The Astonishing Collapse of MF Global

"You can't just look at what is good in the moment, what feels good, what works for today may not be the answer that actually helps ... two years down the road or five years down the road. You have to make decisions with a longer-term perspective."
-- Jon Corzine

Prior to stepping into the role as MF Global (OTC: MFGLQ) CEO, Jon Corzine had a penchant for saying all of the right things when it came to how a financial company should be run.

During his first earnings conference call as the broker's CEO, Corzine, a former New Jersey governor, U.S. senator, and chairman of Goldman Sachs (NYSE: GS  ) , reassured Wall Street analysts and the company's shareholders that taking on huge risks wasn't going to be the answer to turning around MF Global:

But the goal here is not to be a [proprietary] trader. ... I don't think that we will be in a risk-taking position, substantial enough to have it be the kind of thing that the rating agencies would say, "Holy cow, these guys have got a different business strategy" than what we told them we had.

And yet, in late October 2011, the country's eighth-largest futures broker filed for bankruptcy, a collapse that was precipitated by a $6.3 billion bet on European sovereign debt championed by Corzine himself.

MF Global is the United States' eighth-largest bankruptcy by assets -- larger than both Chrysler and utility giant Pacific Gas & Electric. At the end of August, the company held more than $7 billion in U.S. futures customers' funds, more than Barclays (NYSE: BCS  ) and Morgan Stanley (NYSE: MS  ) . And as the company is wound down through the bankruptcy proceedings, more than 2,000 employees stand to lose their jobs.

And as if the collapse itself wasn't enough, in the wake of the bankruptcy it was also revealed that $1.2 billion of MF Global customers' funds were missing, putting thousands of farmers, ranchers, independent traders, and fund managers in financial jeopardy.

Digging in
More than a month after the company's bankruptcy filing, the story continues to unfold and evolve, but there is much that is already clear. In the wake of the bankruptcy filing, The Motley Fool undertook extensive research that included scouring thousands of pages of primary-source documents and interviewing current and former MF Global employees, clients, lawyers, regulators, and other experts and industry participants. We've pieced together a picture that is in many ways uncomfortably familiar. Yet it also brings new lessons that highlight an urgent need for the industry to make changes.

MF Global was a futures broker with roots tracing back more than 200 years. Despite its longevity, the company was deeply struggling just as the financial crisis reached its fever pitch. The broker had been spun off from its U.K. hedge-fund parent and was the victim of poor internal controls, likely stemming from the merger with a rival that had been crippled by fraud.

The weakened company then fell under the spell of two Wall Street "masters of the universe" -- two former Goldman Sachs stars: the much-lauded private equity investor J. Christopher Flowers and Jon Corzine. Each fueled by a need for redemption, Corzine -- who was brought in by Flowers to run the company -- tailored a high-risk strategy for MF Global, surrounded himself with others unlikely to question his decisions, and turned himself into the supreme "CEO trader." Extreme leverage and a huge concentrated bet on European debt eventually led the company's counterparties to run for the hills, leaving the broker to collapse.

Other than that, Mrs. Lincoln...
But it turned out that the bankruptcy of MF Global was only part of the story. In the final days of MF Global's solvency, it was exposed that a huge chunk of supposedly protected client funds had vanished from its books. In the wake of that revelation, U.S. account holders were frozen out of their accounts as regulators moved in to sort out the mess.

We spoke with many of those affected by this act of the MF Global drama. Southwest Minnesota farmer and father of four Dean Tofteland ended up with $250,000 locked up by the broker. Without access to those funds to post margin for his open positions, all of his crop hedges were liquidated. He was also unable to start buying seed for the 2012 growing season, thereby missing out on early purchase discounts and top seed varieties.

Tofteland was not alone. Don Miller, a futures trader we spoke with, had $2 million frozen and was scrambling to pay his daughter's college tuition bill; Elaine Knuth, the owner of a commodity-trading advisory, had to completely shut down her business; and Joe Thomas, a small Tennessee cattle rancher, believes he may lose $30,000.

The fiasco at MF Global put all of these individuals and their livelihoods at risk, but as we look to the bigger picture, the confidence blow it dealt the futures market has the potential to harm the broader economy. Efficiencies gained through the use of futures by both producers and users of commodities are often passed on to us as consumers. As such, a loss of confidence in the safety of those markets could hit the already-shaky U.S. economy right where it hurts -- in consumers' wallets.

Read on
In the chapters ahead, we will lay out the unraveling of MF Global, from the first major alarm bells heard during the 2008 wheat trading scandal to the broker's dying days and the revelation that a significant amount of customer money had disappeared. We'll show how a once-venerable broker was thrust into a risk-heavy strategy by a deeply conflicted leader who was trying to play both CEO and chief trader. We'll explore why internal risk controls, the company's board of directors, and outside regulators failed to curb the company's reckless direction and protect its customers. And, finally, we'll discuss the lessons that can be gleaned from this collapse, as well as the changes needed to prevent a similar disaster.

The global economy has worked its way out of the crater created by the 2008 financial crisis, but the demise of MF Global is exactly the kind of disaster we weren't supposed to see again. The financial industry was supposed to have learned its lesson.

And yet, here we are again.

In the next chapter, we detail MF Global’s problems before Jon Corzine. Click here to read all about it.

Motley Fool newsletter services have recommended buying shares of Goldman Sachs. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer owns shares of Barclays, but does not have a financial interest in any of the other companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a pointy stick in the eye.


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Comments from our Foolish Readers

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  • Report this Comment On December 16, 2011, at 4:27 PM, Hawmps wrote:

    Corzine (and others we've all read about in the past few years) violated his fiduciary responsibilies that he accepted when he accepted the post at MF. Punishments for these types do not come close measuring up to what they have done to people's lives. I think public floggings are in order and banishment from any type of activity that would require them to be in any type of fiduciary capacity... then we can talk prison terms.

    http://en.wikipedia.org/wiki/Fiduciary

  • Report this Comment On December 16, 2011, at 4:53 PM, Thomfranklin wrote:

    As today, Friday, is my Monday and I am getting ready to go to work, I just wanted to thank Motley Fool for the work it put in researching this story.

    I have been actively following the story since it broke on Tyler Durden's "Zero Hedge" blog.

    The part of the story which I hope you guys investigated even more closely is the use of leverage through "re-hypothecation" of customer's collateral.

    Looking forward to the read sometime later this weekend.

    Rock in the Keys

  • Report this Comment On December 16, 2011, at 6:13 PM, Darwood11 wrote:

    @Hawmps, I think flogging would be too easy.

    I have been advocating seizure of all assets, and that includes future pensions; everything including social security benefits.

    I see no other way to deter these people. They (and that includes the likes of Illinois Blagojevich and former CEOs of Fannie and Freddie, as well as certain inept politicians) will never get the message, or will continue to play the game and take the risk, until the price is so high as to be a "kick in the head."

    Currently, the punishments are far too light. The amount of money the average household will have to pay to bail out Fannie and Freddie will be about $1324 and counting. The bad news? Many households pay no income tax at all. So the actual numbers are worse, if we include only income tax paying households.

    When I hear people rail against the war in Iraq or another pet peeve, I simply add up the cost in dollars of all of the bailouts. It's astounding.

    Thx to Matt and the crew at the Motley Fool for their good work. Too bad far, far too few will ever read it.

  • Report this Comment On December 16, 2011, at 6:32 PM, jorasmom wrote:

    Golly, I'd like to read the next part, but my eyes are all clouded with tears over that poor guy whose 2 mil is frozen and he's struggling to pay his kid's tuition ... *sniff, sniff!* Pass the Kleenex, please ... (any guy who has 2 mil in ANY account and does NOT have enough assets in other vehicles to cover his other obligations obviously has some financial planning to do ... hopefully his daughter is majoring in finance and can give him some tips ... ) Wait - I'm tearing up again!

  • Report this Comment On December 16, 2011, at 7:13 PM, WeWereWallStreet wrote:

    This is a wonderful piece of writing. We've been shocked, frankly, at the events of the past few years, and Corzine's mess is icing on the cake.

    We think he had it coming (www.WeWereWallStreet.com/Corzine-what-goes-round.html) but what they're investigating him for is beyond what we could have imagined.

    All this history helps put the whole story together. It'll be interesting to see how it plays out. There's no doubt main street, frying pan in hand, is looking for a big fish. Might have found one in this little pond.

  • Report this Comment On December 16, 2011, at 7:44 PM, Hawmps wrote:

    @ Darwood11;

    The flogging part is just intended to add a more public and humiliating flare to the whole process. We can line up Blago right next to Corzine. Make a spectacle out of these bozos, strip them of their dignity, their assets; bannish them from ever holding any type of executive or board position on any publicly traded company; bannish them from holding public office; banish them from holding any type of professional license in any state, and I want to see them walking the Interstate in an orange jump suit picking up trash for the next 20 years.

  • Report this Comment On December 16, 2011, at 7:58 PM, rplandon wrote:

    MF Global is a broker dealer and did more than

    futures trading, They held fully paid for securities that were in "street name" not in the clients name.

    The bankruptcy judge is saying these street name securities will liquidate out pro rata. Customer Protection Act seems to require that the fully paid for securities are transferred at market on the bankruptcy date to a new broker dealer and not caught in the liquidation pro rata.

  • Report this Comment On December 16, 2011, at 9:37 PM, TMFKopp wrote:

    Thanks all for reading and for taking the time to share your thoughts. A lot of man-hours (and woman-hours!) went into this and we were really glad to be able to bring such an in-depth report to the Foolish readers.

    Matt

  • Report this Comment On December 16, 2011, at 11:22 PM, nickjob wrote:

    Obviously jorasmom doesn't get the point. It doesn't matter if the person who got burned had $2000 or $2,000,000. It shouldn't happen! Corzine didn't risk any of his own money as he said. He took a huge flyer with other people's money but made sure he didn't tap into his own 400 million plus. Instead of criticizing those who got burned, you should be analyzing the greedy, devious mentality of the guy who pulled it off and then has the gall to lie before a whole nation. Only an idiot would criticize the victims.

  • Report this Comment On December 17, 2011, at 12:41 AM, noddleislander wrote:

    ok 1.2 MM lost. What's new here? The same old story. The financiers game prey on our retirement fears and greed. When will these predators get shackled to a solitary confinment cell?

    I am 60, played by the rules, saved the max under the law, witnessed 3 major financial rapes of American economy, and underwrote the losses of these criminals as many times. Most of us lemmings have lost 40% of our old money.

    Those who had a vested interest in the stewardship of the like of MF Global have lost significant wealth. Again I ask, why are so very very very few of these slimmy, well connected financiers shackled in prison? The answer is clear.

    Is there any doubt that fictionalized money is the name of this scam which has been running since the 80's?. Look around. The competent equity advisors are running a shell game. The rest of the monkeys, well, they are just plain vanilla incompetent.The beat goes on. Buy gold.

  • Report this Comment On December 17, 2011, at 5:52 AM, dtman117 wrote:

    until person responsibility is enforced, meaning corzine and the rest of the piglets give up their personal assets , there will be no resolution. go after their homes and retirement packages.

    "other people's money" makes it easy to do this.

    you think they do this with their own funds on the line?

    where were the accountants also? this sounds a lot like Madoff.

  • Report this Comment On December 17, 2011, at 6:28 AM, deepestvalue wrote:

    To my simple mind this is all about Opium aka O.P.M. -Other Peoples' money. The other people here were oe's own clients that one Corzine hada duty to protect -and inform honestly of all risks being taken-.

    Complete liquidation of all assets including houses ,cars, etc.,etc., would go a long way in detering future criminals. I have money in Scottrade,Ameritrade,Fidelity, etc. and find it difficult to sleep. If i withdraw my funds, where do I go? I have already paid off all debts and funded the kids college costs....

  • Report this Comment On December 17, 2011, at 8:43 AM, TMFBane wrote:

    deepestvalue, I think some sort of clawback provision relating to executive pay is definitely necessary for all companies, especially financial ones.

    Obviously, something more powerful would have been needed in the case of Corzine, however. He was a very wealthy man before he arrived at MF Global, and for him, this was probably more about redemption and having an outlet for his inner "rogue trader."

    Thanks, everyone for all of your comments. Be sure to share any reform ideas you might have. MF Global is just one example of a financial system that is desperately in need of change.

  • Report this Comment On December 17, 2011, at 9:11 AM, kkensington wrote:

    It's very very easy, get Corzine jail time asap including a few nights with Baba , this will get the attention of the " others " who have profited from stealing peoples money.

    Most important it will show us working stiffs that maybe, just maybe we might have some leadership here in America that really is looking out for us middle class.

    J-A-I--L ------ J-A-I-L ------ J-A-I-L ----- J-A-I-L

  • Report this Comment On December 17, 2011, at 9:47 AM, nickjob wrote:

    Corzine is a pathetic human being who needs to be in a psychiatric ward. Here is a guy worth hundreds of millions, yet he needs more. And he either doesn't know or doesn't care who he hurts along the way. He probably interprets his money as his level of power in life. The more he has, the more powerful he perceives himself to be in the eyes of others. One senator said he hurt as many as 36000 people. Well I hope every one of them sues him and takes his power away. And lastly, any political crony who tries to protect him should be viewed as the same kind.

  • Report this Comment On December 17, 2011, at 12:21 PM, Merton123 wrote:

    Thankyou MFools for doing an indepth study of MF Global. I didn't know that MF Global was a long term business, and was so large.

    Corzine got caught up in his "Ego". As we move into Christmas we should reflect upon the Bible and the alternate set of values that it teaches. We as a community have become very secular and materialistic. We used our homes as piggy banks to buy buy buy. And today many people are upside down in their homes and are in the process of deleveraging (i.e., paying down their debt).

    We have lost that balance between materialism and spirituality. When that occurs then we will experience Enron, MCI Worldcom, and now MF Global.

    Merry Christmas Everyone

  • Report this Comment On December 17, 2011, at 1:13 PM, Don354 wrote:

    Corzine is nothing but a shill for the administration.

    Look at the Obama and Biden videos praising him. He ran MF Global like he did NJ...it's nice when you can spend other peoples money, eh?

    He'll get away with it!

  • Report this Comment On December 17, 2011, at 5:31 PM, PSU69 wrote:

    Kudos to Matt K. and all who helped get this piece posted. Thank you. Jon needs to join Bernie Madoff in jail and they can share a room.

  • Report this Comment On December 17, 2011, at 10:07 PM, LoadDrive wrote:

    Water Board the Smuck....You WILL Find All the money within 10 min.

  • Report this Comment On December 18, 2011, at 10:08 AM, DianeinMichigan wrote:

    OPM - other people's money. Like Madoff, all Corzine's professional and personal assets should be frozen and confiscated a la RICO, plus jail time for him and his MF pals This man is truly and equally despicable - and Corzine has made a career of mishandling other's money, first in public life and now in the private sector. That his background and name did not draw more scrupulous attention when he went to MF is surprising and disappointing.

  • Report this Comment On December 18, 2011, at 8:34 PM, CarsonWales wrote:

    Who has the money?

    The CDS holders who backed MF Global

    MF Global hit the Repo/CDS market and sold it self for short term capital infusion to stave off the inevitable

    Under the new bankruptcy/Dodd Frank laws ..CDS holders are exempt from the chapter filing hold and can raid the company with no oversight ahead of bankruptcy proceeding

    We find ourselves in a situation now where CDS holders, instead of being punished for risky trading, are rewarded for it with little if any risk, and in fact its in their interest to see the entity they propped up fail

    Follow the money fools

    Follow the money

    And hold onto your ass(ets)..

    Whats coming will make MF Global and Lehman look like chump change

    Out

    From the bunker

    Carson Wales

  • Report this Comment On December 18, 2011, at 8:53 PM, libsDestroyAll wrote:

    Corzine is a very prominent Democrats (very close to pres. Obama), do you see The New York Times, Washington Post, NBC, MSNBC, CBS, CNN reporting this story with the gusto it deserves? Nope. How about Solyndra, Light Squared, Fast and Furios. Nope. Nope. Nope. But wait, Sarah Palin just mispronounced a word. Stop the presses. Some obscure Republican congressional candidate once dressed in a nazi uniform during a WWII reenactment, front page story. I think we need to change a lot more than the financial institutions.

  • Report this Comment On December 18, 2011, at 10:08 PM, TMFMileHigh wrote:

    @libsDestroyAll,

    >>Do you see The New York Times, Washington Post, NBC, MSNBC, CBS, CNN reporting this story with the gusto it deserves?

    Yes:

    http://topics.nytimes.com/top/news/business/companies/mf-glo...

    http://www.washingtonpost.com/the-systemic-risk-revealed-by-...

    http://www.videosurf.com/videos/Mf+Global?providers=37

    http://money.cnn.com/2011/12/14/news/companies/mf_global_cor...

    As proud as I am of the work our team has done and is still doing, I'm also grateful for fine reporting by The New York Times, Reuters, Bloomberg, The Wall Street Journal, and many others that influenced our efforts.

    FWIW and Foolish best,

    Tim

    --

    Tim Beyers

    TMFMileHigh, Motley Fool Rule Breakers Analyst

    Web: http://timbeyers.me

  • Report this Comment On December 18, 2011, at 10:45 PM, richardrollo wrote:

    He bet other people's farms long on European Debt? And he is a financial genius? What am I missing here?

    Oh well, I alway listen to my gut and my gut told me that both Corzine and Elliot Spitzer were walking indigestion.

  • Report this Comment On December 19, 2011, at 9:48 AM, TMFKopp wrote:

    @richardrollo

    "He bet other people's farms long on European Debt? And he is a financial genius? What am I missing here?"

    Well, first off, it's questionable whether he was ever actually the "financial genius" that many people seemed to think that he was. Perhaps he was simply a relatively bright guy willing to take on more risk than others. That would have served him well coming up through Goldman in the 70s and 80s when it was a darn good time to be a bond trader.

    As Nassim Taleb (author of "Fooled by Randomness") might agree, there could be a solid argument that Corzine was simply a risk-taking "lucky fool" that was in the right place at the right time and got to the top of Goldman as a result.

    As far as what happened with MF Global, much still remains unclear about how far Corzine's culpability goes. At the very least though, he is 100% on the hook for bankrupting the company and, from that perspective, you're not missing a darn thing.

    Matt

  • Report this Comment On December 19, 2011, at 1:57 PM, TMFAleph1 wrote:

    <<MF Global hit the Repo/CDS market and sold it self for short term capital infusion to stave off the inevitable>>

    @CarsonWales,

    The repo and credit default swap markets are two completely separate markets. To my knowledge, there isn't a shred of evidence that MF Global was selling CDSs on its own debt. If you have any such evidence, I'd be very interested to take a look at it.

    Alex Dumortier

  • Report this Comment On December 19, 2011, at 4:08 PM, exMFer wrote:

    From Mr. Corzine to all MF Global employee's earlier this year. A rather ironic missive.

    =====================================

    From: Jon S. Corzine

    Sent: Tuesday, January 25, 2011 2:48 PM

    Subject: Our Commitment to Integrity

    Dear Colleagues,

    I’d like to wish you and your families a very happy 2011.

    Looking at our business, it is clear we have begun the new year with a strong start. We find ourselves busy and engaged with our clients, as well as optimistic about the year ahead.

    This certainly holds true for me. We are just now putting the final touches on a series of strategic actions designed to move our business forward, and I expect to share these with you in the coming days. Before we can begin executing our new plan, however, I want to underscore distinguishing characteristics that will serve as a foundation for this firm’s success in 2011 and beyond.

    The reality is that we live in a world where transparency, integrity and values create winning institutions and people. What we have learned from the events within the financial services industry during the last several years and through our own experiences is that the most difficult attributes to build and sustain are not revenues or earnings – it is reputation. In today’s business environment, even the perception of wrongdoing can severely damage a firm’s reputation and its ability to conduct or attract business.

    I believe that we will achieve our long-term objectives through the integrity with which we approach our work, the ethical handling of our clients’ business, and the collaborative approach we take in our daily dealings with each other. These issues of character must form the foundation for our one-firm culture.

    I know that imbued in each of us is a sense of responsibility to do the right thing, everyday. And we understand and are attentive to the rules of the road. Our Legal and Compliance teams have provided us with tools – training, processes and procedures – to keep our organization in compliance with applicable rules and regulations. That said, compliance is built upon strong character, reflected in our judgements and actions as individuals. We are all accountable for the reputation and integrity of our firm.

    My intention, however, is not to preach a commitment to compliance, but to ask you to take that extra step and think about what is right with every decision taken – in every conversation you have and in every trade you make.

    Let’s be an example of how to do it right and play a leadership role in restoring confidence in our industry and most assuredly in MF Global. I want all of our constituents – regulators, shareholders, clients, current and prospective employees – to walk away from interactions with our firm feeling confident about MF Global, because we treat them with respect and dignity and consistently make decisions that demonstrate our integrity.

    I don’t need to tell you that good ethics is good business. But I do want you to know that I intend to hold myself and this firm to the highest standard of conduct in all that we do.

    As we roll out our new strategy, it is our character as much as our skill that will underpin our success and create the client trust necessary to achieve our vision. Your efforts have and will continue to go a long way in making MF Global a stronger and more productive company.

    Thank you,

    Jon

  • Report this Comment On December 20, 2011, at 9:31 PM, oneye1i wrote:

    The collapse of LTCM - just an aberration.

    The collapse of Enron - just an aberration.

    The collapse of Lehman - just an aberration.

    The collapse of both FMs - aberrations.

    These 5 (and the 300 others I failed to mention), of course, happened on the Bush watch, and Bush lifted not a finger, after all, they were just aberrations.

    When you have a problem that keeps repeating itself, if you want to fix it, you find out why and fix it. No thanks, said Bush, nothing to fix here, no pattern.

    Of course pattern recognition is IQ, but we already know that Bush's IQ is somewhere below moron, and that is his best quality - at least even 80 is a number. On the ignorance scale he proudly gets a 0.

    Now the collapse of MFG. But the difference is huge. This happened on Obama's watch. Obama is not ignorant. Obama has also fixed nothing. Obama also cannot recognize patterns. Obama in fact handed out trillions to rich Republicans, who hired no one, but went on the greatest speculation spree the world has ever seen. Pattern with 1929.

    The problem is of course that in the past 30 years dominated by the Raygun devolution, our governments have undone all the separations, anti-racketeering, anti-monopoly, and anti-collusion laws put in place after 1929. Banks, Mortgage, Insurance, Oil and Food companies are now Oligopolies - with (Econ 101) concomitant obscene prices, and rampant corruption.

    Pattern this: More LTCM/Enron/Lehman/MFG on the way.

  • Report this Comment On December 21, 2011, at 6:12 AM, Rivergrrl wrote:

    My experience with "leaders" in the business world is: the people who talk the most about integrity don't have any! Wishful thinking on their part, or self delusion perhaps, but when I hear them go on about integrity, it's a warning flag that they are probably lacking in this area.

  • Report this Comment On December 21, 2011, at 12:31 PM, Doris411 wrote:

    @DianeinMichigan has a point. Why aren't we hearing about RICO with regard to Corzine and the others?

    I would have thought it was a great fit for the recent financial crimes. And the penalties are definitely more than a slap on the wrist, "better luck next time," license to go out and ruin more companies.

  • Report this Comment On December 21, 2011, at 12:38 PM, TMFHousel wrote:

    <<These 5 (and the 300 others I failed to mention), of course, happened on the Bush watch, and Bush lifted not a finger, after all, they were just aberrations.>>

    LTCM collapsed in 1998, two years before Bush was elected president.

  • Report this Comment On December 23, 2011, at 12:30 AM, nickjob wrote:

    BOYCOTT J P MORGAN!! they have the money!

  • Report this Comment On December 23, 2011, at 12:10 PM, DrJac1 wrote:

    Who is the greater fool; those who continually perpetrate crimes against their clients or the clients who continually offer themselves up for sacrifice?

    When will the herd realize that giving your money to someone you don't know is a fool's act?

    The only safe investment there is, if such a thing exists is, GOLD and SILVER bullion.

  • Report this Comment On December 23, 2011, at 12:36 PM, machattan wrote:

    why the need to punish these miscreants.

    we gave them the key to the vault and hung the sign on the window "back after lunch".

    that is to say only, it is to be hoped far fewer of these transgressions might occur if the security dogs had titanium teeth.

    i didn't read every comment but of the many i read no mention of oversight and, no matter how uncomfortable it may make us, regulation is necessary where huge stacks of money lay about within easy reach.

    by the way, as to the first paragraph? the leeches who have caused unthinkable misery deserve whatever punishment we can dream up.

    one last item: before there was citizens united, we thought of corporations as responsible beings ergo, the actual humans making the decisions were pretty much off the hook. kick the fox away from the coop.

  • Report this Comment On December 23, 2011, at 1:15 PM, ziq wrote:

    @libsDestroyAll:

    I first heard this story on "liberal" NPR.

    Sarah Palin was a candidate for VPOTUS at the time the mis-speeches were covered--and is currently, I think, a political commentator for Fox News, wheareas Corzine holds no public office at all currently, nor is he standing for election to any. You allege Corzine is "close" to Obama and hope that some guilt by association will stick. I hope for your sake your financial analyses are more objective than your political ones. Personally, I'd prefer this area stick to the former.

    I agree this story should get wide coverage, as evidence of business as usual in the financial sector.

  • Report this Comment On December 23, 2011, at 1:17 PM, ziq wrote:

    I did a double-take when I saw the headline. Glad to see MF here doesn't stand for the usual.

  • Report this Comment On December 23, 2011, at 2:14 PM, davidvvv wrote:

    Oneye,

    You act as if you study these things so you must know LTCM was created and collapsed all while Clinton was president. I have never seen someone of any stature from the right blame Clinton for that as is correct as he was in no way to blame, however you try to link Bush to it, which is clearly wrong.

    Also on Enron, the fraud there started long before Bush was president, probably as early as 1993 when Fastow started creating the partnerships to hide transactions. Again, no one blames Clinton as it was in no way his fault, but again you try to make Bush responsible as he was president for 9 months of an 8 year fraud.

    I do not see how the president, of either party, can be held responsible for bad acts by people over whom he has no control. There have been frauds and financial collapses due to bad bets for centuries and will continue to be in the future.

  • Report this Comment On December 23, 2011, at 2:30 PM, CEDUP wrote:

    Another blowhard politician. Taking from the people. and never recalls nutin. But when he was the Gov of Jersey, he had all the answers, mostly WRONG, but he sure spouted his BS. Now he just don't remember, where o where d money went! What a TOOL. If this ain't criminal, what is? Another financial whiz, who gets real dumb, when caught being what they really are, con artists. Why else would he have been a senator, gov, just another blowhard.

  • Report this Comment On December 23, 2011, at 7:17 PM, fool31031942 wrote:

    When criminals are the ones who cry hoarse for "freedom" and "free enterprise" and call themselves champions of true American democracy, this is what will surely keep happening. Fools aree the gullible American public to get cheated like this again and again and again.

    Deficit of basic morality and honesty today amongst the Bankers and wall street folks, is the

    true cause of this malady.

    Can I say that American legal and justice system is the worst in the world to allow all such looting of the innocent to keep happening-again and again?

  • Report this Comment On December 23, 2011, at 7:58 PM, geo11zak wrote:

    GREED IS NOT GOOD . Wallstreet needs to undestand that , unfortunately our culture seems to think that greed is good .An internet bubble,a real estate bubble , a financial crisis . what is the common denominator ? GREED. I rest my case, until we change the way we live our life there will always be another bubble or MF Global down the road .

  • Report this Comment On December 23, 2011, at 9:41 PM, Tiingall wrote:

    I believe that personal accountability is a key element to solving this ongoing problem. We are personally accountable if we borrow depositors funds from the bank vault for a business venture. If it does not work we pay with our homes or other collateral.

    The same should apply to ALL the people who work in banks and financail institutions. The CEO, the loan officer etc. They all need to act more prudently with our savings, retirement/pension funds etc when they decide to dip into it to make a business decision to use, loan etc our money in their vaults. We pay their salary, bonuses, commissions etc to responsibly manage our money we entrust to them. They should respect that relationship, and they should back up their advice and decisions with their own money. Just like we do in small business or in direct share investments.

    And if they make big mistakes, they should lose their license to be a financial advisor, bank employee, CEO Director etc. Our economy needs to be protected from these incompetent parasites.

    And if the financial system has become too complex to manage, then it needs to be made less complex, so ordinary CEOs and accountants can do it.

    Perhaps someone can explain what is the benefit of Futures Trading; except for the small band of successful traders. Is it not just another name for gambling? In the long run, no one - except the house - wins with gambling. In this case the house lost too.

    Maybe it's time to accept that the convoluted games played with money are just that; and far too complex for most bankers, accountants and so called financial experts to reliable manage in the long term. It's not possible for gamblers to win overall.

    Investing in sound and well run businesses that actually create products and services which benefit individuals and the entire community and gvenerate jobs seems to be far more Foolish than gambling with peoples' savings, retirement funds and homes.

  • Report this Comment On December 23, 2011, at 11:32 PM, himagain2 wrote:

    At the end of the day the old saw: "The punishment should fit the crime" is the only way to slow the savage decline in Society as a whole.

    This mess as I recall was started by the Medici's with the invention of the insanity of a corporation as a person distinct from its owners.

    Unless as many have said a million times, the punishment does fit the crime, where is the disincentive?

    A corporate Director should be totally personally responsible for his actions and if the company HE/SHE CONTROLS simply goes broke, much less in the criminal fashion of today, does it wilfully, then he/she should never be allowed to hold any post of responsibility until restitution is complete and their total assets and access of interest to The Good Things should be removed.

    Anyone remember the old days of going broke/bankrupt?

    You were left with as I recall: tools of trade, personal clothes and mebbe your bed.......

    While ever the farcial concept of no personal total accountability exists in corporations, there will never be responsibility.

  • Report this Comment On December 24, 2011, at 1:54 AM, Fryatt wrote:

    Our government has allowed this to happen. Time to put some accountability back into the system.

  • Report this Comment On December 24, 2011, at 11:22 AM, nickjob wrote:

    So let me get the picture straight. The bank robber jumps in the getaway car and speeds off with the cops in hot pursuit. He turns the corner and flings the bag of money on his buddy's front porch. The cops catch him a few blocks away and he tells them he didn't rob the bank and he doesn't know where the money is. In the meantime, his buddy, jp morgan, picks the bag up and brings it in the house. At this point, old jp has a decision to make. He can call the cops and say somebody threw a bag of money on my porch and all is forgotten. But no, he decides to hide it and say he didn't know where it came from, and LUCKY ME!! The cops eventually track the money down. But old jp says finders keepers and won't give it back! In the old days, he would be found guilty of aiding and abetting aand get thrown in jail. But in this case, the head cop's name is Holder and he does only what the big boss, Barack, says (who usually gets a piece of any money, called campaign contributions). So far, that is the picture. Or am I missing something? Please tell me!

  • Report this Comment On December 24, 2011, at 5:22 PM, kmtominey wrote:

    The best solution is to simply reinstate Glass-Steagall - everyone knows who to meet its requirements including what functions cannot be bundled together in a holding company. Re-instate the antibucket shop law (eliminates naked CDSs). If it is too complicated for regulation it is probably too complicated to be allowed.

    Any situation where the money of clients is under the same mgt umbrella as proprietary trading, or any other activity such as IPO, M&As, brokerage wealth management the conflicts of interest are glaring. The only way to protect customers in their interaction with a broker-dealer is to see to it that they can only trade legally on behalf of their clients and then only with specific permission.

    These executives - from Penn Central (the classic case study when I did my MBA) to the current - are absolutely, irrevocably, unalterably incapable of self regulation. Poorly raised 3 year olds do better. That is reality.

    Every single citizen who voted for a republican in the past 25 years is responsible for where we are now. It was the fake republicans who worked diligently to undo Glass-Steagall, prevent regulation of derivatives and unloosed the evil of the naked CDS on the financial world. Real republicans like Dwight Eisenhauer, Richard Nixon, Gerry Ford and probably Bush, the elder would never have bought into this silliness.

    The other truth is the Clinton's Treasury Secretary Rubin and his economic advisor Larry Summers both bought into the anti Glass Steagall, no regulation for derivatives, repeal of antibucket shop laws, etc. Rubin was buying a high compensation, no work job in the financial industry; Summers was against anything that Brooksly Born was for because because she was brighter than he and that scared him to death.

    Politically, I pay attention to Senators and Representatives, regardless of their state, that share my views and I give them money and opinions. I keep emailing the white house and elected officials whether i voted for them or not - can't hurt and might help.

    i quote Charly Munger and Warren Buffett - those old guys, with no imagination who just did not understand the modern financial products. They are laughing all of the way to the bank.

  • Report this Comment On December 25, 2011, at 5:32 PM, Mongui wrote:

    Amen! Only saints (?) , I am told, are able so self regulate themselves. The ending of government regulations since the Reagan administration is at the root of our troubles in lot of aspects of our life. The problem is, elected officials don't take time to learn, to consult, to analyze. They end up making up regulations that obstruct more than facilitate the the good running of our communities, or they drop a lot good of regulations in response to political pressures from selfish contributors and/or ignorant electorate. How do we get people who really love our country to run for public office?

  • Report this Comment On December 26, 2011, at 12:04 PM, aleax wrote:

    Tiingall, you ask

    """

    Perhaps someone can explain what is the benefit of Futures Trading; except for the small band of successful traders. Is it not just another name for gambling?

    """

    It's no gambling at all: it's by far the most ancient form of financial trading, and for millennia it has played a crucial role in reducing pricing uncertainty for both producers and purchasers of commodities (mostly and especially agricultural ones).

    "Fortunately", we have case studies generously supplied by politicians apparently thinking exactly along the same lines as you, e.g http://en.wikipedia.org/wiki/Onion_Futures_Act#Effect_on_pri... , showing how forbidding futures trading on one commodity (onions, per US law since 1958!) leads (just as expected) to high price volatility (compared with other similar commodities on which futures trading is legal, and non-US nations in which onion farmers and purchasers can trade futures on onions just like any on other agricultural produce). In a bitter-sweet irony, the son of the farmer who was the main advocate for the 1958 law forbidding futures trading in onions is now the main advocate for abolishing that misbegotten law.

    Pure speculation (futures trading by those who are neither producers nor consumers of the underlying commodity) is arguably a problem, and the Dodd-Frank law indeed tries to limit it (against the fiercest lobbying ever -- those speculators sure like their trade and advance arguments about their crucial role in providing liquidity). But, that's a somewhat different issue.

    Futures trading per se is absolutely crucial -- agricultural commodities in particular are obviously tied to inevitable yearly and multi-year "rhythms", and many of them (such as onions) do not keep well in storage and/or incur high storage costs, so even a very-deep-pockets farmer can't just easily stockpile years' worth of onion production during low-price years to wait for prices to become sensible again... selling some part of next year's production in advance at middling prices (via future contracts -- that's what they're FOR!) reduces pricing risk (and helps a lot with cash flow management, too).

    Similarly, the food-processing firm purchasing those future contracts is buying insurance against the risk of very HIGH prices next year for the onions it needs to purchase as "raw materials" for its production. It's as simple as this... at least until traders unrelated to agriculture and food-processing enter the picture.

    (Futures are also traded in a lot of non-agricultural commodities, playing a similar though usually less crucial role; and in non-commodity areas, such as bonds and security indices, which should really be analyzed in a completely different way from COMMODITY futures, in my opinion).

  • Report this Comment On December 27, 2011, at 12:43 PM, afamiii wrote:

    If you don't know the public and insider reputation of the CEO and Chair of your broker and you haven't reviewed their last quarterly statement, your account is at risk. Even if you do know him/her and have reviewed the statements your account is still at risk. How can I get a custody account at the exchange?

  • Report this Comment On January 04, 2012, at 6:08 PM, thidmark wrote:

    If the media is indeed all over this, why are there still questions about where the friggin' money is????

    Reportage of Corzine's "not me, I don't know" defense is fairly useless.

  • Report this Comment On February 13, 2012, at 6:22 PM, jeninglasgow wrote:

    We are UK investors, investing for retirement through a broker based in Gibraltar; at first they denied that our money was being invested through MF Global and it took another month for us to discover that it was when my husband tried to trade and found his account had been frozen - where's the money gone? Are we ever likely to get any back? And if so, how?

    Any action groups working out there, apart from the sterling work carried out by the Fools- who is acting on our behalf?

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