Best of the Week
Most Popular
1.US Dollar Crashes, Gold And Bitcoin Skyrocket As Economic Recovery Lie Is Exposed - Jeff_Berwick
2.Now Obama Warns Americans to ‘Be Prepared’ for Disaster… What Does He Know? - Jeff_Berwick
3.EU Referendum - Britain's Immigration / Migrant Crisis Explained - Nadeem_Walayat
4.EU Referendum - British People vs Establishment Elite, Vote LEAVE an Act of Defiance! - Nadeem_Walayat
5.Prominent Billionaire Investors Warn of Financial Crash, Quietly Position Themselves - MoneyMetals
6.Bankers Warn of BrExit Financial Armageddon if British People Vote for Freedom - Nadeem_Walayat
7.Bad U.S. Jobs Report Prompts Stocks Bear Market Rally Towards New All Time Highs! - Nadeem_Walayat
8.Gold And Silver – Friday May Have Marked A Pivotal Turnaround - Michael_Noonan
9.EU Referendum - British People vs Establishment Elite, the Illusion of Democracy and Freedom - Nadeem_Walayat
10.Felix Zulauf: Monetary Stimulation Creates Bubbles, Not Prosperity Nor Growth - GoldandLiberty
Free Silver
Last 7 days
Investors Map Post-Brexit Strategies Amid Global Market Upheaval - 26th June 16
Gold Price Weekly COT Update - 26th June 16
First the UK, then Scotland ... then Texas? - 26th June 16
Stocks Bear Market Resumes or Just More Noise - 26th June 16
Gold And Silver: Security, And BREXIT - 25th June 16
Dow, Euro & Brexit Recap - 25th June 16
Resistance Holding Gold Stocks after Brexit - 25th June 16
Venezuela vs. Ecuador (Chavismo vs. Chavismo Dollarized) - 25th June 16
Gold, Silver And PM Stocks Summer Doldrums Risk - 24th June 16
Here’s Why China “Economic Hard-Landing” Worries Are Overblown - 24th June 16
Jubilee Jolt: Markets Crash, Gold Skyrockets as Britain Takes Brexit - 24th June 16
BrExit Morning - New Dawn for Britain, Independence Day! - 24th June 16
LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - 24th June 16
Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - 24th June 16
EU Referendum Shock Results Putting BrExit LEAVE in the Lead Hitting Sterling Hard - 24th June 16
Final Opinion Poll Gives REMAIN 52% Lead, Bookmakers, Markets and Pollsters ALL Back REMAIN Win - 23rd June 16
Does BREXIT Matter? Outlook for Sterling - 23rd June 16
Keep Calm and Vote BrExit - Last Chance to Break Free of EU Superstate - 23rd June 16
Here’s the Foreign Policy Trump and Clinton Really Want - 23rd June 16
Details Behind Semiconductor Stocks Leadership - 23rd June 16
Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - 23rd June 16
BrExit Looks Set to Win EU Referendum, Final Opinion Polls Give LEAVE Lead Over REMAIN - 22nd June 16
Proof that the Gold Bears are Wrong - 22nd June 16
Here’s a Trillion-Dollar Investment Opportunity for Those Few with No Debt - 22nd June 16
BrExit to Save Europe from Climate Change Refugee Migration Apocalypse - 22nd June 16
Increase In U.S. Rig Count Will Not Cap Oil Prices - 22nd June 16
Are Copper and China Stocks Set to Rally? - 22nd June 16
SPX May Break Its Trendline - 22nd June 16
Believe it or Not: More Kids Live At Home Now than Since The Great Depression - 21st June 16
EU Referendum Latest Opinion Polls Show LEAVE Halting REMAINs Surge - 21st June 16
British Pound Outlook - BREXIT, Europe and You - Does your vote matter? - 21st June 16
Fascist Victory Behind the European Union - 21st June 16
EU Referendum Opinion Polls Analysis Shows Strong Momentum in REMAINs Favour - 21st June 16
Is It Time to Dump Gold and Buy Platinum? - 21st June 16
Could Central Bankers Be Gold and Silver's BIGGEST Allies? - 20th June 16
Words Still Mean Things – Brexit With Graham Mehl - 20th June 16
Baroness Warsi the Manchurian Candidate Quits LEAVE for REMAIN, Boris Johnson Next? - 20th June 16
FTSE Soars, Stock Markets Bounce on LEAVE Polls Surge, Bookmakers Widen BrExit Odds - 20th June 16
Brexit Would Trigger Devolution of Europe - 20th June 16
Stock Market Week Of Uncertainty - 20th June 16
Will Gold’s Bullish Price Chart Outperform Gold’s 5 Bearish Indicators? - 20th June 16
Bonds And Stocks At All-Time Highs: Are Markets Confused Or Broken? - 20th June 16
Silver Sleeping On the Job - 19th June 16
BrExit Odds Sink, REMAIN Polls Boost by Jo Cox Killing by Radical Right Extremist, Conspiracy? - 19th June 16
How Elliott Waves Tell You When to "Jump In" & When to "Jump Out" of Markets - 18th June 16
Stock Market Inflection Point During Bifurcation - 18th June 16
Gold And Silver – Insanity Is World “Norm.” Keep Stacking! - 18th June 16
Gold Stocks - Bull Markets that Follow Epic Bears - 18th June 16
The Fed Giveth and the Gold Bullion Banks Taketh Away… - 17th June 16
Brexit: "The Vote Heard Around the World" - 17th June 16
Gold Stocks Summer Breakout? - 17th June 16
Stock Investors Get Higher Returns and More Dividend Income - In Less Time With Less Risk - 17th June 16
How to Use the Gold-to-Silver Ratio? - 17th June 16
Inflation, Deflation & Associated Trading Prospects - 17th June 16
Overnight Markets Struggling to Stay Flat - 17th June 16
Gold Price Surges to Highest in Nearly Two Years On Central Bank and Brexit Haven Demand - 17th June 16
Stock Market Thinking Upside Down; Dow 18k Still Key - 17th June 16
Jo Cox MP Terror Attack Killing Claimed for "Britain First" - Witness Report - 17th June 16
Stock Market, Iron Ore, Bitcoin – Is Silver Next for Chinese Momentum Investors? - 16th June 16
EU Referendum Campaigning Suspended Following Shooting of MP Jo Cox, Suspect Named as Tommy Mair - 16th June 16
Why People are Migrating to the UK, Illegal Immigration, Housing Crisis Consequences - 16th June 16
Stocks Fluctuate Following Recent Decline - Bottom Or Just Pause Before Another Leg Down? - 16th June 16
The US Consumer-Driven Economy Has Hit a Brick Wall - 16th June 16
Bitcoin Price Going Parabolic Again, Now At $730 and Up 60%+ In Last Three Weeks - 16th June 16
China's Hard Landing Has Already Begun! - 16th June 16
Crude Oil Price - Oil Bears vs. Support Zone - 16th June 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Why 95% of Traders Fail

MF Global Implosion: Congressman Grimm Sends a Message

Companies / Credit Crisis 2012 May 03, 2012 - 01:24 PM GMT

By: Janet_Tavakoli

Companies

Best Financial Markets Analysis ArticleIn my previous post, I quoted from MF Global's crisis plan, a document called "Stress Scenario Analysis -- Downgrade Potential Impact on MF Global." Work on that document began in January 2011, although it apparently wasn't completed until around 18 days before the bankruptcy. MF Global worried that it wouldn't have enough cash and liquid assets of its own to meet calls for collateral (margin calls), among other things, in the event of a ratings downgrade.


"Reads Like a Fraud Play-Book"

The document poses a question:

How quickly do we want to send cash back to clients, what is the message if we do not send immediately... -- page 11

I'll get back to the answer to MF Global's question about the message later. To every finance professional I know that has read the entire document, this looks as if MF Global planned to misuse, i.e., to steal clients' money to see it through a period when it anticipated being short of its own funds. One financial professional, who has no economic interest in MF Global, asserted MF Global's crisis plan "read like a fraud play-book."

In the week prior to MF Global's bankruptcy, MF Global did not immediately return clients' funds and the money went to its creditors instead. Unfortunately for MF Global's clients, it collapsed into bankruptcy and never did return missing funds.

That's just one example of the grave issues posed by events throughout 2011 at MF Global. (See my previous posts.)

Investigations or Cover-ups?

The Trustees' handling the bankruptcy looks like theater of the absurd. They've withheld documents and information. In January 2012, The Wall Street Journal reported that the investigations (by trustees, justice, regulators and congress found $1.2 billion to $1.6 billion of customer money "'vaporized' as a result of chaotic trading." But Jill Sommers of the Commodities Futures Trading Commission, the CFTC, testified in December 2011 that it reviewed MF Global's transactions and knew where all the money went.

James Giddens, a Trustee, is trying to pass off MF Global's crime as the result of chaos (perhaps he meant "Kaos," the criminals in Get Smart) or sloppy bookkeeping, and no reasonable finance professional accepts that a firm can both escape prosecution under Sarbanes Oxley and claim this type of "sloppy bookkeeping" -- much less to the tune of a missing $1.2 billion to $1.6 billion.

Giddens claimed the computer systems and employees had trouble keeping up. I can assure Giddens that computers can more than keep up. As for what the employees were doing, note that "errors" did not result in a surfeit of cash being found in customers' accounts. Instead, an estimated $1.2 to $1.6 billion of customers' funds are missing, exactly the kind of outcome one would expect if MF Global's management had engaged in the kind of fraud apparently suggested in its crisis document.

James Giddens' excuses for MF Global sound to me like whitewash. If he genuinely believes he has put forward a reasonable explanation, then he appears to me to be incompetent. Yet his undisclosed fees will probably make your eyes pop out.

Rep. Grimm Calls for Independent Investigator

Jon Corzine, the former CEO of MF Global, is a former governor (D-NJ), a former U.S. senator (D-NJ) with a connection to the Senate Agriculture Committee Chairwoman that "investigated" him, a former CEO of Goldman Sachs with connections to a former colleague on the Fed board and the head of the CFTC, and is a top tier campaign contribution bundler for President Obama.

I've recently met with many Counsels General and a few Ambassadors from countries that are among our trading partners and allies. MF Global's stench is so offensive that they question the viability of our already compromised financial system. They've noted the lack of indictments in the wake of the September 2008 financial meltdown and massive ongoing bailouts. MF Global is another glaring example of our hypocrisy and cronyism and lack of will to restore rule of law to our financial system. The perception is that the needle has moved further in the wrong direction.

Rep. Michael Grimm (R-NY) is a member of the House Financial Services Committee, and he has reportedly circulated a letter in the House asking for an independent investigator and is seeking signatures and support. Obviously appearances are important, and the "investigation" into MF Global so far has every appearance of being broadly compromised. Given our ongoing financial crisis and bailouts, so far it's a shameful performance by Congress, Justice, regulators, and the bankruptcy trustees. The dialogue the financial community has heard so far lacks credibility and basic decency.

I promised I'd answer MF Global's question about "the message if we do not send [back clients' so-called segregated funds] immediately." Even to foreign diplomats the message is that you look like co-conspirators, albeit as yet unindicted.

Endnote: Jane Wollman Rusoff interviewed me for Research Magazine's May cover story, "Finding the Culprits of the Crisis," about the deep monetary connections of Wall Street and Washington and the corrosive effect it has had on the economy and the Republic.

By Janet Tavakoli

web site: www.tavakolistructuredfinance.com

Janet Tavakoli is the president of Tavakoli Structured Finance, a Chicago-based firm that provides consulting to financial institutions and institutional investors. Ms. Tavakoli has more than 20 years of experience in senior investment banking positions, trading, structuring and marketing structured financial products. She is a former adjunct associate professor of derivatives at the University of Chicago's Graduate School of Business. Author of: Credit Derivatives & Synthetic Structures (1998, 2001), Collateralized Debt Obligations & Structured Finance (2003), Structured Finance & Collateralized Debt Obligations (John Wiley & Sons, September 2008). Tavakoli’s book on the causes of the global financial meltdown and how to fix it is: Dear Mr. Buffett: What an Investor Learns 1,269 Miles from Wall Street (Wiley, 2009).

© 2012 Copyright Janet Tavakoli- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife