Commodity Online
A clearing Exchange that looks increasingly reluctant to honour its vow of guaranteeing safety of transactions, a political system where politicians pile on cash based on their position in their country and the first victim of all the crony capitalism that ebbs through the power corridors of the US – private wealth is disappearing into the hands of the few.
Crony capitalism is a term describing a capitalist economy in which success in business depends on close relationships between business people and government officials. It may be exhibited by favouritism in the distribution of legal permits, government grants, special tax breaks, and so forth - wikipedia
When MF Global reported a $600 million in “missing” customer money, the CME (Chicago Mercantile Exchange) was looked upon to honour its guarantee of protecting and ensuring the safety of transaction. Even now, almost 33,000 victims have not be given even a penny from their wealth – their private wealth. And the question of where the millions of dollars have gone remain unanswered.
MF Global had taken money from the customer accounts, used it for their own purposes (without informing the customers) and now they have gone bust. So has Jon Corzine (head of MF Global) who seems to have prior connections to the global investment behemoth – Goldman Sachs.
Not only has the MF Global fiasco sapped of customer money, the confidence of traders have also been shaken with many seriously considering to move away from the markets.
"I would be hedging some feeder cattle right now, but I'm not going to do it. I'm leaving them exposed to the cash market and I don't like that. I have no confidence in the market, because it could happen at any other brokerage”, Reuters quoted a cattle rancher
In 2010, Terrence Duffy, CME Executive Chairman had boasted that CME is “the guarantor of every transaction that happens in our markets” and guarantees “the performance of each and every one of these contracts which means facilitating the transfer of $800 trillion of risk. To do this, we hold more than $100 billion of collateral to support the transactions that are being done on our markets.”
However, regarding the MF global fiasco, where CME was expected to safeguard customer assets, they have not been able to do so. And even though, they have pledged a $300 million "guarantee" to help customers, John Roe (co-founder of a coalition that’s working to document traders’ funds and get the money back through bankruptcy court), said that the guarantee was paltry. Trustee James Giddens is even reported to have said that the first priority for payback goes to the creditors! Not the customers!
The US Congress has meanwhile been busy raking in cash into their private trading accounts. A CBS television report particularly highlights the following three “insider” trading cases:
-Spencer Bachus who bet bullish on option funds after attending confidential meetings in 2008 regarding American financial crisis. He was betting that stock markets would fall.
-Nancy Pelosi, who invested in a Visa in 2008 while at the same time trying to prevent a bill on tougher Visa regulations.
-John Boehner, who played a significant role in defeating the “public option”. He invested in health insurance companies which rose in value as the “public option” was defeated.
The Securities Exchange Commission (SEC) says that trading on the basis of advanced knowledge is not insider trading! And they cannot be criminally held!!
One of the first of the victims of this crony capitalism , Ann Barnhardt of Barnhardt Capital Management (BCM) closed her brokerage operations. She wrote a letter to her clients saying -
“The reason for my decision to pull the plug was excruciatingly simple: I could no longer tell my clients that their monies and positions were safe in the futures and options markets – because they are not. And this goes not just for my clients, but for every futures and options account in the United States
The futures and options markets are no longer viable. It is my recommendation that ALL customers withdraw from all of the markets as soon as possible so that they have the best chance of protecting themselves and their equity
So long as the government remains criminal, it would serve no purpose whatsoever to attempt to rebuild the futures industry or my firm, because in a lawless environment, the same thievery and fraud would simply happen again, and the criminals would go unpunished, sheltered by the criminal oligarchy”
Pretty strong letter. But then, that just sums up what is wrong with the US economy today.
