cut its staff in the run up to the current crisis. It did so even though S&Ls were the leading federally insured lenders making fraudulent liar's loans and the need for intense examination and supervision required greatly increased staff.
"The GOP is leading the charge on turning over the govt to WallSt"
Already happened, a long time ago.
LOL! Republicans fault that Democrat John Corzine is a criminal. Corzine looted dot bomb ipo investors at Goldman and looted NJ. I guess his looting NJ is the GOP's fault as well.
You're right - wow what power of comprehension. Yes, the GOP neutering all oversight of the financial 'services' industry means even a Democrat can cash in. Would've thunk it?
Don't the facts SUCK, if you're a Republican?
Vote totals:
Dodd-Frank: 60 yes(57 Democrats, 3 Republicans)
39 no (all Republican)
Gramm-Leech-Bliley (overturning Glass-Steagall)
54 yes (53 Republicans, and 1 Democrat)
44 no (all Democrat)
If anyone in fact ACTUALLY gives a shit about MFGlobal, and the WallSt takeover of America, the fix is really simple. Vote out every House member who voted against Dodd-Frank. Yes, it's a weak, piece of shit bill, but it's all we could get - and voting out everyone who opposed it would send a message that FINALLY the electorate was starting to give a rats ass. Yes, in 2012, that would pretty much mean voting Democrat. I fully agree many Democrats are corrupt as hell, but at least they're not as a party wholesaling themselves to WallSt. Next House election (2014), vote against whoever was the weakest against WallSt again. Bet by 2015, we've have the problem fixed.
Instead, many of the buttwipes here will continue to vote for the people who are jamming it up their asses. Land of the free & home of the brave - ROFL. Land of the slaves.
LOL You 0bozo asswipes are hilarious. Gramm-Leach Bliliey was signed into law by Clinton and was pushed by Bubba's treasury secretary Robert Rubin of Citi that never sleeps.
I bet you're glad Dodd-Frank was passed. If not for Dodd-Frank, billionaire bankers would be stealing customer money from segregated accounts. I'm glad that's not happening.
So their refusal to grow the SEC by 28% means it was neutered? It SUCKS to be a retarded brainwashed chimp like you who thinks that government needs to grow by 28% each year or else it is neutered.
If you want to end the Wall St takeover of America, vote out everyone who voted for TARP, including the 0bozo whose ass you regularly sniff for your inspiration. Vote against the 0bozo who took the most Wall St money in 2008. Vote against the 0bozo who keep appointing Wall St lackeys to head regulatory agencies. Yes, it will mean voting out your Messiah and the rest of the retarded chimps who gave us 3 consecutive years of $1.5 trillion deficits.
Instead, low IQ chimps like you will continue to vote for banker bailouts while shoving your head up 0bozo's ass. LMAO!!!
Regarding Gramm-Leach-Bliley, you are correct. You're citing only senate votes, but there was precious little opposition from republican reps. One notable R who voted nay on this rag was Ron Paul.
Many here at ZH verbally admonish the partisan illusion, then continue the partisan hackery.
I'm no market whiz... I'm a frikkin carpenter. A registered republican. But in the case of the destruction of Glass-Steagal, there was considerably more democrat opposition than republican.
Both parties are corrupt. Absolutely. That doesn't mean we should disregard intellectual honesty.
Did Rs dismantle the SEC budget? I have no idea.
Did Jon Corzine blatantly steal hundreds of millions? It surely seems like it. (with a little help from his friends)
Now if President Obama at any time issues a pardon to Corzine, I would appreciate the same scrutiny applied to your side of the aisle
Incidentally; frack Obamney. (and Barny Frank... And Chris Dodd)
They are with the banksters.
Get your Ron Paul on.
The 0bozo asswipe think that the wholesale looting of America from 2008-2011 was a golden era. Wall Street was bailed out to the tune of $6 trillion and nobody went to jail. All of that happened under 0bozo and democrat control of both houses of congress. Now the asswipe says we should be asking for more of the same by giving the democrats full control again LMAO. My guess is he's a paid Soros shill or a Wall St banker hoping for more bailouts. Maybe it's Corzine himself hoping his friend 0bozo stays in office so he won't be prosecuted
In a nutshell - Most of the Congress, as well as Obama, Romney, Santorum, and Gingrich are all slimeballs. That leaves the good doctor. Vote Ron Paul in 2012.
Is that you Barry? Sell your pulp BS elsewhere!
Mitt? Have even the vaguest shred of logic or data to present?
Good afternoon, Mr Soros
Great article ...go get the crooks and take no prisoners (Americas cells are rammed already so rope will do fine)
"Oh, please, monsieur. It is a little game we play. They put it on the bill, I tear up the bill. It is very convenient."
-Captain Louis Renault
'Casablanca'
+1 for that pearl...
The WSJ headline should read "How the Fuck Has Corzine Not Being Beaten to Death by Angry Traders" or by Bubba in the alley on behalf of all MF traders?
Paging Captain Obama. Paging Captain Obama. Now is your time to shine. Paging Captain Obama.
How long before someone explains to us sheep that the customers were hosed in favor of JP Morgan et al. to avoid "bringing down the entire financial system."
That's Paulson & Geithner's line.
I can believe the funds were vaporized, The official NIST report of flight 77 was that it vaporized too. 100 tons of airplane turned into an APU engine and 1 piece of landing gear, kinda like the way the MF story above ended, just scraps left behind. But It's plausable..
All jokes aside, 100 tons of airplane makes 100 tons of wreckage.
1.6 Billion MF in total doesn't just fukin disappear.
In the mean time, MF Corzine donation of 500K to the King.
http://www.weeklystandard.com/blogs/jon-corzine-raised-500000-obama_620781.html
http://youtu.be/zdJ8x6lyrfo
they are laughing at you suckers, the ny, regulators, all of them in on it, its their game and they took the futures industry to the cleaners, LAWYERS anyone? LOL
Ha ahahahahahahahahahaha.....