Frozen MF Global accounts impacting rural America
November 16, 2011 | 08:42 PM | Filed in: Commodities Futures Trading Commission
The continued regulation of the futures and derivatives industry by the House and Senate agriculture committees seems to many people in the financial services business to be a historical accident, owing only to the fact that futures were initially mineral and agricultural.
But the continued connection between that industry and rural America became clear this week when it was revealed that now-bankrupt MF Global, Inc. had served as a broker dealer in commodities, and that thousands of Midwestern farmers and firms had money tied up in accounts that were frozen when it got into trouble.
MF Global was run by Jon Corzine, a former Democratic senator and governor from New Jersey.
Although the company went bankrupt over its bets on European sovereign debt, Farm Progress reported that the company cleared a lot of domestic trade: 30 to 40 percent of the traders at the Chicago Board of Trade, 33 trading firms, and the majority of trade at the Kansas City Board of Trade.
An MF Global trustee filed a statement with the U.S. Bankruptcy Court for the Southern District of New York asking that he be permitted to release 60 percent of the collateral in commodity customers’ “cash-only” accounts, and the court is expected to act on the request on Thursday.
Sen. Debbie Stabenow, D-Mich.
Senate Agriculture Committee Chairman Debbie Stabenow, D-Mich., wrote Commodity Futures Trading Commission Chairman Gary Gensler a letter on Monday asking for a report on the situation and noting that she plans to hold a hearing on the regulation of the financial markets in the next few weeks.
Gensler, who worked with Corzine at Goldman Sachs, has recused himself from the MF Global case and has put CFTC Commissioner Jill Sommers, a Republican, in charge of it.
The gravity of the situation for rural Americans was illustrated today when Senate Agriculture Committee ranking member Pat Roberts, R-Kans., called on the CFTC, the stock exchanges and the bankruptcy trustee to work together to release frozen MF Global margin account funds to customers, noting that many of those customers are Kansans.
Sen. Pat Roberts, R-Kans.
“While I can appreciate the need to get to the bottom of the situation at MF Global, many farmers, bankers and agribusinesses in Kansas, and around the country, have been left in limbo,” Roberts said in a news release. “Failure to release these accounts will penalize the innocent victims of this collapse with further financial hardship.”
In a letter to Sommers, Roberts said, “I write on behalf of the large numbers of Kansas producers, grain elevators, cattle feeding operations and commodity risk management firms who, through no fault of their own, are experiencing severe financial losses and hardship due to the MF Global, Inc. bankruptcy. The shortfall of segregated funds in thousands of MF Global, Inc. customers’ margin accounts is a shocking development that is unprecedented in the decades’ long history of agricultural futures markets.”
Jill Sommers, CFTC commissioner
The CFTC said today it supported the trustee’s application for an expedited claims process in the MF Global, Inc. liquidation, and authorized the transfer of funds for customers with “cash-only” accounts outside of the claims process.
“My number one priority at this point is to work with the trustee and facilitate an equitable distribution of funds to all MFGI customers as quickly as possible,” Sommers said in a news release.
But the continued connection between that industry and rural America became clear this week when it was revealed that now-bankrupt MF Global, Inc. had served as a broker dealer in commodities, and that thousands of Midwestern farmers and firms had money tied up in accounts that were frozen when it got into trouble.
MF Global was run by Jon Corzine, a former Democratic senator and governor from New Jersey.
Although the company went bankrupt over its bets on European sovereign debt, Farm Progress reported that the company cleared a lot of domestic trade: 30 to 40 percent of the traders at the Chicago Board of Trade, 33 trading firms, and the majority of trade at the Kansas City Board of Trade.
An MF Global trustee filed a statement with the U.S. Bankruptcy Court for the Southern District of New York asking that he be permitted to release 60 percent of the collateral in commodity customers’ “cash-only” accounts, and the court is expected to act on the request on Thursday.
Senate Agriculture Committee Chairman Debbie Stabenow, D-Mich., wrote Commodity Futures Trading Commission Chairman Gary Gensler a letter on Monday asking for a report on the situation and noting that she plans to hold a hearing on the regulation of the financial markets in the next few weeks.
Gensler, who worked with Corzine at Goldman Sachs, has recused himself from the MF Global case and has put CFTC Commissioner Jill Sommers, a Republican, in charge of it.
The gravity of the situation for rural Americans was illustrated today when Senate Agriculture Committee ranking member Pat Roberts, R-Kans., called on the CFTC, the stock exchanges and the bankruptcy trustee to work together to release frozen MF Global margin account funds to customers, noting that many of those customers are Kansans.
“While I can appreciate the need to get to the bottom of the situation at MF Global, many farmers, bankers and agribusinesses in Kansas, and around the country, have been left in limbo,” Roberts said in a news release. “Failure to release these accounts will penalize the innocent victims of this collapse with further financial hardship.”
In a letter to Sommers, Roberts said, “I write on behalf of the large numbers of Kansas producers, grain elevators, cattle feeding operations and commodity risk management firms who, through no fault of their own, are experiencing severe financial losses and hardship due to the MF Global, Inc. bankruptcy. The shortfall of segregated funds in thousands of MF Global, Inc. customers’ margin accounts is a shocking development that is unprecedented in the decades’ long history of agricultural futures markets.”
The CFTC said today it supported the trustee’s application for an expedited claims process in the MF Global, Inc. liquidation, and authorized the transfer of funds for customers with “cash-only” accounts outside of the claims process.
“My number one priority at this point is to work with the trustee and facilitate an equitable distribution of funds to all MFGI customers as quickly as possible,” Sommers said in a news release.
