Corzine is a criminal? Yes or No. Will Obama prosecute Democratic Wall Street rogues? $MF $GS


Image by deb via Flickr

Jon Corzine of MF Global fame (OTC:MF) is stunned and apologetic about the missing billion dollars. After running Goldman Sachs (NYSE:GS), being a US Senator and then Governor of New Jersey (why did New Jersey have to suffer him twice) he proceeded to ignore his risk officer and make bets he did not understand. The risk officer resigned after he went to the board and was ignored and pushed aside.

There is a concept of reckless endangerment. It fits Jon Corzine like a bespoke suit with matching accoutrements. If Obama is serious about cleaning up Wall Street, start with rogue members of the Democratic party who have raped, looted and pillaged the most effectively.

After that we need a damn good witch hunt, to identify the foolish investors who backed him. When you lose billions it has to be institutional. What Wall Street again? Yep its Wall Street again. What were the terms and conditions of the investment? How can professional money managers condone such huge bets? 

We need to know which institutions had such bad judgement as to give Jon Corzine carte blanche. What were they thinking? You will probably find that a lot of public sector unions are absorbing losses. They will report the debacle as investing losses and not egregious errors in judgement. Pension regulators will be hard pressed to discipline stupidity but they should try anyway.

Finally you have state governors and mayors of all political persuasions with guaranteed public sector pension plans which now have bigger unfunded liabilities. Tax payors have to cover the losses on the back-end. Hard to blame unions on this point.

Thank you Jon Corzine. Apologies and being stunned does not do it.

George Gutowski writes from a caveat emptor perspective.

Morgan Stanley Volckerized

Morgan Stanley's office on Times Square

Image via Wikipedia

Morgan Stanley (MS) is being Volckerized. That’s the new buzz word that refers to the Volcker clause of the Barney Frank Financial Reform Bill. Morgan Stanley is shedding in-house hedge funds by Q4 2010 which means in around 60 days. Employees will be coming up  with billions to purchase equity and get Morgan off the hook.

Financial engineering reigns supreme. These guys were good but do they have a few extra billion kicking around? Watch for compliance and governance nightmares to make this one work. After the mortgage mess we will have the hedge fund mess.

The immediate secret benefit will be to reduce mega compensation off the books of Morgan Stanley and hide it on the books of a private entity. Morgan Stanley and copy cat financial institutions will achieve the necessary political optics.   

Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post.