Via Robert Mish, excerpt from current issue of the Hat Trick Letter
subscription highly recommended.
(this is IMO the best newsletter for understanding the political-economic environment that your investments must consider and are affected by & best value for cost of all such newsletters)
Also, at the end of this article below is the Peter Schiff interview with Ann Barnhardt on the MF Global debacle.
Also, at the end of this article below is the Peter Schiff interview with Ann Barnhardt on the MF Global debacle.
This scandal may dwarf all 2008 scandals, even the brokerage & bank bailouts & Madoff
in what sacrosanct principles & protection for private property in America are gone, sacrificed to the power of corruption & cronyism. Segregated customer commodity accounts & even precious metal bars were either gambled away or stolen, in a sense, by MFGlobal top powers either alone or in conspiracy with their creditors & banksters. MFGlobal is now under bankruptcy receivership. Investigations & lawsuits continue.
◄$$$ THE MF-GLOBAL CASE DEMONSTRATES THAT DERIVATIVES TAKE PRIORITY OVER OTHER ASSETS, THUS SUBORDINATING ALL OTHER ASSETS. THE DERIVATIVES PERMIT THE PRIVATE ACCOUNTS TO VANISH. THE 2005 REVISED BANKRUPTCY LAW ENABLED DERIVATIVES TO GO TO THE TOP OF THE LIST, THUS WIPING OUT ALL JUNIOR ASSET POSITIONS. THE MORGAN STANLEY EVENT RECENTLY DEMONSTRATED THE SUBORDINATION RISK, BUT THE STORY WAS NOT DIGESTED PROPERLY, LIKE IT CAN BE NOW. $$$
The nasty vicious dirty structural detail has come to light. To see it, one must be diligent and alert when observing the events behind the MF Global bust and the ensuing battles. The highest subordinated position for derivatives has been made clear in a financial corporation structure, manifested during the MFG events unfolding under the JPMorgan pressure tactics. The pecking order had been established in the 2005 bankruptcy law during the Bush Admin. Most people paid attention to the individual bankruptcy changes, whereby a debt wipeout against assets was eliminated essentially, replaced by a more strict rule to abide by for debt restructure, with tax obligations carried over. Chapter 13 replaced Chapter 7.The more important item was the ruling for subordinated assets in bankruptcy for financial firms. The ultimate motive could be to destroy all private accounts, as the derivative mountain results in an avalanche of debt destruction that ruins private assets. The destructive levers are installed in the actual financial engineering machinery. Derivatives are set up to be a toilet plunger device that can ruin all brokerage accounts, all pension funds, and maybe all certificates of deposit.
At issue is the safety of brokerage accounts for regular folks, like stock investors, like mutual fund investors, like 401k/IRA investors, the individuals who increasingly are treated like banker vassals. The vanishing act that befell 140 thousand MF Global account holders can happen to the rest of the people, not just farmers, energy firms, and exporters. CEO Jon Corzine was doubling down on bad European sovereign bond bets, using essentially futures contract account holders (other people) as collateral. If not used directly as collateral, then the accounts vanished when the bond bets went bad and the MFG firm went bust. Open the eyes to Clawback Risk more generally, as the ruined firm can snatch & grab all funds beneath it in the pecking order. The unaware public must be careful, or they could lose everything in bank and investment accounts, down to the last penny, even funds recently removed. Having FDIC insurance will mean nothing. The bankruptcy reform law in 2005 placed derivative claims in front of depositors in a business failure, which includes a bank failure. The colossus JPMorgan is claiming in the MF Global case is that the derivative trade is entitled to preference over those who had cash in accounts, maintained either as a margin deposit or free cash. The actual derivative contract is the Repo to Maturity trade on the European sovereign bonds. They are the higher order derivative contract in effect. If a major bank conglomerate goes bust and enters failure, the same claim supported by the same Bankruptcy Law can be invoked to confiscate the entirety of private bank accounts, even brokerage accounts, perhaps pension fund accounts, maybe even bank certificates of deposit. Here is a worse nightmare fact. If the individual suspects a ruin in progress, detects the impending blowup shortly before it happens, the risk still applies. All funds that were removed under 90 days before the failure event are subject to confiscation and loss, as in total loss. It is called the exposed risk through clawback! But the authorities must find the money or firm or person.
MY VIEW IS THAT THE HIGHEST SUBORDINATE POSITION OF DERIVATIVES IS A DEVICE DESIGNED TO WIPE OUT THE MAJORITY OF US PRIVATE WEALTH. It is intended to create a debt slave state. One might argue that major financial firms are attempting to cover their losses, to protect themselves, and to walk away with minimal damage. The Jackass disagrees. These are post mortem events, where the giant financial firm is dead, being carved up, and analyzed in an autopsy. No survivors emerge. A black hole has been constructed with added reinforced power. The subordination rule seems clearly a device to ensure that if the corrupt firms go bust, so will the individuals. It is the Mutually Assured Destruction principle at work. This fallout goes beyond the insurance coverage of the Federal Deposit Insurance Corp. The subordination rule permits the big busted bank to wipe out the individual funds, legally, without remedy. A cascade failure of several large banks would easily result in loss claims that would reach into the $trillions with millions of vanished private accounts of all types.
The Bank of America event several months ago shed light on the practice. BOA brought over $53 trillion in derivative contracts to their balance sheet, inherited from Merrill Lynch in the takeover. That was an marriage merger arranged by the FDIC, acting as Wall Street harlot. They wished to remove bank failures and mass liquidation, to keep America strong to be sure. At risk was and still is the $1.03 trillion in client accounts under ML brokerage. If BOA goes bust, all ML private stock accounts will surely vanish. The unaware and overly trusting individuals again are fodder before the Wall Street cannons. Account holders should worry.
The Market Ticker summarized. They wrote, "A fairly cogent argument can be made that what BOA did was tantamount to intentionally placing an armed financial nuclear device in the center of the board room table and then daring anyone, including the government, to come tamper with it and risk setting it off, knowing full well that if it explodes it is utterly impossible to contain the damage to our economy and financial system. Just in case you missed it, this risk is not limited to Bank of America. Go look at any of the large banks and their derivative book of business notional value and then tell me that it makes a bit of difference which institution we are talking about at any instant in time. If this risk has not sunk into your brain by now despite my incessant table pounding, you need to go for a psychiatric examination stat. This is not to say that you are about to have the entirety of your savings accounts, CDs, and similar funds disappear, because nobody knows exactly how much risk lies where with what in the US banking system (say much less the European one) and thus the odds of such an event cannot be qualified in any meaningful way. But as we have seen since 2007, executives will lie with impunity about their exposure and level of risk in this regard and despite the Sarbanes Oxley Law, which allegedly makes such lies (when reduced to writing in a quarterly or annual report) a crime nobody has been prosecuted for doing so. It is quite clear to me that the USDept Justice is intentionally running the clock on the statute of limitations so those who did and do so get away with it. The bottom line is this: The risk is very real as customers of MF Global have now discovered the hard way. If you are sticking your head in the sand at this point, you have no right of complaint when and if it happens to you." See the utterly frightening alarming Market Ticket article (CLICK HERE) and the Zero Hedge article (CLICK HERE).
MF-GLOBAL MARKET IMPACT
◄$$$ SUPPLY CHAIN INTERRUPTIONS SHOULD BE EXPECTED. AS PRODUCERS DEAL WITH THEIR BUSINESSES WITHOUT THE RELIABLE FORM OF RISK HEDGES, THE SUPPLY CHAIN WILL BE REDUCED IN VOLUME. MANY HAVE ALREADY LOST THEIR SEED (LITERALLY) MONEY AND SEED (FIGURATIVE) CAPITAL. AT GREAT RISK IS THE SUPPLY CHAIN IN THE NEAR FUTURE. EXPECT SHORTAGES AND HIGHER FOOD PRICES. $$$
MF Global has revealed many things, among them is how the inventories dwindle and the shelves might go empty. Producers and suppliers cannot properly manage risk. They are either pulling their funds out of risk-filled accounts, or struggling to recover funds from stolen accounts. As farmers, energy suppliers, and exporters find it increasingly difficult to build in a reliable form of risk hedge strategy, the supply chain will be reduced in volume from their withdrawal. What strain has been suffered on the banking side from insolvency, seen in shortages at ATM machines, has transferred to the tangible economy. Take one Minnesota farmer named Dean Tofteland, who for the first time in 25 years has missed his deadline to buy seed for the spring corn and soybean crops. The land in the North Central states enjoys sunlight until almost 10pm in June. His MF Global account of $200,000 is missing. He cannot buy seed at discount. He and other farmers find themselves in a cash crunch that will ripple far beyond the futures market, all the way to supermarkets. At least one third of farmer accounts is missing. They have postponed purchases of seed, land, equipment, and more. Actual decisions are affected on the farm, where US crop outlook has a big black cloud extended from Wall Street, the crime syndicate location. Look for lower supply of food products. Look for more shortages and higher prices. The supply chain is at risk. See the Reuters article (CLICK HERE).
◄$$$ THE MISSING MF GLOBAL MONEY WENT INTO JPMORGAN ACCOUNTS IN LONDON. THE US CONGRESS SHOW IS A PURE CHARADE. LIKE WITH THE MADOFF MONEY, THEY KNOW WHERE IT IS. THE APPEARANCE OF AN INVESTIGATION IS THE MASKED FACADE PRESENTED AS JUSTICE. THE UNITED STATES SIDE PREFERS TO KEEP THE FACTS IN THE DARK, TO SEARCH ENDLESSLY FOR MISSING FUNDS WHEN THEIR LOCATION IS KNOWN. THE TRUSTEE JUDGE IS SHOWING HIMSELF LOYAL TO THE SYNDICATE IN THE GRAND COVERUP. $$$
The MF Global executives working in London received lavish bonuses on the day before the bankruptcy filing took place on October 31st. The same offices received $500 million of the (never) missing funds raked from the segregated MF Global client accounts. The JPM hands are dirty. The story has brought new meaning to investing other people's money, since JPMorgan used client money to put a patch over a black hole created by both precious metals and the European sovereign debt. They used client assets as collateral. They cited the latter, since overseas, ignoring the former, since glaring publicity is not desired. KPMG was hired to recover funds for MFG clients in London. Richard Heis, a partner at KPMG Ltd inLondon, is involved in the recovery supervision. KPMG has recovered $500 million of MF Global funds, a story refused for release in the United States, the controlled news environment. The trustee has admitted that over $1.2 billion might be missing. The court appointed trustee James Giddens serves as the US trustee, which means he will lead the cover-up and whitewash. One of their first acts and deeds was to confiscate the account receipts so that clients could not prove their account value before they were rifled. A firewall of information has been created between New York and London. My figure for total loss (theft) remains much higher, since not included in the tally are scattered missing accounts that were cleared by MFG, caught closeby and dragged into the black hole descent into the vortex. A large body of other accounts caught near the hole are also missing. See the Cafe Americain article (CLICK HERE).
The MF Administrator claims to know the location of all the missing money. The story has not been publicly aired on the US side of the Atlantic, for obvious reasons. The press is controlled by the same criminal syndicate. The British administrator of MF Global Holdings Ltd has made it known that of the British unit's segregated client funds have been found. The KPMG executive Heis is still recovering customer assets. Heis is on record reciting the allegation in the "United States is that nobody knows where the money is. We know exactly where the money is." It is hiding in London. KPMG serves to supervise the special administration of the MFG London unit, officially to unwind failed financial firms. KPMG has been overwhelmed by the urgent need to unwind a huge pile, millions of positions. See the Bloomberg article (CLICK HERE).
BobO is an astute Hat Trick Letter subscriber. He summarized the ugly situation well, when he said, "OK, let me see if I follow this. MF Global included the standard Dewey, Cheatum & Howe law firm fine print and legally transferred their client collateral to their UK subsidiary, so as to circumvent stricter USrequirements. It was then legally pledged by MFG as collateral under more laxUK regulations for better rates on its own loans. The MFG creditors then allegedly legally seized it when MFG defaulted. Thus $1.2 billion is legally gone.In its place, a Congressional sub-Committee investigation." That sounds about right.
The ugliness of the story is beyond description. Several facets have emerged. Even the MF Global cash left on the morning after was scraped up by JPMorgan, claimed as its own so that the giant corrupt bank could pay the bankruptcy trustees and gain influence, like having JPM sit on the committee for disposition of the credit claims. They want to be first in line, the thief to decide on channeled funds. A ripe $25 million will go the trustees, whose early decision was to keep it from the customers whose accounts were looted. JPM was actually given a lien on all the company's assets, from which they stole. No money is missing. The trail is all clearly marked electronically. The Financial Regulatory Bill shined floodlights on the trails. Like with Madoff Funds, their locations are known but the US Congress charade is conducted to create an illusion of justice. The trustee's primary job will be to cover up the theft for JPMorgan. Nobody will go to jail, certainly not former Senator and Governor Jon Corzine. He might have a fatal accident, served up as a hit & run victim in order to create an even bigger black hole for evidence to vanish. Dead men cannot defend themselves and their burial sites usually contain a grand pile of papers that disintegrate, all figuratively speaking.
This is not a routine bankruptcy. This is a crime scene without the yellow tape. JPMorgan averted a COMEX default with a deft move of pure theft. The fate of cases like Highridge Futures Fund will be decided in the courts. They had an account with $50 million missing, even to appear on transfer lists. JPMorgan managed to snare some Italian Govt Bonds from the MFG dung heap at a ridiculously low discount price, after the bust. The move aroused the curious eye of the compromised Giddens, who as estate liquidator announced as MFG lender, JPM will be investigated by prosecutors but not prevented from continuing their criminal fraud. Whatever they find as evidence will be destroyed. US Bankruptcy Judge Martin Glenn in Manhattan overruled objections and supported MFG & JPM, demanding the victims prove their case, that recovered money (crumbs on the floor) could be part of the $1.2 billion missing from their segregated accounts. See the Bloomberg articles (CLICK HERE and HERE). Also, see the video that alleges JPMorgan averted a COMEX gold default (CLICK HERE).
◄$$$ THE CHICAGO MERCANTILE EXCHANGE SEPARATED ITSELF FROM MF-GLOBAL. EITHER THEY ARE TOSSING CORZINE UNDER THE BUS OR DEFYING THE LEGAL FORCES TO CATCH THEM, AS ATTENTION IS DRAWN TO MF-GLOBAL. IT IS A GIGANTIC CRIME SCENE, ONE TO BE REPEATED. MY BELIEF IS THAT CORZINE WILL BE SACRIFICED IN SOME MANNER FOR THE SAKE OF THE CARTEL. ALL WALLS ARE CLOSING IN ON CORZINE, THE NEW FALL GUY. $$$
The Syndicate occasionally needs to kill off one of its own to continue. Lehman Brothers was such a kill job. Their dead parts, along with the confusion, enabled several tasks to be done, thus perpetuating the criminal system. My belief is that they are protecting the cartel at the expense of what they paint as a lone operator in Corzine at MF Global, in a concerted strategy. If Corzine falls from grace and is prosecuted for felonies, then attention will turn away from the other criminals, like JPMorgan. Clearly the ex-GSax CEO was the patsy, to take the counter-party disastrous side of European sovereign debt for JPMorgan, which underwrote the derivative insurance. Also, another possibility, Max Keiser reports murder threats by Jamie Dimon of JPMorgan to Corzine personally if he did not follow explicit instructions on stealing client funds. It is more than just a matter of the money, but rather the removal of obstacles in the private camps that demanded Gold & Silver delivery. The client funds were the key to gigantic leverage within the criminal fraud. Not surprisingly, after the theft by MFG & JPM, the precious metals prices fell hard. Resistance was vacated from the premises. The only remaining problem for the JPM crime bosses is that the next victim will be the COMEX itself. It will resemble an abandoned warehouse that is better described as a whorehouse.
At the MF Global Senate hearings, in his oral testimony CME Executive Chairman Terry Duffy indicated clearly that one of the CME staff was told during their audit of MFG that the Jon Corzine was aware of large loans and disputed transfers made. The Duffy testimony directly contradicts Corzine during his earlier testimony, when he claimed to know nothing. The CME appears to have broken ranks with the banksters or cut off the patsy. Look for Corzine to be thrown to the wolves, tossed under the bus, sacrificed on the satanic altar. Pick your phrase, as all apply. An MF Global employee had advised the CME that Corzine had been aware of a $175 million loan made to Euro affiliates only days prior to the bankruptcy. The loan was from commingled customer accounts. The testimony calls Corzine a liar under oath before the USCongress. Technically, the transfers of customer funds for the benefit of the firm constitute serious violations the Commodity Exchange Act, which protects segregated accounts. The various testimony points to MF Global knowing about ransacking of client accounts and urging CME not to pursue the search for it. By the way, Duffy and the CME have made it very clear that CME will in no way cover losses (theft or vanish) suffered by MF Global clients. See the Zero Hedge article (CLICK HERE).
◄$$$ JPMORGAN INCREASED THEIR REGISTERED SILVER INVENTORY BY THE SAME AMOUNT THAT NOTICES FOR DELIVERY WOULD HAVE BEEN FORCED TO HAND OVER ON THE RAMPS. THOSE EXPECTING DELIVERY HAD THEIR POCKETS PICKED AT THE WINDOW. THE DATA IS IN FULL VIEW, NO SUCH THING AS COINCIDENCE IN WALL STREET CRIMINAL EVENTS. $$$
On its face, evidence mounts that JPMorgan simply converted 614k ounces of MF Global client silver into JPM licensed vaults. The corrupt kings tried to sneak a massive 613,738 ounce silver adjustment onto their books on November 25th, a thin pre-holiday day. It was deposited into The Morgue's eligible vaults on Friday November 18th. The giant criminal syndicate bank adjusted this amount of silver from Eligible vaults into Registered vaults on a single day! Joining them was Scotia, which followed up its 1.2 million silver ounce addition in the previous week with a hefty increase alongside JPM, theirs being a massive deposit of 2,395,835 ounces. Rather coincidental that Brinks had a nearly identical withdrawal the day before of 2,346,587 ounces. The huge question focuses on where this silver came from. This is hardly a simple client deposit at JPM vaults, since it was adjusted into Registered inventory. One should note that 1,420,916 of Registered silver was at that time currently unavailable, nowhere to be found in the aftermath of the MF Global collapse and scandal. The breakdown of storage data in the wake of the MF Global client silver theft reveals that Registered silver is missing from every single vault except JPMorgan's!!
Review the timeline. MF Global declared bankruptcy on October 31st. About a week later the CME began reporting that 1.4 million ounces of registered silver was unaccounted for and unavailable for delivery, including 627,182 ounces from non-cartel banks. About 7 to 10 days afterwards, JPMorgan suddenly reported a deposit of 613,738 ounces into eligible vaults. Exactly seven days later, JPMorgan adjusted this silver into Registered vaults. JPMorgan has not had a significant silver deposit in months prior to this bountiful day. Great work on the part of the Silver Doctors in the forensic analysis. Too bad they are not interviewed on CNN, CNBC, Bloomberg, FoxNews, or USCongress, nor mentioned in Wall Street Journal, Barrons, New York Times, London Times, Financial Times.
◄$$$ CORZINE HIMSELF IS THE MF-GLOBAL FIREWALL. THE SECONDARY FIREWALL IS HIS COZY FRIEND GENSLER FROM THE C.F.T.C. WHO RECUSED HIMSELF FROM THE CASE. CORZINE HAS HAD NO ACCESS TO DATA FOR DEFENSE, SINCE IT IS BEING DESTROYED AND CAPTURED, LIKE FUTURES ACCOUNT RECEIPTS. GENSLER CAN CLAIM NO ACCESS TO DATA ALSO, SINCE HE RECUSED HIMSELF. $$$
One friend of a colleague had his six-figure account stolen, since kept too close to the MF Global fire. He reported that the bankruptcy trustee did something very unusual. The trustee seized all account receipts, thus making it impossible for aggrieved client victims to prove the amount of their loss in the grand larceny.That is not the normal procedure and should serve to convince any reasonable observer that the coverup is well along. The JPMorgan accomplice thief absconded to London with the theft, home of John Pierpont Morgan and the site of their loyalty in service to the Queen. If this story and associated interview does not stir you the reader, then you have neither a pulse nor a conscience. Personally, the Jackass has seen the Corzine testimonies, and reaction was visceral, like it is with all Goldman Sachs scum. My attention was lost when immediately the placard was visible HONORABLE JON CORZINE before the Congressional Hearing. Somehow contempt was more apt than respect. The placard was a statement that the committee members planned to treat Corzine with kid gloves. The questions tossed at Corzine at the hearing were soft lobs. They accepted his thin excuses and shallow recollections. The respect given was out of line. One must have thought that Corzine was the wronged party! A couple of Congressmen even asked for his advice for a solution so it would never happen again.
We have seen this Madoff movie before. The money is not missing. It is tucked away safely in syndicate closets. The most pathetic display in my view was when Corzine claimed that his back office assured him that sending clients funds to the JPMorgan office in London office was alright. How absurd! The back office contains his subordinates, and they are not lawyers. He kept repeating he did not order this or that, did not instruct anyone to do this or that, when he left open how he probably did it himself. Corzine has friends in high places and will never see jail time, a Goldman Sachs directive decree. If the heat becomes too intense, my guess is Corzine might suffer an unfortunate accident or suffer a heart attack. If Poor Jon saw the Duffy testimony by CME before the US Congress, he must have very worried about his future and safety. The ensuing black hole would be very useful, kind of like Vincent Foster in the early Clinton Admin. He refused to go on orders to Switzerland to make a $250 million homage fee to the masters, as part of a gigantic fraudulent role program begun by Rubin that continues today, and also involves the Bank of England. The following photo speaks volumes.
◄$$$ LEGITIMATE HONEST FUTURES TRADERS WILL DEPART FROM A CORRUPT SYSTEM THAT CONFISCATES (STEALS, AGGREGATES) CLIENT FUNDS. MORE WILL FOLLOW THE BARNHARDT LEAD. THE INTEGRITY OF THE ENTIRE US-FINANCIAL SYSTEM IS FINALLY SEEN AS CORRUPT. ALREADY DEALERS SHY AWAY FROM PILING ON MORE RISK, REFUSING DERIVATIVE TRADES. $$$
Colleagues and followers of the Jackass knew the system has been corrupt for years. Finally the corruption is in full view, naked and bold, even desperate. The thieving JPMorgan has hidden behind their London skirts for protection, cowards to the end. The relatively young futures brokerage house called BCM Capital shut down for fear of having its clients accounts pillaged by Wall Street. The criminals in charge know no limits to their thefts. In an open letter, Ann Barnhardtmade an impassioned speech, perhaps the most damning indictment the Jackass has ever read or heard in a lifetime. This is a bonafide clarion call to beware of profession syndicate thieves. See the Zero Hedge article (CLICK HERE) and the Financial Sense interview (CLICK HERE) where she urged investors to flee paper assets. Ann Barnhardt made several key points in her note and delivered interview. The following are her main points.
- The base of a leveraged account must be kept segregated and remain sacrosanct. Client funds are no longer safe, as the backstop has been shown as flawed in the current US system. A firm failure should see the company reduced to ashes, but the client funds left intact. That is no longer the case in the United States.
- Jon Corzine of MF Global stole client funds at his firm. But he is a Wall Street friend and crony. The regulators compounded the problem by freezing accounts and refusing their liquidation, to put into safer pastures. (My view is the regulators enabled the last penny to be stolen.) No informed person can continue to engage these markets, and no moral person can continue to broker or facilitate client positions.
- The MF Global asset positions are not unique regarding exposure to European sovereign junk debt. The exposure is industry wide and continues to place client accounts at risk. The MFG leverage was estimated at 100:1 ratio, much greater than other firms. The CME did not backstop the MFG implosion because they knew a backstop would have been required across all of Wall Street. The problem is a systemic problem, not merely isolated to one firm.
- Perhaps the most ominous dynamic is the risk of potential clawback actions. Such an onerous process permits a bankruptcy trustee to legally seize assets that departed a bankrupt entity in the time period immediately preceding its collapse. Funds withdrawn from MFG client accounts less than 90 days from the collapse could be seized by the trustee, like a black hole aftermath in suction. Regardless of client detection of fraud or insolvency or recklessness, the client funds might be vulnerable. This is a possibility.
- The futures and options markets are no longer viable. Investors should withdraw from all markets, to protect their equity. The system no longer functions with integrity, overloaded with risk. The rule of law is non-existent. It is replaced with criminals aided by political cronyism. Barnhardt will return to the brokerage business only when the USGovt has been replaced and reformed.
IMPLICATIONS TO PRIVATE ACCOUNTS
◄$$$ CLIENT ALLOCATED ACCOUNTS ARE NOT SAFE. THE DISPOSITION OF THE MF-GLOBAL ASSETS WILL POSSIBLY REACH INTO CLIENT GOLD BULLION STORAGE, CAUSING A FIRESTORM OF PROTEST. THE CLASS ACTION LAWSUIT AGAINST MF-GLOBAL (AND IMPLICITLY JPMORGAN) BY THE COMMODITY CUSTOMER COALITION UNDER THE DIRECTION OF KOUTOULAS WILL REVEAL SOME EXTREMELY SCUMMY DEVELOPMENTS. THE UNITED STATES IS BEING EXPOSED FOR ITS INDESCRIBABLY DEEP CORRUPTION. $$$
The bankruptcy trustee for MF Global is attempting to seize and liquidate even the stored client Gold & Silver bullion sitting in supposedly protected Allocated accounts. Warehouses and bullion dealers are being exposed as not safe to store private gold and silver, even with clear warehouse receipts. The futures market run by CME and the regulated system overseen by CFTC and CME are defaulting on obligations. The trampling of property rights is going much farther than with big failures like Lehman and Bear Sterns, where the customer accounts were kept intact and transferred to safety before the liquidation process. Being in possession of Gold & Silver within a fractional reserve scheme is subject to much more counter-party risk than admitted or imagined. Witness the Fascist Business Model in full glory at climax of systemic failure. The lesson learned is that counter-party risk exists and persist if the bullion metal is linked in the chain to another party or under their roofs, even if a market entity, large financial firm, or a primary dealer, even the US Federal Reserve. What is happening in the MFG case is a Bankruptcy Trustee has attempted to pool private bullion holdings with the rest of the paper assets, then forcing liquidation at prices that are being front run by the Street for even more syndicate profit after thefts.
Clients are soon to be forced to accept whatever paper settlement given, or work for several months to retrieve their assets. So far their assets have been frozen for almost a month, funds unavailable, while the markets fall. The forced action seems consistent with extensive rehypothecation of client assets, meaning the failed MF Global abused those assets by posting them as collateral in a failed investment speculative scheme. Jesse calls it a pseudo-legal fig leaf, a convenient rationalization. The customer assets were stolen. They were used by MF Global to satisfy a urgent margin call right before their bankruptcy, even as MF Global was paying bonuses to its London employees. The weak-kneed trustee is too timid to attempt a clawback into JPMorgan accounts. Incredibly, the regulators and the exchange officials are in shock and disbelief on how far the exposed game has gone out of control, as they try feverishly to resolve and control the situation. They must preserve investor confidence. At risk is a run on the system, and full exposure of the US financial markets as grotesquely corrupt. See the CafeAmericain article (CLICK HERE). Assuming extremely deep corruption has been a mainstay in Jackass forecast success.
The class action lawsuit lodged by the Commodity Customer Coalition is making headlines, led by James Koutoulas, the acting attorney for the group and CEO of Typhon Capital Mgmt. It has revealed some sordid details on the large US financial firms and their emergency practices, basic theft, confiscation, forced liquidation, and trampling of property rights. The coalition represents 8000 investors with exposure to MF Global, many of them hedge funds. Koutoulas calls his action a declaration of war. He is very bold, whose interview on Bloomberg was seen. The trustee Giddens (a certain tool for the major banks) has proposed dumping all remaining customer assets into a single pool that would pay customers only 72% of the value of their holdings. The pile includes gold, silver, cash, options, futures contracts, and commodities. He wishes to act expeditiously, which means in a manner favoring the thieves and criminals. A full liquidation is easiest, and would not expose the illicit usage of client assets as collateral. It would not expose perhaps the lease of Allocated gold, its subsequent sale, and impossibility to return it under contract. Investors are raging mad, angry, fuming,vehement in protest. They oppose the radical solution in the redistribution of property. Clients with warehouse receipts for Gold & Silver bars have claims on assets that still exist and can be readily identified, or so they think.
A quick comment, an I TOLD YOU SO by a strong reliable veteran gold trader who has been a valuable source of information to the Hat Trick Letter for 3-1/2 years. He said late last week, "Not only have I been telling friends and clients what risk they take to leave their physical with the big Boyz and or whatever institution.If your metal is not in a vault where you have instant access and lift authority, and know that the physical is held in that vault in a segregated fashion, then you are royally screwed. A beneficial owner must have unrestricted access and disposal authority over his metal at all times, and exclusively that owner. The MF Global fraud will trigger other Allocated certificate holders to demand for their physical to be delivered. Much of their precious metal bars is long gone, leased and sold illegally. The surprise will be huge once they find out that these banksters are between 40 and 60 thousand metric tons in deficit. They have illegally been leasing gold & silver, replacing them with certificates, lying to clients, assuring them of their safety, over many years. That is a massive fraud soon possibly to come to light. Watch the Swiss lawsuits, if any information can be found." The Jackass has been repeating this man's warnings. More fallout is coming, certain to pressure the existing vaulted inventory and lead to greater scrutiny, like demanded audits. Those who removed their gold from Swiss accounts last year at Jackass urging have avoided the hundreds of lawsuits pending. They total multiple $billions in claims right here right now, the same gold trader mentioned. The syndicate has obstructed the story from hitting the news.
◄$$$ JPMORGAN APPEARS TO HAVE ILLEGALLY USED THIRD-PARTY ACCOUNTS AS COLLATERAL ON A GRAND BASIS. THE TOTAL HYPOTHECATION RISK FROM SNATCH & GRABS BY JPMORGAN COULD TOTAL $41 BILLION IN PRIVATE ACCOUNTS. JPMORGAN HAS ABUSED CLIENT FUNDS TOTALING HALF A $TRILLION, PLACING IT AS COLLATERAL FOR ITS DERIVATIVE BOOK. IF THEIR HIGH LEVEL POSITIONS FAIL, THEN INNOCENT ACCOUNT HOLDERS WILL BE WIPED OUT. JPMORGAN IS THE LEADING INSTITUTION TO USE CLIENT FUNDS AS COLLATERAL FOR TOXIC ASSETS. IN THE PROCESS, POTENTIAL DUPLICATE USAGE OF COLLATERAL IS REVEALED. $$$
Re-hypothecation is using third party assets as collateral, which seems improper but might be protected by hidden fine print in contracts and careful language in legislation. Wall Street firms have exhausted their own capital, and are heavily leveraged. They require any and all available capital within reach. Check the fine print for opening and maintaining client accounts. This entire sordid concept reminds a person of Compulsory Arbitration to deal with crimes in Halliburton camps in foreign lands, like multiple rape. The crime center is too close to the Wall Street smoldering corruption. Tyler Durden has revealed that Jefferies is MF Global's own AIG albatross. It appears that Jefferies has $22.3 billion in re-hypothecated assets on total balance sheet assets of $37 billion. In the news, they deserve the scrutiny. The firm has re-used collateral posted by clients to back their own trades and borrowed funds. From the most recent annual report posted by Jefferies themselves, the firm cites re-hypothecated assets totaling $22.3 billion in 2011, used to collateralize positions in government debt, asset backed securities, derivatives, and corporate equity. Compare to the total Jefferies balance sheet assets of $37 billion.
Durden accuses ten banks and brokerage firms on re-hypothication, with the venerable JPMorgan leading the pack. The colossus crime syndicate fortress bank has $546.2 billion worth of re-hypothecated assets. That is over $1/2 trillion of collateral from client collateral backing up its $90 trillion derivatives book!! Morgan Stanley, the bucket shop on Wall Street, also owns close to $1/2 trillion in such attachments. Durden concludes in colorful tones, "Yet Jefferies is just the beginning. With weak collateral rules and a level of leverage that would make Archimedes tremble, firms have been piling into re-hypothecation activity with startling abandon. A review of filings reveals a staggering level of activity in what may be the world's largest ever credit bubble." Clearly and obviously, the big US financial firms are broke and insolvent. They have resorted to broad and illicit schemes to attack and attack client funds and accounts.
Here is a compilation of firms engaged heavily in hyper-hypothecation. Goldman Sachs ($28.17 billion re-hypothecated in 2011), Canadian Imperial Bank of Commerce (re-pledged $72 billion in client assets), Royal Bank of Canada (re-pledged $53.8 billion of $126.7 billion available for re-pledging), Oppenheimer Holdings ($15.3 million), Credit Suisse (CHF 332 billion), Knight Capital Group ($1.17 billion), Interactive Brokers ($14.5 billion), Wells Fargo ($19.6 billion), JPMorgan ($546.2 billion), and Morgan Stanley ($410 billion). See the Zero Hedge article (CLICK HERE).
◄$$$ HSBC HAS FILED A LAWSUIT AGAINST MF-GLOBAL. A FIGHT COULD ENSUE ON A GRAND STAGE OVER DUPLICATE CLAIMS ON THE SAME GOLD BARS. THE CASE COULD EXTEND INTO CHALLENGES OF THE G.L.D. VAULT WAREHOUSE, WHOSE GOLD BARS MUST BE OVER-COMMITTED ALSO. OBSERVE THE PROCESS WHEREBY BULLION BARS ARE CONVERTED TO ELECTRONIC ENTRIES FOR CORRUPT PURPOSES. $$$
Two oversized tainted powerful dogs are fighting over $850,000 in gold bars. Be sure to know that at least 40 thousand tons have been duplicate sold. The common claims theme will become a fixture later. The case unfolding is the beginning. HSBC has filed lawsuit against MF Global over bullion bars in disputed ownership. At issue is the equivalent of 15 separate 1-kg gold bars, but the MFG contracts are caught in the middle. Watch to see if the case goes behind closed doors, or works toward compulsory arbitration like with the Blanchard lawsuit in 2005, anything to keep a lid on the story. HSBC claims it is exposed to multiple liabilities with respect to the disposition of the property. Some aggrieved parties want to divide the gold bars and distribute the money. They cannot define MONEY. See the Bloomberg article (CLICK HERE).
Once again the market overseers in gold management are accused of foul play. The position of the owner is in dispute. The brokerage firm was in distress, more like broken and deeply insolvent. The system is being asked to establish the rightful owner of gold worth about $850,000 and silver bars underlying contracts between the brokerage and a client. Here is the most important point. The amount of asset in dispute is irrelevant. Whether $1 million or $500 million or $1 billion, the principle is on trial. The possible crime could have been that MF Global used client assets as collateral in its toxic positions. It is called rehypothecating, or lending even doing a repo. They also might have used the same gold bars as collateral in duplicate fashion. The physical asset should not have been transferred in ownership rights under any circumstances. This case addresses the heart of the entire commingling situation. The case must decide where MFG illegally used rehypothecated client gold to satisfy liabilities.
Owners of gold bullion placed in warehouses too close to the corrupted brokerage action should be very worried whether their gold still rests where they are told it does. Some Hat Trick Letter clients have gold stored at the Delaware warehouse, but that is where JPMorgan operates. The HSBC case could easily extend into a total nightmare, a challenge of the GLD warehouse (exchange traded fund), supervised by custodian HSBC. The next challenges if pursued beyond this case could involve charges that an infinite string of pledges for GLD gold bars has occurred in an ugly daisy chain with countless counter-parties. As Tyler Durden says, if one cockroach is spotted, expect more. The thin flimsy defense has been that each bar has a unique serial number, a single owner, and under Allocated account rules cannot be touched or committed elsewhere. But Wall Street criminals do not abide by rules. They steal whatever is not nailed down. The investment community will next observe the process by which physical gold is converted to corrupted electronic entries for abuse, duplicate usage, and theft. See the Zero Hedge article (CLICK HERE).
◄$$$ SCHWAB ACCOUNT HOLDERS HAVE BEEN SUPPLIED WITH A WARNING THAT APPEARS MORE PLAIN THAN MOST. HOWEVER, THE SAME RULES APPLY TO MOST STOCK ACCOUNT HOLDERS. THE LAW ESSENTIALLY PERMITS THE LARGE CORPORATIONS TO USE THE CLIENT ASSETS AS COLLATERAL IN HIGH RISK GAMES. THE GIANT FIRMS ARE BROKEN AND INSOLVENT, THEIR LACK OF CAPITAL AS MOTIVE FOR THE ASSET ATTACHMENTS. THE THREAT COMES TO PERHAPS ALL PRIVATE ACCOUNTS THAT DO BUSINESS IN THE INVESTMENT ARENA, TENTACLES EXTENDED FAR & WIDE. $$$Holders of Schwab stock accounts are subject to the following. "11. Pledge of Securities and Other Property - We may pledge, re-pledge, hypothecate or re-hypothecate, either separately or together with Securities of other customers, all Securities and Other Property that you, now or in the future, carry, hold, or maintain in your Margin and Short Account. The value of the Securities and Other Property we pledge or re-pledge may be greater than the amount you owe us, and we are not obligated to retain in our possession and control for delivery the same amount of similar Securities and Other Property." They can make bets bigger than your assets being collateralized for their purposes. A friend of my colleague recently deposited several $thousand in his futures trading account, two weeks after the MF Global bankruptcy. It vanished that day. What is happening goes much farther than having margined stock shares available for others to short. The risk of losing those borrowed shares is real. The practice is to put private account assets as collateral for the conglomerate asset positions. If they go to ruin, then the cascade occurs and private accounts are wiped out.
This hypothecation threat goes even farther, in a nightmare of legally extended tentacles. Check which firm is in charge of supplying margin credit to stock or mutual fund management. That firm, often a Wall Street giant bank, might grab as collateral the diverse client funds. Check which firm is in charge of brokerage clearing functions. That firm, often a Wall Street hidden cousin entity to serve a function, might grab as collateral the client funds. Check which firm facilitates asset management in actual transactions for pension funds. That firm, often more Wall Street players, might grab as collateral the client funds. The practice of hypothecation brings new meaning to the concept of borrowing other people's money. Worse, it serves as the potential blueprint for a great vanishing act of several $trillion in private US accounts. The MF Global case is demonstrating in a grand lesson how $trillions can vanish from millions of private US accounts of various types.
◄$$$ THE GREAT UNWIND OF OVERLY LEVERAGED US-BANKS WILL RESULT IN UNSPEAKABLE LOSSES, AS WELL AS GROTESQUE RAIDS ON PRIVATE ASSETS. THEY ARE NOT SECURE. THE DE-LEVERAGE PROCESS OF THE UGLY SHADOW BANKING SYSTEM HAS PUT AT RISK $TRILLIONS IN PRIVATE ASSETS. THEY ARE ENSNARED. $$$
The Shadow Banking is defined by Tyler Durden as "the near-infinite fungibility of electronic credit money equivalents within the infinitely interconnected modern financial system." The enormity of broker capital deficiency has been revealed by the MF Global bankruptcy, whose unraveling has shed light upon the shadow banking funding pathways. The re-hypothecation is the tip of the corrupt iceberg, certain to continue in its capital destruction. Witness a run on money market funds, asset backed commercial paper (ABCP), bond repos, synthetic contracts (interwoven among different contracts), structured products (leveraged against toxic bonds), putting great strain on securities lenders and the big banks, to the point that the USFed has had to provide tens of $trillions in phony money to keep the system going.
The grand drain on viable assets continues apace. The black hole of collapsing fiat money systems will digest, ruin, and lay waste to private capital, offsetting reckless derivatives, funding evermore liabilities, in the deadly reversal process of the fractional reserve system caught in a recursive loop. The process is a veritable pathogenesis, the center of which is the shadow banking system in London, for which New York is a mere subsidiary extended from the colony under tow. The process will continue until the United States suffers a total systemic failure. Their defense is synthetic liquidity. Their cannon fodder is private assets, like your accounts. The graphic chart shows the feeding process loop that accesses private accounts. See the Zero Hedge article (CLICK HERE). The MF Global crime scene is vast, and exposes many sordid criminal angles that will be revealed over time, by analysts, investigators, and court revelations. The US financial system is due for a vivisection, a living autopsy of profoundly rancid sick cancerous financial tissue.
Peter Schiff interviews Ann Barnhardt Dec 21, 2011 . Ann Barnhardt explains MF Global debacle and the corruption and bluntly explains why she closed her firm down due to the crisis of MF GLobal. Ms.Barnhardt is very independent and has the luxury of speaking the truth.