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Is Jon Corzine “Too Big To Be Indicted”? Part II

Posted by Larry Doyle on November 7, 2011 7:01 PM |

My commentary Is Jon Corzine “Too Big To Be Indicted”? generated a number of personal messages from many within the financial services industry.

I thank all those who took the time to share with me their concerns about the seeming violation of customer accounts at the now bankrupt firm MF Global.

Without the sense and belief in the safety and integrity of deposits and assets, I firmly believe customers would pull their funds and investments from any and all institutions in a heartbeat. Runs on the bank would clearly lead to a severe economic decline.

The fact that MF Global seems to have violated the sanctity of its customer assets has justifiably shocked many on Wall Street. Anybody with a bank or brokerage account at any institution should be equally shocked and concerned. Why? 

I thank a reader for sharing a thoughtful letter addressing these concerns which I welcome running here at Sense on Cents. I hope it will reverberate throughout the blogosphere and ultimately the offices on Capitol Hill. I hope anybody reading this will want to share it with friends and colleagues.

Dear Congressman

I am writing to you to ask for your immediate help and intervention to ensure the integrity of the US financial markets in lieu of the MF Global debacle. The integrity of the markets are at stake as well as the integrity of the USA in the eyes of the financial world.

Segregated client accounts of MF Global are missing upwards of $600 million USD. This money just does not disappear or then according to news reports show up at JP Morgan and then to disappear once again.

JP Morgan was a custodial bank for MF Global. JP Morgan had repurchase agreements with MF Global.  Were funds sequestered from MF Global clients by JP Morgan to make up in short falls?  Does the US financial system allow stealing of segregated funds at one institution by another?

These segregated accounts are no different than personal or corporate bank accounts or even stock market accounts. These accounts were (possibly) violated and a large amount of assets are missing.

What is worse is the violation of the Commodity Exchange Act, which states that in the event of a FCM bankruptcy client funds are to be handled separately from the firm assets and given priority. It is questionable what transpired, however 50,000 customer accounts have been frozen and hundreds of millions of dollars are unaccounted for.

The analogy is very simple. It is as if a bank makes bad loans and then pillages their customer accounts to remedy the situation or if a stock brokerage company makes bad investments and then withdraws monies from their clients’ accounts. If this is allowed to continue there will be NO trust in the markets. Nothing will be safe!

The implications are severe to farmers and to hedgers of virtually aspect of our human existence. This is not just a group of commodity trading speculators. This is the basis of the US economy.

The fact is that the regulators were not regulating nor are they acting now in order to protect the integrity of the financial markets. I implore you to take a stand to protect the financial markets. I implore you to

1.Demand that the trustees of the MF Global release at least a partial of the frozen cash

2.Open immediate investigations of JP Morgan and how segregated accounts & money supposedly appear and disappear.

3. Open immediate investigations of the regulators who failed their task in regulating the markets.

This can spin out of control very quickly. I and countless others are counting on you to protect the integrity of the US financial markets.

Andy Abraham
Abraham Investment Management

I thank this reader for sharing these thoughts. In the same vein, I repeat my questions from my prior commentary?

Where were the regulators, including the CFTC, FINRA, and the SEC who were charged to thoroughly monitor the risks and degree of leverage employed by MF Global?

Can these same regulators who failed to properly oversee MF Global be trusted to provide a full accounting of what happened to the customer funds held at the firm? What about the Department of Justice? Will those occupying offices at 1600 Pennsylvania Avenue also get involved? Can we trust all of these people and entities that the law of the land will be upheld?

While MF Global was certainly not too big to fail, the real question before those in Washington and on Wall Street is whether Jon Corzine is ‘too big to be indicted’?

You may care to call your brokers and financial planners and confirm that your assets are protected and that your account is not being violated.

Beyond that….navigate accordingly!!

Larry Doyle

Isn’t it time to  subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook? Do your friends, family, and colleagues a favor and get them to do the same. Thanks!!

I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.


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