Tuesday, November 1, 2011

Ah geez it's starting all over again

As we all may recall form the economic meltdown of 2007 that great Ponzi scheme seems to be rearing its' ugly head again. No I'm not talking about Bernie Madoff but what had happened to Goldman Sachs and the Lehman Brothers investment firms. A snipet from the Wall Street Journal :

MF Global collapse sparks FBI investigation
The fallout from MF Global Holdings Ltd.'s collapse intensified as the Commodity Futures Trading Commission voted to issue subpoenas to the securities firm and the Federal Bureau of Investigation planned to examine whether client funds are missing, according to people familiar with the situation.

MF Global admitted to federal regulators that money had been diverted out of customer accounts, according to a federal official who said the move violated the law. Aaron Lucchetti has the latest on The News Hub.

The two moves are the result of a discrepancy of hundreds of millions of dollars in the New York company's books that was discovered just before MF Global tumbled into bankruptcy Monday, according to people familiar with the matter.

It isn't clear if the discrepancy, about $900 million as MF Global raced to sell itself over the weekend, was caused by money being diverted by company officials desperate to meet margin requirements or collateral calls as the financial situation became dire, these people said. Another possibility is that the gap reflects bookkeeping or accounting errors, as well as a delay in recording transactions in MF Global's books given the securities firm's far-flung trading and clearing operations.

Now I'd bet that anyone with a retirement account (remember many pension funds rely on these investment houses) may not know if their retirement is safe. The funds after all investments are as diverse as can be imagined. If you bother to actually read a prospectus I'd bet that many of the companies listed you've never heard of. And knowing exactly what is going on with your money at any given moment would be near to impossible. But we all rely on the honesty of those we instill with our trust. We can only go by past performance which is never an indication of future gains (a standard warning neatly tucked in the fine print). However this example is the reason Glass Stegal was put in place so many years ago. That Act split investment houses from banks so that bankers could not play Vegas with our money and loose it before we had a chance to spend it,

This isn't exactly the greatest theft in American history as compared to 07 but it sure isn't helping the situation. And seeing as how the game of chance is still going on we'll have to wait and see when the other shoe drops. So many things are right on the tipping point at the moment it's scary to sit back and watch. But keep your eyes peeled over the next three weeks as the perfect storm develops.

And let me add: You think anyone of them will go to jail?... I don't think so either.


BBC said...

None of that has any effect on me, as far as I can tell. They just piss me off because greed pisses me off.

Randal Graves said...

Jail's for Cletuses and Negroes, duh.

BBC said...

Cletuses ?? Can't find a reference to that word.

Demeur said...

He means those at the bottom Billy.

BBC said...

Um, I'm at the bottom but I stay out of jail.

S.W. Anderson said...

As I've said several times, we need a gallows permanently installed on Wall Street, and occasional use of it for especially outrageous perps. If my suggestion had been taken after 2007, MF Global's accounts very well might be missing no more than the cost of a coffee break today.

Sometimes, crude but effective is the best way to go. ;)

Mark @ Israel said...

This situation tells us that the people we have instilled our trust are no longer worthy of that trust because they have become dishonest. When there are discrepancies, that means some people are manipulating the books. And I agree, people who are at fault are not jailed even when things like this are discovered.