Another Democratic politician is now demonstrating how his economic theories can be shattered by economic reality.
Former Democratic Senator and Governor Jon Corzine — who as recently as this spring was considered on Barack Obama’s the short list as a new Treasury Secretary — may have singlehandedly killed the large Wall Street firm MF Global Holdings, Ltd.
As Chairman and CEO of MF Global, Mr. Corzine bet on the sovereign bonds issued by European countries with $6.3 billion of the firm’s own money. The company is now tottering between bankruptcy and insolvency.
The irascible Democratic politician ignored warnings that his bets on sovereign debt of Italy and Spain were foolhardy. This is not the first big financial mistake Corzine has made. In 1994 he brought steep losses to Goldman Sachs when he made currency bets and the British pound fell. In 1999 he was pushed out of Goldman as Chairman.
Corzine is a hard driving figure who spends whatever it takes to reach his goal. He spent $62 million of his own money to buy his way into the United State Senate from New Jersey election — waging the most expensive Senate campaign race in history. During the campaign Cozine refused to release his income tax records. When Goldman went public he was reportedly worth $400 million.
He also spent $38 million in his race for New Jersey governor in 2005. Considered one of the most liberal governors in the country he was defeated in 2009 by Republican Chris Christie.
In the Senate Corzine was the co-author of the reviled Sarbanes-Oxley regulations and sought to impose restrictions on individual choices for 401(K) retirement accounts. He played a key role in getting Senator John Edwards to be on the Democratic presidential ticket with Senator John Kerry. Edwards is facing criminal charges of using campaign funds to pay for an out-of-wedlock child he fathered while still married.
While New Jersey Governor , Corzine sought to raise the state sales tax, one of the highest in the country from 6% to 7%. His Democratic legislature stoutly opposed him and resulted in a state government shutdown. Corzine won and today the state suffers one of the highest sales taxes in the nation.
Governor Corzine also sought to sell the state’s highway system to allow it to issue bonds to raise further funds for the state government. The plan would have added $32 billion to the state debt. The Democratic legislature railed against that plan and prevailed.
Now Corzine is back in the private sector working his economic magic. Only this time his bet on high European debt may have cost him his job, his company and burned thousands of investors who put faith in MF Global. As of this posting trading on MF Global has been suspended. A new owner, bankruptcy restructuring or liquidation are the options he faces today.
It all sort of makes sense, doesn’t it?