Tag Archives: MF Global

Jamie Dimon makes a courtesy appearance before the home team

Today, Jamie Dimon, CEO of JPMorgan, made his courtesy appearance before the home team, the Senate Banking, Housing, and Urban Affairs Committee earlier today.

It was, for the most part, a constructive exercise.  Mr. Dimon had been called to explain something alarming, a $2 billion loss due to hedges gone awry in what is essentially the banks internal treasury operations.  Alarming as it may be, the losses fell entirely on the backs of JPMorgan’s shareholders.

It was a stark contrast to the lambasting that Jon Corzine, former bureaucrat and MF Global chief, recieved by committees from both the House and Senate after his firm “lost” $1.6 billion of client funds.  As JPMorgan was the counterparty to the transfer of a portion of those funds, it was only natural that a few questions with regards to the infamous event would find their way to Mr. Dimon today.

Generally, Mr. Dimon gave an impressive show in front of the home team crowd.  As the largest bank on the planet and a Treasury Primary Dealer, JPMorgan may be one of the largest direct and indirect purchasers of US Bond issues.  For the most part, the Senators were kind to their biggest customer.  You can see the entire testimony here.

Some observations from The Mint:

  • Mr. Dimon knows what he is doing.
  • There is a reason that JPM is the banker and/or key liquidity provider of many smaller banks and sovereign nations.
  • It was brought up that loans are the riskiest investments that a bank makes, and JPMorgan is no exception.
  • The term “hedging” is widely misunderstood.  Most take it to mean a trade made to eliminate risk, when in practice hedging has the effect of diversifying a portfolio of investments, often using leverage to do so.
  • Mr. Dimon’s brief response about the need for fewer regulations which are enforced rather that a myriad of regulators which lack expertise and authority was a brilliant appeal to common sense which mostly fell on deaf ears.
  • The US fiscal cliff will not wait until December 31, 2012 to produce derogatory effects for the economy.  Individuals and businesses will begin to take actions to protect themselves long before the deadline approaches.
  • One of the Senators observed that the US Treasury ran a loss of $4 billion per day, twice the amount that Mr. Dimon’s firm had lost on its renegade trades.
  • Most of the Senators, while well intentioned, are absolutely clueless about the inner workings of a modern banking entity.  Which begs the question, what qualifies them to regulate one?
  • JPMorgan is not to big to fail, rather, it is too big to save were it to fail.
  • One cannot apply the hedging and investment strategies of the world’s largest bank to the entire banking industry.
  • JPMorgan is in a league of its own, and thus is required to take risks on the scale that is difficult to fathom.
  • Mr. Dimon places little faith in financial models, which at best are a reflection of the immediate past and generally useless for future decision making.
  • New regulation costs as a result of the legislation inspired by the financial crisis for JPMorgan were estimated to be upwards of $1 billion.
  • It is not below the Senate to play the “US Taxpayer is on the hook” card when speaking with a banker, incorrectly implying that the US Taxpayer somehow thought that TARP and everything after was necessary and stands ready to take similar actions should another large bank get into trouble.

Much of the testimony was peppered with the common theme from the Senators which can be summed up in the phrase “how should we regulate you?”

While Mr. Dimon took the opportunity to point out that the so called Volcker rule was a bad idea, which is what has dominated headlines about today’s hearing, He did point out that JPMorgan’s survival was not dependant upon TARP and other bailouts, as has been suggested.

The message?  Don’t regulate us and don’t save us.

In the end, isn’t that what true capitalism is all about?

 

Never Compromise: Murder, Robbery, Decriminalization, and the Slippery Slope

6/8/2012 Portland, Oregon – Pop in your mints…

As the world continues to hurtle towards a form of financial armageddon, at The Mint, we have become increasingly reflective.  Ed Harrision of Credit Writedowns, recently posted regarding the causes and effects of the current financial crisis/recession/depression which much of the western world now finds itself in.

In the essay, Mr. Harrison observes that one of the root causes of the financial crisis is the combining of financial deregulation with desupervision and the decriminalization of financial crimes.

The most notable example of this phenomenon has been the MF Global Bankruptcy.  On the surface, it would appear that the firm purposely helped itself to its clients’ segregated funds in order to cover the firms margin calls which it received in those gloomy days in late October of 2011.

In layman’s terms, this is robbery.  Yet in the parallel universe of the insane “debt is money” monetary system in which we live, John Corzine, the CEO of MF Global at the time and supposedly the one who is ultimately responsible for the firms actions, is able to freely walk the streets after telling a series of Congressional committees that He had no knowledge of the “transfers” (read: theft) of client’s funds which were illegally used by MF Global in a desperate attempt to stave off the firms imminent collapse in late October of 2011.

We do not wish to further flog Mr. Corzine, or for that matter, Jamie Dimon, who, as the CEO of JPMorgan, served as an accomplice to the theft (for JPM happily took the missing client funds as collateral in the fateful transfer), for their consciences, if indeed they have one, must be flogging them daily without mercy.

We do, however, wish to flog the idea of decriminalization when it comes to the financial industry.  Like sending remotely controlled drones into war, the digitalization of the world in financial matters gives the actors involved a false sense that they are operating not in the real world, but in a virtual world where they alone are acting.

How does this false perception of reality play out and, more importantly, differ from what is commonly understood as real life?

In the example of the remote controlled drone, the drone facilitates acts which more resemble murder than self defense, for it is much easier to convince a teenager, who has been raised playing video games where the actions taken on the screen have no real world consequences (save wasting otherwise valuable time), to kill someone if it can be done by giving them a video game control and a sofa from which to guide their armed drone into real world combat over half the world away.

The experience for the teenager on the sofa is similar to that of the video game and, as such, has the effect of removing the real world consequences of having murdered persons who posed them no existential threat.  It is as if the distance both dehumanizes the very real interaction which is taking place.

So it is with financial crimes.  As persons begin to conduct a great portion of their financial transactions, especially those involving large sums of money, in a virtual world with little or no human contact, it becomes easier for persons who have access to the funds of others to shun their fiduciary duty and use the funds of others for their purposes without their consent.

While the technical medium employed is an electronic transfer, the actions similar to those taken by Mr. Corzine are more accurately described as robbery.

Yet as of today, Mr. Corzine has not been accused of a crime.

The problem is not that crimes such as murder via remote controlled drone and robbery via wire transfer take place, for robbery and murder have been unfortunate parts of the human experience since the dawn of time.

Nor is it a problem that the means to commit these crimes exist and are used as a normal part of life.  For remote controlled airplanes and electronic wire transfers may have great benefits.

No, they problem is that the misuse of these mediums has been largely decriminalized.  Those who use them to commit crimes can now justify their actions behind a smokescreen of words and those who should be holding these persons accountable appeal to some good greater than Justice that is being served:  Security and Financial stability.

However, without Justice, security and financial stability are mere illusions.

What is important is to have a belief in one’s principles which is firm enough so that it is impossible to compromise them, even when holding to them causes one personal injury.

Bettie Mitchell, the founder of Good Samaritan Ministries, recently shared the story of how her father visited her one day, unannounced, when he was 70 years of age.  This was unusual because she knew that her mother had not sent him, which had always been the case in the past.

She knew that what he was to say was important, and that it did not come from him, but from the Holy Spirit.

Her father arrived at her house, she let him in.  He entered, sat down and told her the following:

“When I was your age, I had all of the spiritual gifts that you have.  Then I began to compromise.  Never Compromise.”

With that, Bettie’s father got up, and walked out.  There was nothing more to be said, the message had been delivered.

There are principles by which one must live their lives which cannot be compromised upon.  Put a different way, it is much easier to stand by one’s principles 100% of the time that 95% of the time.

Once one compromises on their principles 5%, or even 1% of the time, they begin to go down a slippery slope.  They are constantly searching for the next patch of firm ground upon which to stand as they find themselves caught sliding down an increasingly unstable incline.

How easy it would have been to simply stay on the level path, even if it did take a little longer to get to one’s destination.

Today, while lawmakers, Judges, and central bankers struggle to find their moral compass as they slide further down the slippery slope they have set out on, we challenge each and every one of you, fellow taxpayers, to stay on the path, where it has always been wrong to steal, and it has always been wrong to murder.

For it is this increasingly narrow path that leads to life.

Stay tuned for further sections and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for June 8, 2012

Copper Price per Lb: $3.30

Oil Price per Barrel:  $84.10

Corn Price per Bushel:  $5.92

10 Yr US Treasury Bond:  1.64%

FED Target Rate:  0.16%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,595

MINT Perceived Target Rate*:  0.25% AWAY WE GO!

Unemployment Rate:  8.2%

Inflation Rate (CPI):  0.0%

Dow Jones Industrial Average: 12,554

M1 Monetary Base:  $2,306,000,000,000

M2 Monetary Base:  $9,790,100,000,000

3 Months After The MF Global Bankruptcy, We Find That $1.2 Billion (Or More) In Client Money Has “Vaporized” | ZeroHedge

More on the missing MF GLOBAL client funds, why justice will never be served, and why our current monetary system is at best an illusion and, more accurately, a fraud.

The same, crystal clear money trails which are used to incriminate alleged terrorists, identity thieves, tax evaders, and drug runners are somehow blurred when members of the political and financial elite are involved in the theft.

It is also clear that numbers on a bank or brokerage statement are subject to “vaporization” without cause, justice, or recourse.

From Zerohedge:

http://www.zerohedge.com/news/3-months-after-mf-global-bankruptcy-we-find-12-billion-or-more-client-money-has-vaporized

Disturbing economic trends continue into 2012

1/9/2012 Portland, Oregon – Pop in your mints…

2012 has gotten off to a relatively uneventful start on all fronts.  Stock and Bond markets continue on autopilot and are completely underwritten by central banks at this point.  Commodity prices seem to be following the inflationary path that the central banks support of the stock and bond markets has set them on.  Meanwhile, productivity, real output, appears stable and poised to climb, which should further fuel inflation as the money supply begins to overwhelm the supply of real goods and labor.

The assault on civil liberties continues.  The United States surrendered its status as a free country when it approved the NDAA, assuring that they government could detain anyone, anywhere, for as long as they want, without ever having to produce charges.

 

 

 

Finally, widespread corruption continues unabated.  Officials at MF Global are still loose after robbing $1.2 billion of client funds in a desperate attempt to stave off a margin call which brought down the firm as the CME washed its hands of the situation, leaving traders everywhere wondering if their univested brokerage funds are safe or even truly exist.

Now, from Switzerland, the bastion of financial morality, comes word that the wife of Philipp Hildebrand, now former Chairman of its central bank, made a substantial purchase of US Dollars just weeks before her husband and his colleagues shocked the world by surrendering the Swiss franc to the same fate as the doomed Euro.  Coincidence?  It would appear not.

 

The Swiss National Bank Courtesy of Baikonur

 

In short, there is nothing in the data to disprove the hypothesis that the world’s financial system and by default the nations which are currently charged with it are headed to hell in a hand basket. 

This, fellow taxpayers, should be cause for hope.  For only when it is acutely understood by all involved the incredible destruction which is being wrought every single day by the current, insane, “debt is money” financial system under which we live, can things finally begin to get better.

 

We hope and pray that the day of collective acute understanding is near, and that the transition to a new system passes peacefully.

 

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for January 9, 2012

Copper Price per Lb: $3.39
Oil Price per Barrel:  $101.40

Corn Price per Bushel:  $6.52  
10 Yr US Treasury Bond:  1.96%

FED Target Rate:  0.07%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,611 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  8.5%
Inflation Rate (CPI):  0.0%
Dow Jones Industrial Average:  11,995  

M1 Monetary Base:  $2,290,800,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,718,900,000,000 YIKES UP $1 Trillion in one year!!!!!!!

COMEX: The March to Irrelevance

A very thorough explanation of the emerging irrelevance of the COMEX due to the permanent beach of trust highlighted in the MF Global fiasco.

Essentially the claim is that JP Morgan, in its rush to seize collateral, stole the precious metals held in COMEX vaults which rightfully belong to MF Global clients.

This is what is generally referred to as theft.  However, the banking elites, who reserve the right to steal for themselves, prefer to call it “rehypothetication,” which simply means that something is pledged as collateral a second time.  In this case, MF Global pledged the same collateral to their clients and JP Morgan.

When push came to shove, guess who MF Global and the CME Group (the owner of the soon to be defunct COMEX) threw under the bus?

It is becoming painfully obvious that the degree of fraud and theft required to keep the bankrupt financial system running is reaching a crescendo. What will December 31 bring?

Readers are advised to convert their paper assets to something tangible before their account becomes the victim of another bankrupt Wall Street firm’s margin call.

Click the link below to see the gory details rehashed at goldseek.com:

http://news.goldseek.com/GoldenJackass/1324501200.php

Precious Metals, Bitter MF Global Investors – Barrons.com

This was bound to happen. MF Global is the first of what will be many CME metals warehouse defaults.  The MF Global clients will take a 28% haircut placing their faith in the CME’s oversight mechanisms, according to Barrons:

http://online.barrons.com/article/SB50001424052748703856804577098740322633760.html?mod=googlenews_wsj?mod=googlenews_barrons

Barrons also reiterates that the CME still has not committed to back stopping the lost MF Global funds. Why any honest and informed person would continue to trade and store precious metals with the CME is beyond our limited comprehension.

Whether the missing MF Global client monies are eventually located, placed by the CME, replaced by Corzine and his accomplices, or not all, irreperable damage has been done to investor confidence as far as commodities go.

Equities won’t be far behind.

MF Global Hearings move to the Senate: Bombs dropping left and right amongst the deaf

12/13/2011 Portland, Oregon – Pop in your mints…

Today the Agricultural committee of the US Senate played host to what has become the political and financial spectacle of the year:  The Hearings on the MF Global collapse.  We have equated these hearings to professional wrestling.  While high in entertainment value, the spectators are left to wonder how much of it is real and how much of the action is staged.

 

Today, Jon Corzine, MF Global’s former CEO, the ultimate insider who has become the poster boy for the corporate and political corruption that seems to rule the day, was joined by Bradley Abelow, former President and COO of MF Global and Henri Steenkamp, who is still acting as the firm’s CFO.

 You can watch the sad spectacle on C-SPAN at the following link: http://www.c-span.org/Events/Senate-Looks-into-MF-Global-Bankruptcy/10737426222/

 

Jon Corzine takes a quick thumb to the eye at MF Global’s Wrestlmania

It appears that the addition of two more members of MF Global’s senior management team was intended to give the illusion that there may be more information forthcoming at this hearing than at the earlier hearing held by the House Agricultural Committee.  That illusion was quickly dispelled as soon as each of them opened their mouths.

 In summary, they are very, very sorry.  They are aware that this situation has undermined confidence in the markets.  They do not know where the $1.2 billion of missing client funds are.  They are pretty sure that the funds went missing from their treasury group, where the funds are held.

 Strangely, the Patriot Act of 2001, in addition to steamrolling the US Constitution, included provisions which required every banking institution in the US to “know their customer,” which in practice means that no transfer from US accounts could have taken place without the authorities being able to quickly track who the money went to.  This provision, which on its face would make theft and money laundering in US Financial institutions impossible, makes “not knowing” who the money went to an untenable defense.

Nonetheless, Corzine and his cohorts stated again and again that they have no idea where it went.

The only revelation, apart from the names of a few MF Global employees who were offered as sacrificial lambs before the inquisition style questioning, was that the CFO of North American division was apparently on vacation when the funds went missing. 

 

They never mentioned whether or not this individual had returned.

 

Corzine went as far to say that nothing he said, such as “I don’t care where you get the money, we have to make this margin call,” for example, “should have been construed” as permission to transfer client funds into MF Global operating accounts and then out to counterparties.  He is obviously slipping towards a plea and hoping to do time with his Goldman buddies at a posh jail in Manhattan.

 

By the end of the morning, nothing that was said, either by a member of the Senate or former MF Global executive, served to instill any measure of confidence.

 

The afternoon, however, looked promising.  The regulators who were on the case and had their noses close to the ground were set to testify.  CME Group Executive Chairman Terrence Duffy, MF Global Trustee James Giddens and CFTC Commissioner Jill Sommers sat down before the committee and took the obligatory oath.

 

Mr. Giddens lead off, restating the obvious.  He is in charge of ensuring that MF Global assets are liquidated and that the proceeds distributed to the creditors based on the criteria laid out in the US Bankruptcy code.  He would later state that efforts to recover assets abroad had been blocked by sovereign governments (those across the Atlantic), who are likely protecting their banks from what would be a devastating clawback of funds.

 

Then, just as we thought that the afternoon would be a snoozefest, Mr. Duffy of the CME Group dropped a bombshell.  In his opening remarks, he stated that he was “in the room” when a CME employee was on the phone with an MF Global employee who stated that Mr. Corzine had direct knowledge that client funds were missing (or in industry parlance, “loaned out”) well before the weekend of October 31st.

 

This directly contradicted Mr. Corzine’s testimony under oath in which he stated that he had “no knowledge” of the missing client funds until that fateful weekend.

 

Et tu, Brute?

 

The diversion only lasted for a moment.  The committee then proceeded to flagellate Mr. Duffy and the CME Group for defending the idea that their exchanges can properly self regulate themselves.

 

Mrs. Sommers of the CFTC was then flagellated by the committee for the failure of the government agency to regulate entities such as the CME Group and MF Global which are supposed to, if we understand correctly, self regulate themselves.

 

As today’s chapter of the spectacle came to a close, there were more questions than answers.  Like the old WWF, no scores were permanently settled and we will have to tune in Friday to see how the next stage in this drama unfolds.  It promises to be exciting, as the committee includes none other than Ron Paul (R-TX), the one man in Congress who may actually understand what happened.

 

The Witness list for Friday can be found here.

 

For those who have not been following, the MF Global situation is extremely important because a number of things that investors have been able to count on have been called into question.  A brief list of these now invalid assumptions:

 

          Client funds are properly segregated from a brokerage company’s operating funds.

          Exchanges such as the CME Group will backstop (make whole) clients in the event that one of their approved brokerage firms goes bankrupt.

          Exchanges will halt trading in the event of a bankruptcy until any missing client funds can be accounted for and that trades from customers of the bankrupt brokerage can be executed.

          Once a brokerage firm declares bankruptcy, all assets must be handed immediately over to a trustee who from that moment on has a fiduciary duty to sell the bankrupt firms assets to the highest bidder to satisfy as many creditors as possible.

          Regulatory agencies such as the CFTC have controls and monitoring in place which will prevent clients from suffering losses if a brokerage firm misappropriates their funds.

          Sarbanes Oxley has effectively eliminated corporate fraud.

          The commodity exchanges, such as the CME Group, can effectively self regulate.

          Theft is illegal.

 

Every day which passes in which there is not a full recovery of the client funds held by MF Global adds to the list of questions.  And every day that passes serves to call further into question the ability of all brokerage houses, exchanges, and government regulators to make good on their promises.

 

The MF Global situation is not simply about the bankruptcy of a large brokerage, it is about whether or not the rule of law can be trusted to operate in the financial markets of the United States of America.

 

For all of the bankruptcies and bank seizures that have occurred in the wake of the 2008 financial crisis, in most cases there has been confidence that the framework of the markets could be trusted, and that the myriad of regulatory entities which are supposed to make Capitalism safe for all have everyting under control.

 

After MF Global, one has to question whether any asset, paper or physical, entrusted to a financial institution is safe.

 

In related news, Mr. Giddens (the MF Global Trustee above) announced today that JP Morgan would be probed in the MF Global investigation.

 

This can only serve to further disrupt futures markets.  Is the end of the current system nigh?

 

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for December 13, 2011

Copper Price per Lb: $3.43
Oil Price per Barrel:  $100.02

Corn Price per Bushel:  $5.88  
10 Yr US Treasury Bond:  1.96%

FED Target Rate:  0.07%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,632 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  8.6%
Inflation Rate (CPI):  -0.1%
Dow Jones Industrial Average:  11,995  

M1 Monetary Base:  $2,255,500,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,623,700,000,000 YIKES UP $1 Trillion in one year!!!!!!!