November 1, 2011
G20 Meet as Obama's Favourite Corzine Flushes a Few More Billion Down the Pan
As we reported last week, the leaders of the G20 nations (plus a few others) are on a jaunt to the Mediterranean seaside in Cannes this week. Amongst other things they are scheduled to discuss the global financial crisis. As luck would have it another item will have added itself to their agenda this morning. According to Yahoo!
MF Global's meltdown in less than a week made it the biggest U.S. casualty of Europe's debt crisis, and the seventh-largest bankruptcy by assets in U.S. history.
The chief executive of MF Global Holdings Ltd. is Jon Corzine. According to The Economist recently, Mr. Corzine is:
Another former head of Goldman Sachs [potentially] running America’s Treasury, Mr Corzine (who is also a former governor of New Jersey) is seen as a long-shot candidate for the job when Tim Geithner steps down, or as a possible future White House economic adviser.
The Economist discusses what it refers to as "The Corzine put". This cunningly constructed derivative means that MF Global:
Is offering an extra percentage point of interest to investors in its latest bond issue, should Jon Corzine, MF’s chief executive, quit to take a government job before July 2013.
I wonder what those bond holders make of that extra percentage point this morning? In the current circumstances it seems unlikely Mr. Corzine will ever in fact have a government job, although I suppose stranger things have happened. According to Politico, not so very long ago:
Putting his own political capital on the line, President Barack Obama headlined a pair of get-out-the-vote rallies for New Jersey Gov. Jon Corzine
Maybe Mr. Obama will put his own political capital on the line for Mr. Corzine again one day, when memories have faded a little? Or there again perhaps not. According to The Economist once more:
It is unlikely that Mr Corzine will stage another comeback. On October 31st MF Global filed for bankruptcy after frantic efforts to sell assets or find a buyer failed. The cause of the firm’s demise were trades and strategies driven by Mr Corzine—not least disastrous bets in the market for European sovereign debt, making MF Global the largest American casualty of the euro-zone crisis so far.
The US regulators supposedly charged with keeping a close eye on these matters have just issued a statement on the MF Global debacle. According to the U.S. Commodity Futures Trading Commission:
For several days, the SEC, CFTC and other regulators had been closely monitoring developments affecting MF Global, Inc., a jointly registered futures commission merchant and broker-dealer, in anticipation of a transaction that would include the transfer of customer accounts to another firm. Early this morning, MF Global informed the regulators that the transaction had not been agreed to and reported possible deficiencies in customer futures segregated accounts held at the firm. The SEC and CFTC have determined that a SIPC-led bankruptcy proceeding would be the safest and most prudent course of action to protect customer accounts and assets. SIPC announced today that it is initiating the liquidation of MF Global under the Securities Investor Protection Act (SIPA).
It sounds awfully like it's not only MF Global bond holders who will be forced to undergo a haircut. It sounds like there are some deficiencies in the supposedly segregated accounts of MF Global's customers too. According to the New York Times:
Regulators are examining whether MF Global diverted some customer funds to support its own trades as the firm teetered on the brink of collapse. It is still unclear where the money went. At first, as much as $950 million was believed to be missing, but as the firm sorted through its bankruptcy, that figure fell to less than $700 million by late Monday, the people briefed on the matter said.
For a more detailed breakdown of the billions of dollars potentially involved in the latest Wall Street crash let's turn for assistance to Michael Bloomberg, who is an expert in such matters. According to Bloomberg Businessweek:
MF Global Holdings Ltd., the holding company for the broker-dealer run by ex-Goldman Sachs Group Inc. co-chairman Jon Corzine, filed for bankruptcy protection as it seeks to reorganize after making bets on European sovereign debt. Its broker-dealer unit, MF Global Inc., faces liquidation. The firm listed debt of $39.7 billion and assets of $41 billion in Chapter 11 papers filed yesterday in U.S. Bankruptcy Court in Manhattan.
I went on a jaunt of my own to the seaside last weekend, although in my case it was to a rather wild and windy Croyde in North Devon, here in South West England. As luck would have it I bumped into a few old friends, and we thought now would be a very good time to send a virtual postcard from us here in South West England to those currently congregating in Cannes. Here it is:
I assume that thanks to the tireless work of their security services the G20 leaders will recognise a Universe Inspector when they see one. Just in case they don't, here's a quick snapshot of one we managed to grab recently:
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