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  • in reply to: Mac died #10445


    Do not turn off your Mac using the power button!!!
    Use the screen “shut down” commands!!

    Using the power button causes a sudden stop of the hard drive
    before the reader arm can park.

    in reply to: The Lesson From Cyprus: Europe Is Politically Bankrupt #7242

    The big “surprise” will be when the banks finally open and most
    most of the “major” deposits are gone!!! Bribery and threats
    make money move very fast!!

    in reply to: The Automatic Earth Is 5 Years Young #6911

    I have discovered that Jon Corzine was not the first to use segregated accounts as collateral for overseas trading adventures. Below is a case that was covered by the 7th US District Appellate Court on 0625/12.

    Court Docket # 10-3607 — Griffin Trade Company (a holding corp dealing in futures contracts).

    Even though this case began 14 years ago it is still being fought over in the court system!!

    Below is a brief description of the events. Section III of the brief covers the CFTC rule that was violated
    and should be used against Jon Corzine!!!


    On December 21, 1998, Park began trading German bonds out of Griffin Trading’s office in London.   Griffin Trading was not a clearing member of EUREX, the relevant exchange for Park’s trades, and so its trades were placed through MeesPierson (a company organized in the Netherlands), which was Griffin Trading’s clearing broker.  (At one point it was known as Fortis MeesPierson, reflecting the fact that it was acquired by Fortis Bank in 1997, but in 2009 the name changed back to MeesPierson.   For the sake of consistency with the historical record, we refer to it here simply as MeesPierson.)   This arrangement created a chain of responsibility:  If and when trading losses arose, EUREX would seek to recover from MeesPierson, MeesPierson from Griffin Trading, and Griffin Trading from Park. In order for each party in the chain to reduce its financial exposure, each one required its customers to maintain margin funds in its customer accounts.   Thus, Griffin Trading had to keep some money on deposit with MeesPierson, and Park was required to keep a minimum amount of money in his account with Griffin Trading.   Park’s trades, however, far exceeded his trading limit;  in less than two days, Park lost over $10 million.

    As a result of these losses, MeesPierson issued a margin call for 5 million Deutsche Marks (DM) on the morning of December 22, payable the next day.  (The euro was not launched until January 1, 1999, but initially it operated only as a virtual currency;  it became fully effective on January 1, 2002, when all participating national currencies, including the DM, had to be converted.   See https://​ec.​europa.​eu/​economy_​finance/​euro/​index_​en.​htm.) This triggered a series of transactions among Griffin Trading’s bank accounts.   First, at 11:19 a.m. in London on December 22, £1.6 million were transferred from Griffin Trading’s account of segregated customer funds at the London Clearing House to its account of customer funds at the Bank of Montreal.   That money was then transferred to its customer-fund account at Crédit Lyonnais, apparently to take advantage of favorable rates.

    On the morning of the next day, December 23, Griffin Trading moved that money—converted from British pounds to DM—back to the Bank of Montreal.   Finally, at 11:52 a.m. on the 23rd, Griffin Trading answered the margin call by wiring 5 million DM from its account of customer funds at the Bank of Montreal to MeesPierson’s account at Commerzbank (a German entity).   In all, as a result of Park’s trades made in London on a European bond exchange, £1.6 million (or the equivalent in DM) bounced around among Griffin Trading’s accounts holding customer segregated funds in England, Canada, and France, until the funds were finally transferred to MeesPierson’s account in Germany.

    Meanwhile, back in the United States, Farrel learned of Park’s losses between 6:00 and 7:00 a.m. Chicago time (noon to 1:00 p.m. UTC) on December 22.   He called his partner, Roger, and both of them quickly realized that this “debacle” (their word) was going to send Griffin Trading into bankruptcy unless they quickly found a solution.   Their first step was, as they put it, to take charge of Griffin Trading’s activities.   Farrel, with Roger available by phone, contacted Park, had several conversations with the London office, and, notably, called MeesPierson directly.   The bankruptcy court determined that both Roger and Farrel at that time discovered that MeesPierson had issued the 5 million DM margin call to cover Park’s initial losses (another margin call for over 13 million DM would come later that day for the rest of the loss, but it was not satisfied), and that they failed in their primary obligation to protect customer funds by not blocking the 11:52 a.m. wire transfer.

    After unsuccessfully attempting to cover the remaining shortfall, Griffin Trading filed for bankruptcy in the Northern District of Illinois on December 30, 1998.   The trustee in bankruptcy initiated this adversary action against Roger and Farrel in 2001, and the suit went to trial in 2004.   At trial, the bankruptcy court found that Roger’s and Farrel’s failure to “stop the wire transfer paying the margin call constituted gross negligence and constituted a violation of their fiduciary duties to their creditors.”  Inskeep v. Griffin (In re Griffin Trading Co.), No. 01A00007 (Bankr.N.D.Ill. Jan. 26, 2005).   Farrel and Roger appealed the bankruptcy court’s decision to the District Court for the Northern District of Illinois, arguing that the application of Illinois’s U.C.C., rather than foreign law, was error.   The district court found this argument forfeited, but it nevertheless thought the bankruptcy court applied the wrong law—in particular, the wrong section of the U.C.C. See No. 05C1834, 2008 WL 192322, at *7 (N.D.Ill. Jan. 23, 2008).   On remand, the bankruptcy court reversed its earlier course, holding that the trustee failed to establish, as a matter of Illinois law, that Farrel and Roger actually caused the loss of customer funds.  418 B.R. 714, 718–21 (Bankr.N.D.Ill.2009).   The court further held that the trustee failed to establish damages.  Id. at 721.   The district court affirmed, 440 B.R. 148, 164 (N.D.Ill.2010), and the trustee now appeals.

    in reply to: India Power Outage: The Shape of Things to Come? #5201

    Remember that India and Pakistan possess hundreds of nuclear weapons. Maintaining their security will become very difficult!!

    in reply to: From Crisis to Crisis: Zimbabwe to Greece to Montana #4643

    Peak has a very good article today: “Trade-Off”: A Study In Global Systemic Collapse

    Below is an executive summary and comments about the paper. Also I have included the URL to the complete paper (PDF warning)

    Page 40 had a very lead in:

    IV. Converging Crises in the Financial, Banking & Monetary System

    In this section the context in which an unprecedented and catastrophic shock could occur sometime within this decade is presented.
    The first sub-section considers the implications of massive credit expansion and global imbalances over decades. At the heart of this is too much debt relative to GDP.……


    in reply to: Autoimmune Finance: The System Attacks Itself #3994


    Don’t confuse money with currency. They are two different things. Money, also known as “tier two assets” is made up of mainly electronic digits that represent deposits, stock, bonds, contracts, pension accounts, ect… As long as the margin calls and bets do not envolve your personal accounts it makes no difference what the details are. But all of everyones accounts appear to be “in play” and can be wiped out
    if the wrong bet is made or a series of bad events occur (Black Swan!!). There is no safe place for money except in currency or “hard assets”. That is the main point TAE is making!!!

    in reply to: Autoimmune Finance: The System Attacks Itself #3986


    “The banks can bet $300 trillion that interest rates will fall. It’s all pretend money either way.”

    Almost, but as Jamie Diamond knows, not quite. If you “bet”
    150 trillion dollars that interest rates will go up and 150 trillion dollars that interest rates will go down you have 300 trillion dollars of f
    “face” value in derivatives but they are “covered”. The bettors try to make money on the differences in the premiums and by “tweaking” the contact terms. J. P. Morgan Chase had apparently some “uncovered” derivatives and lost 2 billion dollars of real money (so far) because they were on the “wrong” side of the bet.

    If the world total face value of derivatives is a quadrillion dollars and at any given moment 1% to 2% are “uncovered” that means between 10 and 20 trillion dollars of derivatives
    are “exposed” at any given time. The main problem is exactly which ones are “uncovered” at any given time is always changing. Know one knows who is “twisting in the wind”. Not even the CEO, as Jamie Diamond found out.

    “So what does that $300 trillion represent?”
    Leveraged bets! It has been estimated that MF Global leveraged the futures accounts under its control at a 100 to 1 ratio and used them as collateral to make CDS bets on sovereign debt bonds in Europe. Apparently they were not covered and the resulting “margin call” wiped them out. That was real money
    (ask the owners of the futures accounts that had them “scooped up” and liquidated by the counter parties in a matter of minutes!).

    in reply to: Autoimmune Finance: The System Attacks Itself #3970


    I am not sure if we are talking about the same thing.

    By derivatives I am talking about items like credit swaps,
    currency swaps, interest rate derivatives, commodities
    derivatives, plus combinations and other forms. The point
    I am trying to make is banks use deposits as collateral
    for various derivative “plays” (Jamie Diamond called it the
    Synthetic Market while testifying before the US Senate today).

    AFAIK the face value of the derivative “plays” for J. P. Morgan
    Chase was somewhere north of 90 trillion dollars, for Bank of
    America it was north of 50 trillion dollars, for CitiGroup it was
    north of 40 trillion dollars. It has been estimated the combined
    face value of derivative “plays” ( includes finance companies,
    brokerage houses, insurance companies, as well as banks) in
    America is around 300 trillion dollars!

    There will be no “Volker” rule, no “Dodd Frank” rules or any
    form of removing commercial accounts from the investment
    side of banks. The loss of that “collateral” would create the
    “mother” of all margin calls against banks and destroy trillions
    of dollars!!!

    in reply to: Autoimmune Finance: The System Attacks Itself #3963

    The main problem with “seizeing” the banks – “Derivatives”

    There are hundreds of Trillions of dollars in derivatives floating
    around. No one knows who the “counter parties” are, what
    type they are, or the terms. The one thing that most have in common
    is the counter parties have “first claim” on any and all assets!

    This would included deposits!! Talk about an international
    legal nightmare!! (MF Global comes to mind!)

Viewing 9 posts - 1 through 9 (of 9 total)