Wall Street's business model is grand theft. Jon Corzine was MF Global's CEO. Earlier he headed Goldman Sachs, America's premiere racketeering organization.
He also was one of legions of corrupt politicians as US senator and New Jersey governor. His extreme, longstanding criminality warrants putting him in prison for life. No restitution can reverse his harm. It's true also for many others like him.
Before its collapse, MF Global (MFG) faced a run on its holdings. On October 31, it filed for Chapter 11 bankruptcy protection.
On November 19, Reuters said the firm "moved hundreds of millions of dollars in customer money from its US brokerage unit to Bank of New York Mellon Corp. in August, just months before filing for bankruptcy...."
In other words, MFG lawlessly looted customer accounts. It used client money for its own purposes to speculate, as well as cover debt obligations and losses. At issue is grand theft.
In fact, it's one of the most brazen acts in memory in a business notorious for outrageous criminality. What ever's gotten away with incentivizes Wall Street crooks to steal more. Why not! At most, they're slap on the wrist punishments mock rule of law justice.
On November 19 on the Kaiser Report, Barry Ritholtz commented on the big lie, hyper-leveraged banks, the MFG scandal, and congressional political whores, saying:
People responsible for creating these problems shift blame to others. Facts say otherwise. Wall Street speculators take big risks. They use hyper-leverage that's only effective when it works.
"Their models were wildly optimistic. Banking is supposed to be very boring." Decisions are supposed to be made about who's credit worthy and who isn't. Instead, reckless speculation replaced investing and sound lending policies.
Wall Street's ideology is bankrupt, "and it's causing global damage to the economy. For investment banks, the five biggest houses got waivers on leverage rules."
SEC collaborators rigged the system for them. These banks also "happen to be the five biggest donors to Congress," or among the largest. Over time, successful lobbying removed everything affecting profits, no matter the risk. The SEC, Fed, FDIC and CME rigged the system for them.
Brazen fraud became standard practice. Criminals deserving prison keep stealing. The dirty game involves grabbing "whatever the hell you want and run for the hills. No one will prosecute you."
"MF Global is another order of magnitude. If anyone is going to jail over this whole period, it has to be" their top officials. Don't bet on it, especially a power broker like Corzine.
He's directly responsible for stealing $1.2 billion in client funds. He looted them brazenly. According to Bloomberg:
"Examiners from CME Group Inc., the world's largest futures exchange, found unexplained wire transfers" and $1.2 billion missing "during the weekend the failing broker was talking with possible buyers, a person briefed on the matter said."
Multiple investigations began, including by Justice Department lawyers. The Commodity Futures Trading Commission (CFTC) and Chicago Mercantile Exchange (CME) were responsible for overseeing MFG. They knew what went on but did nothing.
Huffington Post writer Daniel Dicker said the Koch Brothers were tipped off in time to get out safely. Others weren't as lucky.
MFG is America's eighth largest bankruptcy, the first major one the Eurozone crisis caused. Expect more ahead.
Practices cratering economies in 2008 continue. Nations teeter on bankruptcy. Corzine bet heavily that Spanish and Italian debt wouldn't collapse.
Using 40 to 1 leverage, he bet massively the wrong way. His second quarter $190 million loss drove investors away. Those remaining lost everything. Corzine and top executives pocketed millions.
In 1999, he was worth an estimated $400 million when he left Goldman Sachs. Perhaps its double that now, including funds looted from MFG. We may know more later on.
From 1994 - 1994, Corzine headed Goldman Sachs during the time banking became deregulated. Carter began it late in his tenure. Reagan did much more. Clinton completed unfinished business. James Petras calls the 1990s "the golden age of pillage," the decade of anything goes.
It persists in the new millennium because political Washington and regulators look the other way, profiting handsomely by doing it. Everyone feathers nests belonging to others. Self-sustaining corruption continues. Only little people and unknowing investors get scammed. Power brokers make out like bandits.
After losing his 2009 gubernatorial reelection bid, government regulators welcomed Corzine back on Wall Street. New York Fed president William Dudley (a fellow Goldman alumnus) made MFG a "primary dealer." Despite its size and a former trading scandal $10 million fine, it became one of a handful of firms marketing US Treasuries.
At the behest of Corzine and other power brokers, CFTC head Gary Gensler suspended implementation of new rules imposing limits on broker-dealer use of client funds, especially for foreign sovereign debt. In other words, they were freed to commit grand theft. MFG took full advantage.
Wall Street Journal Money & Investing editor Francesco Guerrera wrote about "Three Lessons From the Collapse." He quoted University of San Diego Professor Frank Partnoy, saying:
MFG's "failure illustrates how much financial markets are about trust and confidence. Once you lose those, you are done."
Guerrera's three lessons include:
• closing accounting loopholes and strengthening oversight;
• establishing lead regulators for nonbank financial firms; and
• writing new rules for "nonsystemic" firms as well as "too big to fail" ones.
Dodd-Frank financial reform left a broken system in place. The entire law needs rewriting. Better still, scrap it and start over. Stiff regulations with teeth are needed, including mandatory prosecution of crooks, especially those highest up to let others know invulnerability days are over.
When culpable CEO heads roll, it'll be a good start. However, game-changer differences won't happen until all high level Wall Street swindlers wear numbered striped suits.
Trends forecaster Gerald Celente lost $100,000 in an MF Global gold futures account. He told Russia Today:
"I really got burned. I got a call," saying "I needed to have a margin call. (W)hat are you talking about," he asked? "I've got a ton of money in my account. They responded, oh no you don't. That money's with a trustee now."
His advice for everyone holding gold ETFs is cash out because "they are going to steal all our money." Angry about MF Global's theft, he called Corzine a "cheap SOB." He's that and much more.
"How come he's not in Jail," railed Celente. It's "because he's one of the white shoe boys from the Goldman Sachs crowd." He added that "the merger of state and corporate power" brought "fascism" to America.
The entire system's too corrupted to fix. Only tearing it down and starting over can work. It's high time the process started. Hopefully, OWS protests began it.
Rumor has it that JPMorgan Chase and perhaps other Wall Street banks are involved. Judge Martin Glenn is handling MFG's bankruptcy. HL Camp, Proprietor of HL Camp Futures, wrote him as follows:
"Our firm is a registered introducing broker with the CFTC. I have written to you previously on behalf of our customers."
"Here is a comment this morning from one of our former customers in Europe," saying:
"I will never do business in the United States of America again."
According to Camp, "(t)he system is to protect futures accounts is broken. And the whole world knows it."
"What started as a failure of one FCM (Futures Commission Merchant) that quickly gave a black eye to the CFTC and especially the CME has now made our United States of America a very bad joke to commodity futures traders all over the world."
"The problem this morning is not just excess margin equity."
"The problem this morning is the reputation of the United States of America."
"Thank you very much for your time and for listening."
Forbes staff writer Robert Lenzner said traders and clients didn't know about MFG's unscrupulousness. He said a CFTC loophole lets firms speculate with segregated client accounts. Few know it without carefully reading contract fine print or getting sound legal advice.
Lenzner's lesson one is CFTC Rule 1.29 must be scraped. It lets futures commission merchants gamble with client funds.
Lesson two is knowing personal funds aren't safe in futures metals, energy, precious metals, or agricultural
Lesson three is resolving which regulator oversees firms like MFG - the CFTC or CME. One should have primary responsibility and be held accountable for fraud.
Lenzner added that Justice Department attorneys are determining whether federal crimes occurred. He expects a lengthy process because MFG's books "are in a state of chaos," deliberately no doubt.
Whether anyone ends up indicted isn't sure. At most perhaps, expect lower level patsies hung out to dry to let crime bosses like Corzine stay free to steal more. It's how it always works.
Stephen Lendman lives in Chicago and can be reached at firstname.lastname@example.org.
Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.