We were going to try not to obsess over this, but the WSJ’s live blog of former MF Global CEO Jon Corzine’s House Committee on Agriculture hearing today is irresistible. A couple of things jumped out at us.
Not Corzine. He is apparently another Washington DC zero. No wonder New Jersey went for Chris Christie. He had no idea what was going on and said so. What really stood out was the posturing by the politicians and the *ss-covering by the bureaucrats.
Democrats, naturally, called for more regulations, defended regulators and proposed MORE regulation. One genius, Collin Peterson (D-Minn) stood up for the CFTC. He said blaming the MF Global regulator for the MF Global bankruptcy is like blaming the police officer after a break-in.
Don’t even try to make sense of that. Police officers are not charged with regulating the behavior of burglars before the crime takes place. Duh.
The head bureaucrat in charge of the CFTC (Commodity Futures Trading Commission), Jill Sommers, said it wasn’t her agency’s fault.
“They weren’t watching MF Global’s $6.3 billion European bet because it wasn’t in the futures unit. [The bet was] made by MF Global’s broker-dealer business. Which makes one wonder: Which regulator was supposed to be watching the overall health of the firm? And why weren’t the different regulators talking to each other more?” blogged a WSJ reporter.
Who was supposed to be watching the overall health of the firm??? The CEO, the employees, the board of directors, that’s who! And it turns out there was a risk manager who actually was warning the board about Mr. Corzine’s risky bets on Eurobonds and sovereign debt, but he was ignored. Finally, he quit or was fired.
Investment lesson: Regulation doesn’t protect anybody. Companies and their employees want their business to succeed and grow, not spin out of control and collapse. Yeah, yeah, we know – they’re greedy.
That doesn’t make any sense either in the context of whether regulation will save a company or a consumer. It won’t. If the company was not protected by a pretend veil of safety and if failed companies are allowed to fail and if other companies see them failing … there is your regulation. It’s called the market – if it’s allowed to operate without hindrance.