One month after the spectacular collapse of Jon Corzine’s MF Global, thousands of investors and millions more decent Americans found something to be thankful for last week when the House Financial Services Committee announced that it has asked the exNew Jersey governor and former MF President Bradley Abelow to testify about the firm’s risky bets and the as much as $1.2 billion that has vanished from company coffers.
Given the fact that Abelow followed Corzine’s career path from Goldman Sachs partner to New Jersey state public official (he was state treasurer) and eventually to MF Global, the hearing should put crony capitalism on full display for the entire nation to witness.
Indeed, four of the five key players in the saga who have been called to testify (including Commodities Futures Trading Commission Chairman Gary Gensler and New York Fed chief Bill Dudley) worked at Goldman, so it will be mathematically impossible for at least two former Goldmanites not to be photographed side-by-side. That alone should serve as a reminder that nothing has changed since the financial crisis exploded more than three years ago.
Given the mood of the nation, the Republican-controlled committee is expected to be tough on Corzine, the former Democratic senator and governor. But we’re talking congressman “tough.” What I’d really like to see is Bob Costas tough — a grilling as revealingly precise as the one the NBC sports journalist unleashed on former Penn State football coach Jerry Sandusky earlier this month.
A Costas-like grilling of Corzine would go something like this:
Governor Corzine, after overseeing multiple blowups on the Goldman Sachs trading desk during your career, in 2008 you decided to put New Jersey state pension money into a fragile Lehman Brothers — a move that cost the state pension fund more than $100 million dollars in a matter of months. Sir, are you a compulsive risk-taker?
You recently recalled that when Lehman went bust in the fall of 2008, while you were still governor, you called the New Jersey treasurer to make sure state funds were liquid at that time and, in your words, “I went out and got drunk after that!” Were you carousing as MF Global began its death spiral this October?
Back in August of this year, MF Global sold $325 million in debt to mom-and-pop investors and unsuspecting institutions. Was there full disclosure about the risky positions the firm had taken? When did you decide to take such big leveraged bets on European bonds?
The lack of disclosure in the August bond offering reminds many of charges by federal regulators in 2010, while you were governor, alleging fraud by the New Jersey pension-fund system. Back then, it was alleged that your state failed to disclose that its pension funds were woefully underfunded, a move that misled municipal bond investors. Are you a serial obfuscator, or were these honest mistakes?
The MF bond offering this summer contained a curious key-man clause that would pay investors an extra 1 percent interest if you took a federal appointment in Washington. Did President Obama promise you the top job at Treasury, or maybe even the Fed? How much more would MF have had to pay bondholders for their money if they truly believed you would stay?
Mr. Corzine, you grew up on a small family farm in Illinois and have always been proud of your heartland roots. How do you feel about the fact that multitudes of small farmers now find their limited capital in limbo over MF’s collapse?
Tough questions — questions Corzine is not compelled to answer. He can and perhaps may take the Fifth. Still, they are the questions that deserve to be asked, even if they’re not answered.