Is it any wonder we have federal budget difficulties? Take a gander at the money management skills at former Senator Jon Corzine’s MF Global firm and you witness activities that give a whole new meaning to the term “shell game.†What has emerged about the frantic transfers of funds during MF Global’s final days before bankruptcy is disturbing on so many levels, but there are two shining exemplars amongst the rubble and now emerging ruffian tactics of the firm taking money from Peter to pay Paul, even as Peter was clueless about the use of his funds. Oh, what backbone was demonstrated amongst the desperation!
As MF Global tried to transfer funds to settle accounts with trading partners, the folks at JPMorgan Chase put out a big, “Whoa, partner!†and questioned the source of the funds being used. The bank with a backbone inquired as to whether MF Global was using customer account funds in violation of CFTC rules. JPMorgan wouldn’t even take the assurances of a backroom flunky that MF Global responded with; it wanted Mr. Corzine to provide a written guarantee that the funds were not coming from customer accounts. That wily chairman Corzine handed the request for a written guarantee off to MF Global’s general counsel, Laurie Ferber. Ms. Ferber refused such assurances on the grounds that MF Global did not provide such special assurances.
Now, the Barometer realizes that Ms. Ferber’s response was both code and protective language because no lawyer with an IQ over 30 would have signed his or her name to such an assurance when said counsel had probably figured out that MF Global’s books and records would have finished first over Berford’s Gas and Guzzle in a contest for seat-of-the-pants efforts on cash-flow accuracy and internal controls. MF Global filed for bankruptcy two days after the Ferber refusal. Be that as it may, when an elephant flies, you don’t fault it for not staying up in the air long enough.
The bottom line is that both JPMorgan Chase and Ms. Ferber did the right thing – they refused to allow transactions to go through that might be in violation of the law – transactions that would result in the depletion of customer accounts. They both showed backbone and stood up to Mr. Corzine, a powerful political and Wall Street figure. Through their actions they threw down the penalty flag and stopped the game. When we are treated to a witness of backbone, hope springs eternal for market trust. Next time, just throw down the flag a bit earlier so that Peter doesn’t lose so much.
