Press Releases
December 6, 2011
Conrad Asks Federal Oversight Committees to Investigate Loopholes Exploited by MF Global
ND Ag Producers, Business Leaders May Have Been Defrauded, Senator says
Washington –Senator Kent Conrad has asked the Chairmen of two of the nation’s financial regulatory commissions to investigate the events surrounding the collapse of MF Global, a commodity broker that a number of North Dakota agriculture producers and business leaders had invested in.
In letters to Gary Gensler, the Chairman of the Commodity Futures Trading Commission (CFTC), and Mary Schapiro, Chairman of the Securities and Exchange Commission, Senator Conrad questioned a legal loophole that allowed MF Global to engage in practices that bankrupted the company, and likely resulted in substantial losses and uncertainty for thousands of its customers, including a number of North Dakotans.
“It shocked me to learn that a company like MF Global could use the so-called "repo-to-maturity" technique to hide massive purchases of European sovereign debt. As you know, the company was able to count these bonds as "sold" even though the bonds were used as collateral, and left MF Global highly vulnerable to the losses that eventually resulted from the European debt crisis,” Senator Conrad wrote. “It is also troubling that MF Global reportedly lobbied against efforts to restrict allowable investments…and may have done the same to stop other regulations that might have helped stop or mitigate the current crisis.”
Senator Conrad went on to note that America's most recent financial crisis was caused in large part by supercharged leverage, a lack of transparency in the shadow banking system, and risky trading done with the money of people who thought their investments were safe.
“It is critical to restoring faith in markets that this loophole be addressed, and in short order. I ask that you inform me of actions you are taking to verify that other firms are not exploiting the loophole, and that you work to close it for good as soon as is practicable,” the Senator wrote.
The letter to Gensler and Schapiro was sent on the heels of letters Senator Conrad sent to the CFTC and James Giddens, the Trustee responsible for the liquidation of MF Global, calling for a timely and complete redistribution of funds to investors.
In a special meeting of the Senate Agriculture Committee today, Senator Conrad voted to subpoena former MF Global executives to testify before the ag committee at a December 13 hearing. “There is very little choice here. The leadership of MF Global owe its former customers an explanation as to why their funds were lost when the brokerage firm collapsed. Those people deserve answers. And the only ones who can provide those answers are the top executives at MF Global,” Senator Conrad said.
Senator Conrad has heard from a number of North Dakotans who invested – and lost - money with MF Global.
