Thursday, December 01, 2011

CFTC Chairman Gary Gensler to Senate Committee: "Jon who? MF Global What?? Are you talking to me?"

In "The Case of the Missing Client Money" at bankrupt MF Global, the relationship between regulator and the regulated is again coming to the fore. Obama administration appointee Gary Gensler – Chairman of the Commodity Futures Trading Commission - recused himself from participating in the investigation of MF Global because of his close ties to CEO Jon Corzine. Fine and good. But he did not recuse himself from meeting with Corzine about potential CFTC rule changes on segregated client accounts earlier this year. You know - the same rules that would have governed use of the very funds that are now missing from the bankrupt MF firm.

Wednesday in a Senate hearing on the impact of Dodd-Frank regulations, Gary Gensler was asked about MF Global, and Eamon Javers of CNBC was on the story:
"...this hearing today was all about MF Global, Jon Corzine, what happened to the missing money and what did Washington regulators do about it if anything? ... the man on the hot seat is the chairman of the CFTF has now recused himself for the MF Global investigation because he had a long-standing personal relationship with Jon Corzine who served as a Senator, Governor and as the head of that firm which collapsed earlier this year. But in the hearing.. it looked as if Gensler did not even want to use the words MF Global or Jon Corzine..."
"I''m not sure if this was a political strategy, a legal strategy or just some kind of psychological tick..."

John Carney of CNBC was also pondering mystery of Jon Corzine, who not only disappeared from Gensler's vocabulary, but seems to have simply disappeared altogether:

Where in the World is Jon Corzine?
"Corzine is not an ordinary chief executive. As a former US Senator and former Governor of New Jersey, he is a public figure. He was even under consideration to be the next Treasury Secretary. As one of the few people who can answer questions about what happened to MF Global—how it went from a healthy midsized commodities brokerage to a fatality—Corzine should be in front of the public offering explanations. He used publicity to climb his way to the top of America's power-structure, and now he's trying to hide."
Hmmm. This caper needs a theme song. How about a reliable blues standard like "Nobody Knows You When You're Down and Out":

UPDATE: 03-Dec-11

Repeat after me - "I plead the 5th Amendment".
New York Times:
"The House Agriculture Committee voted unanimously on Friday to force Mr. Corzine to appear at a hearing next Thursday about MF Global, where as much as $1.2 billion in customer money remains missing. Customers of the brokerage firm included farmers and agriculture companies, as well as hedge funds and other investors."
While answers may be hard to come by, there will be no shortage of questions, as the story is getting worse by the day.

"MF Global took futures segregated money and put it into the account for customer securities, essentially mixing futures and securities that were both owned by customers, said an official familiar with the matter. Until now, it was believed that only customer futures accounts were affected. The source also told Reuters that MF Global had been using customer funds for "several days if not weeks" rather than just a few days before the firm collapsed.Regulators had previously thought the firm was using customer funds on the Thursday and Friday before it filed for bankruptcy on October 31... Congress has already started asking questions about potential lapses in regulatory oversight of MF Global. The pressure on regulators would only increase if MF Global turns out to have misused customer funds over an extended period of time... Investigators such as the Commodity Futures Trading Commission have been scouring the company's books, described as messy and unorganized, for the fund shortfall that has been estimated as much as $1.2 billion by the liquidating trustee..However, regulators have been at odds with the trustee, believing that figure is too high."
Given the regulators track record, I'm more inclined to trust the trustee's numbers.

Andrew Abraham has another question for the investigating committees - What was Jon Corzine from MF Global doing at the White House with Obama?:
"Jon Corzine from "Mf Global has a special relationship with Obama as well as Joe Biden.The question that needs to be asked is what was he doing at the White House in March as well as June."
A pretty good question, since those meetings seem to bracket the timeframe that Corzine was discussing CFTC rule changes with Gensler. Curiouser and curiouser.

Divided and Balanced.™
Now that is fair.

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