I just looked at the Vanguard margin agreement. They key paragraph is:

Quote:

7. Pledge of Securities and Other Property
The Securities and Other Property in Your Account may be carried in the general loan of Vanguard Brokerage Services, and We may pledge, repledge, hypothecate, or rehypothecate, either separately or together with Securities of other customers, all Securities and Other Property that You, now or in the future, carry, hold, or maintain in Your Account. The value of the Securities and Other Property We pledge or repledge may be greater than the amount You owe Us, and We are not obligated to retain in Our possession and control for delivery the same amount of similar Securities and Other Property.

If I don't sign the margin agreement, the firm cannot legally rehypothecate. My IRA and 403b never had this agreement signed. Therefore they cannot be loaned out.

Granted the firm may get into trouble loaning out other's securities, but "my" securities go into a sancrosanct pool held in street name and are fully segregated. Am I missing something here?

In a chamber filled w/ criminals, Harkin on balance deserves a lighter sentence than most of them.

I'm going to say 2 things. One is that Corzine was amazingly stupid ignoring market risk and running a repo to maturity on potential crap. Second, he was not too damn lucky in what happened. It could have been anybody in this business, as it appears customer funds are hypothecated and re-hypothecated over and over again. It is clear the money has to be lost or the mess becomes systematic. This is all in the language none of us understand that is written in the crap they have us sign. It is clear no one understands it to be as it is or there are some smart people that wouldn't sign the crap.

That said, we are watching a candle burn from both ends. I have contended for some time that when the Fed "prints", they are merely engaging in a swap or repo of assets for liquidity. These aren't helicopter drops as imagined, but extraction of assets for what extinguishes the assets in the end. The government, bankers and Fed are in essence milking productive assets out of the private sector.

What else is going on is we are so cross collateralized that all this CB money is absorbed. It is a joke to talk about reserves when there is really no cash in the system to de-lever. Report is there is $4 trillion in assets secured in hypothecation and re-hypothecation of $1 trillion in assets. This is money that has already been leveraged by the banking system before it gets to the point of hypothecation. If they were to outlaw hypothecation, we would see a credit crunch from hell. If they don't, I suspect outfits like JPM are going to such every dime out of the system they can get their hands on. If JPM went broke, their hypothecation alone would domino the entire game. Thus we are really looking at multiple pledges of the same asset, including the pledge the asset, cash or some bank asset also being a portion of the structure of the banking system itself. Are we on a boat that can't be abandoned?

The cries of inflation are overblown. The inflation has already happened. What is going on now is twofold, one that the money has already been created, quite likely on assets of flimsy quality and second, the solution seems to allow the bankers to keep stuffing money in their pockets at the expense of the system. This is their economic execution model that has the world over the barrel, give us money or tanks in the street. The threat is real.

I saw a video on the Monsanto genetically engineered seed business. They have infected the world with their pollen and now demand extortion for the necessity of growing food around the world. Intellectual rights or not, it isn't right to have royalties paid for what is common among mankind, the necessity of food crops. The same is true of the money system, which has been made into a killing and debt slave machine for the benefit of a few. Then we have the cities of the US dumping an industrial waste in the water supply known as Fluoride, which has massive health problems potentially associated with it. The entire system has become inherently evil.

Genesis wrote..

As it stands right now any account you hold at any brokerage can be effectively stolen through being lost via the same mechanism. Got that? Good. Your 401k, IRA, anything -- all at risk.

Yep. People need to get it through their thick skulls that their investment accounts OF ALL FORMS should be presumed to be at risk of immediate confiscation through theft.

Marvin: You're trusting that Vanguard won't do the same **** that Mother****ers did. In other words, Vanguard has your confidence. Given that Corzine et al. haven't even been held for multiple felonies, what makes you think that Vanguard's execs would get dates with Bubba if they took your ****?

The world economy in 2012?

http://devastatingexplosions.com/

Wearedoomed: Are you resisting the system? You should use a 1T ohm image.

http://www.ohmite.com/cgi-bin/showpage.c....

Here's what they need to ask the three stooges of MF Global.

Q: Do you know what hypothecation/rehypothecation is and does your company engage in it?

The answer should be yes. At that point the next question is:
Q: How then could you not know customer funds were mixing as that is what hypothecation means?

My understanding is there are limits on hypothecation/re-hypothecation in the US but NONE in the UK. If your securities firm has a UK branch, they can RE-HYPOTHECATE 100% of YOUR money.

@Quick: Exactly. The reason why they have offices over there is so they can hypothecate/rehypotheciate. It's such a cornerstone of their business model, no way could they all not know customer funds are mixed, as that's what hypothication means (to my understanding). This one word gives away their whole defense. Someone tell me where I'm wrong!

It's a joke. Kabuki questions.

The system was setup to allow the scams , the rules were put in place and when they were written they were spelled out as to this type of activity.

Most people have lives and didn't have time to follow the in and out and the spin doctors used the evil regulations and gvt off your back to slide through all manner of bull****.

None of this is new , none of it is unknown to any who follow this stuff and the cretin liars and criminals in CONgress who now act surprised passed and were paid to pass exactly the rules changes that allowed the thefts.

WeAreDoomed wrote..

You're trusting that Vanguard won't do the same **** that Mother****ers did.

Without some level of trust I might as well hole up in a cave with canned peaches and an assault rifle to guard them. I dont choose to live in that cave.

However, broker dishonesty has appeared as a plausible scenario, and I'm taking some easy steps to make sure if it does happen to me I wont be wiped out.

I also have the opinion that the SIPC is effectively broke after Madoff and the other ponzi schemes. My attitude is that if I need it, it probably wont be there. This means I must take care in choosing a broker.

I don't really need a margin account except for borrowing stocks to short, pledging stocks I own as collateral. The bulk of my assets are being scattered into non-margin accounts in different firms.

Today I'm going by the local Scottrade office and seeing what happens when I ask to revoke my margin agreement and go to a cash basis. If they wont let me do it, then my account goes elsewhere.

Am I actually hearing discussion regarding off balance sheet items??

Mannf wrote..

I'm going to say 2 things. One is that Corzine was amazingly stupid ignoring market risk and running a repo to maturity on potential crap. Second, he was not too damn lucky in what happened.

Stupid? Here's what Corzine's thought process might have looked like:

1) If the bet pays off I'll make out like a bandit.

2) If the bet fails I'll be inconvenienced with a few senate hearings while the corrupt puppet I placed in the White House goes on national TV saying I did nothing illegal.

Nah. The man is not stupid.

You bet and I am not sure that all of this will end up being illegal in the end.
!!

Marvin, let us know how it goes with Scottade . I'm looking at doing the same with optionsxpress soon.

Do any of you accounting types know what the hell happened to FAS133?? I was dealing with that prior to motherhood/housewifedom about 10+ years ago. It was about putting ALL derivatives ON balance sheet. How the hell did they get around that?? Was it abandoned or evaded?

Mannfm

"Then we have the cities of the US dumping an industrial waste in the water supply known as Fluoride, which has massive health problems potentially associated with it."


There's been a meme going around in psychiatric circles for a few years now that governments should add lithium to the water supply.

http://news.bbc.co.uk/2/hi/health/802545....

http://www.smartplanet.com/blog/science-....


They will need to add thorazine if they keep this up, they are making us all too crazy for mere lithium to have any effect!


: )

Mm asked

"Granted the firm may get into trouble loaning out other's securities, but "my" securities go into a sancrosanct pool held in street name and are fully segregated. Am I missing something here?"

My reaction is that your securities aren't segregated and sacrosanct. If the firm goes BK, and "your" securities are in street name, and the firm's creditors include derivative counterparties, those counterparties will get paid off FIRST (see 2005 BK reform) by liquidating "your" securities, segregated or not. Street name ain't gonna cut it.

My question is, what securities might you hold in client name that could reasonably retain a fair measure of their nominal value in a meltdown? DRS does not appear to be available for ETFs or mutual funds, from what I can gather. Otherwise, you could hold UUP, HSGFX, BEARX, SHY, or a -1x unleveraged inverse ETF through it all.

Nothing will happen to Corzine. Here's why:

Re-hypothecation occurs when a bank or broker re-uses collateral posted by clients, such as hedge funds, to back the broker’s own trades and borrowings. The practice of re-hypothecation runs into the trillions of dollars and is perfectly legal. It is justified by brokers on the basis that it is a capital efficient way of financing their operations much to the chagrin of hedge funds.

Under the U.S. Federal Reserve Board's Regulation T and SEC Rule 15c3-3, a prime broker may re-hypothecate assets to the value of 140% of the client's liability to the prime broker. For example, assume a customer has deposited $500 in securities and has a debt deficit of $200, resulting in net equity of $300. The broker-dealer can re-hypothecate up to $280 (140 per cent. x $200) of these assets.  

But in the UK, there is absolutely no statutory limit on the amount that can be re-hypothecated.

Pietertvl wrote..

My reaction is that your securities aren't segregated and sacrosanct. If the firm goes BK, and "your" securities are in street name, and the firm's creditors include derivative counterparties, those counterparties will get paid off FIRST

True. Some level of trust is needed. All the more reason to avoid GS and any other giant NY firm because of the cesspool corporate culture.

Thus the care in selecting a brokerage. I hope I can select a firm that does not depend on rehypothecation as a business model. As I said before, I short stocks so I need a margin account in one brokerage account.

What about the bonuses paid in London before the BK?

I assume they found a gimmick for that too with the fact they did it in London being the key.

Fraud by conveyance, no?

Shane had this:

Quote:

Under the U.S. Federal Reserve Board's Regulation T and SEC Rule 15c3-3, a prime broker may re-hypothecate assets to the value of 140% of the client's liability to the prime broker. For example, assume a customer has deposited $500 in securities and has a debt deficit of $200, resulting in net equity of $300. The broker-dealer can re-hypothecate up to $280 (140 per cent. x $200) of these assets.

How is that any different than letting someone else gamble with your money and, if they win the keep the winnings and if they lose you are the loser? Seems like a one-way arrangement to hell for the customer.

Oh, if my employer would only let me get at my 401(k).

Flap

@Flapping: Exactly. These lying bastards will get away with it. The house always wins.