The picture above is one of MF Global’s magazine ads. I think they’re getting ahead of themselves. First, we’ll have an investigation, then an indictment, then a trial, then convictions, then lenient sentences.
The story I’m referring to is here.
Hat tip: World First via Business Insider
They’ll probably plead negligence like Citigroup.
One difference from Citigroup: there’s a lot less to go after.
MF global is the poster child for why speculation not directly related to providing security for real economic transactions should be banned. Corzine’s actions were no different than stacking chips on a roulette wheel and shouting WEEEEEEEEEEE!!! as it spun.
I disagree with Ben Wolf. If people want to gamble away their money, that’s their business as long as the rest of us aren’t on the hook for any losses and as long as the institution doing the “gambling” isn’t “too big to fail.”
Andy,
The problem is twofold:
A) MF Global is one of only 22 institutions authorized to trade government securities with the New York Fed, which is supposed to mean that the safety provided to investors is virtually bulletproof. Corzine and Friends abused that.
B) A lot of people with money in MF Global had no say in how it made bets with their retirement funds. At the very least Global’s actions were negligent, perhaps even fraud.
The interesting part of the bet to me is that is was a political bet, not a business bet. As described by Henry Blodget: “Corzine and his traders, we imagine, put the odds that Italy, Spain, et al, would get bailed out at, say, 90%, and the odds that they wouldn’t get bailed out at 10%.”
This would seem to confirm that bailouts encourage risk in the system, but it also cautions that great uncertainty remains in making such bets.
Ben,
On point A, that’s a problem with oversight of who can trade and who can’t. On point B – well, I don’t have any say in how the fund managers for my retirement mutuals funds invest. What I do have is a prospectus and the ability to take my money elsewhere. If there’s fraud I can sue.
Andy,
But pensions also invested in MF Global, because it was considered a conservative, safe bet. You can take your individually arrested money elsewhere, but pensioners can’t.
“This would seem to confirm that bailouts encourage risk in the system, but it also cautions that great uncertainty remains in making such bets.”
This a very good, and often missed point. I’ll go even further. Those who make, ahem, “investments,” based upon regulatory or political speculation aren’t investors. They are river boat gamblers.
I’m in this business. Stewarding pension money and such. One of our absolute knockouts on a potential investment is the prospect of waking up in the morning and reading in the WSJ or NYT that your investment is kaput because, oh, I don’t know, the PM of Greece is resigning or something.
This speaks not badly just of Corzine, who obviously is not an investor, but those who chose to put money with him.