Financial News

[StrangeSox]

SS2K5 has been pretty consistent in saying that in this economy, tax cuts are a mistake, as are tax increases, until the economy begins to recover a bit.

 

Yup, and harsh austerity, too.

[StrangeSox]

By the way, can we please end this nonsense that the only way to simplify the tax code is a flat tax? It's not like marginal rates are particularly hard or complicated; a progressive tax bracket isn't what gives us thousands and thousands of pages of code. It keeps getting repeated by the various R's offering their plans and repeated in articles uncritically.

[Balta1701]

If you've paid any attention to how the mortgage swap market worked...the implications of this lawsuit could be huge.

Merscorp Inc., the operator of a national mortgage registry used by banks, was sued by Delaware’s attorney general for allegedly using deceptive practices that hide information from borrowers.

 

The MERS database, which tracks ownership interests in mortgages, impeded the ability of homeowners to fight foreclosures and obscures its data, Delaware Attorney General Beau Biden said in a complaint filed today.

 

“MERS engaged and continues to engage in a range of deceptive trade practices that sow confusion among consumers, investors and other stakeholders in the mortgage finance system, damage the integrity of Delaware’s land records, and lead to unlawful foreclosure practices,” Biden said.

 

MERS tracks servicing rights and ownership interests in mortgage loans on its electronic registry, allowing banks to buy and sell loans without recording transfers with individual counties. MERS acts as the lender’s nominee, remaining the mortgagee of record as long as the note promising repayment is owned by a MERS member.

[southsider2k5]

Too bad they didn't make him Treasury Secretary like it was rumored a while back...

 

http://money.cnn.com/2011/10/31/news/compa...?source=igoogle

 

MF Global files for bankruptcy protection

By Aaron Smith @CNNMoney October 31, 2011: 12:47 PM ET

 

MF Global, the company led by former New Jersey governor Jon Corzine, filed for bankruptcy Monday.

 

NEW YORK (CNNMoney) -- MF Global, a trader in commodities and derivatives brought down by bad bets on Europe, filed for bankruptcy protection on Monday, leaving behind more than $2 billion in debt to some of Wall Street's biggest players.

 

The fate of MF Global, run by former New Jersey Gov. Jon Corzine, has been closely watched on Wall Street as a sign of how Europe's sovereign debt crisis could be cause trouble for U.S. financial companies.

 

MF Global was among firms that were forced to take write-offs as part of last week's deal to resolve the debt crisis in Europe.

 

The firm filed for Chapter 11 protection in U.S. Bankruptcy Court in the Southern District of New York.

 

The largest unsecured creditors owed money by MF Global are JPMorgan Chase (JPM, Fortune 500), with more than $1.2 billion in corporate bonds, and Deutsche Bank (DB), with $1 billion in bonds, according to court documents.

 

JPMorgan's stock fell more than 3% and Deutsche Bank plunged nearly 10%.

 

Those two firms hold the vast majority of MF Global's debt. An additional $10 million is divided among 45 other creditors, including American Express, (AXP, Fortune 500) KPMG and PricewaterhouseCoopers.

 

Trading in MF Global (MF) was halted on the New York Stock Exchange prior to the filing. The Federal Reserve Bank of New York suspended MF Global from conducting business with the Fed.

 

Shares of MF Global fell 16% Friday to $1.20. Shares have fallen more than 85% so far this year.

 

MF Global had until Monday to find a buyer or file for bankruptcy. According to The Wall Street Journal, a deal to sell many of its assets to Interactive Brokers (IBKR) as part of a bankruptcy filing package has been called off.

MF Global's warning bells

 

A spokeswoman for Interactive Brokers declined comment to CNNMoney as to whether the company is pursuing a post-bankruptcy deal.

 

For Corzine, the failure of MF Global is the latest chapter in a long career that began as a Marine Corps reservist in 1969.

 

From there, he moved into finance and eventually politics, then back to finance. Corzine, in addition to serving as a governor and U.S. senator from New Jersey, is a former chief executive at Goldman Sachs (GS, Fortune 500).

 

He started working as a bond trader for Goldman in 1975. Five years later he was named a partner and by 1994 he was CEO, a position he held for five years.

 

Corzine left the corporate world for politics in 2000, when he was elected to the U.S. Senate. Five years later, he was elected governor of the Garden State, a position he held until early 2010.

 

He ran for re-election in 2009 but was defeated by Chris Christie. On March 23, 2010, he was hired as CEO at MF Global and has held the top job ever since.

[southsider2k5]

Too bad they didn't make him Treasury Secretary like it was rumored a while back...

 

http://money.cnn.com/2011/10/31/news/compa...?source=igoogle

 

Yeah, this one is going to be real fun. They are getting suspended pretty much everywhere, and it turns out the deal with Interactive Brokers died because MF can't account for a bunch of money.

[NorthSideSox72]

Yeah, this one is going to be real fun. They are getting suspended pretty much everywhere, and it turns out the deal with Interactive Brokers died because MF can't account for a bunch of money.

This really sucks for many of the people that work there. The brokerage side of the business, retail and institutional, was actually making money and doing fine. This is purely about the foreign and sovereign debt plays they made. I know a few folks over there from back in the EDF Man days.

 

[southsider2k5]

This really sucks for many of the people that work there. The brokerage side of the business, retail and institutional, was actually making money and doing fine. This is purely about the foreign and sovereign debt plays they made. I know a few folks over there from back in the EDF Man days.

 

I still have some connections there as someone who spent years with a Refco subsidiary. It does suck.

[Balta1701]

This really sucks for many of the people that work there. The brokerage side of the business, retail and institutional, was actually making money and doing fine. This is purely about the foreign and sovereign debt plays they made. I know a few folks over there from back in the EDF Man days.

This doesn't seem very nice of them.

Federal regulators have discovered that hundreds of millions of dollars in customer money has gone missing from MF Global in recent days, prompting an investigation into the brokerage firm, which is run by Jon S. Corzine, the former New Jersey governor, several people briefed on the matter said on Monday.

 

The recognition that money was missing scuttled at the 11th hour an agreement to sell a major part of MF Global to a rival brokerage firm. MF Global had staked its survival on completing the deal. Instead, the New York-based firm filed for bankruptcy on Monday.

 

Regulators are examining whether MF Global diverted some customer funds to support its own trades as the firm teetered on the brink of collapse.

 

The discovery that money could not be located might simply reflect sloppy internal controls at MF Global. It is still unclear where the money went. At first, as much as $950 million was believed to be missing, but as the firm sorted through its bankruptcy, that figure fell to less than $700 million by late Monday, the people briefed on the matter said. Additional funds are expected to trickle in over the coming days.

 

But the investigation, which is in its earliest stages, may uncover something more intentional and troubling.

 

In any case, what led to the unaccounted-for cash could violate a tenet of Wall Street regulation: Customers’ funds must be kept separate from company money. One of the basic duties of any brokerage firm is to keep track of customer accounts on a daily basis.

 

Neither MF Global nor Mr. Corzine has been accused of any wrongdoing. Lawyers for MF Global did not respond to requests for comment.

[NorthSideSox72]

This doesn't seem very nice of them.

Wow. Best case scenario is they had bad accounting controls, and just need to "find" it. Worst case, they used customer funds to shore up prop investments. The latter would be horrifically bad, and likely result in criminal prosecutions.

 

[southsider2k5]

Wow. Best case scenario is they had bad accounting controls, and just need to "find" it. Worst case, they used customer funds to shore up prop investments. The latter would be horrifically bad, and likely result in criminal prosecutions.

 

Yep. Intermingling of funds=crossing the streams.

 

Bad things and jail time for sure. I really hope Corzine didn't want to go into politics again, because his career is ova.

[NorthSideSox72]

CME Group now saying publically, MF Global is in violation of the CFTC and CME rules pertaining to seperation of customer and proprietary funds. This was not an accounting mistake - the money was mixed. People will be going to jail.

 

[southsider2k5]

CME Group now saying publically, MF Global is in violation of the CFTC and CME rules pertaining to seperation of customer and proprietary funds. This was not an accounting mistake - the money was mixed. People will be going to jail.

 

Yes, there is a big problem here. And it has to be at the executive level.

[southsider2k5]

http://www.reuters.com/article/2011/11/01/...E79U5PQ20111101

 

(Reuters) - Greek Prime Minister George Papandreou faced calls from within his own party to step down on Tuesday after he threw the nation's euro zone membership into jeopardy by calling a referendum on a bailout package agreed only last week.

 

A leading lawmaker from Papandreou's socialist party quit while two others said Greece needed a government of national unity followed by snap elections, which the opposition also demanded.

 

The leaders of France and Germany scrambled to limit the damage to the wider euro zone, and European politicians expressed incredulity at an announcement that caught everyone by surprise -- including Papandreou's own finance minister.

 

"It's difficult to see what the referendum is going to be about. Do we want to be saved or not? Is that the question?" asked Swedish Foreign Minister Carl Bildt.

 

Business executives in Greece expressed despair at how the country was being run and markets speculated on whether Italy will be the next euro zone country to slide into a debt crisis.

 

Jean-Claude Juncker, who chairs meetings of euro zone finance ministers, refused to rule out a Greek debt default.

 

"The Greek prime minister has taken this decision without talking it through with his European colleagues," he said in Luxembourg.

 

Asked whether a Greeks "no" vote would mean bankruptcy for Greece, Juncker responded: "I cannot exclude that this would be the case, but it depends on how exactly the question is formulated and on what exactly the Greeks people will vote on."

 

DEFECTIONS

 

Papandreou, whose PASOK party has already suffered several defections as it pushes waves of austerity measures through parliament while protesters rally in the streets, said he needed wider political backing for the budget cuts and structural reforms demanded by international lenders.

 

But his problems deepened dramatically after his announcement on Monday. A cabinet meeting was due to held later on Tuesday.

 

PASOK lawmaker Milena Apostolaki quit the parliamentary group on Tuesday, reducing Papandreou's strength to just 152 seats out of 300 deputies before a vote of confidence.

 

"It's my duty to resist this wrong political choice which divides in an effort to replace the popular mandate and threatens the country's viability," Apostolaki wrote in a letter to the president of parliament.

 

"These are crucial moments and citizens need to be represented by members of parliament they have elected. Therefore... I am becoming independent."

 

Fellow PASOK lawmaker Vasso Papandreou demanded a new government to ensure Greece receives the 130 billion-euro rescue deal agreed at a euro zone summit only last week.

 

"I am calling on the President of the Republic to convoke political leaders with the object of forming a government of national unity to safeguard the aid package decided on October 27 and call elections immediately afterwards," said Papandreou.

 

Papandreou did not even inform his Finance Minister, Evangelos Venizelos, he was going to announce the referendum on the latest EU aid deal, a Greek government official said.

 

"Venizelos had no idea about the referendum. All he knew about was the vote of confidence," the official told Reuters on condition of anonymity.

 

"THEY MUST BE CRAZY"

 

French President Nicolas Sarkozy will call German Chancellor Angela Merkel on Tuesday, his office said, while emotions ran high in Greece itself about the referendum idea.

 

"They must be crazy... this is no way to run a country," said the senior executive of one of Greece's biggest firms, speaking on condition of anonymity.

 

Elsewhere in the euro zone, politicians complained Athens was trying to wriggle out of the bailout package, concerned not so much about the fate of Greece as the possibly dire consequences for the entire currency union of the referendum.

 

Ireland, which itself took a bailout, attacked Papandreou's idea.

 

"The summit last week was to deal with the uncertainty in the euro zone...and this grenade is thrown in just a few short days later," European affairs minister Lucinda Creighton said.

 

"Legitimately there is going to be a lot of annoyance about it," she told Reuters.

 

The Greek opposition demanded a snap election and financial markets, which had calmed down after euro zone leaders agreed the second Greek bailout, took Papandreou's bombshell badly.

 

Shares in banks dived, investors fled to the safety of German bonds and Italian borrowing costs climbed despite European Central Bank action. Investors speculated that Italy might follow a similar path.

 

One senior German parliamentarian suggested the euro zone might cast Athens adrift, cutting off its aid lifeline and allowing the nation to default on its huge debts.

 

"This sounds to me like someone is trying to wriggle out of what was agreed -- a strange thing to do," said Rainer Bruederle, a leader in Merkel's coalition.

 

Bruederle, parliamentary floor leader for the Free Democrats and a former German economy minister, said he was irritated by Papandreou's announcement.

 

Europe would have to consider turning off the flow of money which is keeping Greece afloat, he told Deutschlandfunk radio.

 

"One can only do one thing: make the preparations for the eventuality that there is a state insolvency in Greece and if it doesn't fulfill the agreements, then the point will have been reached where the money is turned off," he said.

 

INVESTORS SCURRY

 

On the markets, players scurried for safer investments, hammering stocks and punishing the euro.

 

"The referendum is a bad idea with a bad timing. The post-summit rally is over," said Lionel Jardin, head of institutional sales at Assya Capital, in Paris.

 

The FTSEurofirst 300 index of top European shares was down almost four percent, due not only to the possibility of a disorderly Greek default but chaos surrounding the euro zone's attempts to stop the debt crisis spreading to more significant economies such as Italy.

 

Euro zone banks exposed to Greece and Europe's bigger, troubled economies, suffered particularly. Shares in France's Societe Generale tumbled 17 percent and Credit Agricole was down almost 12.5 percent.

 

Andrew Lim, banking analyst at Espirito Santo in London, said that a Greek "no" vote could trigger a "hard default", forcing banks to take losses of about 75 percent on their Greek sovereign bonds and raising the threat of a systemic risk.

 

"If we get a hard default in Greece, it will exacerbate the situation with Italy and Spain. It just increases the problem of Italy going down the same route, and that's the real risk," Lim said.

 

Investors sold off bonds issued by Italy and Spain -- two major economies with debt problems which would be much tougher to rescue than Greece, one of the euro zone's smallest members.

 

Traders said that prompted the ECB to step in and buy the bonds of both countries as implied Italian borrowing costs hit a three month high around 6.26 percent.

 

On currency markets, the euro fell over one percent versus the dollar and yen. "The Greek referendum is a real curve ball. Nobody saw it coming and it injects a lot of uncertainty," said Steven Saywell, head of FX strategy at BNP Paribas.

 

SNAP ELECTIONS

 

In Athens, the conservative opposition leader called for snap elections. "Elections are a national necessity," conservative leader Antonis Samaras told reporters.

 

Germans on the streets of Berlin expressed exasperation with the entire euro project.

 

"All I understand is that the Greeks keep causing us problems. We'd be better off without the euro," said Bert Kuehn as he delivered rolls to a bakery.

 

Analysts said the latest opinion poll showed a majority of Greeks took a negative view of the bailout deal.

 

The renewed uncertainty is likely to be an embarrassment for G20 leaders meeting in France this week trying to coax China into throwing the euro zone a financial lifeline.

 

Greece is due to receive an 8 billion-euro tranche in mid-November, but that is likely to run out during January, around the time of the referendum, leaving the government with no funds if there is a "no" vote.

 

A survey carried out on Saturday showed that nearly 60 percent of Greeks viewed the agreement on the bailout package as negative or probably negative.

 

(Additional reporting by Ingrid Melander and Renee Maltezou in Athens, Michele Sinner in Luxembourg, Carmel Crimmins in Dublin, Fiona Ortiz in Madrid, Jeremy Gaunt, Adrian Croft and Marius Zaharia in London, Jussi Rosendahlm in Helsinki and Erik Kirschbaum and Madeline Chambers in Berlin; Writing by Dina Kyriakidou and David Stamp)

[southsider2k5]

Man admitted they didn't segregate funds, and used customer funds to cover firm losses.

 

http://www.boston.com/business/articles/20...mer_cash_rules/

 

Official: MF Global admitted using client money

By Daniel Wagner

AP Business Writer / November 1, 2011

 

WASHINGTON—A federal official says MF Global, the securities firm led by Jon Corzine, admitted to using clients' money as its financial troubles mounted.

 

An MF Global executive admitted that to federal regulators in a phone call early Monday after regulators discovered money missing from clients' accounts, according to an official familiar with the conversation.

 

The official spoke on condition of anonymity because he was not authorized to discuss a preliminary investigation by federal regulators.

 

Government rules require securities firms to keep clients' money and company money in separate accounts. Violating them could result in civil penalties.

 

MF Global, which filed for bankruptcy protection on Monday, faced a cash crunch following multibillion-dollar bets on European sovereign debt.

 

Corzine ran Goldman Sachs Group Inc., and later was governor of New Jersey.

 

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

 

MF Global, the securities firm led by Jon Corzine, broke rules requiring it to keep clients' money and company funds in separate accounts, the head of the Chicago Mercantile exchange said Tuesday.

 

CME Group Inc. CEO Craig Donohue says MF Global Holdings Ltd. was "not in compliance" with requirements set by his company and the Commodity Futures Trading Commission, its key regulator.

 

"While we are unable to determine the precise scope of the firm's violation at this time, we are investigating the circumstances of the firm's failure," Donohue said in a conference call about his company's quarterly financial results.

 

MF Global filed for bankruptcy protection on Monday, after a big bet on European debt threatened to topple it. Regulators said they have discovered shortfalls in some of the firm's customer accounts.

 

Companies regulated by the CFTC must account for clients' money and investments separately from money and investments belonging to the company.

 

Corzine, a former New Jersey governor and chief of Goldman Sachs, prompted MF Global to make more trades for the company's own profits, a practice known as proprietary trading. He pushed for the $6.3 billion bet on debt issued by Italy, Spain and other European nations with troubled economies that ultimately doomed the company.

 

The CFTC said in September that MF Global was overvaluing some of its European debt investments. It required the company to raise more cash, according to court papers filed on Monday.

 

MF Global reported its biggest ever quarterly loss last week, mainly because of losses on proprietary trading. Credit rating agencies downgraded the company's bonds to junk status, and business partners demanded that it put up more cash to guarantee its trades. The result was a severe cash crunch that forced MF Global into bankruptcy court.

 

Debt from many European nations has lost value in recent months because bond investors fear one or more countries might default. Fears about MF Global's possible losses spooked investors on Monday.

[Jenksismyhero]

On a somewhat similar note, anyone catch the 60 Minutes piece on the Madoffs? Pretty interesting. The son came off really well I thought. It's hard for me to believe he didn't know what was going on, but at the same time it sounded as though Bernie had a private side to his life that even his family didn't get to see. At some point the numbers just become numbers, so maybe they didn't really know. And it was clear that he was pissed and truly despises his father over it. The fact that his two sons turned him in I think speaks to a little of that.

 

His wife I thought came off as less sympathetic, mainly because she stuck by his side for so long. I mean, I guess at some point Bernie is also sympathetic, as everyone at certain points in their life commits a wrong and the wrong continues to compile and it's difficult to make it right again. But this was just pure greed. Dude had all the money he'd ever need and he just wanted more and more. He could have stopped but chose not too. His wife claims she'll never see/talk to him again, but she isn't getting a divorce. Her whole life was ruined, so I guess I can sympathize a little, but it's odd she backed him for so long.

[Balta1701]

Man admitted they didn't segregate funds, and used customer funds to cover firm losses.

 

http://www.boston.com/business/articles/20...mer_cash_rules/

I'm also reading that the debt to equity, the leverage ratio, for Corzine's mess was something like 40 to 1.

[StrangeSox]

I'm also reading that the debt to equity, the leverage ratio, for Corzine's mess was something like 40 to 1.

 

It was like they saw Lehman Brothers balance sheets circa 2006 and thought "WOW!"

[NorthSideSox72]

Also, this latest Greece episode is laughable. The Euro zone decides to give Greece a whole bunch of money, and cut their debt in half, in exchange for further austerity and tax measures. Greek leadership says OK.

 

Then Greek President goes on TV and says he wants to put it to a vote with his people.

 

Oops. Greece may decide to vote itself into financial oblivion.

 

 

[Balta1701]

Also, this latest Greece episode is laughable. The Euro zone decides to give Greece a whole bunch of money, and cut their debt in half, in exchange for further austerity and tax measures. Greek leadership says OK.

 

Then Greek President goes on TV and says he wants to put it to a vote with his people.

 

Oops. Greece may decide to vote itself into financial oblivion.

The people are already rioting from previous austerity measures and previous austerity measures have pushed unemployment in Greece to 17% while failing to do anything about the status of its debt.

 

There's ample reason to believe that these further austerity measures will simply increase unemployment further, which will then make the part of the debt not written off even more onerous. Thus, requiring another bailout step and another series of austerity measures to put more people out of work next year. And so on.

 

Ridicule Greece if you want...this bailout deal doesn't solve the problem unless the world's economy magically decides to start growing everywhere. It kicks the can down the road again, and the people have figured that out.

[NorthSideSox72]

The people are already rioting from previous austerity measures and previous austerity measures have pushed unemployment in Greece to 17% while failing to do anything about the status of its debt.

 

There's ample reason to believe that these further austerity measures will simply increase unemployment further, which will then make the part of the debt not written off even more onerous. Thus, requiring another bailout step and another series of austerity measures to put more people out of work next year. And so on.

 

Ridicule Greece if you want...this bailout deal doesn't solve the problem unless the world's economy magically decides to start growing everywhere. It kicks the can down the road again, and the people have figured that out.

I guess I disagree. A lot. The people in Greece have had issues with work for a long time. I've known people who do business over there - there is a sense of entitlement and lack of work ethic that is part of the pathos, which makes France look like the US. Businesses over there can't find people who are willing to work a full week, or a full day. They are far too dependent on the government. Conservatives think that is an issue here, but it is miniscule compared to Greece.

 

And if they don't take this deal, where do you think that leaves them? They can no longer service their debt load. They will end up defaulting left and right, the government will break down, and things will be much, much worse.

 

I am amazed people think that is somehow a better alternative. What that country needs is a rescue combined with a swift kick in the ass, but the President doesn't want that because he is afraid of his own people.

 

[southsider2k5]

Also, this latest Greece episode is laughable. The Euro zone decides to give Greece a whole bunch of money, and cut their debt in half, in exchange for further austerity and tax measures. Greek leadership says OK.

 

Then Greek President goes on TV and says he wants to put it to a vote with his people.

 

Oops. Greece may decide to vote itself into financial oblivion.

 

The German contingents reaction was great. If they vote against it, they get drummed from the Euro-Zone and become the Euro equivalent of Detroit.

[Balta1701]

And if they don't take this deal, where do you think that leaves them? They can no longer service their debt load. They will end up defaulting left and right, the government will break down, and things will be much, much worse.

I think taking this deal leaves them right where you think refusing this deal leaves them...either defaulting on their debts or leaving the Euro. Taking this deal simply doesn't fix the problem.

 

Left out all your stuff about them needing a kick in the tail, because you're right, that's a country with a bunch of severe problems, most notably a large segment of the population who skips out on taxes because the country has a weak tax collection system. But that's not the point...austerity measures aren't a "Kick in the tail", they are measures taken that will weaken an economy with no prospects for growth in the near term future and a high probability of defaulting anyway.

[bmags]

Also, this latest Greece episode is laughable. The Euro zone decides to give Greece a whole bunch of money, and cut their debt in half, in exchange for further austerity and tax measures. Greek leadership says OK.

 

Then Greek President goes on TV and says he wants to put it to a vote with his people.

 

Oops. Greece may decide to vote itself into financial oblivion.

 

It would be laughable if it didn't affect more than greece.

[Balta1701]

The German contingents reaction was great. If they vote against it, they get drummed from the Euro-Zone and become the Euro equivalent of Detroit.

Except once they're out of the Eurozone, they will suddenly be a cheap place to do business if you want to sell stuff to the rest of the world.

[southsider2k5]

I think taking this deal leaves them right where you think refusing this deal leaves them...either defaulting on their debts or leaving the Euro. Taking this deal simply doesn't fix the problem.

 

Left out all your stuff about them needing a kick in the tail, because you're right, that's a country with a bunch of severe problems, most notably a large segment of the population who skips out on taxes because the country has a weak tax collection system. But that's not the point...austerity measures aren't a "Kick in the tail", they are measures taken that will weaken an economy with no prospects for growth in the near term future and a high probability of defaulting anyway.

 

Not taking the deal makes them do both.