Laurie Ferber was MF Global's General Counsel, whch meant she was charged with looking out for the firm's interest. However, she may have been responsible for MF Global's failure more than she would like to admit.
That's because she pushed for a regulatory change that allowed Wall Street firms to massively leverage up on risk. Changes to the CFTC's Regulation 1.25 gave brokerages like MF Global the ability to use customer funds in highly risky strategies.
| In December 2000, the CFTC agreed to amend Regulation 1.25 “to permit investments in general obligations issued by any enterprise sponsored by the United States, bank certificates of deposit, commercial paper, corporate notes, general obligations of a sovereign nation, and interests in money market mutual funds” -- in other words, riskier investments that could make more money for Wall Street. Then, in February 2004 and May 2005, Regulation 1.25 was further amended and refined to the liking of Ferber and the banks. In the end, the door was opened for firms such as MF Global to do internal repos of customers’ deposits and invest the funds in the “general obligations of a sovereign nation.” Read full story in Bloomberg here. |
Another stark example of how Wall Street has continued to work hard to tear down the regulatory structure. That's the same regulatory structure that kept the financial sector out of trouble for 40 years.
But in the last 30 years that regulatory structure has come under attack by "free market ideologues" from the world of finance: Greenspan, Rubin, Summers, the IMF, the World Bank and a corrupt academia that has embraced the role of paid-for propaganda arm of the Street.
The attack continues with the recent gutting of financial reform and "de-funding" of the CFTC.
At least this time MF Global was allowed to die and taxpayers were not asked to bail it out, but next time it could be different.
1 comment:
This is really bad. I hope they restrict this kind of activity before something more serious hits them.
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