Jon Corzine has made a career of risky bets, but it turns out his riskiest move was betting on himself. In August, Corzine–then chief of the commodities giant MF Global–sold investors debt, the interest on which Corzine promised would be raised one point if President Obama appointed him to a federal job.
It’s exactly the kind of arrogance mixed with recklessness that got Corzine and his investors in the trouble that was revealed over the course of last week. First we learned that under Corzine’s directorship, MF Global was going bankrupt because it purchased Europe’s risky debt. Then several companies each expressed interest in buying parts of MF Global–only to find that the books were worse than they looked, and that no part of the company was salvageable. But yesterday’s news was far worse. It turns out that $700 million of MF Global investors’ money is missing, and the firm is being investigated to find out if Corzine skimmed investors’ own money to cover his bets:
For now, there is confusion surrounding the missing MF Global funds. It is likely, one person briefed on the matter said, that some of the money may be “stuck in the system” as banks holding the customer funds hesitated last week to send MF Global the money.
But the firm has yet to produce evidence that all of the $600 million or $700 million outstanding is deposited with the banks, according to the people briefed on the matter. Regulators are looking into whether the customer funds were misallocated.
Stanford business professor Darrell Duffie told Bloomberg: “It’s kind of considered the third rail of the brokerage industry that when you’re holding your customers’ funds in their names, you don’t touch them — even in an emergency situation when you’re running short of cash.”
It’s not only the third rail, it’s common sense. But an executive who has already bet many millions of his firm’s dollars on the prospect that President Obama was going to toss him a cushy federal appointment is probably not being too careful about other people’s money.
Corzine is one of the Obama re-election campaign’s major “bundlers,” and he hosted a fundraiser to shower the Obama campaign with Wall Street cash several months ago. One expects his federal appointment to be abandoned rather quickly now, and Corzine’s political future is probably over as well. Residents of New Jersey now have yet another reason to be happy they voted Corzine out of office in favor of Chris Christie in 2009. Corzine’s political career was devastating for the state.
Having no interest in politics other than the power it granted him, Corzine’s gubernatorial term was marked by the state raiding taxpayers to reward Democratic interest groups. Businesses fled the state, as did residents who couldn’t afford the property taxes that are required to fund union bosses’ lavish benefits. The state’s educational institutions are a mess, since the recipients of Corzine’s contract negotiations–the teachers unions–were awarded the funds that should have gone to textbooks, computers, and after-school programs.
Corzine’s lack of policy understanding led to his giving every single proposed liberal regulation the green light, creating a situation in which the state’s red tape began devouring itself and making it impossible to do such things as build affordable housing for police officers and other safety officials. The state had actually ceased functioning on any meaningful level.
This latest scandal, however, may herald the end of Corzine’s career in politics and business. On the political front, at least, it’s about time.