MF Global’s filing for bankruptcy has produced a wave of opprobrium for its CEO, Jon Corzine, formerly CEO of Goldman-Sachs and senator, then governor, of New Jersey. Henry Blodget, for example, characterizes his handling of MF Global, which invested heavily in Spanish, Italian, and Irish bonds, as incompetent, likening his chairmanship to flying the company into a mountain:
As we noted yesterday, Jon Corzine, the pilot who took over the MF Global plane and flew it into a mountain, contractually has the right to a $12 million golden parachute, which would presumably go a ways toward easing his regrets. We hope that, for decency’s sake, he waives it.
If he doesn’t waive it, he can get in a long line of creditors including CNBC, from which Corzine’s MF Global bought (and didn’t pay for) some $845,000 of advertising. And, hopefully, if there’s any justice in the world, Corzine will be at the end of that line.
Because he really shouldn’t get a cent.
What happened to MF Global on Corzine’s watch was not just incompetence. It was spectacular recklessness. It was the equivalent of aiming a 747 filled with people straight at the side of the mountain and hoping that, just before you smash into it, the prevailing winds will shift and enable you to pull up.
And it’s not as if Corzine didn’t know the mountain was there.
All of the Wall Street CEOs who bet their firms in the years leading up to the financial crisis–most of which were then saved at the 11th hour by the government–at least had the excuse that they had never seen markets crash like that.
Jon Corzine had seen markets crash like that.
In fact, he had just seen markets crash like that. Just three short years ago. Along with everyone else on the planet who was not in a coma during the financial crisis.
And yet the first thing pilot Jon Corzine did when he took over the controls of MF Global was aim it straight at the mountain!
Charles Gasparino, on the other hand, says he knew it all along:
Jon Corzine is many things: Erudite, down to earth, and well-meaning being chief among them, people who know him tell me. But is he a good businessman? Not even close, these same people openly admit.
In fact, based on his long years in the financial business, from CEO of Goldman Sachs to his current job as chief executive of the failing MF Global, Corzine is proof positive that on Wall Street you don’t have to be very good at your job to get paid a lot of money, which is why hatred of fat cats remains a bipartisan pastime—and will for the foreseeable future.
What I think is missing from all of the stone-casting is a recognition that Mr. Corzine made an enormous amount of money over a period of many years. Why? If he’s so incompetent why did he make so much money?
He’s held quite a number of positions of extraordinary responsibility, not just as CEOs of Goldman-Sachs and MF Global but as advisor to Preisdent Clinton, senator, and governor. The answer may be Tevya’s conclusion: if you’re rich they think you really know.
IMO there’s only one iron-clad conclusion you can draw from somebody’s making a lot of money: somebody, somewhere is willing to pay for the goods she produces or the services he provides. He or she may be the smartest guy in the room, the hardest-working, the best-looking, or maybe just the luckiest. Those factors don’t explain their wealth but willingness to pay does. There are guys who aren’t particularly smart who make a lot of money (some professional athletes, for example), people who aren’t hard-working who make a lot of money (Jamie Johnson, who may be able to lay claim to popularizing the phrase the 1%, for example), and peole who aren’t particularly good-looking who make a lot of money in a field notorious for very good-looking people (Seth Rogen).
What were people willing to pay Jon Corzine for? I don’t know him and haven’t followed his career. My offhand guess is that early in his career at least he was one heckuva salesman. That echoes my dad’s observation (adjusted for 2011 dollars) that anybody who earns more than $200,000 a year is a salesman.
I’ve written about social class here from time to time. Summarizing my view quickly I think that we do have social classes in the U. S. but the upper class is sufficiently small that it’s not particularly concerning. Here’s my favorite definition of being upper class: you’re upper class when no matter how badly you screw up you won’t be allowed to fail. By that standard the clearest example of somebody who’s a member of the upper class is George W. Bush.
Money isn’t synonymous with being a member of the upper class. Ask Bernie Madoff or Raj Rajaratnam. Despite their wealth they have been allowed to fail in dramatic and public ways. Warren Buffett may be the richest man in the world but he is decidedly not upper class and whether his children succeed or fail will depend more on what they learned at the dinner table and their own efforts than to social class. Money may be a ticket to the upper class (the Kennedys). My greatest concern about the concentration of wealth that’s occurred over the last couple of decades is that those who’ve found themselves the beneficiaries of that trend may try to parley that into a real class system.
I don’t know why Jon Corzine made so much money. I think it’s possible that he was just smart enough, just hard-working enough, just tall enough, just charming enough, and just the right age to ride a demographic wave that brought him and thousands of others enormous wealth. Now the tide is going out.
Indeed, those looking for reckless behavior, massive risk taking, and willingness to bet the farm on marriage, in politics, and in life, Corzine represented rare “impossible to pass up” talent.