Jon Corzine seems to be out of a job: MF Global, the Wall Street commodities and derivatives trading firm that the former New Jersey governor and Goldmanite joined in early 2010, is going bust. This morning, shares of the firm were halted for trading and bankruptcy preparations and asset sale began; the Federal Reserve says it will take a harsh line with MF Global. No help from above forthcoming here.
The firm ran into trouble because of its position relative to European debt — a risky approach that, says Reuters, has an awful lot to do with Corzine.
Corzine could have shrunk MF Global's balance sheet or restructured. With the support of the board — which in a recent regulatory filing applauded Corzine's choice — he embarked on the strategy of transforming the company into what the filing described as "a commodities- and capital markets-focused investment bank."
While before, MF Global would link buyers up with sellers, or place trades on an exchange, the company would now hold an inventory of securities, potentially sitting on positions for longer, and betting on their price movements.
Carrying inventories usually requires more capital. But it seemed like a good move at a time when larger banks such as Goldman were being forced to limit their risk-taking because of increased regulation, according to a company presentation.
It was a big change for MF Global's employees, who had been more used to a conservative approach from management.
Corzine will take a hit to the pocketbook — his signing bonus came in the form of MF Global shares — and to his reputation: His name probably won't be floated as a possible Tim Geithner replacement any longer.