As posted earlier, Jon Corzine's full statement to the House Agriculture Committee has been released.
It appears that Corzine will actively answer the Committee's questions and undoubtedly the key moments from the hearing will come from those likely tense and potentially volatile interchanges.
For now, it is worth taking a close look at the key sections of his prepared testimony and their implications, beyond the biggest takeaway that Corzine has "no idea where the money went."
1) He's really sorry.
"I appear at today’s hearing with great sadness. My sadness, of course, pales in comparison to the losses and hardships that customers, employees and investors have suffered as a result of MF Global’s bankruptcy...I apologize to all those affected"
2) He has not been able to look at his notes.
"I must make clear that since my departure from MF Global on November 3, 2011, I have had limited access to many relevant documents, including internal communications and account statements, and even my own notes, all of which are essential to my being able to testify accurately about the chaotic, sleepless nights preceding the declaration of bankruptcy."
3) January would have been more convenient.
"The Members should also understand that the Committee turned down my request to testify voluntarily in January. I had hoped that, by that time, I would have obtained and reviewed relevant records so that I could be more helpful to the Committee."
4) Everyone says that I was risk crazy, but I reduced leverage.
"One of the recurrent themes in the media has been that MF Global took on too much risk during my tenure, in particular the amount of leverage that MF Global bore at the time of its bankruptcy. In fact, MF Global reduced leverage. In the quarter ended March 31, 2010, MF Global’s leverage was 37.3. During my tenure, it was consistently around 30." [Note: leverage and risk can be related but are not the same thing]
5) The accountants forced me to take the underlying debt from repurchase to maturity transactions (RTMs) off the MF Global Balance sheet.
"It is my understanding – and I do not claim to be an accountant – that under the applicable accounting principles, MF Global was required to recognize its profit immediately in RTMs, and the asset (the debt security) and the liability (the money owed to the Counterparty) must be “de-recognized,” i.e., removed from MF Global’s balance sheet."
6) Everyone at MF Global wanted to put on the Euro sovereign debt trade, not just me.
"MF Global’s involvement in RTMs involving European sovereign debt securities was the subject of internal discussions with the company’s traders, senior managers, and the board of directors."
7) Sometimes we went over our risk limits, but it was ok.
"On a few occasions, however, the chief risk officer reported that the firm had exceeded its limits with respect to a particular country. I recall, for example, one occasion on which the limit was exceeded because the Euro gained value against the dollar, and the risk limits were set in dollars. On the occasions on which the firm exceeded the country limits, it nonetheless remained within the overall limit and took appropriate steps...to bring its level of exposure back within the country limits."
8) My contact with officials during the proposed CFTC Rule 1.25 changes were very limited. That includes CFTC Chair Gary Gensler.
"From the time that I joined MF Global through October 30, 2011, to the best of my recollection, I spoke with Chairman Gensler on only limited occasions. In addition to those contacts set forth above, I had a meeting with him in or about May 5, 2010, and I also met with him in or about December 2010. Those meetings were at the CFTC in Washington, and on those occasions there were other officials from the CFTC present."
9) MF Global's losses reported in its last earnings report was not related to repos.
"...it is important to make clear here that the loss was not related to those positions. The lion’s share of the quarterly loss was a writeoff of approximately $119.4 million that reflected a valuation adjustment against a deferred tax asset. That asset had been created by years of (non-RTM) tax losses cumulated (mostly before I arrived at MF Global) in the firm’s United States and Japanese subsidiaries, which had allowed MF Global to recognize as an asset potential tax benefits – equal to $119.4 million – in future years.
10) I did not participate in MF Global operations, such as clearing trades or moving money—and I also didn't understand a lot of the regulations in the area—thus I don't know what happened to the customers' missing funds.
"As the chief executive officer of MF Global, I ultimately had overall responsibility for the firm. I did not, however, generally involve myself in the mechanics of the clearing and settlement of trades, or in the movement of cash and collateral. Nor was I an expert on the complicated rules and regulations governing the various different operating businesses that comprised MF Global." [emphasis added]
11) There were a lot of transactions in MF Global's last days, and anyone—employees, counterparties, banks—could have made an error.
"Moreover, there were an extraordinary number of transactions during MF Global’s last few days, and I do not know, for example, whether there were operational errors at MF Global or elsewhere, or whether banks and counterparties have held onto funds that should rightfully have been returned to MF Global. I am sure that the trustee in bankruptcy, the SIPC receiver, and the regulators are working to answer these questions and to understand precisely what happened during the firm’s last days and hours."
This story originally appeared on Business Insider
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