If We’re Not Going to Indict Jon Corzine – and We’re Not – Shall We Try Regulating Him (and Others)?
Maybe the Department of Justice reads YCharts. Just a few weeks ago Jeff Bailey wrote here that it’s time to stop obsessing about when we’re going to see bankers in orange jumpsuits. Now the New York Times is reporting that the Feds are unlikely to bring a criminal case against anyone involved in the MF Global blowout.
In fact, instead of going to jail, MF Global chief Jon Corzine may start a hedge fund.
Fine, if that’s how it’s gonna be. But for this to work, the government has to pay attention to the second half of our argument: that it’s time to get practical and start regulating. As Bailey pointed out about the major banks, “any one of them is big enough to sink the Federal Deposit Insurance Fund and require another federal bailout, with but one stupid move.”
And thanks to the magic of leverage, you don’t have to be a big bank to do serious damage to the marketplace. A Corzine-led hedge fund could do plenty.
What's worrisome about the current situation is that despite all the tearing of hair and rending of garments in the wake of the financial crisis, regulators seem just as lousy as they were before the meltdown. JPMorgan’s (JPM) London Whale disaster is one example of that, as everyone from the Office of the Comptroller of the Currency to the Federal Reserve missed that one.
MF Global is another example. Like the banks, MF Global reported to a patchwork of regulators, from CME Group to the Commodity Futures Trading Commission, historically a weak regulator held captive by the futures industry -- in other words, by CME Group (CME).
It seems hard to believe that anyone would still invest money with Corzine at this point, but it sounds like he believes otherwise. Hear that, CFTC folks? There’s no time like the present to start doing your job.