Commodity Futures Trading Commission

• Who Needs the Euro When You Can Pay With Deutsche Marks? (WSJ)
• Now it's personal and ad hominem: Is German Economist Exacerbating Euro Crisis? (Spiegel)
• Bernanke Outlines Range Of Options For Additional Easing (Bloomberg)
• Italy's Monti says serious worry Sicily region may default (Reuters)
• Libor ‘structurally flawed’, says Fed (FT)
• Some Firms Opt to Bring Manufacturing Back to U.S. (WSJ)
• ECB Signals Support for Easing Irish Debt Terms (WSJ)
• China’s Wen Warns Of Severe Job Outlook As Growth Yet To Return (Bloomberg)
• Hollande scraps tax breaks on overtime (WSJ)
• China’s June Home Prices Rebound As Sentiment Improves (Bloomberg)

The sharp losses in the gold mining sector Friday and last week could presage further weakness today but the higher weekly closes for gold and silver were constructive from a technical perspective.

After initial gains in Asia, gold fell early in Asian trading prior to recovering and then weakening again bang on 0800 GMT as Europe opened (see chart below).

Gold is higher in euro and Swiss franc terms but slightly lower in dollars and pounds.

On Friday morning, Jamie Dimon as head of the bank many (well, some: Zero Hedge) expect will be the first casualty when the Liebor scandal finally breaks on US soil, which it will within 2-3 weeks, faced several questions on his Q2 conference call trying to extract more information from the bank as to where it may stand in the Liebor scandal. Jamie was not only not very talkative, but refused to answer questions why by default should have had an answer - i.e., internal controls, which after the discovery 10 minutes prior to the earnigs release that the bank had found a material internal controls weakness vis-a-vis CDS marks, is probably rather critical. Of course, the market being as headline drive as it is, took the lack of further Libor clarity as an "all clear" and send the stock up 6%. That may well have been rather premature. Because as the NYT reports, criminal charges are coming, which may explain JPM's reticence to say much if anything while it is the subject of a multi-year long criminal investigation which is about to break.

If there is an event that should cost Gary Gensler his job as head regulator at the CFTC, it is this. According to a just released Reuters report, the head of MFG(lobal) part 2, PFG, whose story we broke yesterday, Russell Wasendorf Sr. "intercepted and forged bank documents for more than two years to cover up hundreds of millions of dollars in missing money, a person close to the situation." Once Wasendorf realized he was caught, and knew the implications of his actions would be exposed for the whole world to see, he tried to commit suicide, and failed. "Wasendorf, 64, is reported to be in a coma after a suicide attempt Monday morning, according to a complaint filed by the Commodity Futures Trading Commission on Tuesday that accuses Wasendorf and Peregrine of fraud." And while crime happens all the time, what is truly stunning is that as we reported previously, the CFTC gave the firm a clean bill of health in its January inspection of Peregrine Financial Group. That's 6 months ago. The CFTC, as a reminder, was it regulator. The entity whose sole charge is to make sure that firms at least have real, not rehypothecated, cash in their segregated client bank accounts. PFG never did for the past two years. And somehow the CFTC missed this. MF Global was a warning shot, and the CFTC missed it entirely. And not only that but 2 months later ir pronounced PFG clean. For this Gensler has to be fired immediately, and with prejudice.

We can finally close the case on the massive Libor manipulation issue that we first brough to the world's attention back in January 2009 when we penned: "This Makes No Sense: Libor By Bank." As of minutes ago, Barclays is the first bank to admit it has engaged in gross manipulation of the key benchmark rate that sets the cost of capital for $350 trillion in interest-rate sensitive products. As the CFTC notes, as it produly announces an epic wristslap of $200 million for Barclays Bank: "The Order finds that Barclays attempted to manipulate and made false reports concerning two global benchmark interest rates, LIBOR and Euribor, on numerous occasions and sometimes on a daily basis over a four-year period, commencing as early as 2005." Surely this massive fine will teach them to never do it again, until tomorrow at least, when the British Banker Association once again finds 3 month USD liEbor to be... unchanged. In other news, who would have thought that the fringe "conspiracy" brigade was right all along once again.

As if last week's bought and paid for by JPMorgan media circus in the Senate was not enough, in which Jamie Dimon played several bribed muppets like a fiddle, today we get part two. Momentarily, the Committee on Financial Services will pick up the baton where the Senate left off, and confirm to everyone that the people who lead this country, at least on paper, are some of the most incompetent, and outright clueless when it comes to financial matters. The same matters that have led America to the Second great depression, which has so far been prevented from wiping out 20% of the economy only courtesy of Bernanke's relentless money printing. Dimon's testimony, which is a replica of last week's, can be found here. In other news, Jamie Dimon is furious he never bribed Maxine Waters before. Now he will have to explain introductory math for absolute idiots. Karma is a bitch.

LCH under investigation by Holder under antitrust statutes. And just who was the ultimate counterparty to the Corzine trade?

Gold took a tumble for the first time in 7 sessions in Asia as Antonis Samaras, leader of the Greece's New Democracy Party (pro-bailout) was victorious.  Today, Samaras plans to form a coalition with other parties backing the bailout – meaning that Greece’s future in the euro is secure – for now.  Gold’s dip in Asia was thought to be due to profit taking and increased risk appetite after the Greek election. However, this increase in risk appetite has been quite short lived with Spanish and Italian 10 year bonds again coming under pressure resulting in record Spanish yields over 7.13% and Italian 10 year over 6% again. Initial gains in equity markets have subsided and the lessening of risk appetite is seeing gold supported. Greece’s exit from the Eurozone is no longer a short term risk however it remains a real risk as does the risk of financial contagion in the Eurozone due to insolvent banks in Spain, Italy and France.

In all the recent talk of economic gloom and doom, not to mention JP Morgan rehearsing for its role as Federal Reserve and failing miserably, some forgot that Jon Corzine still walks free. That may change soon if James Giddens, trustee for the liquidation of MF Global has his way. In a report filed today, Gidden says: "As attempts were made to transform MF Global into a full-service global investment bank, management failed to add to its Treasury Department and technology infrastructure, which was needed to meet the demands on global money management and liquidity." He continues: "My investigation has concluded that management’s actions, along with the lack of sufficient monitoring and systems, resulted in customer property being used during the liquidity crisis to fund the extraordinary liquidity drains elsewhere in the business, including margin calls on European sovereign debt positions." So someone was at fault: who? "I have determined there may be valid claims against individuals and entities. In my capacity as Trustee, I will make every effort to ensure that such claims result in the greatest possible returns to customers in an efficient and fair manner, whether those claims are pursued by my office or others." And specifically from his list of recommendations: "Provide for civil liability for officers and directors in the event of a commodities segregation shortfall." Well, we know there is a shortfall. So... why is Jon Corzine still walking free? Oh wait, Valukas said there were "colorable claims" against Lehman management too. Last we checked Dick Fuld is still out there... somewhere. But generally yes: it just has not been JPMorgan's year so far.

Back in October 19, 1988, in response to Black Monday from a year earlier (the SEC is not known for fast turnaround times) a little known SEC rule came into effect, known as Rule 80B, and somewhat better known as "Trading Halts Due to Extraordinary Market Volatility" which set trigger thresholds for market wide circuit breakers - think a wholesale temporary market shutdown. According to Rule 80B (as revised in 1998), the trigger levels for a market-wide trading halt were set at 10%, 20% and 30% of the DJIA. Needless to say, a 30% drop in the market in our day and age when the bulk of US wealth is concentrated in the stock market, would be a shot straight to the heart of the entire capitalist system. Which is why the smallest gating threshold is and has always been the key.However, despite the revision, as anyone who traded stocks on that fateful day in May knows, the market-wide circuit breakers were completely ineffective and unused during the HFT-induced and ETF-facilitated flash crash of May 6, 2010. In turn, the SEC's flash crash response was to implement individual stock-level circuit breakers which however, instead of restoring confidence in the market, have become the butt of daily jokes involving freaked out algos. This was merely the most recent indication of how horribly the SEC's attempts to "regulate" a market it no longer has any grasp or understanding of, backfire on it. However, even that may pale in comparison to just how badly the SEC may have blundered yesterday afternoon, when it proposed yet another revision to its market-wide halt rule. And once again, instead of making traders and investors more comfortable that the SEC is capable and in control, the questions have already come pouring in: is the SEC preparing for another massive market crash?

A reminder of the sharp increase in demand for gold and silver, particularly store of wealth demand, in recent years was seen in the figures released by the China Nonferrous Metals Industry Association in Shanghai today. China’s gold consumption rose 33% to 761 tons in 2011 and China’s silver consumption rose 6.8% to 6,088 tons last year. China’s gold consumption rose 190 metric tons last year to 761 tons, Wang Shengbin, China Gold Association Vice Chairman, said in a speech in Shanghai as reported by Bloomberg. China’s jewelry consumption jumped 28 % to 456.7 tons last year, gold bar consumption surged 51% to 213.9 tons and gold coin consumption gained 25% to 20.8 tons, Wang said. China’s silver consumption, including industrial use, jewelry and coins, rose 6.8% to 6,088 metric tons last year, the vice chairman said. The amount shows a surplus given China’s output of 12,348 tons last year, which gained 6.3%, Wang said.

… Which Will Lead to Bailouts and Encourage Even More Fraud

For anyone who had doubts that the JPM CIO debacle was only just starting, the just broken news by Bloomberg that the firm has hired former SEC enforcement chief William McLucas "to help respond to regulatory probes of the firm’s $2 billion trading loss" should put all doubts to rest. Because the last thing JPM needs now is to be perceived as engaging in even more regulatory capture (its current general counsel was also previously a head of enforcement at the SEC) . Yet because it is doing precisely this, means that the offsetting cost, namely the fallout that will be associated with the CIO unwind if and when completed (and we will know for sure when the Q2 earnings are released at the latest), will be fast and furious.

No close encounters of the Dimon kind today, but we get our first sworn testimony on all matters #FailWhale, when Mary Schapiro and Gary Gensler open their mouths at 10:00 am, and confirm what everyone knows - that the TBTF's prop trading desks are alive amd well, that the Volcker Rule was one big misdirection, and most importantly, that nobody has any idea what multi-billion trades the big banks engage in until it is far too late, and even then they refuse to give their investors a snapshot of how big the real losses are.

All you need to read.