Jon Corzine probably never thought he’d find himself in this position.
The former Democratic senator and governor from New Jersey, once a rising star in his party, endured a bipartisan grilling by members of the House Agriculture Committee on Thursday over the collapse of MF Global, the brokerage firm Corzine headed until last month.
It was not only an embarrassing chapter for this former powerhouse financier and politician, it was a dubious historical moment: Corzine is the first former senator subpoenaed in more than 100 years, according to congressional historians. Lawmakers at the hearing weren’t even sure what to call him.
“Governor or senator — I don’t know know what to call you,” joked Rep. Collin Peterson (D-Minn.) at the beginning of his question period. A somber Corzine didn’t smile. In the end, Peterson and other members addressed him as “Mr. Corzine,” although some Republicans used “Mr. Governor” as a kind of veiled insult.
Accompanied by his wife and lawyers, Corzine faced 2½ hours of tough questioning. He was asked about roughly $1.2 billion in missing customer funds that have attracted the attention of the FBI, federal prosecutors and Congress. He was questioned about whether he fired MF Global’s risk officer after that executive objected to the company’s multibillion-dollar bet on eurozone debt, and whether, as part of the “Goldman Sachs fraternity,” he helped block federal rules that would have harmed MF Global.
And lawmakers asked him whether he thought he acted in honorably and ethically during his 18 months running the firm.
For Corzine, it must have seemed like hitting bottom. There were lawmakers, some of whom have never held any other job but politician, portraying him as an incompetent, wild-eyed “risk taker” who drove MF Global into bankruptcy by betting on unsafe European debt offerings.
“How do you explain taking a 230-year company into bankruptcy within 18 months?” asked an incredulous Rep. Jean Schmidt (R-Ohio).
A contrite Corzine was forced to acknowledge that “it would have been better” if the firm had made different investments, something you would not hear from one of Tom Wolfe’s “Masters of the Universe.”
Corzine, who made as much as $400 million during his 25 years at Goldman Sachs, was even forced to admit that he lost at least $3 million of his own in MF Global, plus millions in stock options now all but worthless. Corzine has already waived his severance package from MF Global, worth about $12 million, according to media reports
With lawmakers smelling blood — albeit politely — Corzine threw himself on his sword even before he walked in the door, though he tried to shift blame for some of the alleged wrongdoing at MF Global to others.
“As the chief executive officer of MF Global, I tried to exercise my best judgment on behalf of MF Global’s customers, employees and shareholders,” Corzine said. “Once again, let me go back to where I started: I sincerely apologize, both personally and on behalf of the company, to our customers, our employees and our investors, who are bearing the brunt of the impact of the firm’s bankruptcy.”
But Corzine will soon face more rough handling. Both the Senate Agriculture and House Financial Services committees have subpoenaed him, meaning he could again find himself on the wrong side of the witness table in coming days. Federal prosecutors in Chicago and New York have subpoenaed company records in a bid to find out whether the missing money is the result of criminal actions.
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3 Responses
From the information reported in this article, it would appear that the members of the Agriculture Committee of the US House of Representatives have missed the most undisputable problem at MF Global: that the CEO, and those who report to him, cannot find $1.2 billion in assets that the company was holding as a custodian for its customers. There is little or no judgment or analysis required in carrying out the responsibilities of a holder of other people’s money. You have to keep your books clearly and honestly. More subtle matters, such how much to invest in Euro derivatives, are important, and may have played a role in the company’s financial losses, but the members of the House committee do not seem to know the difference between a financial loss from operations, and a physical loss caused by bad accounting and bad internal accounting and financial controls.
That ignorance is part of the problem with our government’s regulation of financial markets. If the people’s elected representatives have a poor understanding of issues of accounting and financial management, they are unlikely to be able to play a helpful role in regulating markets. Let me emphasize: I am not objecting to government regulation of financial markets, as I believe that regulation is an essential part of a free and efficient market. But unless the people’s representatives understand the complexity of markets, regulation, finance and accounting, the people have little chance of being properly protected from out-of-control, inefficient or dishonest markets. And I think many players in the financial industry, such as Governor/Senator/Mr. Corzine, can run circles around the rest of us, and accumulate extraordinary wealth, in part because of the inadequate understanding of financial and accounting issues of our elected representatives.
#1- No fair picking on him. It isn’t like he misplaced a whole trillion dollars. And if you adjust for deflation in the value of the dollar over the last century, he would have only lost a measley $30 million (in 1911 dollars). And at least a lot people got ripped off this time compared to when he was governor of New Jersey and messed up the finances of an entire state with millions of people (not to mention many innocent cattle). Be happy, he almost became Secretary of the Treasury, and if that happened, imagine what would have happened?????
How does this compare to Rubashkin?
Why the kid gloves by the senate?