You Call That Justice? Too Big to Jail

Recently, the Fiscal Times released a story titled “What the Hell Happened to Jon Corzine?” The article goes on to explain that the Commodity Futures Trading  Commission had filed civil charges against Corzine for his ties to the collapsed trading firm, MF Global. The charges describe that Corzine was responsible for the misuse of client’s money, to the tune of nearly $1 billion dollars, to prop up the firm’s operations in the middle of a liquidity crunch. 

The article goes on to say,

In an agreement with the CFTC that’s still subject to court approval, MF Global has agreed to make sure its commodity customers get back the amounts owed to them as of October 31, 2011, when it declared bankruptcy. It has also agreed to pay a $100 million penalty. The CFTC doesn’t have the authority to bring criminal charges against Corzine, but it is looking to ban him from the futures and options industry, a ruling that would be tantamount to ending his Wall Street career.

The article goes to chronicle the career of Jon Corzine likened to a champion of finance and business. But, after a closer look and with some knowledge of economic history, the reader can see a path of bailout destruction. Jon Corzine wrote the book on corporate bailouts. 

Corzine began his financial career in 1970, working as a bond manager and portfolio analyst for Continental Illinois National Bank and Trust. He later went on to work for Bank One of Ohio and later moved to Hoboken, New Jersey where he was recruited by Goldman Sachs.

Understanding that correlation does not mean causation, Continental Illinois was bailed out in 1984 by the Federal Reserve and FDIC for 4.5 billion dollars in what would be America’s largest ever bailout. Calls of systemic risk rang through the financial sector and the term “too big to fail” was invented. 

In 2004, Bank One merged with JP Morgan Chase and Company which received $94.7 billion in bailout money in 2008. 

In 1994, Corzine was moved to the top job at Goldman Sachs to become a co-CEO with famed bailout king, Henry Paulson. During this time Goldman was losing $2 billion of it’s client’s money by shorting the British Pound Sterling. During his tenure at Goldman, Corzine and Paulson locked horns on occasion. In 1998, Corzine accepted a roll in a federal commission  under Bill Clinton to bail out the over leveraged hedge fund, Long Term Capital Management. Again, systemic risk was the battle cry as $3.6 billion of tax payer dollars were dumped into a fund that liquidated in 2000. Under Federal Reserve supervision, of course. It was then that Corzine was ousted from Goldman and turned to what any dodgy individual would do- turn to politics.

Jon Corzine ran for John Lautenberg’s Senate seat during the 2000 campaign and spent a whopping $62 million of his own money to come from a 30% deficit to win the the New Jersey seat in the U.S. Senate. He refused to release his tax records after receiving some $400 million after Goldman went public, claiming a confidentiality agreement with Goldman Sachs. Critics sited that Treasury Secretary Robert Rubin exchanged his Goldman equity to debt and Corzine should have followed his example.

In 2005, Corzine spent $38 million to win the Gubernatorial election in New Jersey. While Governor, he over saw a 70% property tax increase on New Jersey residents. He served one term, losing to Chris Christie in 2009.

In 2010, Jon Corzine was appointed CEO and Chairman of MF Global. The rest is history. The article lamented that Corzine will end up being barred from ever trading again. That’s tantamount to taking the ax away from Lizzy Borden. Corzine has become a sort of poster child for what is wrong with high finance on Wall Street. Another big wheel, ripping off his clients, goes Scott  free. Instead, he should be wearing orange and handcuffs. The articles closes by bemoaning that Corzine may not have much money left after the whole ordeal is over. That he might pull off a “Milken” and make some sort of comeback. Really?

Consider the billion dollars the man had stolen from his clients. Yes, stolen! A fundamental rule in finance is to keep your client’s money separate from the firm’s money. You would think a big financial genius like Jon Corzine would know about rule number one. Instead, he gets a time out, looses some of his money and enjoys the rest of his care free life. It’s cronies and banksters like Corzine that spawn the national outrage at Wall Street. Remember Occupy Wall Street? Hey Jon, those signs were meant for you.


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