Sense on Cents

I recently received the following message from a regular reader. Given the fact that every other piece of financial news seems to address developments in Europe, I would like to share his message and my response.

Hi Larry –

Hope you are doing well. I have read several articles in the last few days on this topic – rehypothecation – and how this is what really brought down MF Global, and also in a way what brought down AIG.

I’m still not completely understanding this. My primary question right now that I’d love to hear your opinion on is this – Was this the primary reason why David Cameron refused on Friday for Great Britain to agree to the EU treaty?

The reason I ask that is because the only way that MF Global could utilize rehypothecation is because in the UK, it is legal and there is no limit whatsoever on the amount that can be rehypothecated there (as opposed to in the U.S. where there are strict rules). (more…)