Counterparties: Madvillainy

June 25, 2013

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Jon Corzine may be about to be charged with being a bad CEO. Ben Protess reports that the Commodity Futures Trading Commission is planning a civil suit against the former head of MF Global, charging him with failing to meet his responsibilities as the person in control of the brokerage firm. The charges, Protess writes, could result in millions of dollars in fines and a lifetime ban from commodities trading.

Breaking with the tendency of financial regulators to stop short of taking cases to trial, the CFTC will not allow Corzine to settle before filing the lawsuit. The agency may also sue other former MF Global employees, including ex-assistant Treasurer Edith O’Brien.

Kevin Roose observes that the “notable bit of news is what won’t happen to [Corzine]: namely, criminal charges”. That’s not necessarily a surprising development. Reuters reported last year that the criminal investigation was “going cold”.

A spokesman for Corzine said the charges “would be an unprecedented and meritless civil enforcement action”. Insofar as this case is unprecedented, of course, many might cheer regulators’ new prosecutorial zeal: someone needs to be the first.

On the merit of the case, Corzine would seem to be missing one big defense: Jonathan Weil does not think that the ex-New Jersey Governor can argue that “MF’s regulators knew about the company’s problems or had blessed its financial reporting”. As Felix wrote, one of the big takeaways from bankruptcy trustee James Giddens’ report on MF Global’s downfall is that “when regulators started asking him to raise more capital against his risky European bond positions, he just moved a chunk of those positions out of MF Global proper”.

Weil doesn’t expect a quick trial. Corzine, he says, is “fighting for his legacy. Don’t look for any quick resolutions. This case could drag on for years”. Regardless, this isn’t how Corzine imagined his return from Hamptons exile. He reportedly wanted to run a hedge fund, where he would be free to trade European sovereign debt on his Blackberry during meetings without having to worry about running a firm with hundreds of employees. — Ben Walsh

On to today’s links:

For the Wages
Cool offices: just another way to get you to work more – The Atlantic

The last 500 years haven’t been good for gold investors – Matthew O’Brien

Just because it’s an acronym doesn’t mean it’s an investment opportunity – Quartz

New Normal
Labor’s share of income is falling is across developed nations – Bruce Bartlett

High Returns
How to invest in dope, the private equity way – NYTMag

Bearish Semantics
Why markets don’t trust the Fed – Evan Soltas
“The irony is that higher rates are likely to mean more people can get mortgages” – AP

Study Says
Bad math skills keep people from repaying their unaffordable mortgages – WSJ

JP Morgan’s interesting explanation for tight liquidity in China – Sober Look

Side Effects
Health insurance may be an effective antidepressant – Boston Globe

Data Points
Consumer confidence is the highest in 5 years – Conference Board

Meet the CEO with a $159 million pension, the biggest on record – WSJ

Two Point Oh No
It’s like a hedge fund, but for Twitter – eFinancialCareers

Quis custodiet ipsos system administrators? – NYT

Management Secrets
What’s behind Snapchat’s $800 million valuation? Who knows! – Dan Primack

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