Rock County farmer becomes unwitting spokesperson for those affected by MF Global collapse
Luverne’s Dean Tofteland is among more than one hundred Minnesota farmers and businesses affected by the MF Global collapse.
He was stunned to learn that thousands of dollars — held in a customer-segregated account — were frozen when the firm declared bankruptcy last month.
“We were told it was ‘illegally co-mingled,’ in other words, they stole it,” Tofteland said. “This is how Wall Street affects Main Street … It’s amazing. They don’t call it theft on Wall Street, but we do on Main Street.”
Tofteland contacted U.S. Sen. Amy Klobuchar when he learned of the bankruptcy, and she has used his name in Senate hearings.
As a result, he’s become an informal spokesperson for thousands of people whose assets are frozen. He’s been quoted in news stories around the globe, and he’s been asked to testify at upcoming hearings in Washington, D.C.
“There are a lot of people affected by this, so somebody has to step up,” Tofteland said. “It’s time to start the conversation about how these large institutions are conducting business.”
MF Global is a futures commission merchant acting as a broker for clients that include, among many others, farmers and grain elevators.
Tofteland and other ag professionals use the Chicago Mercantile Exchange to hedge against volatile price fluctuations.
“It’s not just the big traders and speculators in Washington and New York,” Tofteland said. “It’s elevators, exporters and farmers affected.”
These clients seeking security were ironically among those affected by the risky financial bets of MF Global.
Led by Jon Corzine (former CEO of Goldman Sachs and a former U.S. Senator) the firm reportedly gambled on European sovereign debt and lost.
Now, after the firm declared bankruptcy, $1.2 billion of clients’ money is missing — money that was supposed to be in separate protected accounts.
The case has prompted renewed Congressional interest in tightening Wall Street financial regulations — something MF Global has lobbied aggressively against.
On Thursday, Dec. 1, Sen. Amy Klobuchar referred to Tofteland when she confronted finance watchdogs about the firm’s failure.
“There are those who say Wall Street reform isn’t necessary, that we’ve learned from our mistakes and we don’t need stronger rules,” Klobuchar said at Thursday’s Senate Agriculture Committee hearing.
“I would have you talk to the farmers in my state who can’t access their life savings and aren’t sure when or how much of it they’ll get back.”
Tofteland raises corn, soybeans and hogs on his family farm by Luverne and said he’s frustrated that he’s locked out of his hedges.
“So, we were forced to liquidate our positions,” Tofteland said.
It appears he’ll be able to recover some of his $200,000 but he said the amount of money at stake for him personally is only part of the picture.
Tofteland said it paints a bleak outlook for the broader scope of the financial regulatory picture in general.
“If you or I are one penny overdrawn on our accounts the banks know about it,” he said. “If there’s a debit in one place there should be a credit somewhere else. The banks know exactly where it is, they just aren’t saying, because they are the largest creditor in this bankruptcy.”
Klobuchar said MF Global hid the risky bets on European markets that should have been on its books.
“When these risky bets came to light, this triggered a loss of confidence. The result was the eighth-largest bankruptcy in U.S. history,” she said at the hearing.
“Pain is being felt in little towns like Luverne, Minnesota.”
She described Tofteland’s case as an example of those victimized.
“He isn’t a speculator. He uses the futures market to manage risks, locking in prices of the growing season so he is protected against price fluctuations that can eat into his profits,” Klobuchar said about Tofteland.
“Those are the kinds of people we have been hearing from in Minnesota.”
Wall Street reform and consumer protection
The focus of Thursday’s hearing was supposed to be about Wall Street reform and consumer protection.
“But today this important topic is overshadowed by the collapse of another over-leveraged financial firm that took on too much risk and did little to disclose its bets,” Klobuchar said at the hearing.
“Three years after the U.S. financial system was nearly toppled by this sort of reckless behavior it seems that little has changed.”
At the hearing she pressed officials from the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) to take quick action to give those affected by the MF Global failure access to their funds.
“It is completely inappropriate and outrageous that funds that were supposed to be in segregated accounts weren’t properly accounted for. This isn’t Monopoly money, it is the hard-earned dollars of Americans,” Klobuchar said.
“Our farmers and ranchers need to know that when they use the market to manage risk, some Wall Street banker isn’t gambling with their savings.”
On Tuesday the CFTC passed a key rule reform to limit Wall Street firms from gambling with customer money.
The rule bars large financial firms from using customer money to invest in risky investments and take the profits for themselves.
The rule will close loopholes that led to $1.2 billion in missing customer funds from MF Global.
Tofteland said this provides little comfort in an era where it appears the big banks always have their way.
“The confidence I have in this process isn’t with our regulators, but in our own elected officials like Sen. Klobuchar,” he said.