Saturday, November 26, 2011

Future Suggests Government Gives & Gives

Chicago Tribune reported on proposed tax breaks for two large Illinois employers, Sears and the CME Group:

CME Group, parent of the Chicago Board of Trade and Chicago Mercantile Exchange, has threatened to leave the state in protest of a temporary increase to the state's corporate income tax rate. The proposal (new tax break) would tax income from just 27.54 percent of electronic transactions on local exchanges, costing the state an estimated $100 million a year.
Ironically, CME is looking at a government sponsored insurance system in the aftermath of MF Global's implosion.

Under discussion is the feasibility of a government-sponsored insurance fund modeled after the Securities Investors Protection Corporation (SIPC). Another option is an industry-sponsored bailout fund

The program would insure customer funds in the case of a broker default, but would not cover outright theft of customer money, as in the case of Jon Corzine's MF Global.

CME Group offered $250 million toward MF Global customer losses, then upped it to $550 million.  Their news release stated:

Our primary concerns are the protection of our customers at CME Clearing and the integrity of all futures markets.

Money is fungible and CME Group faces a crisis of existence, but I wonder how long government insurance programs can cover losses and not participate on the upside?

As an aside, will Jon Corzine ever see time behind bars?  The normal course of events is a multimillion dollar settlement with no admission of guilt.  Those executing the move include Columbia/HCA's Rick Scott, now Florida Governor and Carlyle's co-founder threesome of Rubenstein, Conway and D'Aniello, PEU billionaires with ready access to Red or Blue politicians.

CME dramatically increased its lobbying in 2007 as the financial world darkened.  2008 brought the failure of Carlyle Capital Corporation, Bear Sterns, and Lehman Brothers:

CME's political donations seem to fund the winning team.

Don't forget Jackie Clegg-Dodd, wife of Senator Chris Dodd of Dodd-Frank fame, sits on CME's board.  Will $3 million a year in lobbying and political donations buy CME a government-sponsored insurance fund?  Stay tuned, more shit is on the way.