The Big Bomb on Jon Corzine

A huge bombshell was laid at the feet of MF Global ex-CEO Jon Corzine in the Senate Agriculture Committee hearing. CME Group Executive Chairman Terry Duffy testified and indicated Jon Corzine authorized the transfer of consumer funds to the firm's trading accounts.



Where the missing MF Global customer money is, nobody seems to know. Yet, Duffy testified about a $175 million dollar loan to a MF Global affiliate that was customer money.

Mr. Corzine was aware because our employee had heard this, on the phone—"Send back 175" — and said he was aware of this loan.

CME, one of the largest futures exchanges, is clearly pointing fingers at MF Global instead of the system or themselves, or my favorite, a typo.

Some might conclude that the system failed because of this one instance when customers have been injured despite the prescribed system of segregation. Regulatory failures happen, unfortunately. Banks fail and the FDIC provides sometimes inadequate protection to depositors. The taxpayers get tapped.
Securities firms fail and SIPC is irrelevant to any large account holders. The laws prohibit Ponzi schemes, yet hundreds are detected every year after the public has been robbed and the money evaporated. Insider trading happens every day. Enron explodes, Lehman fails. Insurance companies fail and policy holders lose. While it is clear that action is necessary to restore customer confidence and protect against future failures, the fact is that MFG broke rules by moving customer segregated funds out of an account over which it had control. A firm failed to comply with applicable rules, but that does not mean the segregation system is a failed system. To be clear, the customer segregation regime in the futures industry was not the cause of the losses that customers are suffering from today.

Now this is a bombshell to blame MF Global and Jon Corzine, but Naked Capitalism has a different take and quotes The Financial Times:

CME has one of the most effective government affairs operations in the nation’s Capitol. I’ve rarely seen them on the losing end of an issue,” says Robert Holifield, a former staff director on the Senate agriculture committee.

CME has spent more than $8m on lobbyists since 2008, ranking each year within the top 20 biggest spenders in the securities industry, according to data compiled by the Centre for Responsive Politics, a non-partisan research group.

It has also been a big donor to political campaigns, laying out about $2m to candidates, party committees and leadership political action committees in the last two election cycles, according to the Centre for Responsive Politics.

This year, CME donated more than $75,000 to lawmakers who serve on the House agriculture committee and over $97,000 to members of the Senate agriculture committee. These committees oversee the Commodity Futures Trading Commission, the government futures regulator, which in turn supervises CME’s role as a self-regulatory organisation.

Still, Duffy's testimony is a stark contrast to the below AP hearing testimony denial composite. Magically all MF global executives just have any idea how customer funds were mixed and then lost in MF Global's brokerage accounts.



If witnesses and evidence collaborate Duffy's testimony, Corzine should face a charge of lying before Congress and other criminal charges. Corzine has friends in high places. Maybe he will be thrown to the wolves from the Wall Street cliffs as the latest sacrifice. After all, seems every couple of years someone who, lost power, is thrown to the ravenous crowd for red meat justice. Of course, nothing behind the Wall Street curtain will change. Déjà vu financial scandal du jour. What does it matter all of the lives ruined by financial brazen theft? Why they are just rotting logs on the pile, warming the feet of the privileged few.



CME covers ‘back-side’?

Is CME covering its back-side with Corzine bomb and 550 million to farmers and ranchers?

According to Numerian in a brilliant blog 11/19/11:

1) The CME says it did audit MF Global but was deliberately misled by the firm... CME further states that as of its most recent audit of the firm, all customer monies were accounted for, but immediately after the audit MF Global quietly maneuvered over $600 million out of the customer accounts without the CME being able to detect the deception...

2) What happened at this point, however, has outraged other members of the CME. The exchange, in dealing with the shortfall, froze all MF Global individual customer accounts at the exchange. Nor would it allow these customers to at least trade against their accounts in order to protect themselves from further market moves. These actions essentially violated the basic premise of dealing on a registered exchange. Because all accounts are collateralized against both existing and potential adverse market rate changes, the exchange provides a nearly fool-proof guaranty that a customer bankruptcy will not impact the other members or any individuals who trade through these other members

Two issues: 1) did they in fact audit correctly and 2) why are they late in covering SOME customer accounts... albeit indirectly through the Trustee (i.e. ranchers and farmers still don't have money and won't until trustee finishes its audit)?


Numerian's CME/MF Global article

Did imply this and is located here.

I do not know what is true, but that's why I included the information on CME. I suspect both are true.