Charlotte Observer Equates High Risk-Taking to Criminal Activity

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.

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/

Hedge Fund Manager Damns Obama and His Crony Capitalist

Americans have innately felt that something is wrong; dare I say corrupt. A hedge fund manager has just confirmed everything we’ve suspected about the Obama administration and his democratic cronies. Their style of capitalism has rendered the market place dysfunctional and destroyed the confidence of those who have been in business for decades.

Here is an excerpt from a letter by the manager of Barnhardt Capital Management:

The reason for my decision to pull the plug was excruciatingly simple: I could no longer tell my clients that their monies and positions were safe in the futures and options markets – because they are not. And this goes not just for my clients, but for every futures and options account in the United States. The entire system has been utterly destroyed by the MF Global collapse. Given this sad reality, I could not in good conscience take one more step as a commodity broker, soliciting trades that I knew were unsafe or holding funds that I knew to be in jeopardy.

The futures markets are very highly-leveraged and thus require an exceptionally firm base upon which to function. That base was the sacrosanct segregation of customer funds from clearing firm capital, with additional emergency financial backing provided by the exchanges themselves. Up until a few weeks ago, that base existed, and had worked flawlessly. Firms came and went, with some imploding in spectacular fashion. Whenever a firm failure happened, the customer funds were intact and the exchanges would step in to backstop everything and keep customers 100% liquid – even as their clearing firm collapsed and was quickly replaced by another firm within the system.

Everything changed just a few short weeks ago. A firm, led by a crony of the Obama regime, stole all of the non-margined cash held by customers of his firm. Let’s not sugar-coat this or make this crime seem “complex” and “abstract” by drowning ourselves in six-dollar words and uber-technical jargon. Jon Corzine STOLE the customer cash at MF Global. Knowing Jon Corzine, and knowing the abject lawlessness and contempt for humanity of the Marxist Obama regime and its cronies, this is not really a surprise. What was a surprise was the reaction of the exchanges and regulators. Their reaction has been to take a bad situation and make it orders of magnitude worse. Specifically, they froze customers out of their accounts WHILE THE MARKETS CONTINUED TO TRADE, refusing to even allow them to liquidate. This is unfathomable. The risk exposure precedent that has been set is completely intolerable and has destroyed the entire industry paradigm. No informed person can continue to engage these markets, and no moral person can continue to broker or facilitate customer engagement in what is now a massive game of Russian Roulette.

Now, if that isn't damning enough, just read the following:

Finally, I will not, under any circumstance, consider reforming and re-opening Barnhardt Capital Management, or any other iteration of a brokerage business, until Barack Obama has been removed from office AND the government of the United States has been sufficiently reformed and repopulated so as to engender my total and complete confidence in the government, its adherence to and enforcement of the rule of law, and in its competent and just regulatory oversight of any commodities markets that may reform. So long as the government remains criminal, it would serve no purpose whatsoever to attempt to rebuild the futures industry or my firm, because in a lawless environment, the same thievery and fraud would simply happen again, and the criminals would go unpunished, sheltered by the criminal oligarchy.

Wow! That is jaw dropping. If this were a republican administration, the mainstream media would run this story nonstop until election day. But everyone knows that is not going to happen.

Source: http://www.federalobserver.com/2011/11/18/the-entire-system-has-been-utterly-destroyed-by-the-mf-global-collapse-presenting-the-first-mf-global-casualty/#more-13907