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Corzine headed fund misallocated customer money??

Dorothy Rodham, Hillary Rodham Clinton’s mother, died today at the age of 92.  Dorothy Rodham’s early life reminds me of my grandfather’s.  She grew up in a working class house, raised by her punishingly strict grandmother after her father sent her away.  She longed for a college education but girls like her were unlikely to get one.  Her life took a different path.  You can read more of her biography here.  We send our condolences to Hillary and her family.

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MF Global, a brokerage firm recently run by Jon Corzine, filed for bankruptcy yesterday after it failed to close a deal with another brokerage firm to take it over.  The deal was scuttled when $700 million in customer deposits went missing.  Originally, it was thought nearly a billion was missing but some of that money later trickled in.  What happened to the $700 million?:

Regulators are examining whether MF Global diverted some customer funds to support its own trades as the firm teetered on the brink of collapse.

The discovery that money could not be located might simply reflect sloppy internal controls at MF Global.

Ahh, yes, the “internal controls”.  Does Sarbanes-Oxley apply to brokerage firms or does it just apply to every other corporation from CEO down to the glasswashers where every penny must be accounted for in mind numbing detail?  Oh, wait!  Here’s another article about Goldman-Sachs partners having extraordinary power over their internal controls and compliance and maybe *that’s* why Corzine got carried away (not that he did anything wrong).  It’s like the hazards of confidence  of people who believe in their own (godlike) abilities, the confidence in this case attributed to sitting on a pile of Goldman-Sachs cash and influence.  But what if you’re not at Goldman-Sachs anymore?  Where do you get the confidence to override your internal controls…?  Did I mention that Corzine was betting against the Sovereign debt crisis in Europe?  Yeah, he totally expected no countries to default and that the ECB and countries like Germany would bail everybody out.  Sure, go ahead and place a bet on all those bonds.  The European taxpayers will cover you.  How many other Wall Street firms did the same thing?  Well, we’ll all find out shortly.

But the investigation, which is in its earliest stages, may uncover something more intentional and troubling.

In any case, what led to the unaccounted-for cash could violate a tenet of Wall Street regulation: Customers’ funds must be kept separate from company money. One of the basic duties of any brokerage firm is to keep track of customer accounts on a daily basis.

Wait!  Didn’t Bank of America just transfer some of it’s shadier assets to the FDIC covered customer bank accounts side of its ledger sheet?  That sounds like mixing monies to me and sticking taxpayers with the responsibility to cover potentially catastrophic losses but maybe I’m just being one of those uninformed cotton-headed-ninny-muggins people who don’t really understand the glory of what the banking class is trying to accomplish.  

Jeez, you would have thought that Corzine, former governor of NJ who treated us New Jerseyans so tenderly by solving the property tax problem, oh wait, he didn’t actually do that.  Well, Corzine who was so respectful of New Jerseyans’ voter enfranchisement.  S%&#!  He was the one who gave away ALL of our delegates to Obama at the 2008 convention wasn’t he?  (the Obama contingent are rolling their eyes and can’t believe the rest of us haven’t gotten over that because after all, it was just hard ball politics.  OK, when it happens to YOUR votes, we’ll just tell you to suck it up and quit whining.  I mean, it’s only your vote.  It’s not like it actually counts for anything, as the Obama administration has proven again and again.  And again.)

So, what did Corzine do here?  Not that we’re claiming that Jon Corzine did anything wrong or anything because that would be slander or libel or something we never prosecute anymore and, anyways, there’s no proof!  No proof whatsoever that he did anything the least bit out of the ordinary.  Yep, he was just sitting quietly, with his hands neatly folded in his lap not bothering anyone…

When he arrived at MF Global — after more than a decade in politics, including serving as a Democratic United States senator from New Jersey — Mr. Corzine sought to bolster profits by increasing the number of bets the firm made using its own capital. It was a strategy born of his own experience at Goldman, where he rose through the ranks by building out the investment bank’s formidable United States government bond trading arm.

One of his hallmark traits, according to the 1999 book “Goldman Sachs: The Culture of Success,” by Lisa Endlich, was his willingness to tolerate losses if the theory behind the trades was well thought out.

He made a similar wager at MF Global in buying up big holdings of debt from Spain, Italy, Portugal, Belgium and Ireland at a discount. Once Europe had solved its fiscal problems, those bonds would be very profitable.

But when that bet came to light in a regulatory filing, it set off alarms on Wall Street. While the bonds themselves have lost little value and mature in less than a year, MF Global was seen as having taken on an enormous amount of risk with little room for error given its size. By Friday evening, MF Global was under pressure to put up more money to support its trading positions, threatening to drain the firm’s remaining cash.

Hmmm, it sounds to me like Corzine risked a little too much, had to cover his bets and found that he had insufficient funds to do so, but that’s just my uninformed interpretation.  And if he dipped into his customers’ accounts to take out a temporary loan?  Just enough to tie him over until the next paycheck?  I’m sure everything was going to turn out fine.  It’s not like he was supposed to have enough collateral around, because that might have been in that finance industry reform bill that got watered down to tincture of remedy status.  It seems like the other banks have been howling screams of pain over their obligations to cover their bets.  It sounds so onerous that I thought maybe that weak tea of a bill might have been too much.  Apparently not.

By late Sunday evening, an embattled MF Global had all but signed a deal with Interactive Brokers. The acquisition would have mirrored what Lehman Brothersdid in 2008, when its parent filed for bankruptcy but Barclays of Britain bought some of its assets.

But in the middle of the night, as Interactive Brokers investigated MF Global’s customer accounts, the potential buyer discovered a serious obstacle: Some of the customer money was missing, according to people close to the discussions. The realization alarmed Interactive Brokers, which then abandoned the deal.

Later on Monday, when explaining to regulators why the deal had fallen apart, MF Global disclosed the concerns over the missing money, according to a joint statement issued by the Commodity Futures Trading Commission and the Securities and Exchange Commission. Regulators, however, first suspected a potential shortfall days ago as they gathered at MF Global’s Midtown Manhattan headquarters, the people briefed on the matter said. It is not uncommon for some funds to be unaccounted for when a financial firm fails, but the magnitude in the case of MF Global was unnerving.

[…]

But the firm has yet to produce evidence that all of the $600 million or $700 million outstanding is deposited with the banks, according to the people briefed on the matter. Regulators are looking into whether the customer funds were misallocated.

With the deal with Interactive Brokers dashed, MF Global was hanging in limbo for several hours before it filed for bankruptcy. The Federal Reserve Bank of New York and a number of exchanges said they had suspended MF Global from doing new business with them.

It was not the first time regulators expressed concerns about MF Global.

MF Global confirmed on Monday that the Commodity Futures Trading Commission and the S.E.C. — had “expressed their grave concerns” about the firm’s viability.

Presumably, the regulators let the customers know when they first had “grave concerns” about the firm’s viability so they could reconsider where they put their funds… or not.  “Grave concerns” sounds pretty ominous. Well, it’s not like his customer’s desires should have any bearing on what Corzine actually did with their money.  It’s just not his way.  I seem to recall that he was accused of playing with the NJ state workers’ pension funds but let’s not cast aspersions until I find some links that aren’t in virulently conservative Republican sites.  Still, the pensions are in trouble and this latest information about how Corzine plays fast and loose with money does make one wonder…

And people wonder why OccupyWallStreet has become so popular.

Hey!  Here’s a blast from the past.  Remember when Jon Corzine was at the Democratic National Convention giving away all of his state’s delegates to a candidate that lost the state primary by 10 points?  Memories, it brings a tear to the eye.  Sobbing, actually.  It’s a good thing that Corzine knows people in high places who owe him *big* favors.

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18 Responses

  1. You left out just one little teeny tiny item: that JC was seriously considered recently for Treasury Secretary. But I’m sure it had nothing to do with his awarding of the delegates at DNC and was instead based on his stellar performance at MF Global. .

    • Gosh! How could I have overlooked that?
      Well, I’m *sure* that the Obama administration would have vetted him thoroughly.

  2. My heartfelt thoughts are with the Rodham-Clinton family at this time. Thank you, Mrs. Rodham, for your own wonderful and generous spirit. And for raising and supporting such an amazingly gifted daughter who inspires us with her own courageousness and fortitude.

    May God bless and rest your soul.

  3. So Ed “Gasbag” Schultz is having an orgasm because B of A has withdrawn it’s debit fee. That will be chump change compared to the cost to bail those assholes out again – this time through FDIC insurance.

    Who’s watching this stuff? (I know…no one).

  4. Heh. I was wondering what your views on Corzine would be, RD.

  5. Regulators are examining whether MF Global diverted some customer funds to support its own trades as the firm teetered on the brink of collapse.

    The technical term for such a “diversion” is not “misallocation”, but rather “embezzlement”.

  6. I guess we should have seen it coming

    • Are you kidding? Corzine is the canary in the coalmine. He’s just one of many brokers who put money on the European Central Bank and the solvent taxpayers of Europe bailing out Greece, Spain and the other countries on the brink.
      This is what happens when you don’t curb the bad behavior in the first place. And what the f@#$’s up with BoA dumping their bad asset accounts in with their regular customer’s accounts? I’m getting nervous myself about my 401K. I probably should call T.Rowe. Price tomorrow and put it under my mattress.
      On the other hand, if the finance industry screws up like it did in 2008, that’s it. It’s toast. The occupations will get huge and we will peacefully round up all of the “job creators” and send them on a one way trip to the Cayman Islands where they can spend more time with their money behind a military blockade.

  7. So what, Hillary had already released her delegates to vote as they wish, the floor vote was a ritualized formality.

    • Since you weren’t there and I was in Denver meeting with delegates, let me tell you how it really was.
      The Obama whips were harassing delegates for several days leading up to the roll call vote. They got Hillary delegates into hotel rooms and yelled at them. They followed them around hotel lobbies and called them out. They threatened several delegates from either Kentucky or Tennessee that they would lose their jobs if they didn’t switch. I met two Texas delegates on the street who said while they weren’t personally harassed and planned to vote for Hillary, they knew others in their delegation, including a judge, who was being threatened by the party.
      They were told they were going to vote before they got to the floor. The California delegation refused to play along. They were bound by law to keep their votes on the first ballot. That’s why California never got to present during the roll call vote. There were a group of Edwards voters who told their delegation head that they were going to vote for Edwards first but were planning to throw their support behind Hillary later. They were told that was OK. But afterwards, they were told they wouldn’t be allowed to do that.
      The actual delegate count was pretty close in spite of all the shenanigans. But there were just enough delegates who had switched that Hillary released her delegates. She released them at about 1:00pm. The roll call vote was at 4:00pm. Believe me, there were plenty of Hillary delegates who were angry and upset about what happened.
      As for the delegates from NJ, that was just inexcusable. No matter what happened in the voting process, *I* didn’t agree to give the delegation to Obama unanimously. And neither did a lot of other New Jerseyans who campaigned for her here where she won this state by 10 points. It was an insult to us and Corzine paid for it in 2009 when he lost the governorship. I voted for Daggett, who was the best candidate on the ballot. Corzine lost not because so many Republicans showed up. Their numbers weren’t significantly different than previous years. He lost because Democrats didn’t show up for him. They were either so disgusted they stayed home or they gave their votes to a third party candidate. It was just enough to cost him.
      Finally, the roll call vote has NEVER been done like this. In all past conventions, the first roll call vote goes to the candidates who won the delegates. But for some reason, the DNC thought that Hillary voters were all just a bunch of uneducated working class women and who takes them seriously? They would just get with the program no matter who got shoved down their throats. So, they took their chances and overwrote our votes.
      I don’t know about the rest of the Clintonistas but I will *never* forget what the DNC did. They disenfranchised us, threatened our delegates and humiliated the best candidate we had in 2008. That didn’t look like a roll call vote to me. It looked like a gang rape and I am not the only person who sees it that way.
      There are plenty of delegate accounts around. Alegre’s Corner has a stack of them. You should read them. If you had any sense of justice and fairness, they would make you sick.
      You want to know the real reason why there wasn’t an accurate, genuine roll call vote? It’s because the delegate count was actually so close that it would have called into question Obama’s legitimacy. He went to Denver with his campaign acting like he had some kind of insurmountable mandate but the truth is that any lead he had was from unearned delegates that he got from Michigan where his name wasn’t even on the ballot and the RBC hearing took 4 delegates from Hillary and put them in Obama’s plus column.
      In 2008, the bankers bought the party, bought the superdelegates, bought Obama. If this were a western movie, the good guys lost and the bad guys rode off into the sunset shooting their pistols in the air as they whooped it up, all the money stuffed in their saddle bags. If this were A Bug’s Life, the grasshoppers won and stole all of the princess’s grain. It was that serious and you know how I know? The inexperienced shmoozer who hasn’t got a gift for politics is running the White House while the true Democrat is busting her ass running around the globe. Other countries are now wondering why we passed on her.
      See this video. Watch the whole thing but especially what follows minute mark 3:15.

    • More delegate accounts here.

      Hillary releasing her delegates under pressure does not absolve the rest of the party for fucking us over and we will hold you accountable for as long as it takes.

  8. A glove was thrown by the “pay the debt” crowd. It triggered a clue and some memories
    http://edgeoforever.wordpress.com/2011/11/02/the-tyranny-of-debt-no-medals-for-paying-it-down/

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