Jon Corzine, the former head of now-defunct brokerage firm MF Global, has provided few details as to how exactly the company plunged so quickly into bankruptcy even as it unlawfully dipped into customer funds. It's OK though. Newly-released emails and phone transcripts from the final days of the firm’s existence do a fine job of telling the story.
The 47-page report released last week by the Commodity Futures Trading Commission as part of its civil suit against Corzine details several major lapses in judgment that combined to rip a hole big enough to sink MF Global in a matter of days.
In the fall of 2010, roughly a year before MF Global threw in the white flag, the firm’s chief risk officer voiced his concern over Corzine’s extremely risky bets on European sovereign bonds, telling Corzine and the board that the positions could “result in margin calls and more demands for cash, would be difficult to unwind, and posed a liquidity risk to the firm.” Corzine didn’t change his behavior. He changed the chief risk officer, who left the firm the following March.
Then, in October of 2011, facing serious liquidity concerns, MF Global chose not to access a $1.2 billion revolving line of credit with J.P. Morgan Chase, fearing it may give the “appearance that the firm needed to borrow money and therefore was in financial trouble,” according to the complaint. Around that time, the firm’s global treasury, reportedly nicknamed by Corzine as “The Gravedigger,” told the Chief Financial Officer and another colleague that the firm must “tell [Corzine] that enough is enough. We need to take the keys away from him.” They didn’t.
Finally, at the end of October, MF Global sank itself. It reportedly took $500 million from customer funds and dumped it into its own proprietary accounts. “It is a total clusterf***,” assistant treasurer Edith O’Brien, who has also been charged in a civil suit, told a colleague. Indeed it was. Creditors became suspicious that money being paid to them didn’t comply with CFTC regulations. J.P. Morgan, fearing the obvious, asked MF Global for written assurances that transfers were within the law. The letter made its way around MF Global. No one ever signed it.
Good Old-Fashioned Excess (eFinancialCareers)
Some hedge fund managers still manage to fall into the old trap of sleaze and excess. Here’s a reminder.
Pack Your Bags (WSJ)
Following the cue from other big banks, Barclays will move roughly 4,000 investment banking jobs to less expensive locales. Not details yet on who will be moved and where.
Victim of the Bear? (Bloomberg)
John Longhurst, head of emerging-markets equity research Pacific Investment Management, has left the firm for “personal reasons.” Pimco, which has more than 90 percent of its assets in bond-related strategies, has been hurt by recent bear market for bonds.
Changing of the Guard (Bloomberg)
Following a decade at the helm, Bank of England Governor Mervyn King is retiring today. Taking his place is former Bank of Canada Governor Mark Carney, who many assume will be more sympathetic to U.K. bankers. Things should get interesting.
‘Deeply Unstable World’ (eFinancialCareers)
Among other reasons not to work for a U.K. bank, their capital cushions are razor thin. “At risk is everyone who has a job in the UK, as well as all financial institutions that have significant operations there – including a huge proportion of all global banks,” says Simon Johnson, a former chief economist at the IMF and professor at MIT Sloan.
Good, Not Great News (Bob’s Guide)
The European Central Bank will look to hire roughly 1,000 new employees to help supervise and support European banks. Some estimated the ECB would hire as many as 2,000 new staffers.
Buzz Around the Office
Getting Paid Twice (National Journal)
Roughly one in five members of Congress collect a government paycheck while also cashing in on a government pension. Several make more than President Obama using the double-dip technique.
List of the Day: Working with Recruiters
Financial services recruiters can be a great resource, but if you don’t pick the right ones or fail to work with them strategically, you’ll struggle. Here are three key tips.
- Work with just two or three.
- Know where you are being represented.
- Remember to reciprocate.