NEW YORK (Reuters) – Three weeks after MF Global’s collapsed, furious former customers are still fighting for access to billions of dollars as they question why as much as two-thirds of their money is still stuck.
While authorities have touted the fact that they are returning 60 percent of the collateral and cash that had been frozen in the wake of the broker’s October 31 bankruptcy, a closer look shows that in fact only about 40 percent of customers’ total funds have been authorized for release so far.
The remainder, more than $3 billion, ostensibly remains on hand to cover a shortfall originally estimated by MF Global to regulators at just $600 million.
$3 billion? I thought there was a $600 million discrepancy?
What’s going on here? More to the point, are we about to have another game of “musical creditors” like we did with GM and Chrysler, where certain “special people” got paid in front of others despite not actually having a legal preference?
This is bad juju folks. If confidence in the sanctity of customer deposits is lost across the financial system you will see a massive run on brokerages and banks — after all, if this is going to happen to the futures markets with MF what happens to the farmer who uses these markets as a way to sell forward his production and thus bring certainty to his business operations?
How about the airline? The steamship operator who needs to know what he’ll pay for fuel? The railroad? The chemical factory?
There are dozens of industries that use these markets folks, and most of them are very pedestrian companies that employ huge swaths of America.
You’re going to cut all of this off if this doesn’t stop as people will utterly flee from the markets if there is no clarity on what happened and people do not immediately go to prison if the law was violated — and it appears that it was.