The End of Ethics and A Way Back: How To Fix A Fundamentally Broken Global Financial System

Chapter 2

Jon Corzine’s Fallen Empire of Risk: MF Global

Take calculated risks. That is quite different than being rash.

—General George S. Patton

2008 was the year the rules should have changed.

The fall of proud US banking institutions such as Lehman Brothers and Bear Stearns was both shocking and disturbing to those on Wall Street and Main Street. These banks survived major world events—in Lehman’s case, even the Civil War. In only a matter of months, in 2008, they ceased to exist. Their names were reduced to stories of “what not to do” for hotshot traders and MBA students alike.

Yet, in March 2010, along came Jon Corzine.

The former New Jersey Senator and senior managing director of Goldman Sachs was looking for a new opportunity in the world of finance. After searching for the right position, he was approached by a dear old friend, J. C. Flowers, to lead the nearly 230-year-old brokerage firm, MF Global.

MF Global was known in international finance circles as strictly a brokerage house that placed futures contracts for its diversified client base. MF Global had no investment banking business lines and did not engage in proprietary trading. Proprietary trading is banking on the firm’s own account, not a client’s.

Admittedly, Corzine was drawn to MF Global by the allure of making massive profits and reliving his own self-perceived Goldman Sachs glory days.1 To recreate his image, once Corzine gained control of MF Global, he hastily worked to create a new business plan that called ...