Sat Dec 31, 2011, 02:48 PM
stockholmer (3,751 posts)
James Koutoulas on JP Morgan Boycott, MF Global Failure, ZIRP ... more. [View all]
Warren Pollock interviews James Koutoulas CEO of the Commodity Customer Coalition. Were it not for James, MF Global customers would have been totally overrun by an exparte bankruptcy process dominated by JP Morgan and the SIPC. This breaking interview covers important issues regarding JP Morgan's refusal to address concerns regarding its conduct as custodian of MF Global segregated house, their role in lowballing MF Global customers with a 40c offer on the dollar, with their fingers all over the bankruptcy, head of creditors committee, preferential purchases of LME stock, the ability to flip assets of MF Global without competitive bid. JMP even asked MF Global for a comfort letter to assure that funds were not sourced from customers, yet JPM still grabbed the 200 Million even without such assurance. JPM even fired James as a customer via a vindictive letter written midlevel executive.
JPM does not think that 8000 customers under representation is not a credible force. We talk about having clean hands and unclean hands through a process where people do wrongdoing and then benefit from it. JPM has been stonewalling inquiries on the part of interested parties. MF global may be indicative of other situations in term of hypothecation and re-hypothecation. James thinks that ZIRP Zero Interest rate policy has encouraged the issuance of leverage via derivatives with no provision for loss. Its natural that a small percentage loss on a levered bet would result in customer funds being tapped simply because no other real money or collateral exists. We talk about the idea of segregation of funds being a basic financial construct, yet fractional reserve banking, derivatives, and netting mean that liabilities are far in excess of total cash. Judge Glenn has established a high standard of illegal conveyance in order for MF Global customers to reach into MF Global holdings assets.
James has a strategy to address this standard by arguing that CFTC regulations with bankruptcy laws say otherwise since customer funds must be segregated every second of every day. This may be a venue issue because the bankruptcy is managed by the SIPC even though only 400 customers are securities customers with tens of thousands being commodity customers. Bankruptcy managed under CFTC regulations would have worked to majority interest. Not a single FCM (commodities brokers) filed a document to represent the interests of customers. The commodity customer coalition had to build an organization from scratch then having to deal with issues that managed before its influenced was passed. In a way its outside the process or exparte. JPM has been acting with arrogance and hubris by not listening to the issues of the CCC. JPM made an offer of 40c on the dollar vs an industry standard offer between 80c and 86c.
According to James, a fat cat Trustee has reformed itself based on meetings which he led. The Trustee has been prevented from milking the situation for millions in fees. The Trustee has not incorporated most of the CCC's talking points which has saved the businesses of many a market participant including farmers who would have been put out of business were the bankruptcy proceed at a Lehman pace. Readily Identifiable property, including gold and sliver certificates and treasuries, represents a major issue that has not been addressed. and much more.
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