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The Growing Fallout From the MF Global Collapse

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    American Banker Editor-in-Chief Neil Weinberg on the collapse of MF Global.

  • Duration 5:24
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New developments tonight in the MF global bankruptcy.

That's a trading -- the blew up after mishandling up to one point two billion dollars of investor money.

Jon Corzine who led the company to -- Has now been called to testify before a congressional subcommittee joining me now Neil Weinberg editor in chief of American banker -- great to see you again.

Are we ever gonna find out what happened -- this money because at first we thought it was 600 million now -- one point two billion tomorrow -- you know with the Paper and it's going to be seven point two billion.

Well -- the fact is nobody really knows how much money it is now but it seems like a lot of money left the firm and this was client money.

That seems to have gone to counter parties people who either are asked to.

MF global to post more money because they were losing money or otherwise lost confidence in the firm so taking client money and using it for the firm's purposes is a big no no.

The out you're not supposed to do that -- -- -- segregate never supposed to -- the client money.

Will we ever get their money back I think that's a question that all -- that customers are asking -- some of them.

Are being made partially whole but now the trustees say that there are only gonna get something like 60% of their money at best.

Sure it's entirely possible that they won't get all the money back and the other question of course is.

Where is the money how much of it can be recouped some of it there is some money on balance but most of that has been paid out and the customer money that has disappeared the far higher balance than the amount that actually what they have found so far so there's a lot of questions about where the money isn't getting much will come back.

No kidding you know Jon Corzine former governor New Jersey right he ran Goldman Sachs for goodness -- -- -- -- man.

Who has been widely respected and now it's.

-- accusations are really on him that he was really gambling the firm's money on a wild bed on Europe.

As as regular investors look at this it seems like it just one more reason not to trust the stock market not to win best.

What do you make of those kinds of attitudes kinds of concerns.

In terms of sort of the cynicism about Washington and Wall Street this couldn't come at a worse time particularly when you look at how this was a nexus of former Goldman people.

Gary Gensler who's the head of the Commodity Futures Trading Commission who oversees this supposed to be the cop on the beat.

-- very far he had to recuse himself because he was so buddy buddy with Jon Corzine back at Goldman -- so yes this is gonna -- You know increase the level of cynicism if that's possible Jerry.

And and where were the regulators because wasn't up for exposed to stop all of this weren't we supposed to not have these problems anymore and all of a sudden another one point two billion goes up in flames.

We got reams and reams of new regulations and obviously this hasn't helped you know I think you can't put too much faith.

In micromanaging these firms it really doesn't work and obviously you can't have a cop on the beat who's gonna see everything if you have someone who's really determined to get around the system -- you actually think they're too many regulations not enough.

I think the regulations are horribly complex you need some very simple things like may be criminal penalties may be a high amount of capital for banks so that if they do -- mess up and they don't get caught which seems to happen in cycles that there's some money there to pay for.

And not necessarily a whole re writing of the regulatory scheme which is what we did with Dodd-Frank.

Agency is exchanging -- at exchanges not sharing information I know you're concerned about CME that's.

The commodities exchange at this particular firm cleared through.

Let's look at their stock price because their concerns are gonna get sued in this.

What do you make of the idea that maybe CME is in part response.

00 CME could certainly face some major legal liabilities and financial liabilities here in the CME.

Is an exchange -- to so called self regulatory organization it's supposed to be one of the cops on the beat.

Along with the feds -- that I love that phrase self regulatory -- -- -- Well I mean we've we've found time immemorial that didn't work -- -- which is supposed to oversee stocks that hasn't worked with a New York Stock Exchange over time.

Of course you get back to the analogy of the fox guarding the -- -- here.

Absolutely.

I'm wondering if Jon Corzine is gonna go to jail.

That's the big question are these criminal penalties he could face what will happen to him.

There's no question there are criminal implications here if this money client money was taken and used for certain purposes for the firm then yes there could be criminal securities fraud charges filed here.

Whether Jon Corzine knew about it and whether this would go all the way up the food chain.

Whether there would be a Paper trail or some other form of evidence obviously is a question for courts to decide.

-- he did higher criminal defense turn our only four days after the company went bankrupt so yeah I think Jon Corzine saw what was coming.

And I you just.

Have to think that.

Maybe he was just a little too cozy with these regulators do you think -- too cozy with the regulators it's also manner shown a lot of hubris over the years Jerry I mean he gets into the senate has now I wanna be a governor gets to be the governor doesn't Wear seat -- on the New Jersey Turnpike it's.

Aren't and he's a predator BTR a DER not -- TOR I trader who.

Likes to take big risks so that's obviously what he did he took the sleeping commodities firm he got there and he tried to turn it into -- -- Goldman Sachs with obviously out the risk management that Goldman.

Whether you love them or hate him is famous for.

I'd say there's one is a good news out of this.

That in that global is not being bailed out.

That is true I -- I feel sorry for the investors but at the end of the day I just wanna see taxpayer money going to something -- so -- actually there's a little bit of capitalism at work future.

Who would punk with a Neal thanks for coming in its illustrates the U.

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