Courtesy of Pam Martens.
Jon Corzine Taking Oath Before a House Hearing on the Failure of MF Global
The day after the U.S. House of Representatives’ Financial Services Committee held a hearing on why their seminal financial reform legislation, Dodd-Frank, is a bureaucratic boondoggle that will not prevent another taxpayer bailout of Wall Street in the event of a systemic collapse, we learn just how vulnerable the system is to powerful men allowed to play with other people’s money.
Yesterday, the Commodity Futures Trading Commission (CFTC) brought charges in Federal Court against MF Global, its former CEO, Jon Corzine, and its former Assistant Treasurer, Edith O’Brien. Corzine is a former U.S. Senator and Governor of New Jersey. The two are charged with the unlawful allocation of customer money at the commodities trading firm. The company has agreed to settle the charges against the firm for $100 million. The claims remain outstanding against the individuals.
MFGlobal collapsed in October 2011. Corzine had directed the firm to use its capital to make large bets on European sovereign debt. When the firm collapsed, over $1 billion of client funds were missing.
Trading firms routinely record phone conversations to be able to reconstruct any disputed trades. In one such conversation revealed in the CFTC’s lawsuit against Corzine and O’Brien, the Global Treasurer states: “We have to tell Jon that enough is enough. We need to take the keys away from him.”
Is it really the job of an employee on Wall Street to muster an intervention against a very powerful man in order to save their customers’ funds? Isn’t it the job of Congress to pass laws to ensure that checks and balances exist that prevent powerful men from gaming the system and dipping into customer funds to make casino bets. Isn’t it the job of a Board of Directors and its Audit Committee to understand what is happening within the company they oversee. Isn’t it the job of regulators to monitor the adequacy of these checks and balances?
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