 |
| Jon Corzine |
Testifying under subpoena at a House
Agriculture Committee hearing, Corzine, a former U.S. senator and
ex-Goldman Sachs chief, portrayed himself as “stunned” about the massive
shortfall that emerged as regulators and federal investigators began probing MF
Global’s Oct. 31 bankruptcy.
“I simply do not know where the money is, or why the
accounts have not been reconciled to date,” said Corzine, 64, in his first
public remarks since his resignation after the bankruptcy.
Corzine also said he was unaware whether there were
“operational errors at MF Global or elsewhere, or whether banks and
counterparties have held onto funds that should rightfully have been returned to
MF Global.”
The proceeding is the first of three Capitol
Hill hearings for which Corzine has been subpoenaed to testify.
The brokerage’s implosion, Wall
Street‘s largest since the 2008 bankruptcy of Lehman
Brothers, was triggered in part by $6 billion in bad bets on European
sovereign debt.
Challenging public criticism that has focused on those
investments, Corzine’s statement said the
brokerage’s decision to seek bankruptcy court protection was largely due to a
$119.4 million write-off of tax benefits that could no longer be classified as
assets.
Corzine called the European debt investments “prudent” and
said he advocated them last year as one way to improve MF Global’s flagging
profits and commissions amid increased competition from online brokerages and high-frequency traders.
In his statement, Corzine told the House panel “I accept
responsibility” for that investment strategy.
But he pointedly added that the transactions were approved by MF Global’s
directors and were disclosed to the brokerage’s senior officers and accountants,
as well as to investors, through public
filings with the Securities and Exchange Commission.
“As of today, none of the foreign debt securities” involved
in the European debt transactions “has defaulted or been restructured,” Corzine
said.
The Financial
Industry Regulatory Authority directed MF Global last summer to increase the
brokerage’s net capital with regard to the European debt. Acknowledging he
tried, unsuccessfully, to change that decision, Corzine said in the statement
that the brokerage “promptly complied” in August.
Addressing criticism since the bankruptcy that MF Global
took on too much risk in European debt and other deals, Corzine said the
brokerage’s level of leverage, the use of borrowed capital for investment, was consistently around 30 during his tenure.
“In fact, MF Global reduced leverage,” he said.
Until the bankruptcy, New York-headquartered MF Global had
been one of the world’s leading brokers in markets for commodities and listed
derivatives. The brokerage, most of whose
2,870 employees have been let go since the collapse, was also a broker-dealer in
markets for commodities, fixed-income securities, equities and foreign
exchange.
The MF Global collapse has caused financial uncertainty and
problems for many U.S. ranchers and farmers who turned to MF Global to make
commodities market trades as financial hedges
designed to protect them against swings in agriculture prices.
Many have had thousands of dollars tied up as a
court-appointed bankruptcy trustee tries to
transfer and distribute $2.1 billion in MF Global funds frozen by the
bankruptcy. A bankruptcy judge in New
York is scheduled to consider that issue Friday.
Darwin Rieck, 64, a Luzerne, Iowa, farmer and MF Global
customer, said in a recent interview with USA TODAY he had to send more money to
the Chicago
Mercantile Exchange to meet margin calls on several pending commodities
futures trades. Although his brokerage account held sufficient excess funds, that money
was frozen by the bankruptcy, he said.
“If I hadn’t sent the money, they would have liquidated the
trades,” said Rieck, who works with his son-in-law raising corn, soybeans and
feed cattle. “It just doesn’t seem like the way it’s supposed to be.”
Trying to address such concerns, Corzine ended his
statement by returning to a penitent note.
“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,” the statement said.
No comments:
Post a Comment