The Washington Post says Jon Corzine is “devastated” by the effect the collapse of MF Global has had on its investors.
“I truly apologize to all of those affected,” he said, after being sworn in to testify before the House Committee on Agriculture. … He said he was “stunned” to learn shortly before the firm sought bankruptcy protection at the end of October that MF Global could not account for the money.
Everyone is baffled. “The FBI, the Commodity Futures Trading Commission and other authorities are investigating and have had difficulty figuring out what happened to the missing funds.” However a story from Reuters says the story is simple. Corzine transferred the clients assets to another London where he could legally bet the money — a bet he lost — and now it’s gone. Poof. Voila!
More like, c’est la vie.
“I simply do not know where the money is, or why the accounts have not been reconciled to date,” the former MF Global chief executive said, according to the testimony. …
The journey to the witness table was a dramatic turnabout for New Jersey Democrat Corzine, who made a fortune at the helm of the investment bank Goldman Sachs and then parlayed his wealth into a career in politics….
As the hearing got underway, Rep. Collin C. Peterson (D-Minn.), the panel’s ranking Democrat, said it was “pretty amazing that we’re in this situation.” …
The firm was losing money when he [Corzine] stepped in last year and helped chart a new strategy to make it less reliant on declining revenue sources such as commissions on clients’ trades, Corzine said. Corzine said he strongly advocated investing in the debt of European governments — Belgium, Italy, Spain, Ireland and Portugal.
What could go wrong?
Below, Jon Corzine appears to testify and presents the very picture of contrition, sympathy and caring.
Central Banks and the IMF are bailing out the Euro. Are they basically repeating MF Global's bet?
- Sure, and we will all be having cardboard and dogfood casserole for next Thanksgiving. (54%, 122 Votes)
- "It will work out in the end. Steiner will attack." (27%, 61 Votes)
- Unlike MF Global countries can print money, so the comparison is invalid (18%, 42 Votes)
- Sure. But we have no choice. The Euro is too import to fail. (1%, 2 Votes)
- No. Their exposure is much less (0%, 1 Votes)
Total Voters: 228
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Funny. The one entity he headed that he didn’t mess up was Goldman.
@ Talnik: ‘Twas merely a serendipitous coincidence, I assure you. Nothing further to look at here. Move on, please.
“Ladies and gentlemen, over here on the right, if one looks closely, one is able to view a fascinating …………”
The option that appears to be the consensus here (there’s that word!) is that since they can print money, the comparison is invalid. Although I checked that option, I wish it was a little more detailed. It would be more accurate to say that governments retain the power to create inflation and thus create a stealth default.
If MF Global had the power to print money, it could just run the printing presses and pay off all of its depositers with $1.2 brand new billions hot off the presses. Now those “MF dollars” wouldn’t be worth nearly what their clients had given them, because they would be so debased. But, as Al Gore liked to say, there is “No Controlling Authority” to stop a sovereign government from doing exactly this. And thus the collapse in value can be rolled over from the short term into the long term.
Of course that means that instead of a very sharp one or two year panic, the countries who do this get a 10 or 20 year grinding depression with high unemployment and no growth instead, because new investors aren’t going to put capital to work in a kleptocracy. But that looks like the choice that the western governments are about to make.
When you’re an Obama crony, former New Jersey Democratic Governor and part of the Goldman ‘family’, you’re untouchable. Any poor dumb bastard from Lehman or Bear Stearns would have already been perp walked by now.
While countries or the ECB can print money, the effects on inflation or the real economy will be disastrous at some point. Either inflation will rise, or so many bonds will have to be sold in the open market to soak up the money that rates go up.
By the way, I believe that despite their protests to the Germans, in effect they have already been printing money: if anyone can tell me how a currency swap between the Fed and the ECB is different in total effect between a reverse system repo, I would love to hear it In both cases the balance sheets of the banks balloon.
After Enron, with the rogue accounting firms and whatnot, Corzine authored (most) of a 2002 law called the ‘Public Company Accounting Reform and Investor Protection Act’ or Sarbanes-Oxley, and chaired it being read out of committee, that held CEOs accountable for what happens at their company. Now this same Corzine says he doesn’t know where they put the $1.2 billion dollars they were gambling with.
Conspiratorial, even by Zero Hedge standards, (http://www.zerohedge.com/news/guest-post-mf-global-was-it-hit), Lawrence Lepard back in mid-November posits MF Global was a hit to pour cold water on expanding commodities bubble, thus punishing evil speculators who were betting against approved government scenarios. Corzine was the guy who made it happen and will not suffer any ill effects.
Unfortunately, he did “mess up” Goldman; it was much more profitable as a partneship and now is under seige as a highly-regulated bank.
He is either an incompetent, a liar or an incompetent and a liar. The money is with the counter-parties to meet the collateral calls for the RTM trades, or stolen. They new they were cash tight a day or two before – they bitched and moaned to one guy who was trying to pull out a measly 25K, and so pissed him off that he pulled his company’s account (250K).
As far as finding the money, can’t anyone track the FEDWIRE or SWIFT messages? Or have our illustrious regulators lost the capacity to crack a tape and sql some simple queries? It didn’t leave by steamer trunk.
If the MF “systems” allowed junior people to raid and hide the problem, it is at least a gross failure of management. My guess would be that either management knew, winked at it or didn’t give a damn. Whether the later rises to the level of reckless disregard is for the lawyers to determine, but my read is that Corzine is a crook by commission or omission.
Sorry …partnership. Taking it public allowed JC and his ally Flowers to immediately cash out instead of staying the course in the partnership. Then he was moved aside by Paulson with JC buying a senate seat and then governorship and the rest is history.
3. wws
“If MF Global had the power to print money, it could just run the printing presses and pay off all of its depositors with $1.2 brand new billions hot off the presses.”
They can and do – in the same way the Federal Reserve “prints money” (actually it is the engraving office that prints money – everyone else just creates it electronically).
The shadow banking system creates debt – what passes for money today the same way the FED does. The only problem is that someone has to accept the debt – become a counter party – for it to become current.
If it is not accepted into the system it is not currency.
Bothe GS and the Fed will soon(?) have a problem. No one will want to be their counter party. No one will accept their debt or bond. Trust has been broken. ALL promises will be defaulted on.
If you have not already…you really, really need to listen to this:
http://www.netcastdaily.com/broadcast/fsn2011-1201-1.asx
Welcome back my friends to the show that never ends
We’re so glad you could attend
Come inside! Come inside!
There behind a glass is a real blade of grass
be careful as you pass.
Move along! Move along!
Come inside, the show’s about to start
guaranteed to blow your head apart
Rest assured you’ll get your money’s worth
The greatest show in Heaven, Hell or Earth.
You’ve got to see the show, it’s a dynamo.
You’ve got to see the show, it’s rock and roll ….
- Karn Evil 9, 1st Impression, part 2, Emerson Lake & Palmer
But don’t worry folks, none of these MF Global vanishing billions have anything to do with the CME Group. Gerald Celente is wrong, their guarantee has not been tarnished, and the National Defense Authorization Acts do not authorize the indefinite military detention of American citizens captured on U.S. soil. That actual attorney Kenneth Anderson? Doesn’t know what he’s talking about.
http://volokh.com/2011/12/07/us-citizen-military-indefinite-detention-in-ndaa/
vs.
http://streetwiseprofessor.com/?p=5807#comment-85276
And this
http://www.netcastdaily.com/broadcast/fsn2011-1201-1.asx
http://www.youtube.com/watch?v=zsUWcPIlvNQ
versus this
http://streetwiseprofessor.com/?p=5777#comments
This lady who quit the futures business due to its criminal takeover? Also doesn’t know what she’s talking about.
So says U of H professor Craig Pirrong. No wonder the guy blogs non-stop about Russia and not about his buddies at the CME who froze customers out of their accounts for days while they were looted by the MFers Global. Who do you believe, the people who say get out or the Establishment shill?
Ok, I’ve hit a four post limit (for the day, not the thread) but ZeroHedge has even more on the shadow banking system and how in the heck this stolen money ended up in the banksters’ paradise previously known as the United Kingdom:
http://www.zerohedge.com/news/why-uk-trail-mf-global-collapse-may-have-apocalyptic-consequences-eurozone-canadian-banks-jeffe
Well, the answer is simple: Corzine forgot he was in the private sector. He must’ve thought he was still in Congress where one can “misplace” as much money as one wants and where those who “misplace” enough money with approriately sanctioned recipients actually are CELEBRATED rather than prosecuted.
In the book “The Big Short” (which I heard of here on Belmont) a few investors decided that the mortgage market was heading for a big crash and bet on that, making hundreds of millions of dollars as a result. The crash turned out to be far larger than they had estimated, and for a while after they realized that their biggest fear was that it was so large that the Federal Govt would bail everyone out, buy all the bad mortgages. That did not happen, so they reaped the rewards.
As Neil Cavuto just explained, Corzine saw the European banks heading for a big fall and bet that the governments would bail them all out. They did not; the bail out for Greece turned out to be merely the Euro governments telling everyone how big the haircut would be and who would pay what. So Corzine’s bet was a very bad one.
So, some private investors bet that the Fed Govt would not do a bail out and got very rich. Corzine, a big time politician, bet that the Euro govts would do a bail out and as a result crashed his company. It’s about what you would expect.
Still, a quote from Heinlien comes to mind: “People who go broke in a big way never miss a meal; it’s the guy who is shy half a buck that has to tighten his belt.”
AND Corzine bet it at huge leverage, right?
So if he had won, he would have made out epic.
Y’know, I might have agreed with his bet, but I would never have the cojones to put it all one that one roll. Difference between him and me, I guess. In fact, I’ll bet my loose change right now that he might STILL turn out to be right. In fact, it might be his bet FOR the bailout that caused his counterparty to lobby AGAINST the bailout. Could happen.
When they put him in the bastinado, I’ll do the honors.
Several financial panics ago, the idiots in Congress asked James “Diamond Jim” Fisk to explain what happened to all of the money that disappeared in his failed attempt to corner the gold market.
Quoth Big Jim: “Gone where the woodbine twineth”, a reference to the way that downspouts on the side of houses were often wrapped by creeping woodbine.
Our speculators are immensely duller.
Given Sarbanes-Oxley and the criminal penalties for an officer’s deception, it’s an interesting answer to perhaps the wrong question. It’s not where the money went but what was it used for – similar to an re-insurance company paying off losses of a primary insurer in excess of the amount guaranteed. The re-insurer has no idea who at the end of the transaction chain got the money, but they know the what and why and their obligations under contract. Derivatives are opaque after the top level transaction until the details are gathered from hither and yon.
Be interesting to see if Corzine was “lobbyist in chief” of a firm made out of his old friends and quants who ran it day-to-day, or was he actually in charge.
This sure should take the shine off of all the GS alumni.
“The Honorable” Jon Corzine. OK that’s good for a laugh, now pull the other one. Corzine struck me as a pathfinder for Obama. It was mentioned when he ran for office that he couldn’t really give any details about his ancestry or background. He was just there.
Maybe the money is in the same closet that swallowed Hillary’s Rose Law Firm records.
The NPR left talks about Ken Lay as if the Enron thing happened yesterday, and has already “unpersoned” the data regarding Corzine and the MF global thing in a mere few weeks.
We are now at peak “guess that party”.
You guys are being too tough on Corzine. These things can happen to anybody.
In the past week, I’ve been looking all over the house for a pair of liner gloves to wear inside my work gloves as winter approaches. I was using them last winter, but now “I simply do not know where those liner gloves are…”
I bet there is a perfectly innocent explanation for the MF Global affair. Perhaps Corzine’s wife was straightening up for company and put the 1.2 BILLION in a kitchen drawer under the placemats to temporarily get it out of the way.
Stuff happens – let’s show a little empathy here.
Uh-oh, Even Michael Moore has noticed that our Dear Leader is in the tank for the TBTF:
http://www.huffingtonpost.com/2011/12/07/michael-moore-barack-obama-wall-street-candidate_n_1134303.html
Moore has said Buraq has raised more money on Wall Street than all the eight Pub candidates combined.