Taking Stock: MF Global debacle opportunity for Fed to prove itself
BY MALCOLM BERKO TAKING STOCK December 22, 2011 6:10PM
Updated: January 26, 2012 8:14AM
Dear Mr. Berko: My brother is an Ohio farmer who lost $63,000 that he put for safekeeping and a good yield at MF Global. Two of his neighbors also suffered losses that have put them in a serious bind because it was money they needed for feed, seed and expenses. All have had money at MF Global for years, but after Jon Corzine took over the money disappeared.
The government was quick to help Bank of America, Citigroup, JP Morgan and Merrill Lynch when their clients were at risk and even lent money to smaller banks when they were in trouble. There are people in Ohio and Indiana who need this money. Corzine should be held responsible, and the government should bail out my brother and others who were bushwhacked by Corzine, don’t you think?
Several of us would appreciate your thoughts.
TP, Columbus, Ohio
Dear TP: I know very little about MF Global. But I do know that Jon Corzine, a.k.a. Boom-Boom, who managed MF’s huge portfolio, used to be a Marine sergeant. Boom-Boom is also a former U.S. senator, a past governor of New Jersey and a previous CEO of the most influential, profitable, feared and powerful investment banking firm in the world: Goldman Sachs.
Boom-Boom pledged Phi Beta Kappa and earned an MBA from the prestigious University of Chicago. And it’s hard to imagine a better training ground for acquiring the very special skills to make $1.2 billion disappear so quickly, smoothly, quietly and fingerprint-free — a feat so impressive that the deans at our Ivy League MBA schools are certain to design several of their future MBA courses around the technique.
Boom-Boom is a brilliant, articulate fellow with a Rolodex of like-minded, helpful friends, including close associates who manage the inviolable Vatican Bank, which no government would dare challenge. Boom-Boom knows more about cash-flow analysis, balance sheet ratios and income statements than a bathtub full of CPAs.
Still, it’s a wonder that Boom-Boom, who could easily micro-manage a beehive, has no idea where the money went.
But I believe him and can’t imagine that an ex-Marine (a branch of the service for which I have enormous admiration) would not be completely forthcoming. I can’t imagine that the man wouldn’t be candid with his friends on the Senate Agricultural Investigating committee. And I find it incredulous that a former U.S. senator, who spent $62 million of his personal money to win a Senate seat, would participate in any form of financial impropriety. Nor would I believe that an ex-governor of the Garden State would deign to betray the trust of the people who elected him.
So those who would question Boom-Boom’s probity should be mindful of his selfless contributions to our nation as a U.S. senator, as the governor of a state some consider worthy of financial emulation and as the CEO of the most prominent investment bank in the world.
It’s sad that so many folks lost a billion-plus dollars through MF Global. But rather than spending so much unproductive time and wasting important resources lambasting Boom-Boom, the government ought to use its time and resources to design a solution to make investors whole again. Failing such an initiative, I propose that cherubic Timothy Geithner tell the Federal Reserve to lend $1.2 billion to MF Global’s trustees, who would then write checks to the thousands who were snookered by MF’s strange, inexplicable loss.
And why not? Protecting investors’ money from fraud is the responsibility of the Commodity Futures Trading Commission, a quasi-governmental organization that has been telling investors for years that their money was safeguarded by the CFTC’s iron-clad requirement for segregation of customer funds so this kind of “funny stuff” can’t happen. The Fed did this with alacrity for Goldman Sachs, Merrill Lynch, numerous investment banks, money center banks and regional banks.
The Fed should consider the MF debacle an opportunity to prove that the guarantee of the CFTC is not a hollow promise but more importantly to help MF’s clients. I’d certainly prefer that the Fed assist MF Global’s small client base than continue lending hundreds of billions to stuffy EU banks who look down their noses at us.
Address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at email@example.com.