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Former MF Global Chief Executive Officer Jon Corzine got a chilly reception from the House Agriculture Committee, which held a hearing today on the firm’s bankruptcy, the eighth largest in U.S. history.
Republicans and Democrats did not hold back in questioning Corzine, a former Democratic governor and Senator from New Jersey.
Agriculture Chairman Frank Lucas (R-Okla.) said he believes that Corzine was encouraged to take a lot of risk because his compensation was, in part, based on stock options, which would have been worth more the better the company did.
“To the layman’s perspective, it would appear that the more aggressive the enterprise, the better those kinds of rewards would be,” Lucas said.
Corzine appeared after being subpoenaed by the panel. He offered to voluntarily appear in January, which he said would allow him to refresh his memory by getting access to his documents and emails, but the committee insisted he appear today.
Although he had the right to plead the Fifth Amendment in order to prevent him from providing self-incriminating evidence, Corzine insisted on answering questions to the best of his recollection.
“Considering the circumstances, many people in my situation would almost certainly invoke their constitutional right to remain silent, a fundamental right that exists for the purpose of protecting the innocent,” Corzine said. “Nonetheless, as a former United States Senator who recognizes the importance of Congressional oversight, and recognizing my position as former chief executive officer in these terrible circumstances, I believe it is appropriate that I attempt to respond to your inquiries.”
He also accepted responsibility for investing in risky European sovereign debt, such as the bonds of Ireland, Portugal, Spain and Italy.
MF Global was a leading commodities and derivatives brokerage, but it went bankrupt in late October. The FBI and Department of Justice recently opened criminal investigations into the bankruptcy, and about $1.2 billion of unaccounted customer funds are under scrutiny in those inquiries.
Ranking member Collin Peterson (D-Minn.) said he believes that there is a penchant for risk endemic in Wall Street.
“Apparently when you took over, the leverage was 37.3 to 1, or something, and then you got it down to 30 to 1, and that somehow or another was a good thing,” Peterson told Corzine. “This mentality of Wall Street I don’t get. I guess maybe you have to do that in order to make money ... but it just seems pretty risky.”
Corzine was contrite and apologized to all affected by the bankruptcy.
“I sincerely apologize, both personally and on behalf of the company, to our customers, our employees and our investors, who are bearing the brunt of the impact of the firm’s bankruptcy,” he said.
Reps. Steve King (R-Iowa) and Timothy Johnson (R-Ill.) asked Corzine whether he would use his personal wealth to help cover the lost funds.