By Al Lewis
The boss is always right, because he's the boss.
So goes the epitaph for MF Global. A report released by
Republican members of the House financial services committee last
week concluded that the investment firm's former chief executive,
Jon Corzine, created an "authoritarian atmosphere" where "no one
could challenge his decisions."
He threw MF Global's capital at Europe's debt crisis, and within
19 months he turned a $40 billion company into a puff of smoke.
"Profitability and responsibility must go hand in hand with
growing our franchise," Mr. Corzine said in a news release when he
was hired in March 2010. He promised "new levels of growth,
profitability and reputation." He delivered something on par with
Enron.
Mr. Corzine had set out to turn a struggling commodities trading
firm into a full-service investment bank. To juice his progress
amid a slow-growth economy, he placed enormous bets on a European
recovery.
It sounded crazy with Greece rattling global markets almost
daily. In fact, last week, the euro zone officially fell into a
recession, again. But who dare challenge the bearded eminence
grise?
Mr. Corzine had made hundreds of millions for himself as
chairman of Goldman Sachs. As U.S. senator, he helped craft laws to
protect us from another Enron. He then became governor of New
Jersey.
Investors finally questioned Mr. Corzine's big bets in October
2011, resulting in a nasty decline in MF Global's stock. Mr.
Corzine responded: "We have the resources and expertise to continue
to successfully manage these exposures to what we believe will be a
positive conclusion in December 2012." A week later, MF Global
filed for bankruptcy.
The committee's report details how Mr. Corzine insulated his
reckless decisions. Those who raised risk-management questions soon
found themselves reporting to Mr. Corzine's former Goldman Sachs
cronies, or were pushed out altogether.
The nice thing about financial markets is that they sometimes
prove the know-it-all boss is wrong.
It has been fun to watch Republicans blame the MF Global debacle
squarely on Mr. Corzine, instead of attributing it to some sort of
economic accident. Usually, it's the Democrats pointing fingers at
blundering CEOs. But then Mr. Corzine is a Democrat.
In addition to fingering Mr. Corzine, House Republicans point to
undisclosed risks, insufficient reviews by ratings firms and inept
regulation.
They chide the Federal Reserve Bank of New York for giving MF
Global what was essentially a "Good Housekeeping Seal of Approval."
And they now want the New York Fed to provide "greater scrutiny of
companies with questionable financial health, risk-management
histories and ambitious business strategies."
The report doesn't even begin to answer how $1.6 billion in
clients' money got tied up in Mr. Corzine's failed bets. Farmers,
ranchers and small-business folks have recovered most of what they
lost by now, yet they are still collectively out millions.
"I simply do not know where the money is," Mr. Corzine told
Congress in December. He was just in charge.
Mr. Corzine now faces civil lawsuits and continuing regulatory
investigations. But federal prosecutors have indicated they likely
won't charge him with a crime.
It is not a crime to roll over whoever gets in your way. It is
not a crime to shrug off questions. It is not a crime to be the big
boss man. It should be.
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Al Lewis is a columnist for Dow Jones Newswires in Denver. He
blogs at tellittoal.com; his email address is
al.lewis@dowjones.com