Last week, I ranted about regulation and the folks who regulate. This week, I would like to follow up on that rant.
As many of you may know by now, PFG founder and CEO Russell Wasendorf Sr. was arrested last Friday. He admitted to making false statements to the Commodity Futures Trading Commission relating to the value of customers segregated funds at PFG. He even said, "I have committed fraud".
According to his own attempted suicide note, he's been embezzling money from the company for the past 20 years. He also stated that all the bank accounts came to him directly, and that it was easy for him to forge those bank statements over that time.
Here's a simple question I have for the Commodity Futures Trading Commission, and also for the SEC: Why are you accepting statements at face value from any broker, without further checking with the source of those statements?
In the case of PFG, it would have been the bank. In the $50 billion Madoff Ponzi scheme, it would have been the brokers. It would have been crystal clear that there was no trading going on. Had you checked with the actual bank that PFG claimed they had accounts with, there was little or no activity that remotely matched the statements that you, as a regulator, were looking at.
In the case of PFG, the banks were not at fault. This was an out and out fraud that Russell Wasendorf Sr. admitted to and perpetrated over the last 20 years.
I feel like it's basic business 101! As regulators, you should not accept anything without checking the source, particularly in these days of scanners, copiers, and Photoshop. But, that is exactly what the CFTC along with the SEC have been doing for years.
"Mr./Mrs. Regulator", please look at the original documents, check with banks, check with brokers, and double-check and confirm from the source of any third-party statements. Don't just rely on what you are handed by a brokerage firm. It's just too easy to forge anything these days. If crooks can forge 100 Dollar bills, they certainly would have no trouble with a simple bank statement.
And if you can't do that, then let's just outsource regulation to the private sector. I'm sure they'll be a lot more efficient and vigilant with an incentive to get it right and and protect the public's money.
We don't need more regulation, rather we just need the regulators to follow basic accounting principals and perform checks and balances with third parties for account balances and verification. Until that happens, we're likely to come across more crooks and low lives taking other people to the cleaners.
The public and the industry would be pleased to see the regulators go down a path towards honest and diligent regulation.
Rant over, now back to the markets.
Here's a link to Part 1 if you missed it.
Adam Hewison
President INO.com and co-founder of MarketClub.com
The corruption and power of the bankers is evident in the case of Goldman Sachs. They are the new Bilderbergers whose people run the US Treasury and Federal Reserve. They now control much of Europe. The list is long, Mario Monti of Italy,
Otmar Issing, advisor to German Bundesbank. Peter Southerland, now chairman of Goldman Sachs International, Mario
Draghi, President of European Commercial Bank, and many others that amount to being a secret government. Goldman Sachs is being called the "Vampire Squid." as it has tenacles all over the world.
Adam,
Thank you for addressing these issues, it reflects your own honesty and intelligence.
For what it is worth, here is my general opinion on the subject. I think we are seeing the tip of the iceberg, because the massive, historical levels of corruption exposed by MFGlobal and now PFG are both aspects of fraud that is sanctioned at the highest levels of government (not only in the US). Regulators do not regulate in large part because they are essentially told not to regulate, it is a function of what Jim Willie describes as the Fascist Business Model, see his recent article "Exposure of Banker Corruption" at http://news.goldseek.com/GoldenJackass/1341518400.php I quote from the paragraph with that title:
"The Fascist Business Model is not just showing its bitter fruit after the Bush II Admin came to office in 2001. It is flourishing in a climax of failure. The model does not simply permit financial crime. It encourages it. It promotes it. It rewards it. The higher powers organize it and run it. The result is not simply tolerated financial crime. It enables financial crime to flourish. The USAttorney General office sits on its hands. The Commodity Futures Trading Commission sits on its hands. The Securities & Exchange Commission sits on its hands. The financial press ignores the crime, or minimizes it, or explains it away. They all pay lip service to enforcement of regulations and securities fraud. The outcome is a mind numbing episode of financial fraud, theft, and collusion that the nation has never witnessed in its entire history."
The US Treasury Dept has been run by Goldman Sachs and JPMorgan carries out the policies of the Fed, which primarily include propping up the US petrodollar to maintain it as the global reserve currency. The LIBOR fraud was enacted to provide unlimited funds to facilitate the interest rate swaps, which have been used to maintain the 0% interest rate that enables perpetual trillion dollar US Federal deficits. But this vast ponzi scheme is going into its final innings, as the international community rebels and takes concrete actions to move away from toxic US debt and phony US dollars, and as the toxic portfolios of the "too big to fail" cartel banks become increasingly loaded down with trillions of dollars of interest rate swaps that will soon sink them.
Desperation for cash and liquidity leads to ever larger crimes. In the cartel banking community, the banksters have robbed allocated, segregated accounts, soon to come will be mutual funds. The US government under Clinton/Rubin robbed Fort Knox, which now contains no gold (a good reason why an audit is perpetually blocked); now the US and friends "intervene" in foreign wars, where in the aftermath the entire gold bullion supply of the invaded nation disappears (e.g. 144 tons of Libyan gold and the gold of Iraq).
We have the best Congress that money can buy, which dutifully continues to appropriate "emergency" funds every year for wars that never end, which have contributed to close to half of the national debt since the Vietnam war began (that was a time when the US national debt was less than one trillion -- less than our annual national budget deficit these days). That was also a time when the US actually manufactured lots of different consumer items, before most of the industrial base was shipped overseas by multinational corporations (that don't give a damn about the US,) with the help of corrupt politicians and of course, the banksters. With 50% of our remaining industrial production (like what, 14% of the total GNP?) now in military goods, ending the wars would be bad for business, and think of what the unemployment rates would be for soldiers returning home to a non-industrial nation with no factories to provide jobs.
Endless war and no US industry means no US recovery. The Weimar-like purchase of US Treasury debt by the Fed will soon lead to massive inflation. The (last) giant, manufactured bubble of "safe haven, flight to quality" Treasury notes will eventually lead to default,which will arrive with coming abandonment of the US dollar as the global reserve currency.