The Truth About I-Banks (Almost) Comes Out

Includes: LUK, MFGLQ
by: Charles A. Smith

The following comments from Jefferies Group Inc. (JEF) this morning regarding the fiasco at MF Global (MF) perfectly crystallize everything that is wrong with our current financial system:

9:37 AM Still trying to distance itself from MF Global, Jefferies Group issues a statement saying it "has no meaningful exposure to the sovereign debt of the (PIIGS)," nor does it have "any repo-to-maturity activity or related off balance-sheet derivative activity."

Why is this statement necessary? Why should investors have to worry about the risks of “…repo-to-maturity activity or related off balance-sheet derivative activity"? Why isn’t every single obligation of a financial company ON THE BALANCE SHEET?

And the bankers wonder why their common equity trades at half of stated book value. Here's your answer: These firms are basically un-analyzable, and will remain so until the reporting rules change.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.