April 24, 2024

DealBook: House Panel Subpoenas Corzine to Testify in MF Global Inquiry

Jon S. Corzine, the former chief of MF Global.Pool photo by Andrew HarrerJon S. Corzine, the former chief of MF Global.

9:02 p.m. | Updated

Jon S. Corzine, the former chief executive of MF Global, faces up to three Congressional subpoenas, as lawmakers seek to question him about the collapse of his brokerage firm.

The House Agriculture Committee voted unanimously on Friday to force Mr. Corzine to appear at a hearing next Thursday about MF Global, where as much as $1.2 billion in customer money remains missing. Customers of the brokerage firm included farmers and agriculture companies, as well as hedge funds and other investors.

The committee’s hearing will present the first public questioning of Mr. Corzine since MF Global filed for bankruptcy on Oct. 31. Mr. Corzine ran MF Global before he resigned on Nov. 4.

“We agree that his testimony is essential to fulfill our objectives on behalf of our constituents and to complete the hearing record,” the committee’s chairman, Frank Lucas, Republican of Oklahoma, said at the committee meeting.

Mr. Corzine also faces demands to testify from two other Congressional panels. The Senate Agriculture Committee will meet on Tuesday to vote on issuing a subpoena to Mr. Corzine, a move that comes after he did not voluntarily testify by a Friday deadline. The other panel, the oversight subcommittee of the House Financial Services Committee, will meet on Wednesday to vote on issuing a subpoena to Mr. Corzine.

“For the past week, we led a good-faith effort to obtain his testimony voluntarily,” Representative Randy Neugebauer, the House panel’s chairman and a Republican from Texas, said in a statement. “Unfortunately, it has become clear that is not possible so the subcommittee will meet to consider the issuance of a subpoena.”

The disappearance of the customer money from MF Global has also spawned a sprawling federal investigation, with the Commodity Futures Trading Commission leading the search for the missing money and the Federal Bureau of Investigation examining a potential criminal case. The trustee overseeing the liquidation of MF Global’s brokerage unit is also hunting for the customer cash.

Mr. Corzine has not been accused of any wrongdoing. A representative for Mr. Corzine declined to comment.

The Congressional hearings will be an awkward return to Capitol Hill for Mr. Corzine, who spent five years in Washington as a Democratic senator from New Jersey. He left his Senate seat to become the governor of New Jersey, a job he lost in 2009.

The House Agriculture Committee’s hearing will be quickly followed by the two other Congressional hearings examining MF Global. The Senate Agriculture Committee will hold its hearing on Dec. 13, and the oversight panel of the House Financial Services Committee will hold a hearing on Dec. 15.

In a preview of the coming hearings, members of the Senate Agriculture Committee on Thursday aggressively questioned MF Global’s regulators about the firm’s collapse. With the customer money still missing more than a month after the firm’s Chapter 11 filing, lawmakers noted, some futures industry customers are losing patience.

“MF Global has shattered the faith of customers in the futures markets,” Debbie Stabenow, a Michigan Democrat and the committee’s chairwoman, said at that hearing.

Article source: http://feeds.nytimes.com/click.phdo?i=386a20f91883b30274ab48cfbe5a0b0a

DealBook: Regulators Pledge New Rules After MF Global’s Demise

Gary Gensler, chairman of the Commodity Futures Trading Commission, testifying at a Senate Agriculture Committee hearing.Joshua Roberts/Bloomberg NewsGary Gensler, chairman of the Commodity Futures Trading Commission, testifying at a Senate Agriculture Committee hearing.

8:22 p.m. | Updated

Federal regulators are considering a flurry of new rules for the brokerage industry after MF Global’s collapse and the revelation that customer money is missing from the firm, top officials told Congress on Thursday.

The Commodity Futures Trading Commission will vote next week on a rule that would restrict the industry’s use of customer money, and the Securities and Exchange Commission could soon enforce new accounting disclosures for brokerage firms. MF Global’s bankruptcy has also renewed calls for federal regulators to more closely monitor brokerage firms rather than continue to outsource oversight duties to for-profit exchanges like the CME Group.

Such self-regulatory organizations are “the front line” of oversight, Gary Gensler, chairman of the trading commission, told the Senate Agriculture Committee, which is examining MF Global’s downfall. The committee will hold a second hearing about MF Global on Dec. 13.

Mr. Gensler said he planned to complete new constraints on risky bets with customer money. Brokerage firms can now invest client money in a range of securities, including sovereign debt. Firms can also, in essence, borrow from their customers, using client money for a loan to the firm.

“We need to tighten that up,” Mr. Gensler told the committee. “I think it’s important that we limit how funds can be used.”

The agency planned to finish the rule earlier this year, but delayed the changes amid a fierce lobbying campaign by Jon S. Corzine, who at the time was the chief executive of MF Global. The rules were unnecessary, Mr. Corzine had argued, because federal laws already prevented brokerage firms from mixing client money with company money.

But in MF Global’s final days, the firm broke that sacrosanct rule. Investigators now fear that MF Global tapped anywhere from $600 million to $1.2 billion to meets its own financial obligations.

Regulators are also examining MF Global’s risky bets on European sovereign debt, positions that caused a crisis of confidence among ratings agencies, the firm’s creditors and regulators. MF Global financed those positions through off-balance-sheet deals known as “repurchase to maturity” transactions.

On Thursday, lawmakers asked why the firm was allowed to keep regulators in the dark about such transactions.

“That is a loophole so big you can drive a Mack truck through it,” said Senator Kent Conrad, Democrat of North Dakota. “If that’s not closed, we should ask ourselves what we’re doing.”

Mary L. Schapiro, chairwoman of the S.E.C., said her agency was already considering such a crackdown. The agency, Ms. Schapiro said, was also investigating whether MF Global violated accounting rules.

“We are investigating very carefully both the accounting treatment and the disclosure by the firm,” she said at the hearing.

Article source: http://feeds.nytimes.com/click.phdo?i=f4083dbcf2836343ac52bfa25b8b4e0e