FMX|Connect- WWW.FMXConnect.com (Reported on 11/1/2011)
Regulators make $45,000 per year, and everyone tells them how they are "hedged". Prosecutors, and the laws passed by senators and congressmen put people in jail for wrongdoing. Right now, nobody seems to be doing a perp walk due to the fact that the bankers have co-opted the "police" with campaign cash and lobbyists. That is what OWS is all about, ie people are beginning to realize it.
As for MFG, I don't think this was any type of Ponzi scheme, and I don't think any regulator could have prevented what happened. Should MFG's Treasurer and cash management staff have prevented it ?
Absolutely. But that is easier said than done in the overwhelming panic and confusion of a massive electronic bank run, I can easily see how $1 billion in a $40 billion pot could be grabbed by creditors legally or illegally. When any entity (not just a bank) is going down the tubes, creditors grab cash first, ask questions later, and hire lawyers to help them hold on to whatever they were able to grab even if they indeed grabbed it illegally. In the aftermath of a epic collapse, MFG's conduct certainly looks like outright theft. However, it's possible that MFG has the power to lend client funds to various other clients or even themselves. The boilerplate of client clearing agreements may very well make it legal. Regulators will now take a hard look, MFG's officers will have alot of explaining to do, their auditor PwC will help, and various agencies will decide if the law has been broken. This occurred in Lehman's collapse too, and you will note that nobody including the CEO or Treasurer has gone to jail.
Most of MFG's clients are big boys and understand Clearing Risk. When the stock fell below $5 perhaps they should have gotten out of Dodge.
Importantly, the world now sees how sovereign debt exposures will manifest themselves. If you clear through MS, or another TBTF with an established sovereign risk problem, or even worse a small non-FDIC investment bank, you may very well be thinking of getting out of Dodge this morning. Greece's referendum announcement started the timer on the contagion risk bomb ticking on hundreds of big European bank balance sheets and CDS books. Also, consider that the CDS jack-in-the-box could also spring on JPM, BAC, C, for all we know. The inert yellow metal may be the only counterparty with a AAA+ rating you can absolutely trust, except that it's the ultimate fiat currency with little redeeming industrial utility that costs on average only $500 per ounce to mine.
However, we might do better based on recent events to vote for an inert rock to govern us instead of fallible human beings.- Editor
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