Corzine Apologizes For MF Global Collapse

Transcripts from House Agriculture Committee Hearing....
The House Agriculture Committee today held a hearing to examine the MF Global bankruptcy. Former CEO Jon Corzine, subpoenaed by the committee, was the star witness. Corzine was a US Senator and Governor of New Jersey before taking over MF Global. He joined the firm in 2010 after losing his re-election bid for governor. In a prepared statement, he apologized for the collapse of MF Global. Download Corzine's testimony here {PDF}

"I appear at today’s hearing with great sadness. My sadness, of course, pales in comparison to the losses and hardships that customers, employees and investors have suffered as a result of MF Global’s bankruptcy. Their plight weighs on my mind every day –- every hour. And, as the chief executive officer of MF Global at the time of its bankruptcy, I apologize to all those affected."

Below, opening statements from House Agriculture Committee Chair Frank Lucas (R-OK), and Ranking Member Collin Peterson (D-MN).

Witness list:

Panel 1

The Honorable Jill Sommers, Commissioner, Commodity Futures Trading Commission, Washington, D.C.

Mr. James Kobak, Lead Counsel for the Trustee for the Liquidation of MF Global Inc., New York, New York

Panel 2

The Honorable Jon Corzine, Former CEO, MF Global Inc., New York, New York

Panel 3

Mr. John Fletcher, General Manager, Central Missouri AGRIService LLC, on behalf of the National Grain and Feed Association, Marshall, Missouri

Mr. Terrence Duffy, Executive Chairman, CME Group, Inc., Chicago, Illinois

Mr. William J. Brodsky, Chairman and CEO, Chicago Board Options Exchange, Chicago, Illinois
Mr. Dan Roth, President and CEO, National Futures Association, Chicago, Illinois

Mr. Stephen Luparello, Vice Chairman, Financial Industry Regulatory Authority, Washington, D.C.

Mr. Gerry Corcoran, Chairman and CEO, R.J. O’Brien & Associates, on behalf of the Commodity Markets Council, Chicago, Illinois

Chair Lucas's statement, as prepared for delivery:

Thank you for joining us for this important hearing. I'd first like to thank the Ranking Member and his staff for their help in pulling this hearing together. I'd also like to thank our witnesses for being here.

Each Member of this Committee understands the importance of the futures markets for farmers and ranchers across the country.

For decades, futures markets have been a trusted tool for businesses seeking to manage risk. The bedrock of their trust in these markets is based on the fundamental protections provided by mandatory segregation of customer funds.

This has supported explosive growth and innovation in futures products in recent years, providing farmers, ranchers and businesses throughout the economy with risk management tools. These tools allow businesses to reduce the volatility in the price of goods and services for consumers.

Unfortunately, the very cornerstone of the futures markets, customer funds segregation, has been severely and suddenly called into question.

On October 31, 2011, MF Global Holdings filed for bankruptcy, after revealing that a substantial amount of customer funds were missing. There are now reports that as much as much as $1.2 billion may have disappeared.

Dozens of my constituents have been left not only without their property, but also without answers about why and how this happened. I know my colleagues have all heard similar stories from constituents who now lack confidence in the system that has served them well for years.

Today, this Committee will examine the bankruptcy of MF Global. From the start, I'd like to make it clear that our intent is not to sensationalize the events that have unfolded. And we are not here today to simply or haphazardly point fingers and place blame.

We take seriously that we have asked both the Trustee and the relevant regulatory organizations to appear before us. And we realize that this inevitably diverts their time and resources from the most critical objective at this time: to recover and return to customers the property that belongs to them.

However, it is critical that this Committee shed light on the circumstances surrounding the bankruptcy, to insert additional facts and information into the public domain and to dispel much of the confusion and misinformation that exists.

A deeper and more comprehensive understanding of the facts will put us all in a better position to address this situation and begin to restore confidence in the futures markets. This is the objective of the hearing today.

To that end, last week this Committee took extraordinary action to compel witness testimony that is essential to understanding the whole picture and building a comprehensive record.

I assure you, both the Ranking Member and I do not take this action lightly.

Lastly, it is important to stress that this hearing is not simply a check-the-box exercise. This Committee will continue to monitor the investigation into MF Global's actions and will work to ensure that customers receive fair treatment throughout this process.
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Rep. Peterson's opening statement, as prepared for delivery:

“Good morning and thank you Chairman Lucas.

“As the Chairman said, today’s hearing is to review the bankruptcy of MF Global, potentially the eighth largest bankruptcy in history. Given that futures customers, particularly those in agriculture, were affected by MF Global’s collapse it is necessary that we hear directly from all those involved and find out who knew what, and when they knew it.

“I want to thank Chairman Lucas for granting my request to have this hearing. The Committee has held plenty of hearings about problems that may or may not occur regarding the implementation of Dodd-Frank. Given the serious problem that currently exists for the thousands of futures customers of MF Global, I think it is appropriate that we refocus our attention.

“After the bankruptcies of Bear Stearns and Lehman Brothers, the subsequent financial collapse in 2008, and the passage of historic financial reform legislation, it is pretty amazing that we’re in this situation. It appears to me that no one has learned a thing; that Wall Street is operating as if 2008 never happened. From all accounts, MF Global was leveraged as much as 40 to 1, far higher than either Bear Stearns or Lehman Brothers when they folded. Ironically, it is very possible that there is nothing in Dodd-Frank that would have prevented MF Global’s financial collapse. That’s why I think we should tread very cautiously before rolling back Dodd-Frank’s protections. Given what happened here we should probably be talking about strengthening Dodd-Frank, not weakening it. Three big financial firm bankruptcies over a three year period is not a track record that should be extended.

“During the 2008 financial crisis, futures markets continued to function smoothly. When Refco and Lehman failed, their regulated commodity customer accounts were transferred to other futures commission merchants with no disruption. Wall Street, apparently not content to sully its own reputation, has now stained our well-run futures markets by apparently violating the supreme law – protection of customer funds.

“The futures industry helps farmers, manufacturers, energy companies, and a host of other industries mitigate risk so they can go about growing, producing, generating, and making the things that make this country run. We need to get to the bottom of what happened with MF Global as quickly as possible in order to restore a confidence that has been greatly shaken. We cannot let one company succeed in undermining an industry that has operated safely for customers for decades.

“Unfortunately, some of my friends on the other side of the Capitol seem hell-bent and ready to assign blame for MF Global to the CFTC for what they perceive as failing to do their jobs. Do we blame the police officer the day after our house gets broken into? Of course not. The futures world operates with a self-regulatory system of oversight because the CFTC cannot afford to put a watchdog into every futures commission merchant. And, if these Members had their way, the Commission would get even less funds than they do now. This blind rush to judgment fails to take into account how the self-regulatory system works, and in my view, undermines it.

“On a personal note, I find the press accounts expressing surprise that the Agriculture Committee could approve something as serious as a Congressional subpoena, unanimously on a bipartisan basis, quite amusing. The Committee’s oversight of the futures and derivatives markets is a responsibility that I do not take lightly. On these issues, the Committee– more often than not – will work across party lines because when it comes to matters affecting the financial health and stability of our country, partisan games have no place. I know that’s not something the press is used to seeing from Congress, but it’s how we do things on the Ag Committee.

“Here at the House Agriculture Committee, we are focused on the facts. It is the facts that will tell us what happened, who knew about it, and consequently, who was responsible. Only by uncovering the facts, can we prepare ourselves for policy responses that are necessary to address what has happened. That is what this hearing is all about.

“Again, I thank the Chair for holding today’s hearing and am hopeful that today’s witnesses will shed some light on what exactly was happening at MF Global.”

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