MF Global dying

[pmbug]

MF Global Holdings Ltd., the holding company for the broker-dealer run by former New Jersey governor and Goldman Sachs Group Inc. (GS) co-chairman Jon Corzine, filed for bankruptcy protection as it seeks to reorganize after making bets on European sovereign debt.

The firm listed debt of $39.7 billion and assets of $41 billion in Chapter 11 papers filed today in U.S. Bankruptcy Court in Manhattan. New York-based MF Global’s board met through the weekend to consider options including a sale to avert failure, according to a person with direct knowledge of the situation.

“They were trying to get a deal but at the end of the day the majority of their business is built on trust,” Scott Peltz, the national leader of RSM McGladrey’s Financial Advisory Services Group in Chicago, said today in an interview. “They had a huge position in European debt, which led to a lot of the troubles. There will be questions about that.”

Corzine, 64, who helped run Goldman Sachs from 1994 to 1999, sought to transform MF Global into a midsize investment bank after arriving there in March 2010. He increased the firm’s risk and used its own money to trade, including investments in European sovereign debt that rattled markets.

Fifth-Largest

MF Global is the fifth-largest financial-industry public company bankruptcy by assets, coming after Lehman Brothers Holdings Inc., Washington Mutual Inc., CIT Group Inc. and Conseco Inc., according to BankruptcyData.com. It’s the eighth- largest bankruptcy by assets of any public company, according to the research group.

MF Global owns $6.3 billion of Italian, Spanish, Belgian, Portuguese and Irish debt, the company said in an Oct. 25 presentation. Concerns that it might lose money on the holdings amid Europe’s debt crisis led to demands from regulators to boost capital, credit downgrades, margin calls and bankruptcy, MF Global President Bradley Abelow said.
...

http://www.bloomberg.com/news/2011-...es-for-bankruptcy-protection-in-new-york.html

 

[KMS]

Surely not a credit event, nope.

 

[pmbug]

Investors in Australian grain and wool have been left unable to trade after ASX, the Australian exchange operator, suspended dealing in the wake of the collapse of commodities giant MF Global.

ASX on Tuesday ditched trading in futures in grains, including barley and wheat, and wool "until further notice" following the bankruptcy of the US-based broker, sunk by a $6.3bn holding of eurozone debt.

The measure went further than those imposed by peers, such as IntercontinentalExchange group, which runs New York soft commodities markets, and CME Group, whose exchanges include the Chicago Board of Trade, which have stopped at suspending the broker from trading.
...

More: http://www.agrimoney.com/news/mf-global-collapse-stops-trading-in-aussie-grains--3790.html

 

[pmbug]

I've been a client of MF Global since the Lind days, and I recently took delivery of a contract of white metal (which I want moved out of New York) which is now in limbo, along with all of my free cash in the account. While I would be surprised to ever see the cash again, I must wonder whether that now applies to metal as well. I do not believe the SIPC is going to "protect" anyone (nor is it really capable of doing so in reality).

Needless to say, this experience doesn't make me happy in the least. I am preparing to pull my accounts in two other broker/dealers as a result of this fiasco. It's now to the point that counter-party risk for those BROKERING the acquisition of physical is too great to deal with in this environment. Let my experience serve as an example to others. If there's any good to come of this, let it be a more informed public here.
...

http://www.tfmetalsreport.com/comment/80428#comment-80428

Ouch.

 

[DoChenRollingBearing]

On Monday I was all over Zero Hedge pasting Jon Corzine as The Biggest POS on planet Earth.

And now we see at tf's site that there are real people hurt here, not just traders being inconvenienced.

Yet another reason to buy the real physical gold. And to keep it close.

 

[KMS]

Wow. I feel bad for the good people that get hurt by this stuff. Not saying that everyone that gets screwed over by MF Global will be an innocent victim. I"m sure there are some real assholes that lose money on the deal. I couldn't be happier for them.

 

[pmbug]

Bruce Krasting warning:

...
I think some drop in confidence by market investors in secondary firms has to happen. Money has to leave those players. With that, will go the flow trading that comes with the accounts. Liquidity across all markets (especially futures) will be affected.

If we go down this road (we will if MF/the Banks actually used/seized clients money) the short-term consequence will be another big ramp up in volatility. Most assets classes will suffer in that environment.

Leveraging of "liquid" assets is a critical component of the global system. The repo markets are already under serious attack. The MF story could take us to a new level.

The absolute craziest outcome would be that we learn that it was Goldman who closed the books and seized the cash last Friday (someone did). It would be even crazier if this leads to a problem that gets out of hand. There’s a decent chance that it plays out along these lines.

http://www.zerohedge.com/contributed/mf

 

[KMS]

Wow that would be some sweet justice if GS got caught being directly involved with the illegalities of the MF Global shiz. Line them all up against a wall and assemble the firing squad.

 

[DSAbug]

Wow that would be some sweet justice if GS got caught being directly involved with the illegalities of the MF Global shiz. Line them all up against a wall and assemble the firing squad.

Let's hope that doesn't happen. That would pretty much bring down the whole derivative market in a matter of days.

What I want to see avoided is a quick resolution. Mainly, because we don't know what the other side will end up looking like. I'd much rather have a gradual systemic collapse where people are able to recognize the government's role in all of this.

 

[KMS]

I agree with you, Derek, but my sentiments would be the ultimate end-state of either scenario.

 

[pmbug]

A Republican U.S. senator has called on Gary Gensler, the chairman of the Commodity Futures Trading Commission, to recuse himself from matters related to bankrupt futures brokerage MF Global Holdings Ltd .

Senator Charles Grassley said Gensler's connections to Jon Corzine, who recently resigned as MF Global's chief executive, could be a distraction as the agency investigates the collapse of MF Global.
...
Gensler and Corzine worked at Goldman Sachs Group Inc at the same time and held prominent positions. They both left the investment bank in the late 1990s.
...

http://www.reuters.com/article/2011/11/04/mfglobal-recusal-idUSN1E7A31ES20111104

 

[pmbug]

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:

• Goldman Sachs
• Morgan Stanley
• Jefferies
• Barclays

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.
...

http://www.businessinsider.com/roubini-the-next-mf-global-collapse-could-be-goldman-sachs-2011-11

The squid will never be allowed to fail. Their tentacles control too many levers of power.

 

[DSAbug]

http://www.businessinsider.com/roubini-the-next-mf-global-collapse-could-be-goldman-sachs-2011-11

The squid will never be allowed to fail. Their tentacles control too many levers of power.

I completely agree. GS is the real reason why the CDS market didn't pay out.

 

[pmbug]

Jim Sinclair warns that the fallout from the MF Global scandal has only begun:

...
If the clearing system fails then you have nothing whatsoever. God help you if you are a farmer hedging your crop or livestock if you the farmer have nothing whatsoever due to a broken clearing house. You are insolvent regardless of the fact that your hedge may have been perfect for the needs of your operation.

Unless MF clients are made whole in every way the system is broken.

People did not realize then and some even now that the failure of Lehman broke the technical procedures (mechanism) for the functioning of the OTC derivative and for that reason broke the Western world’s financial system for which we are paying dearly today.

MF is a Lehman Brothers, but worse. OTC derivatives have always been a fraud but could have, before Lehman failed, been globally netted to practically zero.

The lack of faith in the clearing house system breaks the mechanism of the marketplace, even for legitimate transactions. This leaves gold in your possession as the asset of last resort. ...

More: http://www.jsmineset.com/2011/12/02/clearing-houses-are-the-mechanism-of-all-markets/

 

[ancona]

http://www.tfmetalsreport.com/comment/80428#comment-80428

Ouch.

If you can't hold it, you don't own it. These guys are rapidly losing the trust of traders around the world. Equity outflows are continuing unabated as investors, mom and pop and all manner of funds yank their dough from the casino. Pretty soon, the banks will only be trading among themselves.

Kind of like a circle jerk on a global scale.

 

[DSAbug]

Sinclair has been talking about direct registration of gold shares for a while and his reasoning has changed.. His main reasoning 6 years ago was to prevent people from getting the borrow on your shares.

The problem with that idea is if people are naked shorting, it doesn't do anything to help resolve that problem. However, it DOES prevent people from purchasing those securities in a margin account. Having a listing which is effectively 100% requirement severely limits which funds are able to purchase a company and severely limits their ability to raise capital. Most mining companies can not survive if they aren't able to raise capital.

 

[swissaustrian]

Watch Jon Corzine´s testimony before the House Agriculture Committee here
http://www.c-span.org/Events/Fmr-Se...ify-in-MF-Global-Investigation/10737426111-1/

 

[ancona]

Everything is OK now! John Corzine said he's not just sorry, but that he's deeply sorry, and still doesn't know where the money went.

This is just more bullshit from the Brotherhood of Darkness. Why is this douchebag not in a prison cell?

 

[DSAbug]

This is just more bullshit from the Brotherhood of Darkness. Why is this douchebag not in a prison cell?

Let's wait for it all to play out.. I think it's highly likely he ends up in one.

 

[swissaustrian]

Hearing continues

 

[DoChenRollingBearing]

Even if Corzine goes to jail, Obama will likely pardon him right after the election in 2012. And he would spend time in whatever Club Fed is the mildest. Nothing but the best for a big time Obama bundler!

I am surprised that he is not in custody as a flight risk. He may very well have big $$$ stashed overseas in a non-extraditable country.