Individuals who start a business, or invest money know there is risk involved; there are no guarantees in life. But what’s expected is that laws will be followed so as to provide all participants an equal playing field. This certainty breeds confidence and stability in the market place.
But according to the editors at the Charlotte Observer high risk-taking is the equivalent to criminal activity. And these statist are using MF Global as a vehicle to encourage more government regulations.
The episode is highlighting a discomfiting truth about the fallout from the U.S. financial crisis in 2008: Wall Street firms are still engaged in many of the disastrous practices that were majorly responsible for the near collapse and helped push this country into one of its worst recessions. Financial experts say studies have shown that the perverse incentives that Wall Street firms employed to encourage risky trading have gone up since 2008.
The Corzine case is a good example. Reportedly, Corzine - who once ran Goldman Sachs - actually changed the compensation set up at MF Global to one that highly rewarded risk-taking, using discretionary bonuses and salary. And because he actively and avidly traded big himself, Corzine established an MF Global culture that encouraged that activity. Such high-stakes inappropriate risk-taking was once again aided by a lack of company controls and failures of regulators and ratings watchdogs like S&P and Moody's, who flagged problems only days before the company went under.
But according to the editors at the Charlotte Observer high risk-taking is the equivalent to criminal activity. And these statist are using MF Global as a vehicle to encourage more government regulations.
The episode is highlighting a discomfiting truth about the fallout from the U.S. financial crisis in 2008: Wall Street firms are still engaged in many of the disastrous practices that were majorly responsible for the near collapse and helped push this country into one of its worst recessions. Financial experts say studies have shown that the perverse incentives that Wall Street firms employed to encourage risky trading have gone up since 2008.
The Corzine case is a good example. Reportedly, Corzine - who once ran Goldman Sachs - actually changed the compensation set up at MF Global to one that highly rewarded risk-taking, using discretionary bonuses and salary. And because he actively and avidly traded big himself, Corzine established an MF Global culture that encouraged that activity. Such high-stakes inappropriate risk-taking was once again aided by a lack of company controls and failures of regulators and ratings watchdogs like S&P and Moody's, who flagged problems only days before the company went under.
Forbes.com summed it up best:
MF Global may have committed a crime by taking $200 million from segregated customer accounts “and used it to pay for bank overdrafts, shortfalls in other customer accounts and MF Global’s own commodities activity,” according to Vincent Schmeltz III, of Barnes & Thornburg, the lawyer for MF Global’s customers, who are trying to get back their missing funds.
Another $1.0 billion of segregated customer accounts is still missing and unaccounted for according to the MF Global Trustee in bankruptcy. Many individual traders in precious metals and agricultural products were damaged by the bankruptcy. Farmers, ranchers and other agricultural business owners are missing funds they use to hedge the risks of volatile pricing.
Undoubtedly, Jon Corzine, the former CEO of MF Global, will be asked probing questions about the use of customer funds when he testifies before a Congressional committee later this week.
Schmeltz who represents James Koutoulas, the CEO of Typhon Capital Management, told me today that “customer segregated funds were commingled with securities accounts– like a massive Ponzi scheme in which money for one customer is used to pay returns to other customers.”
Established rules and regulations should have been enough to deter MF Global from breaking the law. But they had a CEO who was politically connected and had a front row seat to some of the most corrupt scum in Washington D.C. Is it any wonder that he thought he could get away with it?
Source: http://www.charlotteobserver.com/2011/12/14/2848449/tougher-deterrents-needed-on-wall.html#ixzz1gZA4B5wd
http://www.forbes.com/sites/robertlenzner/2011/12/05/mf-global-used-200-million-for-itself-and-other-customers/
Another $1.0 billion of segregated customer accounts is still missing and unaccounted for according to the MF Global Trustee in bankruptcy. Many individual traders in precious metals and agricultural products were damaged by the bankruptcy. Farmers, ranchers and other agricultural business owners are missing funds they use to hedge the risks of volatile pricing.
Undoubtedly, Jon Corzine, the former CEO of MF Global, will be asked probing questions about the use of customer funds when he testifies before a Congressional committee later this week.
Schmeltz who represents James Koutoulas, the CEO of Typhon Capital Management, told me today that “customer segregated funds were commingled with securities accounts– like a massive Ponzi scheme in which money for one customer is used to pay returns to other customers.”
Established rules and regulations should have been enough to deter MF Global from breaking the law. But they had a CEO who was politically connected and had a front row seat to some of the most corrupt scum in Washington D.C. Is it any wonder that he thought he could get away with it?
Source: http://www.charlotteobserver.com/2011/12/14/2848449/tougher-deterrents-needed-on-wall.html#ixzz1gZA4B5wd
http://www.forbes.com/sites/robertlenzner/2011/12/05/mf-global-used-200-million-for-itself-and-other-customers/
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