Ann Barnhardt explains why she shut down her brokerage business a few weeks ago:
I have received a few emails asking if I was still content with my decision to shut down my brokerage. Not only am I content, but after seeing the news that broke over the weekend, I am of the considered opinion that the entire financial blogging community should formally call for a general financial market strike. And I’m not kidding. A couple of things have happened regarding the MF Global mess that I don’t think got the attention they should have because they broke over the weekend. So let me fill you all in.
First, all notions of personal property rights were essentially destroyed when the MF Global “trustee” began seizing customers’ gold and silver bullion held in storage if that bullion was purchased through contracts brokered by MF Global. In case you’re not following, let me restate. MF Global customers who traded in precious metals and actually took delivery and OWNED bullion, as in outright, free and clear OWNERSHIP, complete with a warehouse receipt (aka title) with SERIAL NUMBERS designating exactly which physical bars they OWNED, and were PAYING RENT to STORE their own property in a “secure” VAULT, complete with statements indicating that these storage fees were paid in full, are having THEIR PROPERTY THAT THEY OWN AND ARE PAYING RENT TO STORE CONFISCATED by the MF Global trustee in order to feed the gaping maw that is the MF Global “estate”.
This would be EXACTLY like if you rented a little storage space at one of the thousands of storage facilities that dot this nation, and stored a car there. I used to do exactly this when I had multiple cars. Imagine the owner of the storage facility went bankrupt. Now imagine that a “trustee” SEIZED YOUR CAR, sold it, and used YOUR PROPERTY to feed the storage franchise owner’s BK. Nevermind that you had an explicit RENTAL AGREEMENT and that you had receipts proving that you were paying monthly rent on said storage space, and that you could produce clear title to the car showing that you owned it, and that the VIN numbers matched.
Do you understand what is happening now? This is outright confiscation of personal property. After having their money stolen out of their accounts and being locked out of their accounts, unable to trade or even liquidate WHILE THE MARKETS CONTINUED TO TRADE, these people are now having their PERSONAL PHYSICAL PROPERTY stolen and redistributed to the MF Global estate, in order to feed Corzine’s gambling debts – MADE ILLEGALLY WITH FUNDS STOLEN OUT OF THE CUSTOMER ACCOUNTS – to repay counterparties with J.P. Morgan at the fore.
So guess what? This is now establishing the precedent that ANY property held by a third party can be seized and confiscated to feed a bankruptcy of said third party. This includes BANK DEPOSITS. Now, please consider that all of the major banks in the United States are insolvent, and insolvent MULTIPLE TIMES OVER. Bank of America, Wells Fargo, Citi, all of them. When these banks collapse – and they WILL collapse – any deposits they are holding WILL BE CONFISCATED and redistributed to their counterparties. Citation URL here at Market-Ticker.org.
Oh, but there’s more.
Also announced over the weekend was the jaw-dropping, yet illuminating fact that the MF Global bankruptcy was fraudulently, nefariously and illegally drawn up as a Chapter 7 BK for a SECURITIES DEALER and NOT a commodity brokerage as it should have been. Look, MF Global was the second-largest non-bank FCM in the United States next to NewEdge which is the old FIMAT. If MF Global wasn’t an FCM, then there are no FCMs. Of course it was an FCM. It had $7.2 billion in customer seg funds as of August 31, 2011. And yet MF Global was immediately, from the get-go, put into Chapter 7 BK as a SECURITIES FIRM. This is fraud. MF Global’s BK should have OBVIOUSLY been established under Subchapter IV of the Chapter 7 code as a COMMODITY BROKERAGE.
Why wasn’t this done? Because in a Subchapter IV liquidation of a commodity brokerage firm, guess who is absolutely and unequivocally at the front of the line? You guessed it: the CUSTOMERS. In the Chapter 7 liquidation of a securities firm, guess who goes to the front of the line? Uh-huh. The “creditors”, aka the counterparties on the firm’s proprietary positions. As in . . . J.P. Morgan, et al.
Got that? So: the private citizen’s risk is essentially unlimited. Not only can you lose 100% of your investment the normal way, by making bad bets or getting screwed by exchanges and market makers, but you can lose it when a corrupt outfit like MF Global steals it, or when a bankruptcy trustee physically hauls your property out of a building, or when a bankruptcy judge allows creditors they like more than you to elbow you in the ribs and jam their way up to the front of the line.
You, dear madam or sir, will be thrown to the wolves in favor of powerful investment banks with illegal financial moves that push them to the front of the creditor line. And the laws on the matter do not appear to matter very much.
Question: how is this not blatantly illegal? How is this not stealing of citizens’ private property? How is this not an egregious abuse of power? Right? What else would you call it?
In a sane world, Congress and law enforcement would be all over this. But sadly, we don’t live in a sane world, and we know this because Congress and the current White House are in bed with the rich and powerful, and because the DOJ is run by a nutjob like Eric Holder.
I’m not one who likes to jump to all kinds of wild conclusions, or who looks for reasons to believe the previously unthinkable: that our government is now completely corrupted and actively works to uproot the Constitution, including the property rights and the general rule of law that have been a major factor separating us from All Those Other Places for centuries now.
But, I don’t know, what else could this be? Anyone? Bueller? Anyone?
This right here, this kind of thing, is exactly what separates society from chaos. And it seems to be evaporating in front of our eyes. And nobody seems to give a shit.
Yet, the news media, the president, the regulatory bodies, they are all silent. None of the so-called “Speak Truth to Power” types have any interest in talking about this — allegedly — illegal and immoral cash-grab. Of multiple billions of dollars of property owned by private citizens? As Larry the Cable Guy says, “what is this, Russia?”.
We might be witness, in the next few weeks or months, to the breakup of modern wealth, where fortunes are ruined, lives are destroyed, and the powerful screw the powerless good and hard. I hope not, of course, but confidence is essential for economic markets to function at all, and when that confidence starts to ebb, it can go into free fall very easily, and suddenly — poof! — trillions of dollars in paper wealth can literally disappear, just like that.
Don’t believe it? Then leave all your money with your banks, your brokers, your trusted third parties. You’ve got contracts and legally binding papers to protect you, right?
Sure you do. That’s what these other folks thought, too.