Something from an email from a City type.
Re MF Global, the company that John Corzine’s just driven into bankruptcy. Basically, what he was doing was taking a broker (someone who does the technical bit of trading for other people) and turning it into a proprietary trading firm, one that takes risks for itself. That’s a pretty hard to to do in itself.
Then the firm took huge bets on eurozone bonds. Bets which, obviously, didn’t come off.
But now to Corzine’s position. OK, so he’s got massive option agreements as CEO. At which point, heck, why not bet the whole company? Turns up red, he makes hundreds of millions. Black? Oops, bye bye company but what the heck, we’ve limited liability don’t we? Only other peoples’ money being lost.
It’s that old principal/agent problem rearing its ugly head again.
5 responses so far ↓
1 So Much For Subtlety // Nov 1, 2011 at 9:40 am
Wasn’t he the Governor who ran New Jersey into bankruptcy? Same problem of course. Except the voters are more openly stuck with the bill.
After this, I wonder if there is a single idiot left in the village who will give him more cash? I think so.
2 The Pedant-General // Nov 1, 2011 at 10:17 am
“but what the heck, we’ve limited liability don’t we? ”
There are limits to limited liability though aren’t there? There does come a point where we get to jail the directors, doesn’t there?
If so, this ought to be well beyond that point.
3 dearieme // Nov 1, 2011 at 2:00 pm
Is Corzine another bit of evidence for the proposition that anyone can be a genius in a bull market?
4 Hopper // Nov 1, 2011 at 3:49 pm
This isn’t the first time that Corzine seemed to think the laws of physics didn’t apply to him. I guess after last time he found an activity that didn’t involve physical pain on failure.
5 Five Daarstens // Nov 1, 2011 at 6:22 pm
Wall St made a big mistake moving away from partnerships.
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