MF Global

  • 04 Apr 2013 at 2:29 PM

MF Global Report Shows Limits Of The “Just Write All Your Positions On Post-Its” Method Of Risk Management

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There’s a new report out today describing how MF Global blew up, which is not to be confused with the other two reports describing how MF Global blew up, and really enough is enough. If you’re interested in how MF Global blew up, basically Jon Corzine decided to put all its money into ultimately-not-all-that-horrible peripheral European sovereign bonds with repo-to-maturity funding, and the markets moved against him and he faced huge margin calls, and MF Global couldn’t meet those margin calls and went kaput, and at some point between the margin calls and the kaput MF Global seems to have used some client money to meet the margin calls, and that was a no-no, etc. Read more here or here or here or in the report.1

Still the report does have fun new details about just what a mess MF Global was. This one may have boggled me the most:

The Company’s efforts to sell its Euro RTM portfolio suffered a setback when Abelow brought a representative of the investment bank Jefferies & Company (“Jefferies”) to meet with Corzine to discuss selling the portfolio. Corzine refused to meet with the representative because he was in the process of auctioning some commercial paper, and needed to complete the sales before the close of the London market. Consequently, no sale of the Euro RTMs was discussed with Jefferies at this time.

This was on October 26, a day before the downgrade that ultimately sparked MF Global’s October 31 bankruptcy. I am trying and failing to imagine another financial company CEO missing his last chance to sell off a position in the bond trading book because he was too busy pricing a CP deal. Most financial companies have, y’know, treasury departments to sell their CP, and bond traders to trade their bonds.

Also on October 26, this happened: Read more »

  • 22 Feb 2013 at 12:21 PM

National Futures Association Politely Requests That Jon Corzine Apply For Membership So That It Can Ban Him For Life

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Earlier this week, the NFA met to discuss the possibility of a lifetime ban of Jon Corzine from the futures industry. Two directors in particular– John Roe and James Koutoulas– wanted him out and wanted him out bad. Guy thought he could take down a once proud brokerage firm for yuks and then get off scot free? He had another thing coming, Roe and Koutoulas probably said to each other while putting the finishing touches on a press release they planned to send out announcing the news, in addition to skywriting plane they put a deposit on to spell out “Hit the bricks, pal,” over Corzine’s house. Unfortunately, the duo will most likely lose their $150 and most definitely have to save the party hats they sent others to pick up for another time. It seems in their excitement to tell JSC that he was “finished here,” Roe and Koutalas failed to make sure he was actually a member of their organization. Read more »

  • 16 Nov 2012 at 11:33 AM

House Subcommittee Has Some Suggestions For The Next Time Jon Corzine Runs A Financial Services Company

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This House Financial Services investigations subcommittee hatchet job on MF Global is, I don’t know, pretty reasonable and not-that-hatchety? It’s 100 pages and not exactly full of new news, but it’s a good read, stuff happens, there’s a clear story arc, heros and villains (kidding, just villains), you’re in suspense until the end. There’s some law of narrative that demands that every financial disaster be a parable for something, and the Fall of the House of Corzine obliges nicely. It reads like the sort of fairy tale where three whatevers come to the guy and tell him “repent repent a thing will happen” and each time he’s like “naaaah” but the third time the thing happens and he’s all “huh, wish I’d repented.”

The thing that was going to happen – which has the benefit of being inevitable in this report though I guess maybe not in real time – was that MF Global’s inventory of fairly short-dated peripheral Eurozone sovereign bonds, which it had bought and then financed via repo-to-maturity transactions, were going to be the death of it. And people kept telling Corzine that and he was all “I SAID NAAAAAH.” And then they were the death of it.

The first people who told him were his auditors at PwC in late 2010, who were troubled by how MF Global was accounting for the repos-to-maturity.1 The RTMs were accounted for as a sale plus a derivative purchase liability; the forward was required to be marked to market but MF Global used its own models to determine that the mark-to-market was so small as to be immaterial because Corzine was pretty sure the chances of default were low. PwC were unamused and advocated a mark-to-market that marked more to the actual market.

Corzine’s response was the best:2 Read more »

  • 12 Nov 2012 at 6:29 PM

Don’t Let Opportunity To Dress Yourself Exclusively In MF Global-Branded Apparel Pass You By

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Waxing nostalgic for the dearly departed brokerage firm? Don’t have any connection to the place or sentimental feelings for it whatsoever but in need of a new wardrobe? You’re in luck. An online auction of MF Global “memorabilia” is being held through Wednesday and all shit must go! Read more »

  • 12 Sep 2012 at 6:33 PM

Breathe Easy, JSC Capital Management Investors: Corzine Unlikely To Do Time Over MF Global

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Jon S. Corzine met with federal investigators last week to discuss MF Global Holdings and the estimated $1.6 billion that went missing from customer accounts when the brokerage firm failed, according to people familiar with the meeting. The discussions, held in New York over two days, were the first time the former MF Global chairman and chief executive spoke to Justice Department investigators about the New York company’s final days. The criminal investigators, as well as civil regulators at the Commodity Futures Trading Commission and Securities and Exchange Commission, have been probing MF Global’s demise to determine if there was any intent to remove money from customer accounts that should have been kept separate from the firm’s own funds under federal rules…Progress on the criminal probe has been slow, and people involved with the investigation say it is increasingly likely that no criminal charges will be filed. [WSJ, related]

Who Wants To Help Jon Corzine Launch A Hedge Fund?

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According to Dealbook, the big guy is merely “weighing” whether or not he wants to start one but it seems more than a little obvious this thing is happening. He’s got the office space, the passion, and the tattoo on his ass that reads “Each time a door closes, a bigger, more fucking awesome one opens.” Mornings at home with Maury followed by early afternoons with his Soaps were fun for a while but it’s not the life for him. He needs a desk and a purpose and that purpose is making you big money. All you have to give him is a little something called “2 and 20.” (3 and 50 if you really want to show your support.) Is that so much to ask? Hank Paulson, can he count on you for $100 million to start? Make it 250mm and the whole pushing him out of Goldman and driving a stake through his heart incident is forgotten. Get in on the ground floor.

  • 31 Jul 2012 at 2:05 PM

CFTC’s Exhaustive Internal Review To Determine Whether Or Not Jon Corzine And Chairman Gary Gensler Had A “Too Close” Relationship Reveals Corzine Was The Kind Of Guy To Make A Big Show Of Signing Up For Athletic Events And Coming Up With An Excuse Not To Do Them At The Last Minute, While Gensler Was The Kind To Smirk And Passive Aggressively Ask If You Were “Actually” Going To Do It This Time

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The memo even explored why Gensler ran the New York Marathon with Corzine’s number more than 20 years ago. According to the report, Gensler learned that Corzine had registered to run the 1991 race. Gensler asked Corzine’s secretary if Corzine was actually going to run. Several weeks later, the secretary informed Gensler that Corzine had decided against running and wouldn’t need the number, the memo said. The secretary gave the number to Gensler. [Bloomberg via DI]

  • 20 Jul 2012 at 4:46 PM

MF Global Wants That $20 Million It Never Borrowed Back

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The trustee unwinding MF Global Holdings brokerage wants to recover $20 million for customers from a commodities firm that extended a line of credit to MF Global in 2002. But the commodities broker, an affiliate of Koch Industries Inc., says there is one big problem with that: Neither the trustee, James Giddens, nor MF Global ever accessed any of the $20 million. In a Thursday filing with U.S. Bankruptcy Court in Manhattan, Koch Supply & Trading LP said the $20 million letter of credit was money that MF Global could access only if Koch breached its customer agreement with MF Global. As the money was never accessed and the agreement expired at the end of 2011, Koch says it shouldn’t have to pay anything. [WSJ]

  • 04 Jun 2012 at 2:14 PM

MF Global Treasury Employees Kept The Firm Afloat By Imagining It Had More Money

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If I were writing a 275-page report explaining What Went Wrong At A Big Thing That Went Wrong, and I knew the answer, I guess I would bury it somewhere around page 117 just to see if anyone was paying attention*:

The party of the first part forwarded the bailment documents to the party of the second part in accordance with provision (ii) of section 408(b) of the second amended and restated indenture (such provision, the “Provision,” and such second amended and restated indenture the “Second Amended and Restated Indenture”) and then Jon Corzine just wrote himself a check for $1.6 billion and walked out of the building with his hands in his pockets whistling a jaunty tune and pursuant to said Provision and certain other provisions of the Second Amended and Restated Indenture the indenture trustee for the party of the second part did take possession of said bailment documents for the benefit of the party of the second part.

Weirdly, though, the MF Global trustee report released today is actually pretty readable and, as these things go, a ripping good yarn. The lack of a pockets-and-whistling smoking gun appears to be due mainly to the fact that there are so darn many smoking guns.** Pretty much everyone was doing their best to blow up MF Global in the most embarrassing way possible, and at that, at least, they seem to have been successful. Read more »

  • 29 May 2012 at 1:47 PM

Woman Wants $150 Trillion-ish From MF Global, Thinks She Is Barack Obama

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Earlier this month, the Journal explored the difficulty MF Global customers have encountered in attempting to get their “missing” money back, after the firm went down for the dirt nap last October. One woman who can relate all too well? Barack Obama AKA Angela Dozier-Carter, who is owed $150 trillion and then some, of which she hasn’t seen a dime. Read more »

  • 25 May 2012 at 2:25 PM

Jon Corzine Bids Hoboken Adieu

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JSC has reportedly unloaded his waterfront penthouse, for $2.8 million. That’s 14 percent less than what he bought it for in 2008, which hurts, but on the bright side he’s got some money, if you’ve got any ideas.