My afternoon train reading:

• Berlin May Have to Nationalize Giant Commerzbank (Spiegel)
• Day Traders: The Wild West of Finance (NYT Sunday Mag)
• The King of Human Error (Vanity Fair)
• MF Global and the great Wall St re-hypothecation scandal (Reuters)
• Former FDIC Chief Bair Calls for Stiffer Rules on Leverage (Bloomberg) see also Why No Financial Crisis Prosecutions? (Pro Publica)
• Britain Suffers as a Bystander to the Euro’s Crisis (NYT)
• For the Families of Some Debtors, Death Offers No Respite (WSJ)
• Unleash the Entrepreneurs (City Journal)
• Is Free Will an Illusion? (Scientific American)
• Gingrich, Backed By Ethanol Lobby, Supports Subsidy (TPM)

What’s on your Instapaper?

Category: Financial Press

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

21 Responses to “Thursday PM Reads”

  1. dsawy says:

    MF Global trustee ups estimates of customer funds in accounts:

    http://www.reuters.com/article/2011/12/08/us-mfglobal-trustee-idUSTRE7B725W20111208

    All I can say is WTF? WTF’ingF? How is it that a major FCM can not know how much money is in each account? How is this information taking so long to surface?

    I’ll bet that up until the day they shut down, if a customer had put on a trade without enough margin, MFG would have known *exactly* how much money they had in their account.

  2. mathman says:

    http://www.nakedcapitalism.com/2011/12/obama-road-tests-hopey-changey-big-lie-2-0-hell-reincarnate-as-teddy-roosevelt-if-you-are-dumb-enough-to-be-fooled-twice.html

    from the article

    “But more broadly, it’s blindingly obvious this Administration has never had the slightest interest in doing anything more serious than posture. As we wrote in early 2010:

    Recall how we got here. Early in 2009, the banking industry was on the ropes. Both the stock and the credit default swaps markets said that many of the big players were at serious risk of failure. Commentators debated whether to nationalize Citibank, Bank of America, and other large, floundering institutions..

    This juncture was a crucial window of opportunity. The financial services industry had become systematically predatory. Its victims now extended well beyond precarious, clueless, and sometimes undisciplined consumers who took on too much debt via credit cards with gotcha features that successfully enticed into a treadmill of chronic debt, or now infamous subprime and option-ARM mortgages..

    The widespread, vocal opposition to the TARP was evidence that a once complacent populace had been roused. Reform, if proposed with energy and confidence, wasn’t a risk; not only was it badly needed, it was just what voters wanted.

    But incoming president Obama failed to act. Whether he failed to see the opportunity, didn’t understand it, or was simply not interested is moot. Rather than bring vested banking interests to heel, the Obama administration instead chose to reconstitute, as much as possible, the very same industry whose reckless pursuit of profit had thrown the world economy off the cliff. There would be no Nixon goes to China moment from the architects of the policies that created the crisis, namely Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke, and Director of the National Economic Council Larry Summers..

    Obama’s repudiation of his campaign promise of change, by turning his back on meaningful reform of the financial services industry, in turn locked his Administration into a course of action. The new administration would have no choice other that working fist in glove with the banksters, supporting and amplifying their own, well established, propaganda efforts.

    Thus Obama’s incentives are to come up with “solutions” that paper over problems, avoid meaningful conflict with the industry, minimize complaints, and restore the old practice of using leverage and investment gains to cover up stagnation in worker incomes. Potemkin reforms dovetail with the financial service industry’s goal of forestalling any measures that would interfere with its looting. So the only problem with this picture was how to fool the now-impoverished public into thinking a program of Mussolini-style corporatism represented progress.

    The list of evidence supporting this view is so lengthy that I am certain to miss quite a few items: the lack of serious investigation, the phony stress tests, the perpetually missing in action DOJ, allowing the banks to exit the TARP pronto, the mortgage fraud whitewash investigation, the clever sidelining of Elizabeth Warren, the way too weak Dodd Frank legislation, which is being watered down further with the blessing of Timothy Geithner. And speaking of legislation, gee, if it was really that hard to prosecute bank miscreants, why wasn’t that incorporated in Dodd Frank? Awfully convenient to notice that supposed oversight now, with no hope of getting a tough bill passed at this juncture and statutes of limitations running out.

    Frankly, the fact that the Administration has joined Khuzami in the “oh, it’s SO hard to prosecute” messaging leads me to believe the SEC really will throw the case. It’s plenty clear this Administration has let the people who really count know it has no intention of ever carrying a stick.”

  3. swag says:

    Gaze into the Exploding Universe of Dark Money (sweet infographic)

    http://motherjones.com/politics/2011/12/super-pacs-501-c-groups-chart

  4. Newsboy says:

    “Obama’s repudiation of his campaign promise of change, by turning his back on meaningful reform of the financial services industry, in turn locked his Administration into a course of action. The new administration would have no choice other that working fist in glove with the banksters, supporting and amplifying their own, well established, propaganda efforts.”

    Frankly, the US.gov has been gearing up for currency devaluation for quite some time now – There is no other “end game” possible, since the FED/Treasury can not default.

    Of course, outright printing isn’t really an option available in modernity, thus the maintenance of TBTF, i.e. Too Big To Prosecute, who by their base nature support through artifice a proliferate Ponzi on a global scale, exporting US.gov inflation by the boatload each and every day…

    At some point out-of-control debt-based liquidity will choke the financial markets to death, and then not only will $20 trillion be reduced to a manageable size when introduced to a non-U$D monetary model, TBTF will become the nameless, faceless scape goat that diverts attention from the true culprits – US.gov debt creation.

    YMMV

  5. rd says:

    It is going to be very interesting see how MF Global plays out in the big picture of the financial sector and the concept of deregulation.

    Many of the people who are going to lose money in MF Global are conservative people in the Mid-West (where some key Republican primaries are going on). Once they fully realize that “deregulation” is going to cost them a fortune, it will be interesting to see if they want to see regulations backed away from or enhanced. It will be interesting to see how it plays out in the Republican primaries.

    Once people realize that Wall Street will use any poophole they can find to maximize their bets with other people’s money, the amount of faith in the financial system will plummet. I don’t think Obama et al are prepared to federally guarantee the whole futures industry through SIPC and FDIC.

    People will be sitting down and totting up their financial position over the holdiays. If MF Global isn’t largely cleared up by then, I would expect that there could be wholesale changes in how a lot of people manage investment accounts, especially futures. The CME has a lot at stake here. It will be interesting to see what they do.

    I doubt that Holder et al will have figured out by Dec 31 if they will press charges, but this is a massive test for Sarbanes-Oxley and Dodd-Frank. If they can’t figure out how to press charges on this one, then there is virtually no point in having securities laws. They blew it on Lehman, Bear-Stearns, and Countrywide. Now the ever gracious financial sector is giving them another bite at the apple.

  6. BusSchDean says:

    Re: MF Global…at what point does the calculus include: How many lawsuits will we face? How much will we pay? What are our legal costs?

  7. inessence says:

    Based on the MF Global rehypothecation article in Reuters, listed above, it appears that the use of client(?) money to leverage the sovereign bond bets was within the rules.

  8. Jojo says:

    Free Speech
    by Mike Masnick
    Thu, Dec 8th 2011 8:29am

    Breaking News: Feds Falsely Censor Popular Blog For Over A Year, Deny All Due Process, Hide All Details…

    Imagine if the US government, with no notice or warning, raided a small but popular magazine’s offices over a Thanksgiving weekend, seized the company’s printing presses, and told the world that the magazine was a criminal enterprise with a giant banner on their building. Then imagine that it never arrested anyone, never let a trial happen, and filed everything about the case under seal, not even letting the magazine’s lawyers talk to the judge presiding over the case. And it continued to deny any due process at all for over a year, before finally just handing everything back to the magazine and pretending nothing happened. I expect most people would be outraged. I expect that nearly all of you would say that’s a classic case of prior restraint, a massive First Amendment violation, and exactly the kind of thing that does not, or should not, happen in the United States.

    But, in a story that’s been in the making for over a year, and which we’re exposing to the public for the first time now, this is exactly the scenario that has played out over the past year — with the only difference being that, rather than “a printing press” and a “magazine,” the story involved “a domain” and a “blog.”

    There are so many things about this story that are crazy, it’s difficult to know where to start, so let’s give the most important point first: The US government has effectively admitted that it totally screwed up and falsely seized & censored a non-infringing domain of a popular blog, having falsely claimed that it was taking part in criminal copyright infringement. Then, after trying to hide behind a totally secretive court process with absolutely no due process whatsoever (in fact, not even serving papers on the lawyer for the site or providing timely notifications — or providing any documents at all), for over a year, the government has finally realized it couldn’t hide any more and has given up, and returned the domain name to its original owner. If you ever wanted to understand why ICE’s domain seizures violate the law — and why SOPA and PROTECT IP are almost certainly unconstitutional — look no further than what happened in this case.

    http://www.techdirt.com/articles/20111208/08225217010/breaking-news-feds-falsely-censor-popular-blog-over-year-deny-all-due-process-hide-all-details.shtml

  9. w/this..”…Frankly, the fact that the Administration has joined Khuzami in the “oh, it’s SO hard to prosecute” messaging leads me to believe the SEC really will throw the case. It’s plenty clear this Administration has let the people who really count know it has no intention of ever carrying a stick.”…”

    from mathman, above..

    BR,

    weren’t you giving ‘us’ the “Khuzami is a ‘tough M*****f*****’”-line not, all, that long ago (?)

    what was up with that?

  10. Sechel says:

    Re the Rehypothecation scandal.

    How does this get explained so the common man gets outraged, otherwise we’ll see this again. Does OWS get the real issues?

  11. Moss says:

    I guess we know now why AIG had Cassano based in the U.K. The whole Financial System is one big cluster.

  12. DrungoHazewood says:

    rd

    “If they can’t figure out how to press charges on this one(MF Global), then there is virtually no point in having securities laws.”

    Unfortunately Bingo! Another part of the productive economy gutted, as the parasitic branch grows ever more powerful. There just isn’t anyway we could be more fucked.

  13. beaufou says:

    “The whole Financial System is one big cluster.”

    Fortunately for us, after blowing up their own sector, bankers are now taking over the political process.

  14. VennData says:

    UFO Hunters Keep Pressing White House For Answers Through ‘We The People’ Petitions

    http://main.aol.com/2011/12/06/tased-and-buried-alive_n_1133688.html

    The ET Party will oust Obama.

  15. rd says:

    inessence

    Corzine said today he doesn’t know where the money is.

    If they were rehypothecating, then the financial controls that he swears per SarbOx are in place should know where the money is.

    So his company either illegally took the money and used it for inappropriate purposes (theft and fraud) or they did their normal business practices, their trade blew up, and he knows the money is bopping about in the UK someplace.

    They should be able to nail him under either fraud, SarbOx, or lying to Congress today.

    The big news today for futures users is that they need to pull out their legal dictionaries and go through all of their fine print on their brokerage and clearing house contracts (possibly even at arms length to them through a broker) and understand how words in their contracts like rehypothecate work in the international financial system under multiple countries’ legal and regulatory systems. I think your average farmer should be able to manage that quite easily.

  16. slowkarma says:

    I’ve just read “Too Big to Fail” and I’ve already read a few other books on the crisis and the question that continues to intrigue me is not whether or not there was criminality involved, but WTF they were thinking? I mean Dick Fuld is maybe reckless and somebody might suggest he’s a criminal, but he lost nearly a billion of his own money. WTF was he thinking? And now Corzine, already unnaturally rich, makes an out-of-control bet that he not only loses, but which takes down the entire firm and something like 15,000 jobs AND makes him into a fool AND could get him sent to prison (he mentioned today that he might have to take the Fifth) and you ask, WTF was he thinking? He’s an ex-Goldman head, ex-Senator, ex-governor, rich as Croesus, and he’s now looking at his declining years at Club Fed? WTF?

  17. scottinnj says:

    What’s interesting in the MF hearings is that what seems to get missed is that good risk management is really, really hard. Risk managers have to pull the punchbowl away from the party, and they get paid a lot less than the BSD’s on the trading risk. And almost all the time if there is a p***ing match with the trading desk the risk management people lose.

    There was one exception to this, one bank that I know that really gave their risk management the upper hand, and that was Goldman. I think this goes back to its partnership days when the BSD’s were playing with the partners money. You want a big bonus fine but you’ll have people looking over your shoulder and if you don’t like it go to CS or Merril. The quality of the risk management at Goldman is why they are successful, and the senior management has their back. Corzine and many ex Goldman thinks it is them, it wasnt it was the risk management culture

  18. godot10 says:

    If I buy a car from a curb side dealer believing it to be legit that later turns out to be stolen, it is tough luck for me. I’m out of a car.

    For the bank that took MF collateral that came from customer funds, they get to keep it!

    We might as well just all bend over and get ready. We know they are eventually coming for us.

  19. godot10 says:

    If I buy a car from a curb side dealer believing it to be legit that later turns out to be stolen, it is tough luck for me. I’m out of a car.

    For the bank that took MF collateral that came from customer funds, they get to keep it!

    We might as well just all bend over and get ready. We know they are eventually coming for us.

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