mr. giddens, mr. freeh, let me ask you, i heard your response to senator corker's last question, that mf global is poorly capitalized, had a liquidity crisis, that it was highly leveraged. was that in essence the harbinger of its doom? >> that was certainly a large contributing factor, so if they had a crisis there was not much of a cushion to fall back on. i think also would be the nature of their investments in risky european sovereign debt in countries such as i believe italy, spain and ireland. with a result that since those were purchased on margin, the margin amounts and the collateral put up had to be continually increased. so that toward the end, as i recall, something in the neighborhood of $200 million to $300 million in margin became closer to $900 million in margin that had to be put up. so all of that created much more severe strains on the firm. >> senator, also in addition to that, a critical factor was the -- really the inability of its i.t. and technology system to just keep pace with

mr. giddens if i might for a second, mr. chairman. mr. giddens, there's been a lot of questions here today, maybe half a dozen regulators, maybe more, about what happened, what transpired, things been talked about, poorly capitalized, liquidity problems, when mr. corzine came on board. and we see something happen in the eighth largest bankruptcy that's ever happened where segregated funds were compromised. does this kind of stuff just happen? as a policymaker, you always look to say, what went wrong, what could we have done better, who screwed up? are you to a point where you can say that? i don't want you throwing anybody under the bus, just be honest. are you at a point where you can say, this is where the system failed? this was a regulator that either didn't do their job or did do their job, or if you've got a cagey enough accountant, you can juggle the books good enough, you can get away with just about everything? because it appears to me that, unless there's something else out there, and tell me what it is. >> i think that the evide

mr. giddens where that number came from, our number is significantly lower. anything we could have gained by the experience, i think we have done everything, as dsro,hive reviewed all our practices going back, looking through the whole forensic analysis of mf global, and we feel very strongly we did all the things that were appropriate. i think mr. gideon said something important just a moment ago, he said the company had a liquiddy crisis, and increases from $200 million to $900 million on margin calls. that money had to come from somewhere. i think that's a very important point in this hearing today. that's one of the things i've learned. as far as going forward i think the cmo is, without a doubt, that is the biggest part of what we do as dsro is protect the integrity of our markets and our clients. >> so there's nothing structurally -- >> i don't believe there's anything structurally wrong with the process, sir. >> thank you, mr. chairman. >> senator johanns. >> let me just say, thank you for being here. mr. giddens or judge free, either one of you may be

mr. giddens. our staff's are in sometimes daily contact. we meet on a regular basis. there'll be times where our interests diverge. just as the interest of other parties in this very complex and, i think, long-running bankruptcy, will occur. but we have some very clear and immediate common goals, which is to get as many assets back to the estates as possible and then alternately courts in england, perhaps the bankruptcy court in new york, or ultimately make decisions about how those assets are distributed. sharing the information, getting the assets, returning them is a very common, critical need. i very much endorse the important considerations that were set forth, particularly on the international cooperation. we have a lot of assets that we believe are in the u.k., but the u.k. has a separate administrator. a separate court system. we do not have privy as to the holdings company to challenge some of the files and claims that the subsidiary will do. but it is a very difficult task to get facts a

mr. giddens'. we're looking to determine be available cause of action, lack of fiduciary responsibility -- >> where are you now in that investigation? >> we are beginning. >> you can not identify the responsible party ? >> i cannot do that. >> mr. giddens, at the suggested in your earlier testimony -- they're not director liability here now? >> farewell may be, and we're looking at that. if their work breaches of fiduciary duty, that are accessible, we will pursue that. >> ms. sommers, in december 11, there was a rule that prohibited the investment of customer funds in foreign sovereign debt securities. if the rule had been finalized before the collapse of mf global, or not overturned in 2005, does the cftc believe mf global would have avoided collapse? >> no, sir. the investments under when 0.25 are the permissible investments that the fcm uses to invest customer funds in segregation. they cannot be used by the fcm themselves to invest it for the f cm's own gain. >> my understanding you have ident

mr. giddens, as trustee. on april the 4th, mr. giddens, you provided an update on your investigation of jpmorgan chase which is mf global's largest creditor, regarding the mf global funds in its possession, you stated that you and jpmorgan, these are your words, are "presently engaged in substantive discussions regarding the resolution of claims." is it your expectation that some of these funds will be returned from jpmorgan chase to mf global customers, and when can mf global customers expect a resolution of claims against jpmorgan, if they can? >> i believe that we have a solid basis for seeking recovery of some of the funds that were transferred to jpmorgan. as to how that decision ultimately will be made, if we do not reach a consensual conclusion, it will probably have to be resolved by bankruptcy judge john glenn, and how long that will take is difficult to predict. difficult to predict. but we would not be exchanging information and engaging in really confidential discussions about legal arguments unless we thought we had a

mr. giddens. under the bankruptcy code, my obligation is to investigate the acts, conduct, look at assets, liabilities and the financial condition of the debtors among other things. unlike mr. giddens who is charged primarily with the return of customers' investment property, the responsibility of the chapter 11 trustee is to maximize the value of the estate for the creditors. and we have a list of many creditors, including the top 20 which is, i believe, in the materials. when i was appointed in november, i landed in the middle of a number of issues. first, the very ongoing, active investigations by the agencies represented here this morning, in addition to two federal prosecutors' offices as well as the cipa trustee. one of my first challenges was to understand what documents the chapter 11 trustee and the's candidates -- the estates controlled so i could make some arrangements and insure that the investigators could access the information they needed without compromising any of the privileges t

mr. giddens, our staffs, are in some times daily contact. we meet on a regular basis. there will be times when our interests diverge as the interests of other parties in this very complex and i think long-running bankruptcy will occur. we have clear, common goals to get as many assets back to the estates as possible. and then ultimately courts in england, perhaps, bankruptcy court in, in new york, will ultimately make decision as but how the assets are distributed. but sharing the information, getting the assets, returning them, is, is -- is ate very common critical need. from the perspective of the trustee, i am very much endorse the -- the six very important considerations that he sets forth. particularly on the international cooperation. we have a lot of assets we believe that are in the uk. uk has a separate administrator. separate court system. we don't have privity as the holdings company to challenge and file some of the claims as subsidiary inc. will do. but it is a very difficult task to -- to get facts and return assets overseas. some restriction as but how s

mr. giddens. on april 4 you provided an update on your investigation of j.p. morgan chase which is mf global's largest creditor, regarding the mf global fund and its possession. you stated that you and j.p. morgan "are engaged in substance of discussion regarding the resolution of claims." is it your expectation that some of these funds will be returned from j.p. morgan chased to mf global customers? when ken mf global customers expect a resolution of claims against j.p. morgan? >> i believe that we have a solid basis for seeking a recovery of some of the funds that were transferred to j.p. morgan. as to how the decision ultimately will be made, if we do not reach a consensual conclusion, it will probably have to be resolved by a bankruptcy judge. how long that will take, it is difficult to predict. it is difficult to predict. we would not be exchanging information and engaging in confidential discussions about legal arguments unless we thought we had a good prospect of recovering something from them. >> can i ask mr. freeh one quick question? mr. freeh, you a

mr. giddens and just free, what happened? what happened to the customer accounts? how did the money end up in places that it was not supposed to end up? we've talked about everything but that here today. >> our analysis of what happened and where the money went i think is substantially concluded. that's the first phase of the process. because of the liquidity crisis in the last week, something like $105 billion in cash went out of the firm to banks, depositories, some to commodities customers, some to securities customers, in what on the surface appear to be ordinary commercial transactions. a great deal of this was caused by customers leaving the firm and asking that their assets be transferred out of the firm. also, the firm has to scurry around to find additional collateral. additional collateral was required with respect to the repo to market transactions which went from something like $200 million to maybe $900 million additional collateral required. in these firms, cash is moved around from various accounts on a daily basis. and it is possible that mistakes a

mr. giddens had had, a small caliber, .380.un at the point i shot it was laying on the car in this position. and the round struck the weapon in the downward angle and point of impact is right here, but the bullet, after striking the handgun, went into the engine compartment of the vehicle and disintegrated. >> his years of police training. >> i derive great personal satisfaction just from the fact that you work hard and you do develop skills that you have a chance to use and it came out good. >>> coming up -- a convenience store clerk fights for his life after getting stabbed in the neck. >>> a store clerk fights for his life after being stabbed in the neck during a bold daytime robbery. but even after the thief gets the money, he continues his violent assault. >> he took the money and he told me to follow me, otherwise i'm going to cut your throat, again. august 7, 2011. daytona beach, florida. a place known for its sun, sand and international speedway, but like a lot of tourist hot spots, there exists a seedy and dark undersi

mr. giddens had had, a small caliber, .380. car in this position. and the round struck the weapon in the downward angle and point of impact is right here, but the bullet, after striking the handgun, went into the engine compartment of the vehicle and desint grated. >> his years of police training. >> i derive great personal satisfaction just from the fact that you work hard and you do develop skills that you have a chance to use and it came out good. >>> coming up -- a convenience store clerk fights for his life after getting stabbed in the neck. this is $100,000. we asked total strangers to watch it for us. thank you so much, i appreciate it, i'll be right back. they didn't take a dime. how much in fees does your bank take to watch your money ? if your bank takes more money than a stranger, you need an ally. ally bank. no nonsense. just people sense. has been because of the teachers and the education that i had. they're just part of who i am. she convinced me that there was no limit to what we could learn. i don't think i'd be

mr. giddens had had, a small caliber, .380.the point i shot it was laying on the car in this position. and the round struck the weapon in the downward angle and point of impact is right here, but the bullet, after striking the handgun, went into the engine compartment of the vehicle and disintegrated. >> mcgann attributes the successful outcome of the standoff to his years of police training. >> i derive great personal satisfaction just from the fact that you work hard and you do develop skills that you have a chance to use and it came out good. >>> coming up -- a convenience store clerk fights for his life after getting stabbed in the neck. every communications provider is different but centurylink is committed to being a different kind of communications company. ♪ we link people and fortune 500 companies nationwide and around the world. and we will continue to free you to do more and focus on what matters. [ male announcer ] aggressive styling. a more fuel-efficient turbocharged engine. and a completely redesigned interior. ♪

mr. james w. giddens is a trustee for the securities investor protection act of mf global incorporated. lewis j. freeh is a trustee from mf global holdings, honorable gerald summers is commissioner for the commodity futures trading commission. mr. robert cooke is director of the division of trading and markets for the u.s. securities and exchange commission. mr. richard ketchum is chairman he is chairman and ceo of the financial industry regulatory authority. he is an executive chairman of the chicago mercantile exchange. i would like to ask witnesses to keep remarks to five minutes. your full written statements will be included in the areaing record. you may begin your testimony. chairman johnson, ranking member shelby and members of the committee. i take seriously a trustee of mf global links. i would like to provide a copy and of course input from regulators a lack of supervision and inattention to maintaining segregation of customer accounts caused the shortfall of customer funds. this is imposing personal liability on senior officers and directors when there is a regulatory shortfa