Wednesday, February 1, 2012

February, Wednesday 1, 2012

DOW + 83 = 12,716
SPX +11 = 1324
NAS +34 = 2848
10 YR YLD +.05 = 1.85%
OIL -1.31 = 97.17
GOLD + 6.30 = 1744.00
SILV +.58 = 33.81
PLAT +31.00 = 1622.00

MF Global's customers' money didn't just vaporize. Investigators have determined what happened to nearly all of the customer money that disappeared from MF Global around the time of its bankruptcy last Oct. 31, but have not publicly disclosed their progress, fearing that doing so might cripple efforts to recover the cash and pursue potential wrongdoing. Dealbook reports authorities have traced hundreds of millions of dollars to banks, MF Global’s trading partners and even the firm’s securities customers, but investigators remain uncertain about whether they can retrieve the money.

Some recipients were entitled to payouts from MF Global, which could make clawing back the money difficult. For instance, securities customers withdrawing their money as MF Global began to collapse were paid from accounts that belonged to futures clients. A significant impediment has been clashes among the parties trying to resolve the MF Global mess: three federal agencies and two bankruptcy trustees. As of late December, investigators had obtained more than 10,000 e-mails, interviewed more than 50 witnesses and subpoenaed about 20 people. Customers, including farmers, hedge funds and other small traders, have been very frustrated with the pace of the investigation and the dearth of updates about their missing money. Even regulators are growing anxious about how long the investigation is taking.

In November, investigators said they began to worry that money may have vanished into a web of counterparties and creditors who are entitled to MF Global’s money. The concern implies that the money may not be missing, but is gone for good. A few days ago, there was concern the money had just vaporized, puff, gone, zzzzz.

But at least some of the customer money MF Global misused was transferred to JPMorgan Chase, MF Global’s main bank. Investigators also suspect that MF Global made improper transfers of customer money to the Depository Trust & Clearing Corporation, a clearinghouse that did business with MF Global. The clearinghouse may have passed on the money to MF Global’s trading partners, who would have rightful claims to money from MF Global. A major part of futures customer money also went to securities customers who were closing accounts in October.

As one of the investigative teams hunts for the money, it is quietly coaxing some recipients to return it. In a statement they claim:  “We are pressing our investigative team to now come up with actionable intelligence that the trustee can use to determine the location of remaining customers assets, and most importantly, if we can get those assets back under the trustee’s control for return to customers.”

Here's an idea. The government can send hundreds of police officers in full riot gear to clear out a park. If the money is offshore, we can send in the Navy Seal Team 6. I guarantee you they'll get the money. It is time to stop pretending that these financial firms that steal money are anything more than common criminals, and they should be treated as such.

President Obama  announced a new package of legislation that, if approved by Congress, would make it easier for millions of homeowners to refinance at today’s low interest rates. The president will ask Congress to allow the Federal Housing Administration to refinance privately held mortgages in a program to be funded by a fee charged to large banks based on their size and the riskiness of their portfolios. The estimated cost of the program would be $5 billion to $10 billion, depending on the number of participants. 

Mass refinancing would essentially be an economic stimulus plan because it would lower homeowners’ monthly payments, giving them more cash to spend. The president’s plan includes incentives for homeowners that choose to apply the savings toward paying down their principal, helping them to rebuild some of the home equity that was wiped out in the financial crisis.

Proponents of mass refinancing have pointed out that Fannie Mae and Freddie Mac can allow homeowners who owe more than their homes are worth to refinance without taking on more risk because they already guarantee those loans. But media reports disclosed this week that Freddie Mac also had $5 billion invested in a type of security whose returns hinge on keeping interest rates high — in effect, the company had bet against homeowners’ ability to refinance at the same time that it was increasing restrictions on refinancing.

ADP reports nonfarm private employment rose 170,000 in January, marking the 24th consecutive month of gains. The labor market is improving; it's just slow. Friday, we'll get the monthly jobs report.

Unemployment is a staggering problem in Eurozone countries that are at the core of the debt crisis. Spain’s jobless rate jumped to 22.8%. Among 16 to 24-year-olds, it’s an unimaginable 51.4%, up from 18% in 2008 when Spain’s crisis began with the collapse of its housing bubble. In Greece, youth unemployment reached 46.6%. In Portugal, it’s 30.7%, in Italy 30.1%. A new survey shows  80% of the people in the EU had a negative outlook on their local job situation. Greece, Ireland, and Portugal are probably planning their exit from the Euro-zone. Spain is another story.

Europe could have a super debt firewall in place by this summer. The firewall would be 1.5 trillion euros, or nearly $2 trillion dollars. The idea is to combine the current bailout fund, the European Fubar Slush Fund with the European Stability Slush Mechanism, and then have the IMF toss in an additional $600 billion. International Monetary Fund  chief Christine Lagarde says the idea is to have the fund in place but she doesn't think it will ever be used. I'm just saying if you point a loaded gun at somebody, you better be ready to pull the trigger.

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