Posts Tagged: mf global

 

A former head of the Federal Bureau of Investigation has been appointed to look into allegations of misconduct at the office administering compensation claims against BP for the 2010 Deepwater Horizon disaster.

Louis Freeh, who was FBI director during 1993-2001, was appointed by the US district court in New Orleans that is hearing the case for damages over the spill.

Mr Freeh now leads his own risk management firm, and has worked on high-profile cases including, until recently, as bankruptcy trustee for collapsed broker MF Global, and on an investigation into Pennsylvania State University’s response to child abuse allegations. >> Read More

 

James Rickards is a hedge fund manager in New York City and the author of “Currency Wars: The Making of the Next Global Crisis” from Portfolio/Penguin. Follow him on Twitter at@JamesGRickards.

Investors have by now heard of the LIBOR scandal engulfing the banking industry. LIBOR stands for the London Interbank Offered Rate. To some it may be just the latest entry on a list of bank frauds and blunders in recent years, from mortgage scams to MF Global and the London Whale.

In fact, this may be the mother of all scandals—the one that finally leads to criminal charges and the insolvency of major banks. The fraud is breathtakingly easy to understand once past a small amount of jargon. Indeed, the simplicity of the fraud is the greatest threat to the perpetrators because here at last is a fraud that is easy for juries to understand and for prosecutors to prove.

LIBOR is the interest rate at which top-tier banks in London offer to lend to each other on an unsecured basis. The loans are usually short term, typically a day, a week, or several months. Historically the banks in the LIBOR market were among the strongest credits in the world and this type of lending was considered extremely low risk. As a result, LIBOR was among the lowest interest rates available in the market. Other interest rates including corporate loans were benchmarked to LIBOR and expressed as a spread, such as LIBOR plus 1 percent. LIBOR became the base rate used in calculating a vast number of other products and transactions. >> Read More

 

When Lehman Brothers collapsed at the height of the financial crisis, JPMorgan Chase was at the center of the storm. The bank was a major lender to the firm, which filed the biggest bankruptcy in United States history.

Now, more than three years later, regulators have penalized JPMorgan for actions tied to Lehman’s demise.

The Commodity Futures Trading Commission filed a civil case against JPMorgan on Wednesday, the first federal enforcement case to stem from Lehman’s downfall. The bank settled the Lehman matter and agreed to pay a fine of approximately $20 million.

The Lehman action stems from the questionable treatment of customer money — an issue that has been at the forefront of the recent outcry over MF Global. JPMorgan was also intimately involved in the final days of that brokerage firm.

The trading commission accused JPMorgan of overextending credit to Lehman for roughly two years leading up to its bankruptcy in 2008.

JPMorgan extended the credit using an inaccurate evaluation of Lehman’s worth, improperly counting Lehman’s customer money as belonging to the firm. Under federal law, firms are not allowed to use customer money to secure or extend credit.

The arrangement worked well for both parties. Lehman wanted a larger loan, and suggested counting money from the customer account to justify it. JPMorgan complied, counting the money as part of Lehman’s coffers. >> Read More

Links for You

15 February 2012 - 6:19 am
 

• Kass: The ‘Wisdom’ of Jeremy Siegel (The Street)
• Greece faces death by a thousand cuts unless it leaves the euro (Telegraphsee also EU officials shelve Greece meeting (FT.com)
• I.S.S. Adds to Criticism of Facebook’s Governance (DealBook)
• Repeat Until Happy (Behavior Gap)
• UBS issues $1bn debt for capital boost (FT.com)
• MF Global: Where’s the Cash? Defective Commercial Land Titles (Institutional Risk Analyst)
• Valentine Day Two-fer:
…..-Cut Your Valentine Some Slack: Partner’s Efforts at Improving Your Relationship Should Not Be Ignored (Science Daily)
…..-Love, Chocolate Good for the Heart, Says Cardiologist (Science Daily)
• Man as Machine (Wilson Quarterly)
• The Thermostat Wars (Slate)
• The Ultimate Guide To Writing Incredible Headlines (Content Strategistsee also On the Web No One Cares If You Write Like a Dog (Bloomberg)

• Felix Zulauf’s market prognosis (Business Spectator)
• In New Year, Being More Active Is Thus Far Good (Financial) Advice (WSJ)
• A secretive hedge fund legend prepares to surface (Fortune)
• For California, Attorney General Insisted on Better Terms in Foreclosure Deal (NYT)
• Wall Street’s Reputation Still Falling (DealBooksee also Wall Street turns wrath — and cash — on Obama (Politico)
• Interpreting the St. Louis Fed Stress Index (A Dash Of Insight)
• Why Tax Policy Assumes People Are Richer Than They Think (Economixsee also Private Equity Tax Break ‘Indefensible’ (Bloomberg)
• What Would the End of Football Look Like? (Grantland)
• Apple Apps Remain Developers’ Favorite Even as Android Spreads (Bloomberg)see also Apple Tops Google for No. 1 Image (Bloomberg)
• Austerity Tourism: Greek Travel Deals (Smart Money)

 

From Eric Sprott and David Baker

The Financial System is a Farce: Part Three

2011 was a merry-go-round of more bailouts, more deferrals and more denial. Everyone is tired of the Eurozone. It’s not fixable. There’s too much debt. The politicians don’t know what’s going on. Nothing has structurally changed. We’re still on the wrong path. There’s more global debt than there was a year ago, and it’s the same old song: extend and pretend, extend and pretend,… around and around we go,… and it isn’t fun anymore.

Just as we wrote back in October 2007, and again in September 2008, we feel compelled to state the obvious: that the financial system is a farce. It’s a complete, cyclical farce that defies all efforts to right itself. This past year continued the farcical tradition with some notable scandals, deferrals and interventions that underscored the system’s continuing addiction to government interference. With the glaring exception of US Treasuries and the US dollar (which are admittedly two of our least favourite asset classes), it was not a year that rewarded stock picking or safe-haven assets. Many developments during the year bordered on the ridiculous, and despite some positive news out of the US, we saw little to test our bearish view. If anything, our view was continually re-affirmed. >> Read More

Links for U

14 December 2011 - 5:58 am
 

MF Global for Dummies (i.e., Congress) (Peter Brandt)
• Hislsenrath: At home with Ben Bernanke (Alphaville)
• The best and worst of Wall Street 2011 (Fortunesee also Top economists reveal their graphs of 2011 (BBC News)
• Housing Bust to Look Worse With Sales Revised (WSJ)
• Gingrich Tax Plan Would Codify Lower Taxes On Rich Than On Middle Class (TPMsee alsoNewt Gingrich and his sleazy ways: A history lesson (Fortune)
• China-Based Hacking of 760 Companies Reflects Undeclared Global Cyber War (Bloomberg)
• The dos and don’ts of Googling people (CNNsee also Google’s 3 Top Executives Have 8 Private Jets (Tech Crunch)
• Amazon’s Kindle Fire lets kids charge up a storm (Yahoo Finance)
• Steve Jobs: Reflections on His Legacy (Wired)
• Handbook for Life: 52 Tips for Happiness and Productivity (Zen Habits)

Just Late Night and in Morning read these links……….u too can read and enjoy !

 

Nouriel Roubini was in fine form yesterday, scaring the bejeezus out of his followers on Twitter by saying that several huge financial institutions could collapse in the blink of an eye like MF Global.

 These houses of cards, Roubini tweeted, include:

The problem, as Roubini has consistently warned, is the banks’ dependence on short-term financing to maintain their long-term asset leverage and run their businesses.

What killed MF Global, Lehman BrothersBear StearnsAIG, and other huge financial firms, after all, was the sudden refusal of short-term lenders to continue lending money to the firms. >> Read More

 

Full bankruptcy filing attached below, where we find that in addition to owing JPM and Deutsche Bank $1.2 billion and $1 billion respectively, as bond trustees, the 7th biggest unsecured creditor with $845,397, is… CNBC? Perhaps that explains the objective reporting the Comcast station has provided on the topic of MF over the past several weeks, considering the caliber and quality of guests invited to opine. It also should be a reminder to all advertising collections offices to never be more than 30 days late on collecting receivables. Of course, this is pure speculation on our behalf. We are confident CNBC will provide a far more rational explanation why it is owed nearly $1 million by MF Global, and just what is the nature of services rendered…

 

MF Petition

 

It has been just over 48 hours since our call that PIIGS the world over will scramble to demand the same concessions that were just granted to Greece courtesy of its economy being in the toilet and getting worse (thanks to lies to misrepresent the Greek economy as being worse than it really was). We already got Ireland yesterday. Now it is Portugal’s turn. Reuters reports that “Portugal asked Mexico on Saturday to tell fellow G20 members next week that the United States should offer “financial help” to resolve the euro zone sovereign debt crisis, describing it as a “systemic and global” problem, a Portuguese government source said.” Of course, the “US” is a clear proxy for “everyone else” – that the US, whose politicians can’t agree on a fiscal stimulus for the US, let alone for some country by the straits of Gibraltar they have never heard of, will not move an inch to save Portugal is a given. Which means that once Portugal is, as it anticipates perfectly well, shut down by the US it will commence demanding for help from those who at least can grant it – the EMU and the Eurozone. And when those refuse, Portugal will do the glaringly obvious: take a page right out of the Greek textbook and proceed to suicide its own economy. And why not – it worked miracles for Greece. Now: two down and two to go. The only question is when does Italy do precisely the same logical next step, and tell the world that its $2+ trillion in debt, the second most in the Eurozone after only Germany, is unsustainable, and will need a modest haircut. 20% should do it. We wonder, what will that do to French banks (and their “perfectly hedged” US proxies – such as MF Global and others)?

The story from Reuters: 

“The crisis isn’t in the euro zone. It is a systemic and global crisis and we hope that other big G20 countries intervene,” the source told reporters in the capital Asuncion, speaking on condition of anonymity.

 The source added that Washington should help resolve the crisis “by boosting trade and also with financial help.”

 No one from Calderon’s delegation in Asuncion could immediately be reached for comment.

 Financial markets rallied strongly this week after European leaders hammered out a deal to recapitalize their banks, boost the firepower of a euro zone rescue fund, and impose hefty losses on holders of Greek debt. >> Read More

 

So much for the market “completely ignoring” the total chaos and complete cacophony out of the tragicomic DC soap opera which is transitioning into less of a comedy and into more of a tragedy with each passing day. For everyone still wearing rose-colored glasses here’s a refresher: stocks dropped, the S&P expressed in dollar terms, or adjusted for loss in dollar purchasing power is now negative for the year, bonds tumbled despite a “strong” auction driven almost entirely by Direct Bidders on the margin, and, the kicker, US CDS is now at 56 bps: US default risk is now the highest since February 2010.

US CDS:

Here is one attempt at an explanation from the media, always so eager to assign plotlines to an otherwise irrational market: >> Read More

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Technically Yours,
Team ASR,
Baroda, India.