So much about the collapse of MF Global, the international commodity firm, has revisited the worst sins of the 2008 financial meltdown. There's been outsized betting with other people's money using Wall Street created derivative instruments. Ongoing investigations now show that leverage in these wagers had even eclipsed the worst of the Lehman failure. As in 2008, there's been the total lack of oversight from regulatory agencies, as customer funds were diverted and used as collateral for Corzine's wagers and 50,000 accounts are now being moved without the cash that they came in with.
But perhaps the most stunning piece of news we're getting in the wake of the MF Global collapse is in the clients of the firm who managed to get away scot-free, with no freezing of accounts or capital -- particularly the accounts of the mega-cap independent oil company Koch Industries, run by the politically active Koch brothers.
A recent report in Reuters has described the billions of dollars of client accounts that were withdrawn from MF Global in the last few weeks before their collapse, including 8 accounts from Koch industries engaged in oil trade that were transferred to Mizuho Securities after years of a steady and profitable relationship with MF. The Reuters piece concentrates on the possibilities of legal "clawback" of client money if the bankruptcy does not allow remaining client accounts to be made whole.
The Reuters piece misses the point.
Both the Commodity Futures Trading Commission and the Chicago Mercantile Exchange were charged with overseeing MF Global, their clearing member. If we are to believe them, they had no idea of any difficulties within the firm before customer accounts went missing just a few days before the collapse. But someone clearly knew of the cratering positions and imminent collapse of MF Global, as billions of dollars of accounts were "coincidentally" withdrawn. And what do the Koch brothers say was the reason for these withdrawals? There's been no comment.
For those still battling the excesses of 2008 and those occupying Wall Street, this has been another proof of the inside, "fixed" operation of the financial markets. When banks go wrong, betting big with other people's money and losing, they can be sure of a bailout that guarantees their bonuses and businesses. And when firms are tailspinning to disaster, the richest and most financially influential partners are sure to get a phone call -- a "heads-up" - to save their assets and leave regular people with the mess.
Jon Corzine used his strong Wall Street reputation to intimidate regulators in establishing the positions that ultimately doomed MF Global. That reputation was built upon always taking care of your friends and your biggest customers.
The next investigation should question whether Jon Corzine used his last days at MF Global to help his friends one last time -- as for me, I have no doubt.
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