Corzine Takes “Full Responsibility” For Missing MF Global Cash

We often see this in the news, a quote like, “I take full responsibility” for some screw-up, fraud, or disaster. But what does it really mean?

Here’s the latest example, Jon Corzine, former Democratic Governor, Senator, Obama advisor, and CEO of Goldman Sachs has been more recently the CEO of scandal-ridden MF Global, . I haven’t been following the story closely, but it’s been hard to avoid. From what I can tell, Corzine’s MF Global was recently discovered to have lost $1.2 billion from customer accounts. It simply disappeared according to Corzine. Investors left holding the bad are not pleased.

Jon Corzine: Caught Off Guard – WSJ.com: Former MF Global Holdings CEO Jon Corzine: “I’m not aware … I’m not an expert … I may be unable to respond to various questions…I simply have no personal knowledge…I don’t have records to confirm…To the best of my recollection … If I’m not mistaken…Um…ah…uh…I was stunned…I simply do not know where the money is…There were many transactions that occurred in those last chaotic days. It would be very hard for me to speculate…I never intended to break any rules…”

How does $1.2 billion disappear from customer accounts without an explanation in sight? Mr. Corzine, who has served as a Democratic U.S. senator, governor of New Jersey and even chairman of Goldman Sachs, has clearly reached that point in an executive’s career where it’s better to look stupid than guilty.

How could this happen?! Wasn’t there any oversight, any regulation of big Wall Street players such as Corzine and MF Global? It turns out there was regulation, and it was even given ramped-up powers under the recent Dodd-Frank law. So what gives? Do the federal regulators have any culpability here? Well, it gets a bit uglier. It turns out that the Chairman of the Commodity Futures Trading Commission is one Mr. Gary Gensler. Messrs. Gensler and Corzine are former Goldman Sachs colleagues. And the two have had contact since leaving Goldman Sachs.

 The Talented Mr. Gensler – WSJ.com: ‘I simply do not know where the money is,” Jon Corzine told Congress on Thursday. The man who led MF Global into bankruptcy claimed ignorance as to why more than $1.2 billion in client funds is still missing. But the former Democratic Senator and Governor did disclose some interesting details about his relationship with his primary regulator and former Goldman Sachs colleague, Gary Gensler.

As if to underline that Monday was a political exercise to deflect blame and make the CFTC look busy in the wake of the disaster, the commission also invited market players to seek exemptions from the new rule on a case-by-case basis. So the reforms are “critical,” but well-connected players can still lobby Mr. Gensler to avoid them. This bureaucratic eyewash is not going to satisfy MF Global clients who have had their funds frozen, if not plundered. The CFTC chairman sought and received vast powers under the Dodd-Frank law on the premise that he and his staff had the wisdom and knowledge to re-engineer derivatives trading. CFTC regulators have now failed at a much less complicated task, and one of central importance to customers.

In classic Washington fashion, Mr. Gensler is nonetheless using his agency’s regulatory failure in MF Global to impose still more rules and argue for still more power. A better response would be to acknowledge that the political system has already entrusted too much power to regulators, who can never be all-knowing and all-seeing but are often vulnerable to political influence from executives or firms they know and like. Investor beware: Regulators cannot protect you.

So that’s all unpleasant enough. But back to Corzine himself. When grilled before Congress last week he says he takes “full responsibility.” But he also has claimed to not kn0w where the missing money is, or even how it went missing.

Corzine distances himself from firm’s downfall – WSJ.com: “I simply do not know where the money is, or why the accounts have not been reconciled to date,” he said.

When Corzine was asked last week if he would use part of his personal fortune to make whole the defrauded investors, he declined. So given all of the above, what does it really mean to “take full responsibility” when ones has no answers, dodges ownership, and declines to make victims whole?

I think this is a classic tale of crony-corporatism, and what happens when we mix politics and politicians with big business. If the Occupy Wall Street crowd really wants to make a difference, they should be going after the players in this saga.

Corzine Defends Tenure, Puzzles Over Missing Funds – WSJ.com: Mr. Corzine also defended the firm’s books and records, which he said deteriorated amid a run on the bank in its final days that put MF Global “under severe pressure.” Regulators have struggled to untangle the firm’s records, which they have described as “a disaster.” In its last week, MF Global wasn’t recording its trades in the firm’s general ledger, according to people familiar with the matter, making it difficult to trace the missing funds.

Additional links:
The Free Market versus Crony “Capitalism”
Jon Corzine’s Testimony By the Numbers – WSJ
Corzine and Former Colleagues Squirm Through the Day – WSJ.com
Corzine distances himself from firm’s downfall – WSJ.com
Corzine: Don’t know where firm’s missing money is
Corzine: ‘Simply don’t know’ where money is – USATODAY.com