MF Global: Uncertain futures – This is a good article (may require subscription registration) on a sorry and damaging saga, written by Hal Weitzman and Gregory Meyer for the Financial Times. Here is the opening:

  Since MF Global filed for bankruptcy on October 31 and revealed that customer money was missing, attention has been focused on Jon Corzine, the firm’s former chief executive. Once a Wall Street “master of the universe”, with a career including stints as head of Goldman Sachs, a US senator and governor of New Jersey, Mr Corzine is now one of the most reviled figures in finance.

There has also been intense scrutiny of CME Group, America’s biggest futures exchange operator and the industry body responsible for regulating MF Global’s commodities business. Some customers are angry at what they say was a lapse in oversight; others say a for-profit entity should not be regulating its own customers. CME responds that no watchdog can guarantee against fraud.

 But the MF Global scandal is more than just a question of tarnished reputations. It has had a profound effect on the entire financial industry. The realisation that customers could lose money kept in segregated accounts separate from the firm’s own money – thought by many to be as safe as a bank – has severely damaged confidence in the 163-year-old US futures market. Before the financial crisis, futures were among the fastest-growing of all exchange-traded products.

“This is unprecedented. It’s the single biggest blow the industry has ever had to its business and credibility,” says a former senior CME executive. “It has forced us to ask the question: is the model of the futures industry so flawed that it can never be the same again?”

 Such soul-searching is rare for a business that in the past 30 years has transformed itself from an agricultural backwater. Futures markets – which enable producers such as manufacturers to fix for the longer term the prices at which they buy or sell rather than expose themselves to the risk of volatility on the daily spot markets – were once seen chiefly as a system of crop insurance for farmers. Today investors trade agreements to buy and sell in the future anything from oil to financial products.

My view – The scandal of MF Global has less to do with regulatory problems than a cavalier recklessness on the part of the firm’s management. Jon Corzine, of all people should have known better. Many observers felt that he was treated deferentially by former colleagues during the Congressional committee hearings examining what went wrong at MF Global.   There should be a proper trial and if found guilty, Mr Corzine and others responsible should receive sufficient fines and jail sentences to serve as a deterrent to others who might be tempted to play fast and loose with their fiduciary responsibilities, not least clients’ money.

http://www.afterdawn.com/news/article.cfm/2012/01/20/doj_brings_the_hammer_down_on_megaupload?utm_source=newsletterENG&utm_medium=email&utm_campaign=20120127

If they can take file sharers down, without the legislation, then why bother trying to bring in legislation that could shut down Google, Facebook and loads of socially useful sites.

Then I read this from someone commenting on the takedown:

This should make people stop and take a second look of storing their data in the cloud. Many legitimate users of megaupload are being inconvenienced now. XDA Developers, the developers of apps for Android, Windows Phone, and other mobile devices had over 200,000 links to Megaupload, all non-functional now.

Taking out the filesharer’s, such as Megaupload, inconveniences their own backers and seriously weakens the campaign to get more people thinking cloud-computing is safe.

The whole furore about piracy is being used as a cover for trying to control the Internet to an extent that only an authoritarian Gov’t, such as China can do, at present, , whilst still laying claim to supporting the Democratic principle.

Mirror.co.uk printed this pic of The RBS boss and proceeded to justify his bonus, not in terms of the criteria that must have been set (one hopes that such criteria were set) but by comparing him to a Premiership footballer.

Apparently, his salary is a mere £40,000 per week:

“That’s about the same as a mediocre Premier League player. Mario Balotelli, the clown prince of Manchester City, and Wayne Rooney command £200,000 a week.”

A fair comparison?

The Public can actually see these mediocre footballer’s earning their money during their short career, after which many will need intensive and on-going medical care.

Everyone can see why Rooney got his job. Who appointed Hester? How did he merit this job? ( Never mind..  C.V .’s aren’t real evidence)

These mediocre footballers will be knocking back Ibuprofen, when Hester will be knocking back Banana Dacquiri’s, in the Caribbean.

Of course there’s no threat that Hester’s career could be shortened by a crippling injury.  Even if he makes a momentous mess of his job, he’ll probably get an O.B.E.,  or some such.

Perhaps Hester should be rated on a par with Rooney.

Rooney was sold by cash-strapped Everton to wealthy M.U. for a sum which helped them out of financial straits.

RBS is cash-strapped, perhaps there’s a bank out there, in the real world, that’d like to buy Hester off us, at a Premiership price, but I somehow doubt it.

Share prices in RBS are exceptionally low at present but that is nothing to do with his stewardship, apparently, and so he deserves(!) his bonus.   I’d like to know how he qualified for this bonus.

What criteria were set that he has been able to meet?

Why has no-one asked or answered this point?

Obviously the anticipation is that he will be motivated to see the bank run more profitably, so that these share prices will rise and thus increase his pay-out, when he sells the shares.

The assumption is that he is an honourable man.

That he didn’t take measures to depress the share price, prior to his award and that he won’t indulge in artificially bumping the share prices, when it comes to time for him to sell them.

[I was told eons ago that the simplest means of doing this is by sacking staff and selling stock in January, before the end of the financial year, then rehiring and re-stocking in June after the budget figures have been released and the share prices boosted.]

“Capitalism only creates misery – we need a system that puts human wellbeing first.”  http://www.guardian.co.uk/commentisfree/belief/2012/jan/27/capitalism-creates-misery-human-wellbeing?commentpage=last#end-of-comments

Capitalism is a useful means of funding business start-ups.

The problem arises when the power it has is used to destroy good businesses for profit or corrupt the political process.

The first scenario arose back under Maggie, when many firms, which had trading difficulties, were asset stripped instead of just being stripped fitter (the main benefit claimed for private enterprises).

The second scenario, although originating in the John Smith Institute, was again seized on by Maggie.

That is the notion of privatisation.

Gas etc. had, wisely, been nationalised, because the plethora of independent enterprises was causing chaos.

The State (funded by the taxpayer) bought these companies up , standardised and modernised them, before Maggie sold them off.

They lie in the hands of cartels.

These work against the public good and show one area in which Capitalism needs to be removed from the equation.

I.e. where it acts against the good of the Nation.

Essentially those facilities that an enemy nation would target, in the event of war.

Privatisation is also contrary to public interest, when it relies on State funding and is enforceble by Law.

Here I include BBC licensing, most Arms-Length organisations, quangoes, PFI’s etc.

Keep Capitalism but keep it in check.

Quite apart from anything else it uses the U.S. spelling but the main point to notice is the poundage of words used.

It is  Obviously written by someone with more than a passing interest  in privatisation and, from the substance, someone biased in favour of it.

I get a sense of someone muddying the waters (obfuscation), to dissuade any depth of discussion, so here’s my take, as someone who opposes it.

First, any Government function or concern that is passed over to a separate organisation, which is funded either directly from public funds, or indirectly from Government enforced levies, or through monopoly/cartel position as the chosen provider has been privatised.

In all these cases the public pays (after providing the infra structure at minimal cost, or even free of charge), without any control over a facility, which the public either need or are legally required to take.

For me the arguments, given, in favour of privatisation boil down to the claim that they are allegedly more efficient and provide a better service.

The supposed logic is that ***Civil Servants get paid, no matter what, whereas a privatised organisation trims the fat to maximise profits. Employees being incentivised, by bonuses and threat of the sack.

What we’ve found in practice is that the logic is false.

Yes they trim the fat and yes they use stick (hourly paid) and carrot (management) to maximise profits.

But the profits, coming from public money, isn’t being re-invested to provide the supposedly better service, it’s being bled out to share-holders.

In many cases it’s being bled out of the country to foreign shareholders, who recognise a money-on-tap investment.

Who looks after our interests?

Politico’s, supervised by ***Civil Servants, who both get paid no matter what.

The main difference for the politico’s is that they can now claim that they have no direct control over these functions, so people should stop moaning to them about the problems.

Privatisation is about about enslaving your customer base using resources that they previously owned and the connivance of their corrupt, or ideologically misguided, political masters.

You may have spotted on the internet that one of the members of the Joint Committee looking into the draft House of Lords Reform Bill, Lord Norton [1], is claiming that they have only received 22 written submissions.

This simply isn’t the case. In response to our campaign last year, over 4,100 people took part in our survey and over 2,400 people separately wrote their own submission, entirely in their own words. We even submitted the ones from people who didn’t want reform.

We encouraged people to submit their views in this way because we were asked to do so by the clerks. Indeed, the committee made it clear that they would not accept submissions from individuals unless they submitted them both on paper and by email – a completely unnecessary act of bureaucratic nonsense. Having jumped through their hoops, it is quite repugnant to now see certain committee members claiming that means your views don’t count.

We’ve taken this matter up with the committee’s clerks and they have assured us that they have read your submissions and that your name will be published as a respondent (unless of course you don’t want it to – in which case please reply to this email and let us know).

It is unfortunate that a member of the committee feels they can play games like this but it just goes to show that they will say anything to try and stop democratic reform of the House of Lords.

All the best,

Peter Facey

Director, Unlock Democracy

[1] Lord Norton’s blog post can be found here: http://lordsoftheblog.net/2012/01/09/stirring-up-apathy-2/

“The United Nations Committee on Decolonisation has 16 cases open on places that remain colonies, of which 10 are British colonies, and one of the best known is our beloved Malvinas islands,”

Time to decolonise ?

We need to do something to blunt the point of this accusation.

Could we declare these colonies, Departments, as the French did?

They’d have voting rights in the British and, for the present, European Parliaments, and they could insist on being addressed by their own chosen name.

[Incidentally, what name would The Falklands be listed under by the United Nations Committee on Decolonisation?]

There must be some legal nicety that would remove the opportunity for Argentina, Spain etc. to use the U.N. as a soapbox to demand control of English speaking territories.

Above all, a line needs to be drawn under which territories can be declared colonies; perhaps they should be territories captured or annexed since the inception of the U.N. and the international agreement that colonies are a “bad thing”.

If the Argentine claim to the Falklands has to go back to 1883, why not go back to the seizure of South American Territories from the Amerindians in the 1500′s. There are probably a few native people’s, deep in the jungles, who weren’t exterminated. We could have a U.N. resolution for their present overlords to negotiate a settlement on sovereignty with some of their representatives.

Sounds ridiculous but then we have our own example of Welsh independence for land that was captured, even earlier and populated by people who are genetically indistinguishable from the rest of the population of Britain.

We could go back even further and split England along the lines of the Viking North and the Saxon South.

What role has the U.N. played?

All I could find was this load of blather (http://www.un.org/News/Press/docs/2009/gaspd422.doc.htm ), which makes it clear that the mighty peacemakers of the U.N. have done no more than ask us to negotiate with Argentina.

The wisdom of Pontius Pilate, rather than a Solomon.

Why ask us to negotiate?

What possible agreement can there be?

It’s just a playground “They’re ours…. Oh,No, they’re not!”.

In its present context, it’s as soluble as a debate on Theism.   We need a new context that removes the debate.

Above all of this:

What is the point of the U.N., except as a talking shop, fermenting (not fomenting) discord?

One point it neglects is that, like many large U.S. companies, they can’t repatriate oversea’s profits, without incurring a 35% tax hit.

Presumably, similar applies to other Western Corporations.

Perhaps Gov’t's need to work a deal that brings these businesses back to the West, or offers tax breaks for oversea’s profits used for domestic Labour intensive Public Works.

Politicians and Union’s need to find some way of getting Capital and Capitalists to regrow domestic economies.

“It is hard to estimate how much more it would cost to build iPhones in the United  States. However, various academics and manufacturing analysts estimate that  because labor is such a small part of technology manufacturing, paying American  wages would add up to $65 to each iPhone’s expense. Since Apple’s profits are   often hundreds of dollars per phone, building domestically, in theory, would  still give the company a healthy reward.   But such calculations are, in many respects, meaningless because building the iPhone in the United States would demand much more than hiring Americans – it   would require transforming the national and global economies. Apple executives believe there simply aren’t enough American workers with the skills the company   needs or factories with sufficient speed and flexibility (These jobs and skills were exported, just re-import them the same way).

 Other companies that   work with Apple, like Corning, also say they must go abroad.
 Manufacturing glass for the iPhone revived a Corning factory in Kentucky, and   today, much of the glass in iPhones is still made there. After the iPhone became a success, Corning received a flood of orders from other companies hoping to imitate Apple’s designs. Its strengthened glass sales have grown to more than   $700 million a year, and it has hired or continued employing about 1,000 Americans to support the emerging market.
  But as that market has expanded, the bulk of Corning’s strengthened glass manufacturing has occurred at plants in Japan and Taiwan.
  “Our customers are in Taiwan, Korea, Japan and China,” said James B. Flaws, Corning’s vice chairman and chief financial officer. “We could make the glass here, and then ship it by boat, but that takes 35 days. Or, we could ship it by air, but that’s 10 times as expensive. So we build our glass   factories next door to assembly factories, and those are overseas.”
  Corning was founded in America 161 years ago and its headquarters are still in upstate New York. Theoretically, the company could manufacture all its glass   domestically. But it would “require a total overhaul in how the industry is structured,” Mr. Flaws said. “The consumer electronics business has become an Asian business.  As an American, I worry about that, but there’s nothing I can do to stop it. Asia has become what the U.S. was for the last 40 years.”

This is a more likely incentive for the City of London and Wall Street to shift abroad, unless Politicians can find a way to encourage wealth production here that doesn’t rely on I.T., so much.

In British terms, an example would be to give tax breaks to home based entertainment Industry, such as Film. It could fund universities to provide serendipitous research, instead of tying funding to expected/provable outcomes.

I don’t understand the first, because they agree all sorts of things with us, then renege. I’m not just talking election promises, which we all seem to accept as being blatant lies.

I’m talking about pension rights etc. Welfare payments, etc. which control our weekly budgets and hence are crucial in making long term decisions. At the simplest level, consider the question of further education. To stay on at school, work hard for good exam results, apply for University and get a better job, where I can make a greater contribution to Society, or should I grab that short life job at McDonalds, which will bring in some cash now, knowing that the future is uncertain and can be changed on a political whim.

I say renege on any foolish agreement with OUR  banks.

The second aspect is highly suspect. Quite apart from HSBC already being in talks with China, having scented bigger profits in that more authoritarian regime, what is keeping them here now?

The factors that keep them here rather than going to the Far East, or S.America, or even The U.S.A. will probably be more significant than any small attempt to tax them, or curtail their excesses. They’re certainly not going to move into Europe, if its a question of location.

In fact as no-one has even attempted to elucidate these factors, or clarify how far we’d have to push them, I’m even further inclined to believe that this is a spurious excuse for not taking effective action against their flagrant disregard for the consequences of their cavalier attitude towards public sentiment. I’m even more convinced that politicians have a financial self interest in maximising the power of the Banks and other financial institutions.

In short, the pleadings of Osborne etc. stink.