Janet Tavakoli, president of Tavakoli Structured Finance Inc., spoke with Lauren Lyster on her “Capital Account” program about too-big-to-fail banks, the financial oligarchy and how MF Global fits into the web of derivatives-inspired meth lab of shadow liquidity and off-balance sheet risk.
MF Global “sort of epitomizes a lot of the issues that occurred that led to our financial crisis,” Tavakoli says. “The fact that this can happen after the financial crisis, after Dodd-Frank, after Sarbanes-Oxley, just shows you how lax and hypocritical we’re being in the United States about financial regulation â€¦ and the world is watching.”
The mystery of the MF Global bankruptcy continues to be the location of the missing funds. Chris Whalen, senior managing director of Tangent Capital Partners, says the raiding of customer accounts at MF Global to make a margin payment to JPMorgan ruins customer trust in the broker-dealer relationship.
“Look, it’s very basic. In our industry, we have a legal responsibility to safeguard customer funds,” Whalen says. “It appears that the individual accounts of the commodity customers of MF Global were raided and they took those funds and made a margin payment to JPMorgan to try and save the business. Everybody in our business who works for a broker-dealer should be getting really angry about this because no customer is gonna trust an independent dealer to act as custodian for their securities; that’s gonna be over, between Madoff and this.”
First Business’ Bill Moller talks with Janet Tavakoli, president of Tavakoli Structured Finance, about her new book, The New Robber Barons, a compilation of articles and other pieces she wrote about the global financial crisis.
“What we’ve learned from this crisis is that when you throw trillions of dollars on the table, nobody tells the truth and everyone plays for keeps,” Tavakoli says.
CNBC’s Rick Santelli talks with Mark Melin, Alternative Reality contributor and editor of Opalesque Futures Intelligence, about the SEC’s role in the MF Global investigation.
Melin says the SEC knew in May that “Corzine had sovereign debt exposure and they were the only people that knew.”
Credit where credit is due, here. Janet Tavakoli was talking back in November about the fact MF Global’s leveraged default and liquidity risk exposure to European sovereign debt was disclosed in a 10-K filing with the SEC for the year ending March 21, 2011. “The CFTC and other regulators had the information right under their noses, but it appears they didn’t understand that they were looking at a leveraged credit derivative transaction that could lead to margin calls that MF Global would be unable to meet,” Tavakoli wrote on the Huffington Post.
But Melin has more.
In August, three months after the SEC received MF Global’s 10-K, there was a $300 million bond offering floated to professional investors. None of those investors were told about or knew of MF Global’s European sovereign debt exposure, Melin has written, and he reiterated the point on Wednesday [Jan. 25].
“We should have transparency,” Melin says of the role of a regulator like the SEC in the case of a bond offering like MF Global’s. “Investors should be protected by regulators.”
New York University professor and economist Nouriel Roubini, who predicted the 2008 financial crisis, talks Greek debt with Bloomberg TV’s Margaret Brennan. He discusses the prospects for an accord between Greece and its private creditors, which include banks and hedge funds.
“â€¦ [E]ven if they reach an agreement, but even if they reach an agreement, there’ll be so many holdouts that then they’ll have a problemâ€¦,” Roubini says.
Watch this excerpt of the full interview below.
Update: Greylock Capital’s Hans Humes tells Margaret Brennan he’s cautiously optimistic that Greece and its creditors will make a deal.
Hans Humes, president of Greylock Capital Management talks with Bloomberg TV’s Margaret Brennan about a halt in the talks between Greece and its creditors after negotiations in Athens failed to yield an agreement.
“You could say there’s a bit of an impasse right now,” Humes said. “I think the issue at hand now is, the creditors have really given a lot of ground. â€¦ The sticking point is coming down to what the interest rate would actually be on the new bond, and then some of the structural elements.”
First off, it’s The Onion, so there’s no telling what’s real and what’s irony. But that sure looks like Grover Norquist. And it sure sounds like him. In any event, it’s good for a laugh.
In a story in the satirical newspaper, Norquist is revealed to have “for decades â€¦ engaged in a romantic affair with taxes.” Norquist also appears in a video (below), where he confesses to the trysts at a mock news conference.
“Over the past 28 years I have carried on multiple affairs with numerous kinds of taxes,” Norquist says.
Thomas Strauss, Ramius president & CEO, discusses the investment outlook for hedge funds, commodities and real estate in the new year.
“Institutions and private clients around the world are still well under-invested in hedge funds,” Strauss told CNBC’s Maria Bartiromo on the Closing Bell. “Fees are too high, and we’re trying to address that problem by helping clients understand which hedge funds really produce alpha and which don’t. And there are a lot of exposures created by hedge funds that can be owned in liquid format at much lower costs by ETFs and other liquid instruments than just owning hedge funds.”
Sam Hocking, head of prime brokerage for BNP Paribas, discussed investment strategy for distressed assets and the outlook for hiring by hedge funds recently on Bloomberg TV.
“When performance is down and assets aren’t coming in to the market like they once were, you have to have different decisions on how you hire, Hocking said. “So what I see people doing is re-sizing their outfits and not growing. â€¦ [A]t the moment I see much more selective hiring in what they’re doing.”
James Koutoulas is chief executive of Typhon Capital Management, a commodity trading adviser and commodity pool operator and also the co-founder and attorney at the Commodity Customer Coalition, an organization representing many MF Global clients. He spoke with CNBC’s Rick Santelli on Thursday about MF Global, JPMorgan and about the CME Group’s role in the bankruptcy. He praised CME executive chairman Terry Duffy for his testimony before Congress that MF Global chief Jon Corzine knew about the transfer of customer funds.
“The darker side (to the CME’s involvement in the MF Global bankruptcy) is the CME is both a publicly traded company and a regulatory organization, and there’s inherent conflicts there,” Koutoulas said. “One of the things I think the CME might want to look at going forward is spinning off that regulatory function.”
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