I've been watching the MF Global hearings in the House Agriculture Committee, and it's certainly enough to make your blood boil. Today we heard from farmers who have been affected, directly or indirectly, by the loss of money in the segregated accounts.  Even those who were not clients of MF Global have been hurt by the resulting shock in the commodity broker industry.


The farmers were followed by top MF Global executives whose responses to questions about where the funds went summed up to, basically, "Beats me." The fact that they all appeared in front of Congress without taking the fifth makes me inclined to believe that just possibly, they really didn't know anything about where the funds went. And yet, how inadequate that is! This is not a case where they stupidly went along with a stupid market; they flubbed one of the most basic duties they have to their clients, which is to keep track of the money that was handed to them.

Just in case you weren't outraged enough, in his opening statement, the COO emphasized how sorry he was that the shareholders had lost all their money. Not to dismiss the losses to MF Global shareholders . . . who certainly didn't deserve to have this happen . . . but seriously? That's weighing on you right now? How do you even have time to think about that as long as $1.2 billion worth of client funds are missing?

So: no insight into where the funds went. But the plaints of the affected farmers raise a harder question:  will they ever get their money back? Theoretically, the bankruptcy judge has the authority to reverse the transactions which misappropriated the funds. But I don't know if that's how the law will actually grind things out -- are the victims of malfeasance now simply unsecured creditors of the firm, like other potential litigants? I know that in the Sentinel case, where funds were illegally co-mingled, the trustee has tried to clawback funds . . . from other Sentinel customers who were lucky enough to withdraw funds before the firm failed.

Instinctively, I'd think that the clients whose segregated accounts were compromised should have precedence over any counterparties to whom MF Global transferred the funds. But I'm not sure that this is what the law says, and I haven't seen any good analysis.

Even if they get the funds back eventually, however, a great deal of damage will still have been done. These are funds that independent traders use to trade, and farmers use to buy seed for the year's planting. If they can't access those funds, their business will be badly hurt.

At this point all I understand is that it took enormous restraint not to hurl things at the television.

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