Market Matters Blog
Katie Micik DTN Markets Editor

Wednesday 11/14/12

House Report: Corzine's Choices to Blame

Jon Corzine's decision to turn 230-year-old commodity brokerage firm MF Global into a full-service investment bank lead to its ultimate failure, according to a House Financial Services Oversight and Investigations Subcommittee report that will be released on Thursday.

"Our investigation is essentially an autopsy of how MF Global came to its ultimate demise and what can be done to prevent similar customer losses in the future," said Chairman Randy Neugebauer, R.-Texas, in a press release issued on Wednesday.

The report is expected to detail how Corzine's authoritarian management style enabled the rapid build-up of MF Global's sovereign European debt position. The company's failure to disclose the extent of their risks prompted an exodus of MF Global Investors, creating a liquidity crisis that set the stage for accounting errors.

"As the company struggled to find additional liquidity," the subcommittee reports, "company employees identified excess company funds held in customer accounts. However, because they did not have an accurate accounting of the amount of customer funds the company held, they withdrew customer funds as well as company funds."

The subcommittee stated it's up to prosecutors and regulators to determine whether MF Global or its employees violated laws or regulations when the withdrawals of customer funds were made.

However, it does recommend that Congress consider legislation to impose civil liability on officers of futures merchants that authorize transfers from customer segregated accounts, aka the "Corzine Rule."

The report is also expected to address "regulatory agencies' failure to share critical information with each other about MF Global, failures by credit rating agencies to sufficiently review MF Global's public filings, and concerns about the New York Federal Reserve's decision to designate MF Global as a 'primary dealer' despite the company's troubled financial situation."

The full report will be released on Thursday. A link to Wednesday's press release can be found here: http://financialservices.house.gov/…

Posted at 2:23PM CST 11/14/12 by Katie Micik
Comments (1)
With Obama's re-election, don't look for any charges forthcoming against Corzine. This son-of-a-twitch stole money from me and tens of thousands like me - in what was a CLEARLY illegal manner, swiping customer funds to make margin calls on bad positions on European debt. It is really that simple. But, if you will recall, Corzine was a bundler for Obama - not that the media would ever connect the two - hence, Corzine is off scott free. If Corzine had been a bundler for a Republican politician, his name would have never left the front page. It's a joke.
Posted by Peter Smith at 2:31PM CST 11/14/12
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