By Barry Ritholtz - November 4th, 2011, 1:30AM
Bruce Kastings worked on Wall Street for twenty-five years, trading Fed Funds, FX options, long dated swaps, and currencies for Credit Suisse, Irving Trust, Citi. In 1985 he joined Drexel, worked with Mike Milken building investment activity in third world debt, making markets in busted Brazilian and Mexican debt. (Think trading Greek bonds today). After Drexel, he started a private hedge fund. He adds “Long ago I got a college degree in economics. My graduate school was on the curb at Wall and Broad.”
He began blogging three years ago. There is never a shortage of things to write about regarding the global capital markets these days.
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The MF Global story gets more bizarre by the minute. At this point one has to ask if it could become a systemic problem. At first, I did not think so. I’m rethinking that. There is no definitive information as of yet. The CFTC is suggesting that the missing client money is $633mm. It might be larger than that (Zero Hedge Link).
Some thoughts:
I was one of many who tried to stave off the bankruptcy of Drexel Burnham Lambert in 1989. Skadden Arps, (the same law firm who is advising MF today) was involved in the last month as the chess game played out. They were advisers. Their clear advice was to NOT commingle custody accounts. To commingle funds is potential jail time for any involved. Drexel went down. But client money/assets were returned.
Of course Corzine and all the other seniors at MF knew this. Skadden was giving them the same advice as they gave to DBL 20 years ago. So how can it be that three days after a chapter filing there appears to be a very big hole?
This happened with another big future’s house back in 2005. That was Refco. In that case there were significant client account losses. Of historical interest:
-Phil Bennet, the boss at Refco, went to jail for 12 years.
-Man Group bought what was left of Refco (they were good futures brokers).
-Man became MF Global. Rinse and repeat.
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