There was a JP Morgan connection with the MF Global collapse. Apparently, Corzine (MF Global's CEO) ordered the transfer of customer funds to JP Morgan during the crisis. It looks like JP Morgan may have used those funds to cover overdrafts in MF Global's accounts.
| Ms. Genova told the subcommittee in her prepared testimony that J.P. Morgan discovered on Oct. 28 overdrafts in foreign-exchange clearing accounts managed by MF Global's U.K. affiliates. Mr. Corzine and other officials at MF Global were notified about the overdrafts, she added. MF Global assured J.P. Morgan that the overdrafts would be covered, according to Ms. Genova's testimony. |
Recently we heard that the CFTC was charging Mark Fisher's firm (MBF Clearing) with improper use of customer funds. However, we find out that Fisher transferred customer funds to JP Morgan during the Lehman meltdown and according to Fisher, "JP Morgan assured him that the funds were in customer segregated accounts." That ended up not to be true.
| “During the financial crisis, we decided at MBF to move money out of money market funds — including the reserve fund, which broke the buck — and move it to the safest bank in the world, JPMorgan, in the safest instrument available, U.S. government bonds, and that’s where we kept all this customer money,” he said. |
Now we find out that JP Morgan is getting hit with a $20 million fine by the CFTC (slap on the wrist) for improperly using customer funds of Lehman Brothers.
| The CFTC charged that J.P. Morgan, between 2006 and 2008, counted customer Lehman customer funds as if they were Lehman funds, for the purpose of facilitating transactions on behalf of Lehman proprietary accounts. |
Looks like JP Morgan has a habit of using the customer funds of client firms to cover overdrafts. Clearly an illegal pattern here, but once again, JP Morgan (Jamie Dimon) gets away with it scott free. Meanwhile, the customers of those firms are out their money. It went to JP Morgan.
4 comments:
Right Mike, I find it hard to believe that the bank didnt know who's balances they were... they are the bank after all.
Everyone seems to be blaming Corzine for "transferring the funds" but this seems like it would be impossible to me.... how could the BD 'transfer the funds'? it would seem to me, THE BANK would know which accounts are segregated at the BD, and THE BANK would have to 'transfer the funds', perhaps upon direction from the BD, but it would seem to me the bank would have some responsibility here...
IMO you may be able to offer your consulting services to the legal defense team of Corzine.
If MFG was leveraged on bonds, and their bank called in their credit line, and foreclosed on them, I dont see how that gives the bank the right to clean out the segregated accounts of the MFG clients. The bank would have to take the hit...
Resp,
Jamie Dimon now obviously feels he can do anything he wants without repurcussion.
It looks to me like JP Morgan used customer funds of its clients to cover its clients' overdrafts. Those overdrafts would have equated to losses for JPM, so they used the funds to make themselves whole. At least that's how it looks to me.
IMO Regulators should force brokers to use separate institutions for clearing, credit lines, bank accounts, segregated funds accounts. Too much conflict of interest for one institution when they combine everything under one bank. Awkward for the Federal Reserve to go after JP Morgan's clearing because I believe they provide a great deal of these services to the Fed.
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