# Jon Corzine is being framed by the media and Congress **URL:** \ **Category:** Great Debates\ **Created:** [December 8, 2011, 8:36pm UTC](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556 "2011-12-08T20:36:16Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![elbows](https://avatars.discourse-cdn.com/v4/letter/e/b3f665/32.png) [@elbows](https://boards.straightdope.com/u/elbows)\ **Post date:** [December 11, 2011, 3:52pm UTC](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556/41 "2011-12-11T15:52:52Z")
Why not actually criminalize white collar crime substantially? I mean, through the whole bad books, bad accounting there had to be certified accountants, auditors, lawyers. That’s many people, in a position to know better, who failed to act. Those people should lose all of their accreditations and pay the sort of fines that cost you your retirement account! Cooking the books isn’t a one person crime and it’s time for only one person going to jail/facing life altering consequences, to end, I say. ---
**Author:** ![Linden\_Arden](https://avatars.discourse-cdn.com/v4/letter/l/53a042/32.png) [@Linden\_Arden](https://boards.straightdope.com/u/Linden_Arden)\ **Post date:** [December 11, 2011, 3:59pm UTC](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556/42 "2011-12-11T15:59:17Z")
> [@elbows](#): > > Why not actually criminalize white collar crime substantially? I mean, through the whole bad books, bad accounting there had to be certified accountants, auditors, lawyers. That’s many people, in a position to know better, who failed to act. Those people should lose all of their accreditations and pay the sort of fines that cost you your retirement account! Cooking the books isn’t a one person crime and it’s time for only one person going to jail/facing life altering consequences, to end, I say. You’re right. But prosecutors have a tough job even with existing laws. But they do get caught sometimes - famously. Skilling and Fastow (Enron) Ebbers and his CFO (Worldcom) Kozlowski (Tyco) Rigas family (Adelphia) They do happen. But many wrongly assume anyone who worked on Wall St is a criminal. Its just wishful thinking on their part. In fact I would bet Wall St has LESS white-collar crime than Main St. ---
**Author:** ![SpoilerVirgin](https://avatars.discourse-cdn.com/v4/letter/s/4491bb/32.png) [@SpoilerVirgin](https://boards.straightdope.com/u/SpoilerVirgin)\ **Post date:** [December 11, 2011, 4:18pm UTC](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556/43 "2011-12-11T16:18:13Z")
> [@Linden\_Arden](#): > > They do happen. But many wrongly assume anyone who worked on Wall St is a criminal. Its just wishful thinking on their part. In fact I would bet Wall St has LESS white-collar crime than Main St. While not everyone on Wall Street is a criminal, it is absolutely possible to be a jerk and an idiot on Wall Street without engaging in criminal behavior. Assume for a moment that there was no missing money at MF Global. The fact that Jon Corzine took a 230 year-old respected firm and used it to make risky proprietary trades, basically lost the entire firm, putting people out of work and severely disrupting agricultural markets, makes him a jerk who is not worthy of respect even if there is absolutely no crime involved. The idea that “everything I did was legal, and therefore perfectly O.K.” may fly on Wall Street, but it doesn’t fly on Main Street. I’m angry about criminals on Wall Street, like Bernie Madoff, but there will always be some people who are criminals everywhere. What makes me angrier is a Wall Street culture that is based on getting away with bad behavior no matter who gets hurt as long as it sticks within the law. BTW, I am a party line liberal Democrat and a strong Obama supporter and I am thoroughly disgusted and appalled by Jon Corzine. I hope that he is thoroughly punished either by the civil or criminal courts, and that he is condemned in the court of public opinion. ---
**Author:** ![Linden\_Arden](https://avatars.discourse-cdn.com/v4/letter/l/53a042/32.png) [@Linden\_Arden](https://boards.straightdope.com/u/Linden_Arden)\ **Post date:** [December 11, 2011, 4:29pm UTC](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556/44 "2011-12-11T16:29:54Z")
> [@SpoilerVirgin](#): > > BTW, I am a party line liberal Democrat and a strong Obama supporter and I am thoroughly disgusted and appalled by Jon Corzine. I hope that he is thoroughly punished either by the civil or criminal courts, and that he is condemned in the court of public opinion. Well, I am a supporter of Obama as well and he gets little credit from Democrats on Financial Reform. Most of his critics are financially inept. Dodd-Frank is far stronger than Glass-Steagall and is much more comprehensive - as it covers ratings agencies and all consumer touchpoints as well as banks. When I hear Michael Moore screaming to bring back Glass-Steagall I cringe. ---
**Author:** ![Gray\_Ghost](https://avatars.discourse-cdn.com/v4/letter/g/c0e974/32.png) [@Gray\_Ghost](https://boards.straightdope.com/u/Gray_Ghost)\ **Post date:** [December 11, 2011, 4:43pm UTC](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556/45 "2011-12-11T16:43:15Z")
Discussion of the MF Global scandal really should include mention of a leading candidate for the missing $1B+: [Hypothecation](http://newsandinsight.thomsonreuters.com/Securities/Insight/2011/12_-_December/MF_Global_and_the_great_Wall_St_re-hypothecation_scandal/). The linked short article from ThomsonReuters explains first what hypothecation and rehypothecation are, and how differences in U.K. vs U.S. banking and securities laws may have allowed MF Global to overleverage itself. ---
**Author:** ![SpoilerVirgin](https://avatars.discourse-cdn.com/v4/letter/s/4491bb/32.png) [@SpoilerVirgin](https://boards.straightdope.com/u/SpoilerVirgin)\ **Post date:** [December 11, 2011, 5:07pm UTC](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556/46 "2011-12-11T17:07:13Z")
> [@Gray\_Ghost](#): > > Discussion of the MF Global scandal really should include mention of a leading candidate for the missing $1B+: [Hypothecation](http://newsandinsight.thomsonreuters.com/Securities/Insight/2011/12_-_December/MF_Global_and_the_great_Wall_St_re-hypothecation_scandal/). The linked short article from ThomsonReuters explains first what hypothecation and rehypothecation are, and how differences in U.K. vs U.S. banking and securities laws may have allowed MF Global to overleverage itself. This is _exactly_ what I was talking about in my previous post. Just because the law had a loophole that allowed the company to lose clients’ money, doesn’t mean it was right or ethical. A mentality that says that because a loophole exists it should be exploited, no matter what the risks to clients, the markets, or the company itself, is a bigger threat to financial stability than criminal behavior. **Linden Arden** - I have to disagree you with there. I may not always agree with Michael Moore, but he is 100% right about Glass-Steagall. The comingling of commercial and investment banking has been a disaster and needs to be stopped. ---
**Author:** ![Linden\_Arden](https://avatars.discourse-cdn.com/v4/letter/l/53a042/32.png) [@Linden\_Arden](https://boards.straightdope.com/u/Linden_Arden)\ **Post date:** [December 11, 2011, 5:29pm UTC](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556/47 "2011-12-11T17:29:26Z")
> [@Gray\_Ghost](#): > > Discussion of the MF Global scandal really should include mention of a leading candidate for the missing $1B+: [Hypothecation](http://newsandinsight.thomsonreuters.com/Securities/Insight/2011/12_-_December/MF_Global_and_the_great_Wall_St_re-hypothecation_scandal/). The linked short article from ThomsonReuters explains first what hypothecation and rehypothecation are, and how differences in U.K. vs U.S. banking and securities laws may have allowed MF Global to overleverage itself. Good link. "MF Global disclosed in March 2011 that it had significant credit risk from its European subsidiary from “counterparties with whom we place both our own funds or securities and those of our clients”. " So they admitted substantial commingling earlier this year - at least in Europe. ---
**Author:** ![China\_Guy](https://avatars.discourse-cdn.com/v4/letter/c/779978/32.png) [@China\_Guy](https://boards.straightdope.com/u/China_Guy)\ **Post date:** [December 11, 2011, 5:37pm UTC](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556/48 "2011-12-11T17:37:14Z")
> [@Linden\_Arden](#): > > So they admitted substantial commingling earlier this year - at least in Europe. I do not think this is an admission of co-mingling funds. They invested proprietary funds, and they invested funds under management. This is a common practice. Co-mingling means something else entirely. ---
**Author:** ![Linden\_Arden](https://avatars.discourse-cdn.com/v4/letter/l/53a042/32.png) [@Linden\_Arden](https://boards.straightdope.com/u/Linden_Arden)\ **Post date:** [December 11, 2011, 5:40pm UTC](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556/49 "2011-12-11T17:40:43Z")
> [@SpoilerVirgin](#): > > **Linden Arden** - I have to disagree you with there. I may not always agree with Michael Moore, but he is 100% right about Glass-Steagall. The comingling of commercial and investment banking has been a disaster and needs to be stopped. Just as in the S&L crisis, the vast majority of entities in the mortgage crisis were not subject to that bit of Glass-Steagall. Lehman, Merrill, and Bear Stearns were the worst of the lot and G-S did not apply to them since they had no commercial banking. Citi was the only beneficiary of the 1999 G-S relaxation. Morgan got bigger for sure but was never in peril. Citi would have failed without intervention. A stand alone Bank of America would have been fine but they were nearly pulled down by the shotgun marriage to Merrill - which was doomed anyway. The real culprits outside Wall St were the Countrywide, WaMu types - all unaffected by G-S. ---
**Author:** ![China\_Guy](https://avatars.discourse-cdn.com/v4/letter/c/779978/32.png) [@China\_Guy](https://boards.straightdope.com/u/China_Guy)\ **Post date:** [December 11, 2011, 6:52pm UTC](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556/50 "2011-12-11T18:52:31Z")
> [@Linden\_Arden](#): > > Morgan got bigger for sure but was never in peril. Citi would have failed without intervention. Not to pick nits, but Morgan Stanley was less than a week away from a cash flow bankruptcy when they got their TARP lifeline. All the former investment banks were days away from going under including Goldman. ---
**Author:** ![Linden\_Arden](https://avatars.discourse-cdn.com/v4/letter/l/53a042/32.png) [@Linden\_Arden](https://boards.straightdope.com/u/Linden_Arden)\ **Post date:** [December 11, 2011, 7:23pm UTC](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556/51 "2011-12-11T19:23:51Z")
> [@China\_Guy](#): > > Not to pick nits, but Morgan Stanley was less than a week away from a cash flow bankruptcy when they got their TARP lifeline. All the former investment banks were days away from going under including Goldman. Agree, but I meant JP Morgan. Yeah, Morgan Stanley was on the ropes. ---
**Author:** ![CJJ](https://avatars.discourse-cdn.com/v4/letter/c/ecc23a/32.png) [@CJJ](https://boards.straightdope.com/u/CJJ)\ **Post date:** [December 12, 2011, 4:44pm UTC](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556/52 "2011-12-12T16:44:56Z")
> [@Gray\_Ghost](#): > > Discussion of the MF Global scandal really should include mention of a leading candidate for the missing $1B+: [Hypothecation](http://newsandinsight.thomsonreuters.com/Securities/Insight/2011/12_-_December/MF_Global_and_the_great_Wall_St_re-hypothecation_scandal/). The linked short article from ThomsonReuters explains first what hypothecation and rehypothecation are, and how differences in U.K. vs U.S. banking and securities laws may have allowed MF Global to overleverage itself. I encourage everyone to read the article linked in **Gray Ghost** ’s post; personally this was a real eye-opener. If the obscure name scares you, think of hypothecation as pledging collateral in order to borrow money–a mortgage is a simple example, since a borrower holds the home but the bank hypothetically controls it by the threat of foreclosure should the borrower default. Re-hypothecation is just the lender re-using the hypothecated collateral to secure its own borrowing. There are rules regarding this strategy, but note the follwoing: > [@](#): > > Under the U.S. Federal Reserve Board’s Regulation T and SEC Rule 15c3-3, a prime broker may re-hypothecate assets to the value of 140% of the client’s liability to the prime broker. For example, assume a customer has deposited $500 in securities and has a debt deficit of $200, resulting in net equity of $300. The broker-dealer can re-hypothecate up to $280 (140 per cent. x $200) of these assets. > > But in the UK, there is absolutely no statutory limit on the amount that can be re-hypothecated. In fact, brokers are free to re-hypothecate all and even more than the assets deposited by clients. Instead it is up to clients to negotiate a limit or prohibition on re-hypothecation. On the above example a UK broker could, and frequently would, re-hypothecate 100% of the pledged securities ($500). So…take a guess where MFG “re-allocated” their customer accounts by way of subsidiaries. The article provides even more startling outrages–from the liberalization of Fed purchasing rules for re-hypothecated funds (first limited to government bonds, then eventually to any kind of security, even distressed European debt) to what is essentially re-re-re-hypothecation, where collateral funds were lent across a chain of typically 4 transactions (“churning”, which provides the illusion of financial liquidity, but is backed by only a quarter of real assets–and is only as strong as its weakest lending link). More tales from the Great Casino that is supposedly running our economic system… ---
**Author:** ![ralph124c](https://avatars.discourse-cdn.com/v4/letter/r/8797f3/32.png) [@ralph124c](https://boards.straightdope.com/u/ralph124c)\ **Post date:** [December 12, 2011, 5:13pm UTC](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556/53 "2011-12-12T17:13:46Z")
Indeed frightening-we have the “Captains of Finance”-who are (essentially) nothing more than gamblers-with OUR money! ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [December 12, 2011, 5:32pm UTC](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556/54 "2011-12-12T17:32:14Z")
That’s only frightening if you’re new to investing. What did you think they were doing all this time? ---
**Author:** ![Ludovic](https://avatars.discourse-cdn.com/v4/letter/l/7ab992/32.png) [@Ludovic](https://boards.straightdope.com/u/Ludovic)\ **Post date:** [December 12, 2011, 6:14pm UTC](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556/55 "2011-12-12T18:14:18Z")
> [@Really\_Not\_All\_That\_Bright](#): > > That’s only frightening if you’re new to investing. What did you think they were doing all this time? Keeping it in a jar by the door? ---
**Author:** ![CJJ](https://avatars.discourse-cdn.com/v4/letter/c/ecc23a/32.png) [@CJJ](https://boards.straightdope.com/u/CJJ)\ **Post date:** [December 12, 2011, 6:31pm UTC](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556/56 "2011-12-12T18:31:59Z")
> [@Really\_Not\_All\_That\_Bright](#): > > That’s only frightening if you’re new to investing. What did you think they were doing all this time? I naively assume that when I hire a broker or money manager, they work for me and trade according to my directives–or at least my expressed interests. Unless I explicity tell him/her to feel free and gamble with it, taking in down to the Great Casino and putting it all on red to cover his/her losses ain’t part of the deal, no matter how many bits of legalese they can waive in front of a judge. It’s legally-sanitized theft–plain and simple. We’re not talking about investors who are angry about bad choices or unexpected market reversals. ---
**Author:** ![Fotheringay-Phipps](https://avatars.discourse-cdn.com/v4/letter/f/d9b06d/32.png) [@Fotheringay-Phipps](https://boards.straightdope.com/u/Fotheringay-Phipps)\ **Post date:** [December 13, 2011, 3:11pm UTC](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556/57 "2011-12-13T15:11:10Z")
> [@ralph124c](#): > > What I find amazing is how he (Corzine) can stand up and say:"I don’t know where 1.2 billion was lost". Granted, he doesn't know everything, bt he has a staff, who (presumably) advise him. Plus, he was paid a multi-million salary-IT IS HIS JOB to know. From what I’ve read, it all happened rather quickly, in the last week or so. The CEO can put into place controls, but he can’t manage the funds on a day to day basis. UBS lost about $2B due to the actions of a single [rogue trader](http://dealbook.nytimes.com/2011/09/15/ubs-reports-2-billion-loss-to-rogue-trader/) and the same has happened at other banks. Amazing that one low level guy can access that much money, but apparently it’s possible. > [@Stratocaster](#): > > I had the same reaction as Absolute, I’ll admit. I think most people from either party will waste no time making excuses for him. But those who do–I am speculating–are protecting a Dem because they simply can’t resist. See the second post to this thread. > [@ralph124c](#): > > You are absolutely right-the fact that Soros was able to buy these bonds at such a tremendous discount, means that the bonds are absolutely “junk”-there is a substantial chance that they might be worthless. > Say what you will about Soros-but he is taking an enormous risk. If it pays off, he he makes a killing-but if not, he loses his entire investment. MF didn’t pay full face value either, and Corzine was doing the same thing as Soros. Problem he had was that his creditors pulled the plug. ---
**Author:** ![Truman\_Burbank](https://avatars.discourse-cdn.com/v4/letter/t/ecc23a/32.png) [@Truman\_Burbank](https://boards.straightdope.com/u/Truman_Burbank)\ **Post date:** [December 13, 2011, 4:30pm UTC](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556/58 "2011-12-13T16:30:46Z")
> [@Linden\_Arden](#): > > True on the responsibility. And I am not implying he was even an average CEO. But financial chicanery tends to be systemic in a corporation and I argue Corzine bit into a bad apple unwittingly. > > And now the media and Congress wants to make an example of him. If this stuff was all public record, and it’s his business acumen they were hiring, how does that square with “unwittingly”? ---
**Author:** ![China\_Guy](https://avatars.discourse-cdn.com/v4/letter/c/779978/32.png) [@China\_Guy](https://boards.straightdope.com/u/China_Guy)\ **Post date:** [December 13, 2011, 5:03pm UTC](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556/59 "2011-12-13T17:03:31Z")
Corzine was also a big swinging dick trader by media reports at MF global. That is simply patently stupid and against risk management common sense. When I worked in investment banking, when you became a serious high level manager, they take away your trading screens, live price screens and personal account trading. That’s so you have a lot more clarity when it comes to assessing risk and making bold decisions on the trading. Talking your own book is one of the big sins of Wall Street. Corzine went into with eyes wide open and mandate to rachet up the profits and risks. Long and wrong, baby, and the market lined up against him even if his sovereign Euro bet didn’t lose money. ---
**Author:** ![Mighty\_Mouse](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mighty_mouse/32/7776_2.png) [@Mighty\_Mouse](https://boards.straightdope.com/u/Mighty_Mouse)\ **Post date:** [December 13, 2011, 5:33pm UTC](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556/60 "2011-12-13T17:33:26Z")
> [@Fotheringay-Phipps](#): > > UBS lost about $2B due to the actions of a single [rogue trader](http://dealbook.nytimes.com/2011/09/15/ubs-reports-2-billion-loss-to-rogue-trader/) and the same has happened at other banks. Amazing that one low level guy can access that much money, but apparently it’s possible. This will keep happening unless when someone makes $2B by going rogue, they get strung up just the same. You are only rogue when you fail. [Previous page](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556.md?page=2) [Next page](https://boards.straightdope.com/t/jon-corzine-is-being-framed-by-the-media-and-congress/605556.md?page=4)