November 2, 2011
By, Zachary Karabell
As the Occupy Wall Street movement gathers momentum and money, Wall Street itself is losing both. The swift collapse and bankruptcy of trading firm MF Global is testament to that, and—while like all unhappy families it has its own peculiar story—its failure is also emblematic of the spiral of declining profits that is rendering Wall Street a shadow of what it was just a few years ago.
It is tempting to make the failure of MF Global into a passion play of its high-profile CEO, Jon Corzine, former senator and ex-governor of New Jersey, and former head of Goldman Sachs. As Charles Gasparino noted, Corzine is a decent man with a stellar résumé and undoubted success in the world of business and politics, yet he has presided over major failures at Goldman in the 1990s and now at MF. His political career is equally mixed: yes, he got elected twice by the good voters of New Jersey, but he was then vehemently booted by those same voters who preferred the histrionics and no-b.s. demeanor of Chris Christie.
Corzine undoubtedly and most unwisely encouraged risk at MF Global. As we know now, that entailed taking $6.3 billion in short-term positions on European sovereign debt just as the euro zone was plunged into yet another phase of its multiyear crisis by the near-default of Greece. That $6.3 billion was five times the entire tangible equity of MF Global, and was only possible through a leveraged bet that Corzine had to have countenanced. Betting five times your firm on risky bonds can make you a fortune. It can also go bad quickly, and for Corzine it did, bringing down the remnants of a firm whose origins stretch back to the beginning of the 19th century and the heyday of the British Empire.