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Maybe MF Global's Missing Client Cash Went to a Credit Union

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This past weekend saw quite the financial-industry fakeout. It was reported on November 4 that MF Global's $593 million in missing client funds was found in one of the brokerage’s accounts at JPMorgan, bringing some weekend cheer to Wall Street. Two days later, though, it turned out that wasn't the case -- so the whereabouts of the money remain a mystery, exacerbating everyone’s Monday blues.
What happened? Back on Friday, MF announced it had found $659 million in customer money in its JPMorgan accounts, meaning there was actually no shortfall in client cash. But over the weekend, the Commodity Futures Trading Commission's Bart Chilton said the commission had already accounted for the JPMorgan accounts when it was examining MF’s books last week.
"It's not like we looked behind a couch cushion and were like, 'oh, there it is,' " Chilton said, per the Wall Street Journal.
So the case of the missing millions at MF Global remains unsolved. Where could the money be? Hedge funder Bruce Kastings has a theory:
My guess is that the missing cash was grabbed by one (or more) of the big players in the global bond market. MF did not sign off on the cash grab. The banks moved on them and their customer accounts. MF had no say in the matter.

Given Corzine’s relationship with Goldman I put them high on the list of probable plug pulling bankers. Nomura was a place to go to finance AAA sovereign positions. One of the French or German banks could have been the warehouse for MF’s sovereign exposure. It wouldn’t surprise me if any one of them pulled the plug on the leveraged bets.
Okay, so we have Nomura, Goldman Sachs, or a French or German bank as our suspects. Going along with the Kastings’ theory that MF Global’s missing client funds were snatched up by counterparty margin calls, Felix Salmon at Reuters suggested the culprit might be the New York Federal Reserve, because of MF Global’s $950 million exposure to the NY Fed. Salmon wrote:
MF Global’s $950 million exposure to the NY Fed is much bigger than the $630 million of missing MF Global customer funds. Money’s fungible, of course, I’m sure that other banks seized MF Global funds as well, and we have no idea how big the Fed’s margin call was. And as Kastings says, “all of the big players talk when they are moving on collateral and closing relationships with financial firms. When the SHTF, they act as one.” But it’s entirely plausible that the cash grab by the NY Fed was a key move in the spectacular demise of MF Global.
Alas, Salmon’s guess was quickly ruled out when he learned that the Fed’s margin call was "closer to $3 million than to $950 million: That is, the margin was designed to cover losses incurred in replacing the trade — which it did — rather than cover the gross size of the trade itself.”
Well, we have our own theory about where the missing client funds are. Recall that on Friday, November 4, MF Global reported there was over $600 million in customer funds stored in its JP Morgan account. One day later, on November 5, it turns out that’s already accounted for. Well, it just so happens that very day was National Bank Transfer Day, where thousands of Americans came out to close their banking accounts at big boys like Citigroup, Chase, and Bank of America and move their money to community banks and credit unions.
Think about it: With potentially thousands of transfers occurring between Chase and credit unions on Saturday, it would have been easy for the money to slip out unnoticed, no?

Several hundred million may seem like too much money to be lost in any shuffle. But remember, America lost track of $6.6 billion of cold, hard Iraqi rebuilding cash for eight years before it turned up last month in Iraq's central bank. So can we really rule out that one lucky Occupy Wall Street type is sitting on a new credit union account balance with quite a few extra zeroes at the end?

If you have any likelier guesses, feel free to leave them in the comments.

(See also: Did Bank Transfer Day Make a Dent?)
POSITION:  No positions in stocks mentioned.