Fall of MF Global’s Jon Corzine (Part 1)

[Tams 20]

Fall of MF Global’s Jon Corzine (Part 1)

 

http://forexmagnates.com/fall-mf-global%E2%80%99s-jon-corzine-part-1/

 

 

How can a forex broker fail?

[MadMarketScientist 11]

Wow - losing 90% of market value since he took over. Wonder how much many millions he got paid to for that spectacular perform. And they're thinking he might take over as Treasury Secretary?! Oh I fear for the USA.

 

MMS

[SIUYA 11]

How can a forex broker fail?....."Jon Corzine had attempted to turn MF Global from a brokerage to a mid-tier investment bank. In doing so one of the cornerstones of his strategy was to take on more principal risk. "....

 

more questions should be raised by this statement....

"Jon Corzine stated, “The broker has “little principal risk” The short-term debt positions are “my personal responsibility and a prime focus of my attention,” said Corzine."

 

doesn't the place have internal personal trading guidelines

no wonder its going broke, he as CEO is trading rather than running the business.

looks like they must be paying salaries that are too large.

 

 

A lot of brokers are struggling at present, volumes are down, cut price brokers and DMA are eating their margins, and the rules regarding bonuses etc in Europe, the US have meant a lot of these guys are high cost overheads - always an issue in a quiet time.....but i am sure John will do just fine

[MightyMouse 12]

Fall of MF Global’s Jon Corzine (Part 1)

 

Fall of MF Global

 

 

How can a forex broker fail?

 

Being the middle man is apparently not as easy as it seems.

[MadMarketScientist 11]

Well it has happened ... betting the company on european sovereign debt will do it to you.

 

The firm, MF Global, had come under increasing strain in recent weeks due to $6.3 billion in outstanding bets on the sovereign debt of some of Europe's most troubled economies, including Spain and Italy.

 

Last week the European Union announced a plan to help prop up the economies of its weaker members, but the plan will not insulate financial institutions like MF Global from losses on holdings of European sovereign debt. In early October a large Belgian bank was rescued from bankruptcy after sustaining big losses on such holdings.

 

In an echo of the demise of Bear Stearns and Lehman Brothers in 2008, questions about MF Global's bad bets led investors to grow afraid of trading or transacting with the firm, sending the stock price down, scaring off investors further. Just last week the company's stock fell 67%.

 

MF Global goes bankrupt, is 1st U.S. casualty of European crisis

[SIUYA 11]

and this is why people should be protesting at wall street. Here is a guy who takes a perfectly good company and through reckless bets with the firms money blows it all and more.....he is an embarrassment to capitalism. Any one who defends him should have his head read and its also why investment banks should be risking their own money of clients who invest in funds knowing what they are going in for, and not shareholder money (did they know he had these massive bets on...??) and definitely not client money.

For my two cents if client accounts don't get paid back and have not been ring fenced he should go to jail. (and yes... I did have a MF account that I tried to close last week once I found out he was betting on Italy...I hope to get ALL the money back sooner rather than later and it reinforces why you keep a minimum amount with these people and with multiple brokers.)

....end of rant.

Edited October 31, 2011 by SIUYA

[gosu 10]

It is very fortunate this guy was not put in charge of running a country or a state where he could have really done some serious . . . oh, wait, never mind.

[MadMarketScientist 11]

 

For his stellar performance at MF Global, Corzine will receive around $12.1 million in severance, according to the New York Times' business blog, Dealbook.

 

This should light a fire under the Occupy Wall Street protests.

 

MMS

[steve46 12]

Well regardless of what others may think of him, the gentleman was CEO of MF Global. You don't elect yourself to that position.

 

He had the balls to make the bet...and unfortunately it didn't go his way....so he loses and his company goes broke...thats how this business is supposed to work. No more of this "too big to fail" crap....

 

Most people do not know that when the bonds (still trading) for MF Global were issued, buyers requested that they include a key employee clause so that if Corzine were to leave they would receive additional compensation.

 

The game has always been played this way...and before this MF Global bought the remaining interests of Refco when THEY went bust.....to be sure its unpleasant for those who trusted the gentleman to keep the ship afloat but if it had worked out, most of you would have applauded the gentleman's business accumen, never knowing the extent of the risk he had assumed.

 

Winners take risk...sometimes they win, other times they lose....while the rest stand on the sidelines and talk trash...

[gosu 10]

LOL...Winners do not run a company into the ground by taking outsized bets in an attempt to turn it into something else.

 

You are right about it not being too big to fail, but it's plain the idea was to eventually get the company into too big to fail territory, which is the obvious strategy now for any large financial institution.

 

No, he didn't elect himself to be CEO, just like he didn't elect himself to be governor of New Jersey, just like Geithner didn't elect himself to be president of the NY Fed and now Treasury Secretary, which is the position Corzine seemed to be headed for until this blow up. None of these guys "elect" themselves for their positions because that's not how the game works. Not even dictators "elect" themselves for their positions. They have to play the game. It's called cronyism.

[SIUYA 11]

Well regardless of what others may think of him, the gentleman was CEO of MF Global. You don't elect yourself to that position.

 

Gaddafi was never elected, Hitler was.....so these blame games for who was elected or employed are irrelevant - he was employed period. That employment was to run the firm, but not into the ground with gambles. He also most likely has other fiduciary duties.

 

He had the balls to make the bet...and unfortunately it didn't go his way....so he loses and his company goes broke...thats how this business is supposed to work. No more of this "too big to fail" crap....

 

Most people do not know that when the bonds (still trading) for MF Global were issued, buyers requested that they include a key employee clause so that if Corzine were to leave they would receive additional compensation.

 

The game has always been played this way...and before this MF Global bought the remaining interests of Refco when THEY went bust.....to be sure its unpleasant for those who trusted the gentleman to keep the ship afloat but if it had worked out, most of you would have applauded the gentleman's business accumen, never knowing the extent of the risk he had assumed.

 

Winners take risk...sometimes they win, other times they lose....while the rest stand on the sidelines and talk trash...

 

While many might applaud business acumen - this is not business acumen - this is a massive speculative punt with other peoples money. He had the balls to bet with other peoples money with little personal economic downside to himself....as you say - "never knowing the extent of the risk he had assumed." Well like most traders who bet too big he has been found out. He was not a businessman, but a gambling politician.

 

I think most of us can agree business should not require bailouts - better tell most of the subsidized businesses of all sorts around the world involving industries such as agriculture, chemicals, steel, automobiles.....

 

Dont worry I dont think he is the only one, and there will be others.....but to defend him with quotes like "He had the balls to make the bet" is what is wrong with capitalism as it has become today - it has become too opaque, with little real accountability and a way to transfer wealth for failure, by just saying such things.

You have worked in firms before, it makes me cringe when traders at firms say "its not my money".... These people in the great American tradition should be lambasted for being failures. Do you look at people on the street who might be homeless who gave it a go and lost, but you dont know their story.

(if I misread your tone of email Steve I apologise, and have little more to say on the matter if it just devolves into a spat which is not the intention. )

Edited October 31, 2011 by SIUYA

[steve46 12]

Thanks both of you for confirming my comment...

[MightyMouse 12]

Corzine has the ability to raise capital. He is only where he is because he can attract capital.

 

The funny thing is that he just crapped out and he still has the ability to raise capital so he is still a valuable player.

 

You are far more valuable to an entity if you are able to bring capital to the table than you are if you can trade.

[daVinciLite 10]

For his stellar performance at MF Global, Corzine will receive around $12.1 million in severance, according to the New York Times' business blog, Dealbook.

 

This should light a fire under the Occupy Wall Street protests.

 

MMS

 

I’ll bet any amount of money the Occupy Wall Street crowd (mob) will never even hear the name Corzine. After all Wall Street is all a greedy gang of Republicans, right? If you hear his name mentioned from any of their gatherings (riots) post it here. It’s just not going to happen.

 

dVL

[MadMarketScientist 11]

For my two cents if client accounts don't get paid back and have not been ring fenced he should go to jail.

 

MF Global Didn’t Segregate Client Collateral ... damn it doesn't look good here. Sorry to hear you had an account with them. If this is true there *better* be jail time.

 

thx

MMS

[MadMarketScientist 11]

He had the balls to make the bet...and unfortunately it didn't go his way....so he loses and his company goes broke...thats how this business is supposed to work. No more of this "too big to fail" crap....

 

100% agree with no more of the "too big to fail" crap. But have to disagree with betting the company and going broke - thing is it wasn't his company. Yes he was the CEO but the shareholders own the company and I'm certain they are not too happy he was betting the company on Italy

 

MMS

[steve46 12]

Its actually quite simple, the CEO is put there by the company's board of directors...At that point he is entitled to direct the company in whatever way he/she sees fit...those are the rules....You may not like it, shareholders may not agree with all his decisions....even those among the board of directors may not agree or like his actions....if that were the case, they should have ACTED to curtail his activities...by voting him out....

 

This is the way the rules are structured sir or madam....I didn't write the rules...but unlike some here I do understand them....

 

Now as to whether his actions were morally correct, ethically correct, or by whatever metric the rest of you wish to apply....that is YOUR perfect right....be my guest....I suggest at this point it is water under a bridge....unless the gentleman is found to have done something illegal, the game is over...Just as MFGLOBAL came in to buy REFCO....now someone else will come in to buy MFGLOBAL'S assets.....

[SIUYA 11]

Its actually quite simple, the CEO is put there by the company's board of directors...At that point he is entitled to direct the company in whatever way he/she sees fit...those are the rules....You may not like it, shareholders may not agree with all his decisions....even those among the board of directors may not agree or like his actions....if that were the case, they should have ACTED to curtail his activities...by voting him out....

 

This is the way the rules are structured sir or madam....I didn't write the rules...but unlike some here I do understand them....

 

So in other words he completely f...d up and he is the only one to blame....you cant have it both ways Steve.

.....and as an aside if you do understand the rules you would no there are other fiduciary duties and responsibilities. As a director you cannot just do what you see fit.

 

Now as to whether his actions were morally correct, ethically correct, or by whatever metric the rest of you wish to apply....that is YOUR perfect right....be my guest....I suggest at this point it is water under a bridge....unless the gentleman is found to have done something illegal, the game is over...Just as MFGLOBAL came in to buy REFCO....now someone else will come in to buy MFGLOBAL'S assets.....

 

Which if you did not take a simplistic standpoint you would understand that while people are pissed off he f..d up, they are expecting jail if segregated client accounts where dipped into and that illegal actions occurred.

Even if someone within the firm was doing it to cover his liabilities of his trades (and he admits they were his trades)- as CEO/director he should be responsible for ensuring processes where in place for this not to occur.....he should have at least understood the risks and the capital flows of his own company - or was he asleep at the wheel as well.

CEOs generally dont get paid big to take punts even though they might and are able to they are paid to run the company in the best interests of the shareholders. They get paid a lot because they have responsibilities and liabilities that go with that position....when people f...k up even as a CEO they should not be defended for this. This is not little league where you say - oh better luck next time.

 

now when it comes to ethics, morality etc...its a whole other kettle of fish, and people are entiltied to their opinions, just as you are yours, but it appears you are saying the same as everyone here (which is why I wonder it is that you think everyone else an idiot and does not 'understand' and when people do suggest that the "rules" get re-written or amended to avoid or minimize such collapses your best answer is "thems the rules".)

[steve46 12]

If the gentleman did something illegal, he will be prosecuted....I am sure there are many who will want him to pay for anything that he MAY have done wrong...other than that my own interest is very limited....I have no equity or debt interest and my association with the parent firm (E D & F Man) ended long years ago..

 

Those of us who actually work in the business view these events philosophically. It happens....it happened to Refco, and now some years later, it is happening to MF Global...

 

I hope you have a clear understanding of my position now.

 

Thank you

Edited November 2, 2011 by MadMarketScientist
language

[MadMarketScientist 11]

You may not like it, shareholders may not agree with all his decisions....even those among the board of directors may not agree or like his actions....if that were the case, they should have ACTED to curtail his activities...by voting him out....

 

Very true. I guess this is just identifying an even bigger problem with public corporate structures and responsibilities. But that is a topic for another thread ...

 

MMS

[MCM 10]

Well regardless of what others may think of him, the gentleman was CEO of MF Global. You don't elect yourself to that position.

 

......

 

Winners take risk...sometimes they win, other times they lose....while the rest stand on the sidelines and talk trash...

 

Winners (in this arena) take calculated risk with the full knowledge that position may go to zero. Despite that loss - their account/capital/company won't be decimated.

Charlatans/incompetents/thieves take risks with the full knowledge that IF the position goes to zero - so does their account/company/OPM (other peoples monies)

 

Another curious example of someone who will get a golden parachute, and not spend a day in jail despite likely illegal activities (rumored to have moved client money after an audit late last week). I am certain as CEO he had no knowledge of any wrong doing.

 

Run a state into the ground.

Run a company into the ground.

Hell - he should be elected president - he can finish the job our current house of fools have started. (both sides...)

 

Cheers

Edited November 3, 2011 by MCM

[steve46 12]

One lesson that this teaches is that activism is necessary if you want to have a voice in government or within a company whose shares you own..If you want to be heard, you have to vote and/or you have to participate in the process. Quite a few folks do nothing and then complain about the results when it is too late.

 

I am guessing that no one really monitored what Corzine was doing, or they might have raised questions about it long before this event. What does that say about the board of directors?.... about shareholders and bondholders alike?

[MadMarketScientist 11]

One lesson that this teaches is that activism is necessary if you want to have a voice in government or within a company whose shares you own..If you want to be heard, you have to vote and/or you have to participate in the process. Quite a few folks do nothing and then complain about the results when it is too late.

 

I am guessing that no one really monitored what Corzine was doing, or they might have raised questions about it long before this event. What does that say about the board of directors?.... about shareholders and bondholders alike?

 

Have to agree with you 100% here Steve. Like I say to my employees - "if you don't have input don't complain later". BOD definitely has a responsibility to the shareholders to keep a watch on whats going on. But on the other hand. the CEO also has a responsibility to work in the best interest of the company as a whole - not just what is good for him. Lots of blame to go around here ... but it does look like someone is going to jail.

 

MMS

[SIUYA 11]

yes, we already have some checks and balances for those to voice their opinion. Largely it works....

 

We also need to encourage people to not turn a blind eye to things and not just support those who bully and force their ways around firms taking excessive risks. Too often many people turn a blind eye to things they know are wrong, dubious or just plainly represent a conflict of interest....even if there is nothing illegal.

If you have worked in a trading firm you know what I am talking about.

 

What we appear to have developed is a system where those who are meant to be the best in the system, the leaders of society are rather more self serving and worse still make no apologies about it....unfortunately the old boys networks do exist.

What happened to being a member of society. ....not one of the haves and the have mores.

 

(wishful thinking I know, and its not about to occur, but wouldn't it be nice if more of the top were a little more humble and thankful - not to take away from those that already do, as there are plenty of wealthy people who do a lot.)

 

Bod Diamond (not to pick on him) Bob Diamond: No apologies. No restraint. No shame. - Business News - Business - The Independent

 

supposedly is to make a speech shortly whereby he is reversing his previous stand.....interesting.