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Anger mounts as MF Global clients see $3 billion still stuck By David Sheppard and Jeanine Prezioso Reuters – 38 minutes ago

NEW YORK (Reuters) - Three weeks after MF Global's collapsed, furious former customers are still fighting for access to billions of dollars as they question why as much as two-thirds of their money is still stuck. While authorities have touted the fact that they are returning 60 percent of the collateral and cash that had been frozen in the wake of the broker's October 31 bankruptcy, a closer look shows that in fact only about 40 percent of customers' total funds have been authorized for release so far. The remainder, more than $3 billion, ostensibly remains on hand to cover a shortfall originally estimated by MF Global to regulators at just $600 million. Because the bankruptcy trustee, regulators and exchanges have made no comment on the missing funds in weeks -- and have given no information as to how much cash they are retaining -customers are left guessing exactly how much might end up in the creditors' process of the bankruptcy. After weeks of intense lobbying by customers and exchanges, trustee James Giddens last week won court approval to release another $520 million in funds from MF Global accounts that contained only cash as of October 31. But that has still left thousands of customers in an uproar. Clients who had a mix of cash and trading positions have yet to see a dime of their excess funds, they say. The trustee is planning a third cash transfer to cover these clients, but no


timing for that tranche has been announced. "The whole process is a mess," said Jason Skole, a private investor who had invested $200,000 at the start of this year in a small hedge fund who traded through MF Global. "Those who had just cash positions will get some of their money. All I've got is 60 percent of the small amount of collateral I had backing trades," he said. He says around $185,000 of his money is still frozen at the bankrupt firm. Giddens said late last week that they were working on a third bulk transfer to "true up" the value of distributions so that all former customers get the total 60 percent of their net equity, but they weren't yet confident enough in MF Global's bookkeeping and cash on hand to go beyond that. "We've seen enough (money) to make the 60 percent distributions but we can't distribute money we don't have," Giddens' spokesman Kent Jarrell told Reuters on Sunday. "As soon as we identify assets under our control, we are trying to distribute them. And we can't get ahead of that because then we can run out of assets.... We have to find the assets and we have to make sure we have to control those assets. It's a time consuming, complex task and we have hundreds of people working on it on our end now." CME Group referred all questions to the trustee. MONEY TRAIL The tale of the customer's funds goes like this. On October 31, exchange operator CME Group estimated in a court filing that there was a "requirement" of some $5.5 billion in segregated customer funds -- including, presumably, the missing funds that could not be immediately located. Over the following weeks, while authorities poured over sloppy and haphazard records, the trustee identified two pools of money that could be partly returned to customers. The first was $2.5 billion in collateral that was being used as margin to cover existing trades. Those trading positions were transferred to new brokers


along with 60 percent of the value of the collateral, or about $1.55 billion. The second was $869 million that was left in MF Global accounts that contained nothing but cash -- either because customers had liquidated all their trades before October 31, or because they simply had no positions open as it failed. The bankruptcy court ruled last week that those account holders would also get back 60 percent, or about $520 million. Those two pools of funds only account for about $3.4 billion of the original total $5.5 billion. The customers whose accounts hold that remaining $2-plus billion have never been explicitly identified, or told when they will get their funds. "We have the $520 million to do distribution of cash accounts. And we knew we had the assets to distribute on the first one around. Now we also feel confident we have enough to true up. What we don't know is what we'll have beyond that," said Jarrell. It's clear that some cash is being held back in order to cover the missing money that regulators say MF Global may have taken from customer accounts, an unprecedented violation of one of the fundamental tenets of commodity brokers. What has not been clear is why officials have declined to be more specific about how much money they believe should be in those accounts, regardless of what is missing. "...The Trustee should publish a report showing how much funds have been accounted for, how much has been distributed and how much he is still holding," said Ronald Filler, director of the Center on Financial Services Law at New York Law School. "Once the accounting nears completion, one would hope that another 20 percent or more will soon be distributed, leaving an adequate amount to cushion any shortfall. If the Trustee holds on to the remaining 40 percent without explanation, then one could possibly presume that the shortfall may be greater than $600 million. Let's hope not." One answer became clearer on Friday: Some, perhaps most, of those unexplained funds are being held by customers who had both open


trades and large sums of money on account at the stricken brokerage, ex-MF Global customers said. While these customers have been reunited with their open trades, their cash is still frozen. The result? More than $3.3 billion or 60 percent of total customer funds at the time of the bankruptcy are still frozen. MOUNTING ANGER While customers were initially outraged at the thought that MF Global had tapped into their segregated funds, that rage has increasingly been targeted at the trustee and the bankruptcy court for the handling of an unprecedented collapse. "The (bankruptcy) Trustee is creating new protected classes within a pool of segregated customer assets," said John Roe, a spokesman for the Commodity Customer Coalition, a group lobbying for the speedy release of funds representing 7,000 former MF Global customers. "(This) has dangerous implications in future Future Commission Merchant (FCM) bankruptcies. How is this in the interests of customers, FCMs, bankruptcy creditors or the system as a whole?" It is still unclear what happened to the $600 million of customer funds unaccounted for since MF Global's Chapter 11 filing, and whether MF Global might have illegally mixed customer funds with its own or used them for its own proprietary trading. The Commodity Futures Trading Commission, federal prosecutors and the Securities and Exchange Commission are all investigating the bankruptcy. (Additional reporting by Nick Brown in New York; editing by Marguerita Choy, Jonathan Leff and Edward Tobin)


Forbes: Alex Jones & Gerald Celente Call for Run on Banks. The U.S. banking system is not safe from the unraveling European sovereign debt crisis. Alex Jones, the T-Rex of conspiracy radio, and his guest say it is time to take the money and run. Jones’ guest, the inflammatory Gerald Celente, founder of The Trends Research Institute, said investors should forget U.S. stocks and bonds and put it in cash, or the usual favorite of the apocalyptic, gold and silver coin. “The whole thing is a game thats rigged by Wall Street,” says Celente. “The whole system is going down. Pull your money out your Fidelity account, your Scwhab accout, and your ETFs.” On Nov.14, Celente toldRussian 24 hour news network RT TV that he lost over “six figures” in gold future contracts when MF Global collapsed Bear Stearns style, seemingly vanishing from the market overnight. Hardly one to mince words or mask his disdain for what he sees as a Wall Street-to-Washington crime syndicate, Jones’ show on Thursday is a testament of Main Street’s overall caution about investing after being fully or nearly totally wiped out in 20008. Celente’s view is not relegated to just fringe internet radio programming. He’s been on nearly every network news show over the last 15 years, from Oprah Winfrey to CNN. In 2009, one of Celente’s employees took his advice and switched nearly 60% of her 401k into gold. Forbes said she overreacted, but the only security to perform better than the SPDR Gold (GLD) ETF this year, for example, has been Chinese internet stocks. “When I say take your money out


of the banks and put it under the mattress, this is not advice,” Celente says. “Personally, I buy gold coins from reputable companies. I take my money out of investment funds and I buy gold and silver. You need the three g’s — gold, guns and a get-away plan.” A getaway plan from what? As Jones and Celente see it, the collapse of the Western financial markets and contagion from southern Europe. On Thursday, bond spreads from Spanish and French debt rose on fears that Italy’s problems will spread throughout the region. Spain and France struggled with government bond auctions early Thursday. Nobody wants them at current yields, so yields will have to go higher to represent the risks involved with buying south European government debt. It might not just be Greece anymore. It’s Italy. And then Spain. And them Portugal might get worse. And up north…Ireland. Where does it end? Spain 10-year bond yields on Thursday rose to their highest level since 1997, with interest rates rising 1.5 points above the average paid at similar auctions this year. Reuters cited unnamed sources calling the bond market “pretty awful” to “dreadful.” The euro fell on the foreign exchanges in response. Paris fared a little better, but again had to pay markedly more to shift nearly 7 billion euros of government debt. Fears that the euro zone’s second largest economy is getting sucked into the maelstrom have taken the two-year debt crisis to a new level this week, 1. Reuters reported. “The euro zone has got to deliver something which is going to calm markets down and at the moment markets feel like they are being given no comfort whatsoever,” Marc Ostwald, a strategist at Monument Securities, told Reuters. Back at the Jones radio show this morning, talk of the usual suspects from the elite salon group known as the Bilderberg Group, to a conspiracy of hedge funds allegedly “stealing people’s brokerage accounts” en masse, investors are witnessing a “hostile takeover”, says Jones.


Celente said that people have to find morality in order to change the political and financial system. He charged political leaders with perpetuating a system of fraud for personal gain. “The politicians are enablers of crime bosses,” he says. Newt Gingrich made over $1 million advising Fannie Mae and Freddie Mac, which were at the center of the sub prime mortgage crisis.

“Every financial institution is under the same kind of pressure as we see in Europe. If you think your money is safe with any of those big names, you’re making a big mistake,” Celente said…loudly at times. While Celente and Jones’ passionate plea may, on balance, fall on mostly deaf ears, investors holding cash in simple savings and checking accounts are protected by the FDIC up to $250,000 even in the case of bank failure. Under SIPC rules, stock accounts are also partially protected up to a point if a broker/dealer goes bankrupt, though the process often involves a legal fight.


The Complete And Annotated Guide To The European Bank Run (Or The Final Phase Of Goldman’s World Domination Plan) 1. Zero Hedge November 20, 2011 “Nervous investors around the globe are accelerating their exit from the debt of European governments and banks, increasing the risk of a credit squeeze that could set off a downward spiral. Financial institutions are dumping their vast holdings of European government debt and spurning new bond issues by countries like Spain and Italy. And many have decided not to renew shortterm loans to European banks, which are needed to finance day-to-day operations. ” So begins an article not in some hyperventilating fringe blog, but a cover article in the venerable New York Times titled “Europe Fears a Credit Squeeze as Investors Sell Bond Holdings.” Said otherwise, Europe’s continental bank run in which virtually, but not quite, all banks are dumping any peripheral exposure with reckless abandon is now on. Granted, considering the epic collapse in bond prices of Italian, French, Austrian, Hungarian, Spanish and Belgian bonds which all hit record wide yields and spreads in the past week, and furthermore following last week’s“Sold To You”: European Banks Quietly Dumping €300 Billion In Italian Debt” which predicted precisely this outcome, the news is not much of a surprise. However, learning that everyone (with two exceptions) has given up on Europe’s financial system should send a shudder through the back of everyone who still is capable of independent thought – because said otherwise, the world’s largest economic block is becoming unglued, and its entire financial system is on the edge of a complete meltdown. And just to make sure that various fringe bloggers who warned this would happen over a year ago no longer lead to the hyperventilation of the venerable NYT, below, with the help of Goldman’s Jernej Omahan, we bring to our readers the complete annotated and abbreviated beginner’s guide to the pan-European bank run.


But first some more details from the NYT: The flight from European sovereign debt and banks has spanned the globe. European institutions like the Royal Bank of Scotland and pension funds in the Netherlands have been heavy sellers in recent days. And earlier this month, Kokusai Asset Management in Japan unloaded nearly $1 billion in Italian debt. At the same time, American institutions are pulling back on loans to even the sturdiest banks in Europe. When a $300 million certificate of deposit held by Vanguard’s $114 billion Prime Money Market Fund from Rabobank in the Netherlands came due on Nov. 9, Vanguard decided to let the loan expire and move the money out of Europe. Rabobank enjoys a AAA-credit rating and is considered one of the strongest banks in the world. American money market funds, long a key supplier of dollars to European banks through short-term loans, have also become nervous. Fund managers have cut their holdings of notes issued by euro zone banks by $261 billion from around its peak in May, a 54 percent drop, according to JPMorgan Chase research. Is this setting familiar to anyone? It should be: “Experts say the cycle of anxiety, forced selling and surging borrowing costs is reminiscent of the months before the collapse of Lehman Brothers in 2008, when worries about subprime mortgages in the United States metastasized into a global market crisis.” Ah, but there is one major difference: last time around, the banks were not all in on the wrong side of the world’s worst poker hand (as described by Kyle Bass earlier). Now they are. And should Europe’s banks begin a domino-like spiral of collapse, there will be nobody to bail out first Europe, then Japan, then China, then the US and finally the world. But lest someone suggest this is merely the deranged ramblings of yet another blogger, here is Goldman Sachs with a far more cool, calm and collected explanation for why we should all panic (which comes at the sublime moment: just as Goldman takes over all the key political locus points of the European continent: more on that in the conclusion…)


Core’ banks cut GIIPS debt by €42 bn (-31%) in 3Q; a manifestation of PSI sideeffects? In 3Q2011, banks from the ‘core’ cut their net GIIPS sovereign debt holdings by €42 bn (or by one-third), mostly Italian (€26 bn), Spanish (€7 bn) and Greek (markdown of €7 bn). French and Benelux banks cut their exposures most, by €21 bn and €9 bn, respectively. GIIPS portfolios remained unchanged with periphery banks. 1. Full article here http://www.zerohedge.com/news/co mplete-and-annotated-guide-europea n-bank-run

The American Dream http://www.youtube.com/watch?v= ZPWH5TlbloU

END THE FED

Anger Mounts as MF Global Clients See $3 Billion Still Stuck  

NEW YORK (Reuters) - Three weeks after MF Global's collapsed, furious former customers are still fighting for access to billions of dollars...

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