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MF Global: Where's the Cash -- Part II
This week in The Institutional Risk Analyst we published a comment on the ongoing financial genocide at MF Global, “MF Global: Where's the Cash?” http://us1.irabankratings.com/pub/IRAstory.asp?tag=515
The comment correctly identifies the location of the “missing” $1.6 billion as JP Morgan Chase and other bank custodians of MF Global. The trouble is that even though we now know where the missing customer money has gone, namely JPMorgan, there is little chance that the defrauded customers of Jon Corzine will ever recover a dime.
Here’s the link to a video by William Rochelle of Bloomberg News explaining how the safe harbor in Section 546(e) of the Bankruptcy Code likely will prevent MF Global customers from ever getting their $1.6 billion back -- even when it’s located, as it has been evidently.
http://www.youtube.com/watch?v=3zVEZ-knlcA&feature=youtu.be
When Bill recorded the video, the bankruptcy trustee hadn’t yet raised the loss estimate from $1.2 billion. In case you’re wondering why Bill is so knowledgeable about bankruptcy law, he was head of bankruptcy litigation at Fulbright & Jaworski in New York before he decided to take up journalism.
What people need to understand is that like the case of WorldCom, the MF Global bankruptcy illustrates the way in which the large Wall Street banks have used their Washington lobbyists to encroach upon the rights of investors. Even if it were proved that John Corzine and his colleagues committed criminal violations of the Uniform Securities Act and state law, there is little chance that the investors in MF Global will ever receive equity and justice. Again, read the WorldCom case.
The problem here is that the existing laws against pillaging customer accounts and other acts of fraud are in conflict with the bankruptcy statute designed to make the world safe for large banks and over-the-counter derivatives. Specifically, the post 2005 bankruptcy laws prohibit trustees from clawing back the $1.6 billion in stolen customer funds. Indeed, the Bankruptcy Court and trustee are precluded from pursuing the banks just as the trustee in the Madoff fraud has likewise been stymied.
In addition to the clients of MF Global who were apparently defrauded, the big losers in this mess are the smaller independent broker dealers who have acted as custodian of client funds. Once institutional customers understand that they have no rights in the event that management of a small broker-dealer absconds with client funds to pay bank margin calls and a broker-dealer fails, the ability of independent dealers to hold customer funds is going to evaporate.
Purely as a matter of due diligence, no fiduciary will ever again be able to use a US-based broker dealer as a custodian. To do so would be reckless and would expose the fiduciary to claims of negligence in the event a loss similar to MF Global occurred.
Until the Congress rectifies the current bankruptcy laws and allows trustees to claw back payments made to secured lenders and other counterparties, there is no reason for any rational personal to allow a broker dealer to hold securities in custody. All of this business will go to the big banks, who will be just as happy to see the smaller dealers thrown into the meat grinder.
Now why, you may be wondering, did the lobbyists from the big banks push Congress to expand the safe harbor for secured parties in the bankruptcy code? As one former Bush II Treasury official told me last night: “The canard the banks used to get 546 amended was that overriding the trustee's normal avoidance powers was said to be necessary to limit systemic risk and ensure access to credit. God forbid the banks be required to do some due diligence. As the bailouts showed, the systemic risk was in fact enhanced by the changes to the bankruptcy code and the illusion of superior claims to collateral, thus increasing leverage.”
The MF Global bankruptcy provides yet more evidence that the 2005 bankruptcy reform legislation passed by Congress is an abomination, but the cancer goes even deeper than the years of Bush II. The big banks who earn the lion's share of their profits in the quantum world of derivatives are literally looting the real economy and real investors, all with the full approval and complicity of the Fed.
Fred Feldkamp, learned securities counsel and expert on RMBS, put the problem in perspective:
"Greenspan proved his total ignorance of the current state of the law when he stupidly eliminated regulatory restraints on fraud saying there was no need for regulation because "fraud is self-regulating." The "Supremes" don't "get it" as of now and Congress precluded just about every other means for controlling fraud between the last 2 years of Clinton and the 8 years of Bush II. It took a decade (1929-1938) before the Supreme Court woke up to the Great Depression's root cause (fraud of the 1910s to 1929). Blaming Obama for this is understandable in one sense, but overly simplistic."
It may be overly simplistic to blame President Obama for the financial mess, but don't think that this president won't throw Jon Corzine to the wolves to make political points. "Jon Corzine is not well-liked in Washington," one veteran republican operative told me over dinner tonight. "Don't be surprised if we see a high profile prosecution of Corzine by the US Attorney to prove Obama is distancing himself from the big banks."
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You mean like "OSS" Hank Greenberg and Joe Cassano faced "heat" for the taxpayers's $200 billion bailout of AIG??????
That's funny. You should be on the Comedy Channel...
He won't go to jail. It would be easy for the DOJ to put a rookie lawyer up there or some corrupt political hack prosecutor who will throw the case on purpose. The only way he'll go to prison is if there is a special prosecutor appointed by Congress. Corzine was a power broker, former CEO at Goldman, former US Senator and NJ governor. He raised tens of millions for Obama. People like that just don't go to prison.
you have to admire the audacity of the elite reptiles such as corzine and TBTF. the public cannot get heated about the crime of high finance and captured gov, because the size is so huge the laws and regulations so arcane, to us average Americans, it invokes brain freeze and doubt about if it is even illegal. as the author above states no funds will be clawed back and no top exec will see a jail cell- by bk regulation no less!! now show us some guy with a knife taking grandma's purse and we want justice!!
where are the injured parties to this crime? have MSM just swept them under the rug?? they are the key put a face on this robbery give ave people a way to understand that justice must be demanded.
I am sure front line will do an expose 5 yrs from now..and call it a job well done.
It's hard to admire a thief, not matter how successful.
It will take the MSM five years to find a book that explains what went on. Then, they will have their underlings copy and paste a report together that they will read on air. That way, no banquets or cocktail parties will be missed. Life is swell in the PolJorFin world.
On to the Culture Wars.
"Blaming Obama for this is understandable in one sense, but overly simplistic."
You can go backwards in perpetuity to keep blaming, for me the tragedy starts with Reagan. The simple idea of get what you can today and do not worry about tomorrow
has put us on this path of ruination. Every president since has done their part.
That being said I think you can blame Obama intensely. There are executive decisions that can be made that will start to fix things. Obama can appoint an attorney general
that will actually prosecute people. If people start going to prison the fraud and corruption will stop. Obama can appoint a responsible fed chairman. These two acts if done
from the start of his administration would probably have us coming out of a hard recession by now in a strong manner. So no its not overly simplistic, it is that simple. Blame
the executive.
Hundreds of bankers went to prison for the S&L scams in the 1980's. None have gone to prison yet under Bush Jr/Obama. None have even faced a judge and jury
At least there was some law and order under Reagan/Bush Sr and bankers were not above the law.
Brown Brothers, Harriman Puppet Boy Bush Sr. fought the prosecutions tooth and nail trying to shield his Wall Street boys from prosecution...
Remember: Milken's junk bonds financed Keating's take over of Lincoln (and many other S&L's) that could then be stuffed to the gills with Milken's worthless junk bonds...
Sound familiar? Securitization anyone? Anyone?
"At least there was some law and order under Reagan/Bush Sr and bankers were not above the law."
At the time (during Bush 1) it appeared that he ran out the clock on the statutes of limitations; perhaps he too -- oh great leader of the CIA -- kept justice shackled so that his friends/donors would be safe from prosecution? Big money protects their own.
Don't know about Reagan but have suspicions. He named his cabinet, so cabinet members' buck stops on his desk.
No one should be above the law, even those we love or admire.
The "crisis of confidence" that Greenspan described stems from the rampant fraud. The fraud has grown instead of being punished. That is why the economy is in the shitter.
++ oulus
This is all fucking politics, blame the guy who has passed away for the mess we're in and consequently do nothing about to get rid of this steaming pile of toxic crap.....well, the only thing done thus far by this administration is adding more and more to the pile at an increasingly faster pace, in addition to (of course) the complementary can-kicking.
These finger pointing fuckers in charge are the true enablers of the ponzi continuum.
There is nothing the dead or the people not in charge can do about it.
To put it in Farage lingo: The Big Zero is the silent assassin of the USSA economy . . . Although lately he has been quite noisy about it.
I also used to think it "began" with Reagan. The more I've studied, though, the more this system has been built this way a long, long time. It is reasonable to point to Roosevelt (got a problem with investors protecting themselves with gold? Forcibly take the gold)... it is equally reasonable to point to Wilson and the creation of the Fed, and more ominously, the imposition of a federal income tax (can't pay for world war? we can force the proles to pay)... or how about the radical change in the agreement of the constitution that was represented by the civil war (union of autonomous states? Uh, no, not really. Forget that autonomy part). Nixon going off the gold standard? There are many turns in the road that have led us here. It is unsustainable for sure, and Obama is merely doing his part in the continuing drive off the final cliff. But the momentum we have built up would be tough to stop, even assuming we do change direction. Ron Paul would represent (I'd like to believe, though I'm cautious even about him) a shift in priorities that would be refreshing, but even in the unlikely even that he were to get in, how much could he acheive? Scary times.
"See Something, Say Something hotline?"
"Yeah, I would like to report SofaPapa."
"Reading history."
"Yep, gold standard, Fed, then Ron Paul."
"See Something, Say Something hotline?"
Yeah, I would like to report the Federal Government, negligence, fraud, dereliction of duty, malfesance, ......
It seems to me that Greenspan, et. al. knew exactly the nature of the financial system monstrosity they were creating.
It is working exactly as designed to blow up the US financial system and make way for the global financial regulatory system that has already been designed as its replacement.
Quite frankly, I have to question the credibiliity of any financial analysis that fails to recognize this obvious reality.
Fraud is self regulating. L O L yeap you better believe it. Dont walk, you better take the money and RUN !!!
fron; Carl Sagan
to; world
http://www.ebaumsworld.com/video/watch/82292649/
The Corzine Strut:
http://biosocket.com/jon-corzine-steals-1-6-billion-walks-free/
Where are the fiduciary duties to protect investors
Apparently nobody gives a fuck.
Act accordingly: protect yourself.
Legal Genius?
MF Global Holdings is a "person" and it owes "child support" to MF Global ! Federal Court to decide motion;
http://www.timesunion.com/business/press-releases/article/Corporate-Pers...
VIDEO:
http://www.youtube.com/watch?v=7ykKH1cEdik
Lawyered
Where are the laws against receiving stolen goods? If they got the dough from MF Global in MF Global's name it was stolen and they should give it back. If it was given to them in the customers' names it belongs to the customers and they should give it back.
Ann Barnhardt was right.
http://www.financialsense.com/contributors/2011/12/02/ann-barnhardt/interview-transcript
Jon Whorezine. There, fixed it.
"Jon Whorezine. There, fixed it."
Shouldn't be laughing but can't help myself. Things are sooo effed and if we don't laugh, we die. Thanks; so appropriate.
Last I checked, Corzine is many things (note Coldfire's quip above) but he isn't a "big bank". I will be surprised if the customers get their money back.
I keep telling people: Paper claims on physical assets will simply not be honored.
"Paper claims on physical assets will simply not be honored."
Somewhere -- like here -- wasn't there an article that gave the exponential number of papers involved in just one fraudclosure case on one house?
How many pieces of paper are there, do we suppose, and how many claims on each? Considering all the possible claims handed out by congress over the decades on each USD, it's amazing I can still afford salt and pepper. (sorry about the bolding...can't get rid of it).
What? And wake Eric "Empty Suit" Holder up from his 20 year sleep?
And... Don't be surprized if most of the missing money went for the Obama re-election.