The House Financial Services Committee has asked Mr. Corzine to attend a hearing scheduled for Dec 15 to inquire events leading up to MF Global’s collapse. Some observers are ringing the question whether the three major rating agencies had been clouded by Corzine’s star power to give a fair rating that realistically reflected its ailing conditions; the pending collapse of MF Global had only become obvious when Moody’s downgraded the broker-dealer to the edge of “junk territory”. As Deloitte’s forensic accountants appointed by the trustee are wrapping up with their reconstruction of books, it has found that missing client funds far exceeds the originally estimated USD600 million and can shoot beyond USD1.2billion.
CFTC first detected the missing client money managed by MF Global and issued subpoena for an investigation near the beginning of November. The agency then jointed hands with SEC and other exchanges such as the CME Group to see whether customer money was diverted at MF Global to meet its financial obligations. To date, MF Global has not accounted for the lost client money.
Upon joining in March 2010, Mr. Corzine was aspiring to turn MF Global into a full-fledged investment bank comparable to Goldman Sachs under his management. Anxious to realizing the vision, MF Global invested heavily in European debts under the Corzine’s directorship only to find itself entrenched in a downward spiral. Investors were alarmed about the health of the firm and its stock was in free fall by the last week of October.
WSJ report on rating firms’ role in the MF Global collapse can be accessed here.
Dealbook’s report on MF Global’s latest estimated shortfall can be accessed here.
The article from the New York Times Dealbook can be accessed here.