Thursday, December 8, 2011

Lift Limited Liability and Go After the Bankster Criminals

 hat tip Zerohedge

MF Global and the great Wall St re-hypothecation scandal Christopher Elias

(EXCERPT FROM Business Law Currents) "A legal loophole in international brokerage regulations means that few, if any, clients of MF Global are likely to get their money back. Although details of the drama are still unfolding, it appears that MF Global and some of its Wall Street counterparts have been actively and aggressively circumventing U.S. securities rules at the expense (quite literally) of their clients. 

MF Global's bankruptcy revelations concerning missing client money suggest that funds were not inadvertently misplaced or gobbled up in MF’s dying hours, but were instead appropriated as part of a mass Wall St manipulation of brokerage rules that allowed for the wholesale acquisition and sale of client funds through re-hypothecation. 

A loophole appears to have allowed MF Global, and many others, to use its own clients’ funds to  finance an enormous $6.2 billion Eurozone repo bet. 

If anyone thought that you couldn’t have your cake and eat it too in the world of finance, MF Global shows how you can have your cake, eat it, eat someone else’s cake and then let your clients pick up the bill. Hard cheese for many as their dough goes missing...."

MAJIA HERE: MF Global was playing with its clients' money, unbeknownst to them. The missing money amounts to approximately $1.2 billion. Yesterday, The Wall Street Journal ran a story about all of the farmers who had invested with MF Global.

WSJ: "MF Global Collapse Felt in Farm Country: Hedging Positions Caught Up in Firm's Bankruptcy Filing" by J. DiColo p. C1,

The article explains that in order to secure loans and stabilize income,  most farmers purchase futures contracts. Futures enable farmers to predict with some degree of certainty the price at which they will sell their crops. Farmers who had contracts with MF Global are not clear whether or not they will be "made whole."

Majia here: Again and again it is clear that the financial industry is without any moral responsibility and is incapable of fulfilling fiduciary responsibility. The ceaseless bailouts by government are simply reinforcing moral hazard. I say that limited liability rules should be lifted for this sector, thereby making it easy to go after the financial criminals who are bankrupting individuals, companies, and nations.


  1. This conclusion is morally correct but can it be implemented at this late date? We are passengers on the arbitrage train, and most of the (very right on) Zerohedge articles are reports from those who are looking out the windows and seeing that we are speeding to the end of the line.

    After that there will be a transition to a future that agrarians like me have have many romantic notions about, but between now and then there are two problems: triage and spent fuel pools.

    Here's the discussion on arbitrage:

  2. I do agree with lisa.

    Lisa thanks for sharing..

    Liability forms


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