Guest Post: John Corzine- An Insider Helping Out Fellow Insiders
Submiited by James Miller of Miller's Genuine Draft
Jon Corzine -Taking Care of His Friends With Insider Connections
Few men have a resume quite like Jon Corzine. Not only has Corzine served in the U.S. Senate and been governor of New Jersey, he has also been the CEO of Goldman Sachs and the recently imploded brokerage firm MF Global. The insider blood filtrated through cronyism and the endless squandering of the public dime flows heavily through his veins.
When MF Global went belly up back in the fall, Corzine was finally revealed for the inept, overly connected bureaucrat he really is. Corruption seemingly follows the former Senator, Governor, and banker like shadows on a sunny day. Earlier this week, New Jersey was declared the least corruptible state in the union much to the surprise of, well, everyone. But as the great Jonathan Weil pointed out, the methodology in the study conducted by the Center for Public Integrity was horribly flawed. New Jersey has historically been defined with corruption:
…this is a state where in 2009 three mayors, two assemblymen and five rabbis were among 44 charged in a single money-laundering and bribery sting by the Federal Bureau of Investigation. One of those mayors, Peter Cammarano, was from Hoboken, where I live. He was sentenced to 24 months in prison. Five years before his arrest, another former Hoboken mayor, Anthony Russo, pleaded guilty to corruption charges. His son now sits on the city council.
Corzine was of course acquainted with one of the mayors listed and a member of his own cabinet faced investigation by the FBI during the same time period. And that was only the man’s tenure as Governor. Anyone who spends their time horse-trading in Congress is instantly guilty of corruption by definition. Corzine was especially so as he coauthored the Sarbanes-Oxley financial regulatory bill which heaped another expense on start up businesses to the benefit of already established and politically favored firms.
Corzine’s political career was launched after his term heading the financial vampire squid known as Goldman Sachs which has its tentacles within practically every important or relevant governing authority around the globe. During his time at GS, he served on a presidential commission for Bill Clinton and a committee in the U.S. Treasury. In short, before his time heading MF Global, Corzine was an expert paper pusher whose connections in the political establishment were deeply rooted. That’s why he made the perfect candidate for a multinational investment firm on the up and up.
Not too long after Corzine went to MF Global, he visited the New York branch of the Federal Reserve in an attempt to expedite the process by which MF could received the coveted “primary dealer” privilege. This primary dealer position gave MF the ability to be one of the first financial institutions the NY Fed would purchase government securities and bonds from when the central bank wished to expand the monetary base. It is the ultimate position any banking insider looking to game the system seeks. Though an official from the NY Fed denies any special treatment was given to Corzine (as if they would own up to it in public anyway), as the Wall Street Journal explains, “the New York Fed doesn’t publicly discuss” decisions of granting primary dealership status, “but a source with knowledge of the process says that it sometimes takes several years for a firm to gain acceptance.”
And yet we are to believe that Corzine’s numerous connections didn’t help fast track this process?
It should be obvious by now how heavy a user Mr. Corzine is of the revolving door between Wall Street and Washington. Insiders are able to make a fortune by occupying public office and subsequently being offered a prominent position in an industry seeking to exploit regulation by hiring those who know it best. This often includes the authors of the regulations themselves. Corzine is not only an experienced alumni of this group but a practical valedictorian.
For someone so experienced in this utterly corrupt dynamic, it came as a surprise to see MF Global crash and burn as the European debt crisis escalated. Perhaps Corzine was betting on a more monetarily aggressive European Central Bank to bailout the profligate governments of the periphery? Whatever the case, Corzine and co. were caught red handed as the firm declared bankruptcy and $1.2 billion of money supposed to be secured in customer accounts went missing. At the time, Corzine pathetically told the Agricultural Committee in the House of Representatives:
“I simply do not know where the money is, or why the accounts have not been reconciled to date,”
As it turns out, Corzine should have known where at least some of the funds went. From Bloomberg:
Jon S. Corzine, MF Global Holding Ltd. (MFGLQ)’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in a brokerage account with JPMorgan Chase & Co. (JPM), according to a memo written by congressional investigators.
Edith O’Brien, a treasurer for the firm, said in an e-mail quoted in the memo that the transfer was “Per JC’s direct instructions,” according to a copy of the memo obtained by Bloomberg News yesterday. The e-mail, dated Oct. 28, was sent three days before the company collapsed, the memo says. The memo does not indicate whether that phrase was the full text of the e-mail or an excerpt.
In what will surely be labeled an unfortunate coincidence, a fellow NY Fed primary dealer was given a helping hand as the firm knowingly imploded.
Talk about friends with benefits.
Corzine may be subpoenaed by Congress and used as a punching bag by Republicans looking to score political points but the dominant culture of increasing centralization and cronyism which is an ever-present aspect of state will carry on unchallenged. Corzine will simply be the scapegoat of the political class looking to give off the mirage of integrity within government. God forbid politicians not “do something” in the wake of a controversy they themselves are responsible for.
As economist Freidrich Hayek taught, power centers attract and breed unscrupulous behavior. There is no institution more powerful than that of the state apparatus which feeds off the continual usurpation of authority and acts as the sole monopolizer of force over a given geographical area. Governments don’t minimize class divisions, they are the originator of stagnant social mobility. The Jon Corzines of the world feel entitled to their positions of prominence and will do anything to secure them as they blatantly skirt the law and protect their friends by any means necessary. The normal rules imposed on society don’t apply to them for they are the rule makers. The existence of central banks not bound by restraints on money creation and the backing of fractional reserve banking with taxpayer funds are simply extensions of the unceasing jackboot pressed down upon economic and social freedom. This is why Ben Bernanke’s Fed fought tooth and nail to not disclose the amount of money “lent” out to big banks during the financial crisis.
If there is one good thing to come about from the whole MF Global affair, besides putting a stake in the heart of Corzine’s reputation, it was the fact that the firm wasn’t bailed out by by the Treasury or Fed. The powers that be decided to let MF go as a possible sign that more of the public is becoming aware of the farce of a market the financial industry is which acts as a middleman between the government and the printing press. Market forces don’t decide winners and losers in today’s banking industry; the members of the elite class do.