Saturday, November 5, 2011

Bart Chilton: Using Client Funds in Repo Agreements Like MF Global is "Standard Practice in Industry"

BNN interviewed CFTC Commissioner Bart Chilton Friday regarding MF Global's commingling client funds with firm funds in repurchase "repo" agreements and margin calls.
Chilton stated that the CFTC unsuccessfully attempted to implement a rule months ago that would have outlawed the use of client funds for repo agreements after numerous banking heads vehemently pushed back against the rule and stated that if implemented it would create a lack of confidence in the system.
Chilton stated that MF Global CEO Jon Corzine PERSONALLY lobbied him against the rule stating that using client funds was "standard business practice" and a "commonly accepted thing across the industry".

Chilton calls the use of client funds for internal repo agreements a "shell game", and states the CFTC needs to put a rule in place to outlaw it immediately.

BNN Host:
"You were one of the people pushing for the rule (to outlaw using client funds for repo agreements) to be implemented many months ago.  Many reports are indicating that many firms, including MF Global pushed back...that Jon Corzine personally lobied the CFTC. 
Did he personally lobby you, did you ever meet with him so that he could try to talk you out of voting for this rule?

Chilton:  "I met with a bunch of people including Senator Corzine and others.  Senator Corzine and others explained to me that this is a business practice that is a commonly accepted thing.  That doesn't mean it's appropriate- I don't think it is...
I think we've learned enough now that we need to put this limit in place, and we need to do it pretty dang quickly."

Entire Chilton interview can be seen here: