A House Republican report on the collapse of Wall Street trading firm MF Global lays the blame for the debacle on former CEO and Democratic New Jersey Gov. Jon Corzine and regulators who failed to properly supervise the firm.
The Oct. 31, 2001, bankruptcy filing of the firm led to $1.2 billion in customer losses for thousands of customers, the report issued today noted. MF Global made losing bets on the debt of troubled European nations, and allegedly failed to disclose those positions to regulators, which led to the firm’s demise.
The report from the Committee on Financial Services called out the Commodity Futures Trading Commission and the Securities and Exchange Commission for a “disorganized and haphazard” approach to regulatory oversight prior to MF Global’s collapse.
The firm and former CEO Corzine have been criticized for using customer funds to shore up its failing operation, a move that is prohibited under securities regulations.
“This marked the first time in the history of the U.S. futures industry that a customer suffered a loss due to the mishandling of customer funds,” Rep. Spencer Bachus, R-Ala., chairman of the Financial Services Committee, said in a statement. ”These customers deserve to know how and why their money went missing. And all Americans deserve to know that regulators and policymakers are held accountable to prevent similar losses from ever occurring again.”
Much of the money belonged to farmers, ranchers and other business owners. They bought and sold financial contracts with MF Global to reduce their risks from the fluctuating prices of corn, wheat and other commodities. In recent months, nearly 80 percent of those funds have been returned.
Republican members of the subcommittee said the panel’s staff interviewed more than 50 witnesses and reviewed 243,000 documents from MF Global, former employees of the firm and federal regulators.
On Wednesday, Corzine disputed through a spokesman the allegations made by the Republican lawmakers. He said he “acted in good faith” at all times and rejected the claim that he ran the firm in an authoritarian manner.
Democrats on the committee did not sign off on the report.
The Associated Press contributed to this story.