Jon Corzine has been the CEO of Goldman Sachs, a United States senator, and the governor of New Jersey, the position he held in 2009, when the Obama administration was preparing to take office. His mix of Wall-Street and public-sector executive experience is doubtless why the Obama transition team called on him for advice. As Joe Biden tells it, they'd gathered a few dozen economists in Chicago to talk over the financial crisis. Some were suggesting a bank holiday.
"I literally picked up the phone and called Jon Corzine and said Jon, what do you think we should do," Biden said. "The reason we called Jon is that we knew that he knew about the economy, about world markets, how we had to respond, unlike almost anyone we knew. It was because he had been in the pit -- because he had been in the furnace. And we trusted his judgment."
Now the October 2009 remarks could come back to haunt the Obama administration, given recent revelations about what happened after Corzine left office to run the brokerage firm MF Global, a position he resigned last week. "The resignation capped a disastrous week for Mr. Corzine, as he saw MF Global lose two-thirds of its market value, file for bankruptcy and face a handful of federal investigations into more than $600 million in missing customer money," DealBook reported.
Soon after joining the firm, he moved to transform the sleepy brokerage firm into a full-service investment bank in the mold of his former employer, Goldman. He aggressively bought up European sovereign debt, wagering that the Continent would not let troubled countries default on their loans. As the sovereign debt crisis dragged on this fall, regulators noticed the risky bets and pushed the firm to hold more capital against the investments.
The move alarmed shareholders, clients and rating agencies, inciting a crisis of confidence. With the stock in free-fall, the firm searched desperately for a suitor to buy at least a part of its business.. overnight revelation of hundreds of millions of dollars of missing customer money scuttled any potential deal. Early Monday, the firm filed for bankruptcy.
This is the sort of story that shows why it will be difficult for the Obama administration to win over Occupy Wall Street protesters.