A revealing part of the article includes a fascinating bit of information:
Barry Zubrow, JPMorgan’s chief risk officer, called Corzine to seek assurances that the funds belonged to MF Global and not customers. JPMorgan drafted a letter to be signed by O’Brien to ensure that MF Global was complying with rules requiring customers’ collateral to be segregated. The letter was not returned to JPMorgan, the memo said.
Interestingly while that same common-sense reasoning should apply to the commercial banking system in general, unfortunately it does not. Alas, in our current fractional-reserve banking system, customer demand deposits become assets of the bank that they can use as they see fit. What is good for MF Global should be good for you neighborhood depository institution. Deposits by customers should be considered property of the customers and not assets owned by the bank. Banks should not be able to use those funds that are payable on demand to finance loans or other investments they want to make. Jon Corzine is in some serious legal trouble and may be found guilty of monetary malfeasance. Every day commercial bankers in our fractional-reserve banking system do the same thing Corzine is alleged to have approved. The only difference is that it is legal for commercial bankers to do so.