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Wall Street’s Risky Business Shortchanges Farmers
It’s too easy to gamble with other people’s money. That’s the picture drawn by the bankruptcy of a brokerage firm that’s left farmers and other investors in the lurch.
As much as $1.2 billion in customer money remains missing through MF Global, according to the bankruptcy trustee. Customers included farmers and grain coops in Iowa that had money in MF Global accounts, which they used to trade in commodity futures markets to help manage the major investment risks in agriculture.
MF Global is reported to have taken big risks with customer money by trading in risky European securities. Now, the customers are scrambling to figure out how much of their money might be possible to recover. Congress and federal regulators are trying to learn how this disaster happened, how to help the customers, and what might need to happen to prevent this kind of mess in the future.
It might be that MF Global took liberties with existing laws limiting the risk-taking allowed with customer funds and that the federal agencies that oversee these laws were asleep at the switch. Or it could be that new restrictions are necessary and that the federal agencies weren’t paying enough attention to anticipate the need.
Last week, the Senate Committee on Agriculture, Nutrition and Forestry had a hearing with the top federal officials in charge of enforcing commodity trading and securities laws. As a committee member, I was able to ask questions on behalf of Iowans. Despite an effort from several of us on the committee, there wasn’t a lot of specificity from these officials about exactly how and when their agencies learned of the MF Global problems with missing customer money. Establishing the specifics of what happened is key to figuring out how the system failed and how to fix it going forward. And that’s in addition to the immediate task of helping to minimize the damage for farmers and other investors caught in the MF Global debacle. Congress will need to keep drilling down. The hearing left a lot of questions unanswered. The good news is there are more hearings scheduled in both houses of Congress, and I’ll continue to ask the questions Iowans want answered.
December 5, 2011
It’s too easy to gamble with other people’s money. That’s the picture drawn by the bankruptcy of a brokerage firm that’s left farmers and other investors in the lurch.
As much as $1.2 billion in customer money remains missing through MF Global, according to the bankruptcy trustee. Customers included farmers and grain coops in Iowa that had money in MF Global accounts, which they used to trade in commodity futures markets to help manage the major investment risks in agriculture.
MF Global is reported to have taken big risks with customer money by trading in risky European securities. Now, the customers are scrambling to figure out how much of their money might be possible to recover. Congress and federal regulators are trying to learn how this disaster happened, how to help the customers, and what might need to happen to prevent this kind of mess in the future.
It might be that MF Global took liberties with existing laws limiting the risk-taking allowed with customer funds and that the federal agencies that oversee these laws were asleep at the switch. Or it could be that new restrictions are necessary and that the federal agencies weren’t paying enough attention to anticipate the need.
Last week, the Senate Committee on Agriculture, Nutrition and Forestry had a hearing with the top federal officials in charge of enforcing commodity trading and securities laws. As a committee member, I was able to ask questions on behalf of Iowans. Despite an effort from several of us on the committee, there wasn’t a lot of specificity from these officials about exactly how and when their agencies learned of the MF Global problems with missing customer money. Establishing the specifics of what happened is key to figuring out how the system failed and how to fix it going forward. And that’s in addition to the immediate task of helping to minimize the damage for farmers and other investors caught in the MF Global debacle. Congress will need to keep drilling down. The hearing left a lot of questions unanswered. The good news is there are more hearings scheduled in both houses of Congress, and I’ll continue to ask the questions Iowans want answered.
December 5, 2011