Thursday, August 16, 2012

No Criminal Charges

From the August 15, 2012 New York Times:

A criminal investigation into the collapse of the brokerage firm MF Global and the disappearance of about $1 billion in customer money is now heading into its final stage without charges expected against any top executives.
After 10 months of stitching together evidence on the firm’s demise, criminal investigators are concluding that chaos and porous risk controls at the firm, rather than fraud, allowed the money to disappear, according to people involved in the case.
Now, it might indeed be just incompetence by the guy that Obama used to claim was one of the smartest people in the country about finance.  But considering that Jon Corzine is one of Obama's biggest bundlers (and bunglers) of money...just imagine the questions that would be raised if a Republican was in the White House, and a Republican of equal fundraising background had been CEO when a billion dollars of customer funds were stolen and lost?  

It must be nice to be a Democrat: you don't have to be responsible for losing other people's money in a highly regulated industry.


  1. You didn;t really expect Holder to charge Corzine did you?

  2. Sure, right after indicting the people responsible for Solyndra, and Fast and Furious, and pursuing the New Black Panther Party, and distributing the automobiles that run on unicorn flatulence.

  3. My favorite part of the article was this:

    "Mr. Corzine, in a bid to rebuild his image and engage his passion for trading, is weighing whether to start a hedge fund, according to people with knowledge of his plans. He is currently trading with his family’s wealth.

    If he is successful as a hedge fund manager, it would be the latest career comeback for a man who was ousted from both the top seat at Goldman Sachs and the New Jersey governor’s mansion."

    I don't think I'm going to invest my money with John Corzine. I'm going to wait for Bernie Madoff's new investment company.

  4. You aren't much of a believer in the ability of people to change, are you?

  5. Capitalism is better than Cronyism. But less profitable.

  6. A couple of days ago the guys at "Powerline" highlighted the unifying theme of the Obama administration: lawlessness.

  7. Heh. Although it's my understanding that Corzine didn't do anything strictly illegal, this is a case of simply not abusively prosecuting him when so many others have been.

    When people got accounts with MF Global, they signed contracts who's fine print in essence said "We can take the cash money in your account and send it to the casinos in the U.K. for higher yields". Corzine's big mistake was to make very bad bets at those "casinos" (the wrong way on European sovereign debt).

    We can argue whether this should be legal, how the exchange(s) and regulator (CFTC) should have handled the collapse, and how this has destroyed trust in "the system" (and even if that, right now, is good or bad), but again, as I understand it, no white line laws were broken.

  8. Ah, I should add that Corzine's other big mistake was to "fundamentally transform" the way the company invested the cash holdings without making the necessary investments in risk management, trading and the computer systems to support all that. That's one of the reasons the denouncement was so ugly.

    But it's not clear that is or should be actionable. People whine and moan about Goldman Sachs, but one of the secrets to their success is that a long time ago they developed their own computer language and backing system (the latter is much more important) and it allows them to e.g. very quickly find out what their positions are, play "what if" games, etc.

    The rest of the industry is incredibly primitive, with, as I understand it, the norm being a zillion spreadsheets and people essentially manually reporting stuff based off of them.

  9. "The rest of the industry is incredibly primitive"
    By rest of the industry, do you mean like Dean Witter? Bateman Eichler (if they still exist) Ameriprise?