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It’s Official: Wall Street Firms May Legally Steal From Their Customers

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stockholmer Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Nov-11-11 11:19 PM
Original message
It’s Official: Wall Street Firms May Legally Steal From Their Customers
http://www.zerohedge.com/contributed/it%E2%80%99s-offic...

......they may not have to pay them back, even when they are caught. The customers will be expected to 'take one for the team,' and for the good of the system. Confidence and all that. “This means they can take segregated funds and leverage them to kingdom come. It means nothing is safe.” If you have a commodity account with Wall Street, they may gamble with your money, with your assets, the rule on segregated accounts be damned. If they lose the money you might be reimbursed, or not. The losses may have to be 'socialized' and haircuts received.

This is most likely a distortion of the principle known as 'rehypothecation' in which a broker can use customer positions and holdings as collateral pledged for a margin loan for the purpose of securing funding from a third party to service that loan. The principle at play here may be closer to a type of droit du seigneur, in which any assets you have posted at a futures brokerage may be used at will by the broker for their own purposes without regard to any customer obligations. It depends on the extent to which MF took customer assets and leveraged them.

In a way it is just making the unbalanced relationship between Wall Street and its customers official. It means that customers are bearing hidden counterparty risks on assets to which they thought they had a clear title, such as Treasuries, and foreign currencies, and warehouse receipts for precious metals.

It means that brokers can go beyond the mere provision of funding for loss, and use customer accounts to fund their own leveraged speculation under exemptions duly granted by their 'regulators.'


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MF Global May Have Used Customer Funds In The Losing $6.3 Billion Trade Without Informing Clients

http://www.forbes.com/sites/robertlenzner/2011/11/08/mf... /

After an intense day of investigation, I have just discovered that a CFTC rule(1.29) allowed Jon Corzine’s MF Global to use the margin and cash in customers heretofore segregated accounts to amass a risky $6.3 billion investment in European sovereign debt that backfired. Nor did Corzine have the obligation to inform any of these customers he was gambling with their money. Or that he was intending to keep all the profits for himself and his troubled firm. Nothing for the customers.

The language of Rule1.29 allows “The investment of customer funds in instruments described in 1.29 shall not prevent the futures commission merchant (MF Global) or clearing organization so investing such funds and retaining as its own any increment or interest resulting therefrom.” Increment refers to any trading profits or gains.

The criminal division of the Justice Department in New York — as well as the SEC and the CFTC and members of Congress– are investigating whether any laws were violated and if so, whether any criminal charges can be brought. As of 3pm today, there has been no sign of the missing $633 million. My sources believe it was probably grabbed by the institutions that made the margin calls on MF Global as the European bonds sank in value.

This shocking loophole, which is available to all commodity traders, whether giant ones like Goldman Sachs or members of commodity exchanges, means that huge risks are being taken with money that does not belong to the trading firms– without the customers having any idea of the danger they are in. As Andy Abraham, a futures trader in Israel put it to me today; “this means they can take segregated funds and leverage them to kingdom come. It means nothing is safe.”


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Dawson Leery Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Nov-11-11 11:23 PM
Response to Original message
1. Restore the Glass-Steagal Act.
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FreakinDJ Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-12-11 04:03 AM
Response to Reply #1
8. +1000
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bvar22 Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-12-11 03:22 PM
Response to Reply #1
14. Dodd-Frank is a joke,
..and it is an INSULT to call it "reform".
It is not "reform".
It IS an A-OK for the continued looting without penalty by the Big Banks.
"Historic"....my ass!
The same goes for the "Historic Credit Card Reform 2009".

ONLY a propagandist or a Marketing Agent can call these "reforms" with a straight face,
and THEN they giggle uncontrollably after the cameras are turned off.



You will know them by their WORKS,
not by their Campaign Press Releases.
Solidarity99!
--------------------------------------------------------------------------------------------------------------------------------




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SomethingFishy Donating Member (552 posts) Send PM | Profile | Ignore Sat Nov-12-11 06:59 PM
Response to Reply #14
22. The bill was pretty sad and they couldn't even
manage to implement most of it. I think out of the 400 new regs 38 got put into place...
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Lucky Luciano Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-12-11 07:31 PM
Response to Reply #1
24. Glass-steagal would not apply here. HOWEVER, laws already on the books SHOULD apply here. nt
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RainDog Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Nov-11-11 11:26 PM
Response to Original message
2. this is the company that just went bankrupt?
because it made a bad bet on the direction of the european market?

so people who have worked all their lives will potentially lose their savings b/c of a bad bet? wow.

who was the big name with this one? I heard it yesterday. oh yeah.

wiki:

Jon Corzine

54th Governor of New Jersey
CEO of Goldman Sachs
Political party Democratic
University of Chicago Booth School of Business (M.B.A.)


Jon Stevens Corzine (born January 1, 1947) is the former CEO of Goldman Sachs and of MF Global, and a one time American politician, who served as the 54th Governor of New Jersey from 2006 to 2010. A Democrat, Corzine served five years of a six-year U.S. Senate term representing New Jersey before being elected Governor in 2005. He was defeated for re-election in 2009 by Republican Chris Christie.<2> In March 2010, Corzine was named chairman and CEO of MF Global Inc., a financial services firm specializing in futures brokerage that filed for bankruptcy protection in October 2011.<3><4>

Corzine began his career in banking and finance. In the early and mid 1970s, he worked for Midwestern banks (Continental-Illinois National Bank in Chicago, Illinois and BancOhio National Bank in Columbus, Ohio) during and after his master of business administration (MBA) studies at the University of Chicago Booth School of Business. In 1975 he moved to New Jersey to work for Goldman Sachs. He became Chairman and CEO of Goldman Sachs and the leading advocate in the firm's decision to go public. In 1999, having lost a power struggle with Henry M. Paulson, Corzine left the firm. After his departure from Goldman Sachs, he earned what has been estimated to be US$400 million during the 1999 initial public offering of the company.<5>

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JDPriestly Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-12-11 03:25 PM
Response to Reply #2
15. Corzine called himself a Democrat, but he could not have done what
he did had he really been an FDR Democrat. In fact, he would not have had anything to do with Wall Street in the first place.

Think a Robert Rubin Democrat. I don't define Robert Rubin's philosophy if he has one as Democratic.
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RainDog Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-12-11 06:04 PM
Response to Reply #15
18. well, he was elected gov. of NJ as a democrat
so he's a part of the party.

I don't think you can honestly say that a democrat has nothing to do with Wall Street and corruption. Was Bill Clinton a democrat? He didn't act like one, according to what I understood were the positions of the party when he was all for deregulation and NAFTA and blaming the poor for their poverty under the guise of workfare. whatever happened to those poor families that didn't find work, I wonder?

I just think it's important to recognize that the Democratic party has powerful members who are just as complicit in destroying labor as Republicans. Who's the mayor of Chicago now? Isn't he attacking teachers? Isn't he integral to the Democratic Party? Wasn't he Obama's chief of staff?

It's coming down to a difference between those who actually give a fuck about working people and those who don't. There are people in both parties who don't give a fuck and yet think they are somehow still entitled to votes from those same people. Entitled.

They think their jobs are to protect the interests of a small group of wealthy and powerful people. And to engage in the same sort of money-grubbing schemes.
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JDPriestly Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-12-11 06:23 PM
Response to Reply #18
19. I learned a lot from the Clinton years. I won't fall for anyone like that again.
I'm also very upset about Obama. He is too weak for words.
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RainDog Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-12-11 07:09 PM
Response to Reply #19
23. well, growing up is an education
I'm not a "joiner" for most things - I'm not comfortable forming identity this way. politics can creep me out for this very reason. I didn't start out this way but my experience of the herd mentality is that I don't want to be part of the herd or one of the herders.

the reality, for me, is that my pov is farther to the left than a lot of people's and I have to live with that reality. I didn't start where I am. I arrived there after lots of different moments in life. But I assume if I, as a southern baptist female with a majorly dysfunctional family, can overcome years of programming to recognize bullshit and to honor the difficult truths, anybody can.

I just want to be able to tell my truths.

I don't think Obama is weak. I think he's more comfortable with the status quo than I am and he's more willing to sacrifice issues and ideas that I find too important to let slide. I think he's also faced an enormous amount of racism that remains in our culture and that very racism has been used against him to constrain some of his actions. I know I wouldn't want his job.

the reality, for me, is that no politician is "perfect." that would mean so many things to so many diff. ppl. anyway. rather than going strictly after the pols, we need to look at the system that forces pols to give allegiance to situations that they would not, if they did not need that very system to get elected.
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crunch60 Donating Member (85 posts) Send PM | Profile | Ignore Sun Nov-13-11 01:48 AM
Response to Reply #19
25. Democrats and Repukes are almost the same, except
I think Democrats are less evil. Both take money from wall street, Obama I believe got one million from Goldman Sachs in the last election. Understand why there is no prosecutions of the wall street thieves? Revolving door between wall street and the White House. The only people I believe in now are the people who OWS!
This powerful movement will force the changes we need. It is already happening. I thank each and every one of them.
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prairierose Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Nov-11-11 11:30 PM
Response to Original message
3. The game is rigged...unless you are a billionaire and can...
afford to lose your entire investment....glad I'm too poor to have any money there.
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RainDog Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-12-11 12:08 AM
Response to Reply #3
5. Corzine is a democrat and a former CEO of Goldman Sachs
the rot is deep in American politics and on both sides of the aisle.
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Citizen Worker Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Nov-11-11 11:50 PM
Response to Original message
4. Welcome to the American Casino! If you're a member of the 1% club you gamble with someone else's
money! Just great, right?
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Eric J in MN Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-12-11 12:15 AM
Response to Original message
6. How does a criminal investigation = officially legal? NT
NT
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DeSwiss Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-12-11 02:15 AM
Response to Original message
7. I don't care what economic terms are made-up to describe it.....
...they're just a bunch of fucking thieves who should all be in prison. No, horse-whipped first. Then put in prison.

- K&R

It ain't robbery, it's a business cycle

Capitalism is about one thing: aggregating the surplus productive value of the public for private interests. As we have said, it is about creating state sanctioned "investments" for the workers who produce the real wealth. Things like home "ownership" and mortgages, or stock investments and funds to absorb their retirement savings. That crushing 30-year mortgage with two refis is an investment. So is that 401K melting like a snow cone at the beach.

As the people's wealth accumulates, it is steadily siphoned off by government and elite private forces. From time to time, it is openly plundered for their benefit by way of various bubbles, depressions or recessions and other forms of theft passed off as unavoidable acts of nature/god. These periodic raids and draw downs of the people's wealth are attributed to "business cycles." Past periodic raids and thefts are heralded as being proof of the rationale. "See folks, it comes and goes, so it's a cycle!" Economic raids and busts become "market adjustments."

Public blackmail and plundering through bailouts become "necessary rescue packages." Giveaways to corporations under the guise of public works and creating employment become "stimulus." The chief responsibility of economists is to name things in accordance with government and corporate interests. The function of the public is to acquire debt and maintain "consumer confidence." When the public staggers to its feet again and manages to carry more debt, buy more poker chips on credit to play again, it's called a recovery. They are back in the game.

~ Joe Bageant, "Waltzing at the Doomsday Ball"
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dixiegrrrrl Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-12-11 05:03 PM
Response to Reply #7
17. sigh..I miss Joe.
:(
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DeSwiss Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-12-11 06:47 PM
Response to Reply #17
20. Yeah, me too.....
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Scuba Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-12-11 06:25 AM
Response to Original message
9. Know what's really weird? Republicans think Wall Street is over-regulated. n/t
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stockholmer Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-12-11 09:08 AM
Response to Reply #9
10. I agree, and they are absolutely delusional and brainwashed by false propaganda
It is staggering the ignorance of anyone who buys into the false notion that the big systemic controllers are 'over-regulated.' This false belief comes from the process wherein small and medium size firms are indeed hamstrung with over-regulation (regulations written by the big firms specifically to crush small and medium size ones). Of course the the giants are exempt from this, yet scream bloody murder and hold up the very same 'small-businesspeople' as examples of tyranny against large business/Wall Street in general.

It all boils down to a false consciousness wherein so-many Americans think that they are just one lucky break or one golden idea away from being multi-millionaires themselves. The Horatio Alger myth runs deep, and scum like the Koch brothers exploit this to mobilize an army of Tea-Party dupes to simply carry out the bidding of the equestrian class. The Tea Party is almost entirely composed of people who will never, ever get to even shine the boots of the corporate overlord/bankster class (let alone sup from the same table or drink from the chalices of true power), yet these reactionary little pawns defend the pillaging that rains down from the top as if all the booty gained from this oligarchic raping will somehow magically fall into their own little private pirate chest of dreams.


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Scuba Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-12-11 09:32 AM
Response to Reply #10
11. Well, Republicans will argue that everyone has an equal shot, because...
<a href="http://imgur.com/nRnac "><img src="" title="Hosted by imgur.com" alt="" /></a>
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JDPriestly Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-12-11 03:26 PM
Response to Reply #9
16. They will probably rethink that after a few more weeks of OWS.
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Fumesucker Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-12-11 06:49 PM
Response to Reply #16
21. How can Republicans "rethink" something when no thinking was involved to start with?
;)
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BlueToTheBone Donating Member (196 posts) Send PM | Profile | Ignore Sat Nov-12-11 10:28 AM
Response to Original message
12. A license to steal. How convenient. n/t
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Earth_First Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-12-11 10:39 AM
Response to Original message
13. "....and warehouse receipts for precious metals"
Anyone want to bet that something major is in the works with respect to the valuation of precious metals?
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Fumesucker Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-13-11 05:04 AM
Response to Reply #13
28. If you don't have physical possession you don't own any precious metals..
All you really own is a piece of paper.
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JCMach1 Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-13-11 01:53 AM
Response to Original message
26. What's yours is mine and apparently legally so...
:wtf:

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Initech Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-13-11 04:50 AM
Response to Original message
27. God damn them. God damn them all.
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