Wall Street Journal Columnist Ties MF Global Chief Jon Corzine’s Failure to His Democratic Politics

A Target They Just Could Not Resist

The collapse and bankruptcy of MF Global, a broker dealer that engaged in trading it is own account and for other is not major financial news.  The company is not large in the scheme of things, and its failure is important only for those wealthy investors foolish enough to invest in the company.   Investment in risky ventures carries risk, and it you cannot stand the risk, get out of the kitchen.

The reason that MF Global is news is that it is headed by former Goldman Sachs chief, former U. S. Senator and former New Jersey Governor Jon Corzine.  Mr. Corzine is one of the symbols of modern finance.  He is arrogant, all knowing, highly compensated and egotistical to the point where he knows what’s right and everyone else does not.  Mr. Corzine borrowed heavily and invested heavily in European bonds, expecting to make a fortune when they went up in price.  They didn’t.

Mr. Corzine’s politics were of the liberal variety.  Even though this is totally irrelevant with respect to his management and investment actions, it would be impossible to think that Conservatives would not try to link the two.  Now Holman W. Jenkins, Jr. of the Wall Street Journal has stepped up to the plate and made the un-makeable connection.

It seems fitting, then, that Mr. Corzine's contribution to MF Global's failure was a big leveraged bet on politics as usual in Europe, via the bonds of heavily indebted euro-zone governments, whose pension and union problems are deeply analogous to New Jersey's

See the reason for Mr. Corzine’s failure as an investment manager has to do with a political philosophy.

Closer to the truth is that if governments themselves weren't broke, perhaps they could afford to let banks (which are big holders of government debt) go broke. But they can't.

This is what Mr. Corzine's sovereign bet was ultimately all about. He only went wrong because he failed to anticipate that, with politicians like himself in charge, unprincipled outcomes between default and non-default are possible. Thus in the Greek finagle unveiled last week, losses will be borne by private banks but none by official lenders like the IMF or the European Central Bank. Yet neither will the private banks be able to call in their own private insurance, in the form of credit default swaps, because the politicians insist on styling the Greek writedown "voluntary." Go figure.

Now if that sounds like gibberish to you, welcome to the club.  It is gibberish.  It has to be gibberish since there is no plausible rationale link between the politics of Mr. Corzine and his erroneous investment strategy so it is impossible to make the link without talking gibberish.  Had he been a Conservative with the same investment strategy the failure of his firm would have been an event of national tragedy as far as Conservatives were concerned and solely the fault of liberals.

Here is the conclusion of Mr. Holmes piece.

Were the political class that Mr. Corzine so ably personifies—and whose unprincipled maneuvering he so richly emblemized in all his roles—doing a better job of clearing a path to growth, a lot less cynicism about its behavior would be in order.

Makes no sense does it?  That’s because it cannot.