Tuesday, November 22, 2011

Clients Whose Funds Are Trapped in MF Global Probably Want More Wall Street Regulation

You Cannot Get to your Money When Regulators Fail to Regulate

MF Global is (was) a Wall Street broker/dealer firm that used to be run by former Democratic Governor of New Jersey Jon Corzine. Mr. Corzine had become very wealthy as an executive at Goldman Sachs, and after the good citizens of New Jersey said they preferred a bombastic bully Conservative like Chris Christie to Mr. Corzine, he took over as head of MF Global.

After literally betting the firm that European debt markets would rally and bond prices would increase (it didn’t and they didn’t) Mr. Corzine drove his firm into bankruptcy, and either lost track of client account funds or used those funds to support the firm. (A very bad and very illegal practice).  Now clients who had money in their accounts at the firm cannot get to them.


Claudio Papapietro for The Wall Street Journal
Scott Gettleman, shown here at the
New York Mercantile Exchange, tried to
withdraw nearly $100,000 from MF Global.
 The check bounced.
(Bet he favors more regulation!) 

More than two weeks after MF Global filed for Chapter 11, some 33,000 customers are stuck in a sort of purgatory, with no access to their cash until a trustee liquidating the securities firm says they can get it.

Now the failure of MF Global rests solely on the shoulders of Mr. Corzine.  It was his management and his control and his decisions that led to the current problems.

But this is also a failure of regulation.  Like in the Madoff cases and countless others, the failure was not lack of adequate regulations and laws, but the failure of those in charge of regulating to regulate.  The head of the main agency regulating MF Global was so close to Mr. Corzine that he has had to remove himself from the investigation.

There has been no polling of the individuals who have money trapped inside MF Global, if indeed it is even there.  But even without polling one can assume that these people would opt for more rather than less Wall Street regulation.  Proponents of regulation of Banks and Financial firms can be described as a wealthy former Conservatives who has been mugged by the failure of regulators to protect their interests.

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