The best part of this is that, for Western Europe at least, the banking system has been "global" and interconnected since about 1200. Stupid is as stupid does. Ditto for ignorant, especially about history.
Isn't the big point of this that the value of the rehypothecated assets are not worth as much as they thought they were? Rather than the rehypothecation in itself?
The crisis in Greece an Europe and pretty much the whole financial crisis. The simple fact is the assets the banks were basing the collateral on are not worth what they thought they were.
I am sorry, even if the above were true, I don't see what that has to do with either the article or my comment...
Mghoul, thanks for the belated response. You made two criticisms: one, that it is an argument of degree between the U.S. regulation and the U.K. regulation of rehypothification, and two, that the author did not explain the mechanics of rehypothification to trace who ended up with the missing MFG funds. The first criticism is a straw man argument, becuase the article is not an argumennt of degree of regulaton of rehypothification...it merely shows the difference to explain why funds were moved to the U.K. jurisdiction. It is interesting to note that where rehypothification was prohibited...in Canada; no customer money was lost. The second criticism has some validity. The author could have done better to make a tracing explanation of where the money went...who had competing claims on the collateral...and who used those claims to get paid at the expense of some other claimant...presumably the customers. You are right; that is not well explained. I disagree that this invalidates the substance of the article that rehypothification apprears to have been involved in the movement of funds from the U.S. to the U.K. and cannot be ruled out as playing a role in the lost customer funds. Lets just let this play out and see what comes out of the investigation. When we know what happened to the money we can see the role of rehypothification. With regards to the comment on Greece and public market....your comment was correct in the absolute but it ignored the substance of what was being discussed...so, I appreciate it as a pissant comment that is beside the point and distracts more than it contributes. Morganist is right to point out that the value of collateral is everything. Debt in all forms, even currency, exists only with regard to the pretext of some value in collateral, or some access to assets by the guarantor....when the value of the assets that back up the debt are devalued the debts on that collateral have to be written down, and the competing claims on that collateral value have a musical chairs problem.
Yes but it is worse than that the calculations on retrun are based on principal investment. This is likely to cause catastophe.
None of which is what brought down MF Global. Their business model was obsolete. Someone there decided, at the very end, to try what in American football is called a "Hail Mary pass" to try and save the poor thing. Didn't work. In other words, this may (and it has yet to be proven) have contributed to the actual timing of their downfall. Maybe. But MF Global had big big problems that predated this, and predated Corzine. I believe that is part of what martinghoul has been trying to point out. None of us really knows what actually happened there, but if the euro sovereign debt crisis was any part of it at all, it was only as a contributing factor at the end. Kind of like burning a piece of rotten wood. If it hadn't been burned it might have just finished rotting and become a part of the topsoil. Burning it just speeds that up a bit.