MF Global: Beyond crony capitalism

You might remember that a great deal of regulation was put into place to “protect consumers” from financial misrepresentation. Various new procedures would make certain that businesses were on the up-and-up. Of course, we’ve seen huge amounts of failure in the “green jobs” arena, but these are special cases, Protected by Special Relationship. They don’t operate by the same rules.

But consider MF Global: Not necessarily the same sort of Special Relationship, though the head of the company (until yesterday) was a Democrat politician — a Senator and recent Governor of New Jersey.

The company as recently as August put out a strong, positive outlook to raise money. They had checked their own risk-assessment mechanisms, and everything was A-OK and in accordance with all the new regulations.

And on October 25 of this year, Corzine was really upbeat:

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 … 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.”

One week later, they filed for bankruptcy.

The regulations that have worked so well here (but that cost smaller businesses so much in compliance that some cannot afford it) have shown themselves to be simply decoration when it comes to crony capitalism. So, the Obama administration would like to see them implemented world-wide. There is no experimental result that can ever convince these folks that something was a bad idea.

Not even communism, intentional killer of more than 100,000,000 people in the last century — but that’s a separate topic.

Ah, the New York Times has an opinion about Jon Corzine of MF Global and why he went wrong: He was just too darned intelligent. He worked hard to lift himself up from poor beginnings, and made a lot of money based on merit. The very idea of a meritocracy, that people are valued because of their worth, is attacked in this opinion piece as what is wrong with America.

Now, the fact that Mr. Corzine was giving rosy pictures of the company’s future one week before they filed for bankruptcy might mean that he was stupid, or it might mean that he was crooked, or both. But it does NOT mean that he was just too smart.

===|==============/ Keith DeHavelle