Customers May Lose $1.2 Billion At MF Global

To comment on the Reuters story with the $1.2 Billion potential shortfall, Jesse says this:

Ironically a reader sent me their analysis yesterday that showed that the losses were $1.2 Billion. The twist here is that the Trustee may be accruing those losses to the customers even where there is some discretion.

One would think that the customers should be paid first out of all MF Global creditors. But I suspect that where it is possible, their loss will be subordinated to the unsecured creditors like JPM who have a powerful influence with this Trustee and the courts. The customers of consequence, like the Koch brothers, appear to have been tipped off weeks in advance.

This is the perversity of law without justice.

If that happens, then nothing is safe. If a customer in cash and Treasuries can be robbed, and then be made to stand in line with unsecured creditors, then your 401(k)s are not savings but loans to the custodians of your plans.

As he says, if custodians can raid customer accounts, then your retirement account may disappear.  I don't see how unsecured creditors would get in line in front of customers, but if Corzine and company don't go to jail, then we are totally screwed.