From MarketWatch: You may be watching the news about MF Global and shrugging. You may think, “minor blowup on Wall Street, few injured.” But you’d be wrong. What just happened at MF Global illustrates everything wrong with the U.S. economy. That’s right: It’s all here!
1. Spin, spin, spin On Oct. 25, just days before the company collapsed, Corzine told investors that MF Global’s exposure to European government bonds was fine. These were “opportunities” to make good money, he said, and the position was “fully financed.” He added: “We remain confident that we have the resources and expertise to continue to successfully manage these exposures to what we believe will be a positive conclusion in December 2012.”
And this was in print — no mere throwaway quote on a phone call. Corzine added that over the past three months, a few things really stood out. “We were particularly pleased with the repositioning of our mortgage, credit and foreign exchange businesses; the performance of our commodities group; and the common alignment of our brand to strategy. These efforts reflect positively on our ability to execute and deliver competitive returns to shareholders in the quarters ahead.” Ah, good times!.
2. Don’t think, just tick boxes MF Global blew up because it took big risks and they didn’t pay off. But that’s okay. The company had a risk management “process,“ so everything was just peachy keen.
“The Company’s risk-management framework is an integral part of our control structure,” it boasted in is most recent quarterly filing. “Our risk management approach emphasizes compliance with our risk management policies and practices and each employee’s responsibility to function as a risk manager.”
3. Heads they win, tails they flip again You’ll probably hear a lot in the days and weeks ahead about how much Jon Corzine and the other honchos have just “lost” on their MF Global incentive payments, restricted stock, and options. Ignore it. The options racket is grossly misunderstood by the wider public, which is, I suppose, just how the honchocracy like it….
Read the rest at http://www.marketwatch.com/story/mf-globals-risk-mismanagement-2011-11-01
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