Jon Corzine says he has no idea of the whereabouts of up to $1.2 billion in customer money that disappeared amid the implosion of the firm that he ran, MF Global. His “Sgt. Schultz” defense yesterday before a congressional committee would be pretty funny — if it weren’t a major Wall Street CEO and Obama economic adviser who was playing the goof from “Hogan’s Heroes.”
In fact, Corzine was booted from Goldman Sachs in the late 1990s for precisely the same reasons his MF Global is now bankrupt — his inability to manage risk. When he left Wall Street, he became a US senator and governor from New Jersey — whose already dodgey finances only got worse on his watch.
After Jersey voters fired him, he went to MF Global and vowed to make it a money machine, not unlike Goldman. He made big bets on troubled European sovereign debt — the bets that sank the firm when they were disclosed to investors.
What’s really striking is that Corzine, in changing the firm’s business model, appears to have had absolutely no idea what he was doing. The firm’s “books and records” were a mess, according to people I know involved in the bankruptcy. Others close to the firm tell me it didn’t have the infrastructure to adapt to a new business model that transformed it into something closer to a hedge fund than its traditional business as a broker of commodities.
The fault begins and ends with the Corzine, whose job as CEO is to make sure the firm’s plumbing actually works, particularly in times of crisis.
Yet Corzine was clueless during MF Global’s crisis, at least according to his testimony yesterday.
Keep in mind, losing any customer money, not just the massive amounts that seem to have vanished here, is fairly unprecedented among major Wall Street firms. Bear Stearns and Lehman Bros. were far bigger outfits, yet not a single penny of investor cash went missing when they imploded amid the 2008 financial crisis.
By law, those funds must be kept separate from the firm’s own operations — and keeping them that way is among the most fundamental duties of any Wall Street firm and its management.
But here’s how Corzine described what he knows about MF Global’s now missing customer accounts: “I simply do not know where the money is, or why the accounts have not been reconciled to date. I do not know which accounts are unreconciled or whether the unreconciled accounts were or were not subject to the segregation rules.”
He stuck to that story during the Q&A. Or as Sgt. Schultz would say, he knows nothing.
Some will say this is just a smart ploy to deflect blame to others and save his own skin. Maybe so. Certainly, taking the Fifth would have been a disaster.
But, based on what I know about Corzine, I really think he didn’t have a clue — bad news that MF Global’s shareholders and employees have already received.
In fact, if you want to understand why this administration has been so inept at managing the US economy — from its failed stimulus package to its huge investment in the unproductive “green economy” — it’s because it listens to “smart” guys like Jon Corzine.
Vice President Joe Biden called Corzine “the smartest guy I know in terms of the economy.” President Obama, after accepting some $500,000 in bundled campaign contributions from Corzine, is said to have placed him on his short list to head Treasury.
The silver lining for America in Corzine’s public cluelessness is that Obama now can’t screw up the economy even more by giving him that job.
Charles Gasparino is a Fox Business Network senior correspondent.