Corzine’s Troubles Worsen
Regulators and investigators are circling over the carcass of MF Global, wondering where more than $630 million in investor money went, even as MF Global admits to commingling funds and not having proper protections in place.
The company admits that they’ve broken the cardinal rule in commingling funds, and the regulators also note that MF Global officials apparently tried to hide transactions from regulators after the latest audit in the runup to talks meant to stave off bankruptcy.
It was when the disclosure work was being done that all kinds of irregularities became known and the buyers walked. MF Global had no choice but to declare bankruptcy as margin calls were made and the company lacked the capital to cover its positions.
Corzine, who ran the company, has now resigned, but is looking at potential criminal charges (he’s retained a criminal defense attorney).
And to add sauce to the goose? He lobbied the very same regulators to water down rules that would have prevented his company from carrying out the very transactions that brought down MF Global.
As a former United States senator and a former governor of New Jersey, as well as the leader of Goldman Sachs in the 1990s, Mr. Corzine carried significant weight in the worlds of Washington and Wall Street. While other financial firms employed teams of lobbyists to fight the new regulation, MF Global’s chief executive in meetings over the last year personally pressed regulators to halt their plans.
The agency proposing the rule, the Commodity Futures Trading Commission, relented. Wall Street, which has been working to curb many financial regulations, won another battle.
Yet with MF Global in bankruptcy and regulators scrambling to find $630 million in missing customer funds, Mr. Corzine’s effort may come back to haunt him.
The proposed rule would have restricted a complicated transaction that allowed MF Global in essence to borrow money from its own customers. Brokerage firms are allowed to use customers’ money to earn interest, not unlike banks, but this rule would have outlawed using customer funds for a loan to the firm itself.