scm had been taken over by another company and they had all lost their jobs.conomic tragedy was the basis for a series of what are some of the most devastating political ads ever run by a democrat against a republican. those plant workers in marion, indiana, were fired after mitt romney's firm, bane capital, helped take over scm in 1993. a year later mitt romney decided to challenge ted kennedy for his u.s. senate seat in massachusetts. here's how ted kennedy ran against mitt romney that year. >> mitt romney's ads claim he created jobs. what's the record? romney's firm bought a company called scm, fired all 350 workers are, told some they could reapply at a 27% pay cut. many pregnant or older -- mitt romney made $11 million in two years. mitt romney, he has misled us twice, with negative ads distorting sceptor kennedy's record and the phoney claims about his own. >> i worked there 30 years and i never dreamed that i'd lose my job. >> mitt romney says he helped create 10,000 jobs. the former workers at scm in marion, indiana, stay something else. >> if he's cre

an scm is authorized to invest funds in accounts. this authorization is found it 4d and commissions regulations 1.25. the commission finalized changes to regular 1.25 monday of this week. these changes just reenforced the long held view of the commission that customer segregated funds must be invested in the manner that minimizes their exposure to credit risks both to ree preserve their availability to customers in dcos: regulation 1.25 is a general prudential standards that requires all permitted investments be consistent with the objectives of preserving principle and maintaining liquidity. while an scm is permitted to invest customer funds, it is important to note if they do so the value of the segregating the must be in tact at all times. if customer funds are transferred out of the account to be invested by the scm, they must make a simultaneous transfer of asset intuse the segregated account. an scm cannot take money out of a segregated account, invest it, and then return the money to the segregated account at some later time.

global were an scm only, it would not be a bankruptcy liquidation. however, the commission regulations do uplight even an at the bankruptcy it -- they do apply in the bankruptcy. if customers would not be treated any differently in the bankruptcy, to my understanding. >> the statute says that not only does the trust the have those duties, but he as the duties and rights in the bankruptcy as even if it was just a straight commodities liquidation. >> maybe somebody has answered this, but at the senate agricultural committee hearing last week, chairman gansler said and individuals who co-mingle their own funds with customer funds could face civil penalties. could you confirm there are civil sanctions for this? are they just monitor it? is there punitive damage or jail time for taking a customer fund and using it for an authorized purpose? >> misuse of customer funds is a violation under our act and we have the authority to impose civil penalties for violations of our act. >> are the monetary only? >> monetary penalties. criminal authority has the right

>> they were not a part of the scm, and the answer to your question was yes. >> where did you think the money came from? >> we run liquidity positions. as i heard mr. abelow said, we also have access draws against our liquidity lines with banks. >> mr. steenkamp, you as c f review the financial condition of a company on a regular and daily business -- basis? >> i would review the consolidated financial statement and financial condition, and as i mentioned in my statement, we have various regulated subsidiaries around the world that have various rules and regulations under the specific jurisdictions that they operate in. with regards to the financial condition and operations of those entities, i would receive exception reporting as issues arose from the finance and other offices in those entities. >> so, were you aware within the, let's say two weeks leading up to october 31, the regular margin calls were being made against one of the subsidiaries for the foreign debt investments? >> senator, i was aware on occasions that there were margin calls made at the variation margin, and at times

the sovereign positions were held at the broker-dealer and they were not a part of the scm process. >> i do not know a lot about this business. the profitability is in the earnings. >> i will not bore you with rehashing it. we tried to make it precise. they yield 5%. there is a payment of two% of interest. the difference is the probability that you will make on that. >> what i was asking is that a part of your profitabilty bigger than the commission itself? >> no. . >> are you making money on that? >> i tried to frame some of the history. they are under enormouse pressure given the legitimate competition. there is pressure on it. commissions had declined. we had not stayed up to date with technology so we were boys brokering more than technological delivery. probably more important is the extent it time of low interest rates are around the global bad had compromised the spread and would be able to earn. have other long-term aspects that i spoke of that were attracted because of the scope was a business in stres s. >> thank you. the chair now recognizes the chairmen from virginia. >> t

response to questions, primary subject of that conversation were repos between the broker dealer and the scm. >> three separate meetings according to cftc with three separate commissioners that you participated in. did you have any separate calls or conversations with mr. gensler when you took the job at mf global to the present time? other than what you've indicated? >> to the best of my recollection, you have my calls, my meetings. >> okay. >> outlined. >> you never once called their cell phone? >> no. >> okay. did you ever call another member of the administration during this time about any of these issues? >> i'm sorry, congressman, i couldn't hear you. >> did you ever call a member of the administration? i mean, you were very close to the current administration as a very generous campaign bundler. did you ever visit with anybody in the administration about the, about your business at mf global? >> um, to my knowledge, i have never spoken about the business at mf global to anyone in the administration. >> did you visit with anybody at the federal reserve? >> um, i visited with people at

that's why there's rules on the books and that's why we have disclaimers that make certain scm is going to do business ref because there is a risk. madame chair, that is something the would be an extreme hazard to try to make up $150 billion of the customer segregated money. >> you mentioned earlier on on the security side there is an insurance system, and it's a little early i think probably to have spent too much time and we are not sure where all of the recommendations are going to go, but one question that we have been asked a number of times is should there be an insurance system like that that is on the commodity side for the commodity customers you have any thoughts on that? >> you're trying to have an insurance system devotee in the hundreds of trillions of dollars in the notional value to ensure the premiums would be so astronomical they would never need to pay out. so i don't know if that was something that would be beneficial. there may be something you want to look at and preliminary at best farmers, ranchers, hedgers of the product you may want to look at different types of

at each scm must submit to the commission and its sro and annual financial report certified by an independentivision of the swap dealer and intermediary oversight as well as the sro's. fcm's are also required to file monthly unaudited financial reports. each report must include a statement of financial condition and the statement of segregated funds. the dsr o.'s conduct a primary review of the monthly financial statements. the cftc staff conducts limited scope examinations of fcm's either as part of the assessment of the dsr o.'s examination function or on a four cause basis. these examinations include n. segregation reviews. the respect to the protection of customer funds, by statute and f. -- -- mica tim must treat all money for the trades are trade your trades are contractors of that customer as belonging to that customer. all customer money securities and properties must be separately accounted for and segregated from the ftm's for dietary funds. funds deposited at one customer for margin or secure traits may not be used for another. and ftm must notify the commission immediately of any