It’s been awhile since we got an article from our old friend Gonzalo Lira. This is a good one. He sums up the MF Global implications quite well. The big boys, like JP Morgan, will always win out over the ordinary investor. Those in power will always screw you in order to protect the criminal Wall Street banks. They look down upon the serfs from their penthouse castles in NYC. You cannot trust any financial institution. Some day you will wake up from a good nights sleep to find out that your politician “leaders” in Washington, in collusion with their Wall Stree masters, have absconded with the money in your brokerage, IRA, or 401k plan. They will do it for the good of the country. Trust them.
A Run On The Global Banking System—How Close Are We?
So first off, what happened with MF Global?
Simple: It went bankrupt—because it made bad bets on European sovereign debt, by way of leveraging positions 100-to-1. Yeah, I know: Stupid. Anyway, they went bankrupt—which in and of itself is no big deal. It’s not as if it’s the first time in history that a brokerage firm has gone bust. But to me, the big deal in this case was the way the bankruptcy was handled.
Now there are several extremely serious aspects to the MF Global case: Specifically, how their customers were shut out of their brokerage accounts for over a week following the bankruptcy, which made it impossible for those customers to sell out of their positions, and thus caused them to lose serious money; and of course how MF Global was more adept than Mandrake the Magician at making money disappear—about $1 billion, in fact, which still hasn’t turned up. These are quite serious issues which merit prolonged discussion, investigation, prosecution, and ultimately jailtime.
But for now, I want to discuss one narrow aspect of the MF Global bankruptcy: How authorities (mis)handled the bankruptcy—either willfully or out of incompetence—which allowed customer’s money to be stolen so as to make JPMorgan whole.
From this one issue, it seems clear to me that we can infer what will happen when the next financial crisis hits in the nearterm future.