MF Global is not the first firm to be done in by bad bets in the casino known as Wall Street, nor will it be the last. With many questions still unanswered – perhaps most importantly what exactly happened to the $630m of customer money that was required to remain in segregated accounts – attempting to divine the meaning of its collapse may be premature. But a first rough draft of the meteoric history of the brokerage company offers a few lessons and timely reminders.
This first post-Dodd-Frank failure of a significant financial institution provides an opportunity to assess the quality of regulatory oversight. The judgement may ultimately confirm the fears of those who doubted the efficacy of the recent regulatory reform legislation. Once again, we appear to be confronted by a company that was supervised by a patchwork of regulators, none fully in charge.
Let’s also be careful not to see only what we wish in the MF Global collapse. I reject the notion that this is another example of financial industry compensation run amok. Mr Corzine received a salary of $1.5m, a signing bonus of $1.5m and $11m of stock options, very small beer by Wall Street standards. While it’s unquestionably true that he had more to gain financially from a success with MF Global than he had to lose in its collapse, in the end he lost something far more valuable, he lost his reputation. Continue reading »