MF Global's Jon Corzine In the Spotlight
Senior Editor, CNBC.com
Former New Jersey Governor and Senator Jon Corzine is testifying to the House Agricultural Committee today about the collapse of MF Global, the financial company he led until shortly after its bankruptcy last month.
The “Ag Committee”—as its known on Capitol Hill—is interested in MF Global’s bankruptcy because farmers, ranchers and other agricultural businesses use firms like MF Global to reduce their risk to swings in commodity prices. Many of the Representatives on the committee have constituents who were customers of MF Global.
The $1.2 billion of customer money that is apparently missing from client accounts is likely to be of particular interest to committee members. Some members of the committee reportedly have constituents who had MF Global accounts that are frozen or missing funds.
In his prepared testimony, Corzine claimed to not have any knowledge about what happened to the funds.
"I simply do not know where the money is, or why the accounts have not been reconciled to date," he said.
Here are the latest updates:
4:16 p.m. : The hearing continues but this liveblog is done. We're moving on, even if Corzine cannot.
4:06 p.m. : When the cameras pan out, we get a good view of how empty the front of the room—where committee members are seated—really is. It must be very frustrating to have to sit at the witness table answering questions while the questioners themselves get to keep leaving the room.
4:03 p.m. : Congressman Schmidt focuses on Corzine’s repeatedly saying he never “intended” to authorize the commingling of segregated funds.
“Paint a scenario in which you could unintentionally do that,” he tells Corzines.
Corzine says that someone could misinterpret “we’ve got to fix this” as authorizing use of customer money.
3:47 p.m. : Good observation from the Twitterverse’s @reinman_mt: "I don't know all of the details." Again. The new Fifth Amendment.
3:41 p.m. : Congressman Scott of Georgia is obviously fed up with Corzine claiming ignorance and seeming to point fingers at the board of directors.
“Tell me this: what did you do at this company? Was it run by the board? Who made these decisions?” he asks.
Corzine responds by talking about the board. I wish I could have seen Scott’s face because he must have been freaking out. Finally, however, Corzine comes around to say that the investment decisions were made by him.
3:33 p.m. : Corzine has once again said he “never intended” to authorize the use of segregated funds to be moved out of segregated accounts. The continued use of “never intended” raises the question of whether he fears that he may have actually authorized the transfer without intending to do so.
3: 25 p.m. : We’re apparently now entering the comic stage of the hearing.
Congressman Scott asks what Corzine did “at that very second” he realized that the money was missing.
“Did you call the police? Did you run to the bathroom and throw up?” Scott asks.
“Stunned disbelief” is how Corzine describes his reaction.
“Go back and check you work was the first response,” Corzine says.
Is Corzine’s confidence that the money will be found just an extension of this initial skepticism?
3:14 p.m. : Congressman King spices things up with a challenge to Corzine. Would Corzine be willing to compensate MF Global’s customers with his “personal fortune.”
At first, Corzine tries to dodge the question by saying that he doesn’t think that “this will go unresolved.” When the Congressman keeps up the questioning, Corzine replies that he is “not prepared” to commit his personal resources to make customers whole.
That’s not exactly shocking. And the Congressman’s question seems a bit like political showmanship.
But Corzine’s original answer is more interesting, and hopefully some member of the Committee will press him further. Because Corzine just indicated that he thinks the missing funds will be found and customers made whole—which is contrary to the expectations of most people familiar with the investigation.
3:02 p.m. : Congressman Goodlatte is up next. He starts off by asking what role Corzine “personally” played in the segregation of customer funds and how often he monitored segregation.
Corzine’s response is that his job was to put in place a team but didn’t personally do anything at all with respect to segregation.
“I was aware that we had to make those calculations daily. But I didn’t look at them daily,” Corzine says.
This is a bit deceptive. When pressed, Corzine admits that he never actually looked at the calculations at all but was “assured” they were being made and submitted to the appropriate parties.
2:55 p.m. : We’re now getting to the good stuff. Who has the authority to move money?
“I believe it is a team of people in cash-financing and cash-management that have that authority. I don’t think it rests with any one individual,” Corzine says.
He says that he doesn’t know who the people were, however.
1:56 p.m. : At the start of the hearing, Chairman Lucas accidentally referred to "FM Global." As it turns out, FM Global is a real company. And they are a bit upset at the confusion.
"@FMGlobal is a large, US-based #insurer with NO ties to @MFGlobal. #FMGlobal," a company spokesman said on Twitter.
1:45 p.m. : The Committee is taking a break now so that the members can vote on the House floor.
1:30 p.m. : Lucas asks why Corzine was so confident in taking on exposure to European sovereign debt.
Corzine names a number of market indicators that he thought made the position attractive. But the biggest point in favor of buying the debt was “ongoing discussions” that led Corzine to believe the European Union would take more forceful steps to avoid sovereign defaults.
1:24 p.m. : Chairman Lucas is asking about MF Global’s chief risk officer, who reportedly warned Corzine about the position the company took in European sovereign debt. Corzine says that the CRO had a “different view” of sovereign default risk.
1:22 p.m. : Chairman Frank Lucas (R-Okla) asks his first question: Is there a shortfall in customer funds that MF Global was legally required to keep segregated?
Corzine responds that to there were accounts that could not be “reconciled.”
Why is there a shortfall?
Corzine responds that there were many transactions that occurred “in those chaotic” days. Says it “would be very hard for me to speculate why or where that shortfall took place.”
1:18 p.m. : By my count it took about Corzine about nine minutes to read his statement.
1:13 p.m. : Just as a reminder, you can read Corzine’s written statement here.
1:09 p.m. : Corzine has taken the witness table and is reading his prepared statement.
He’s dressed in a crisp white shirt, grey suit, and solid blue. Wearing expensive looking wireless glasses.
Probably the most interesting part in his opening remarks is that he points out that he has not had access to his notes from his time at MF Global. This could be a legal maneuver, allowing him to claim that any discrepancies between his testimony and the facts was caused by a memory lapse.
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