Corzine Apologizes For MF Global Collapse

Transcripts from House Agriculture Committee Hearing....
The House Agriculture Committee today held a hearing to examine the MF Global bankruptcy. Former CEO Jon Corzine, subpoenaed by the committee, was the star witness. Corzine was a US Senator and Governor of New Jersey before taking over MF Global. He joined the firm in 2010 after losing his re-election bid for governor. In a prepared statement, he apologized for the collapse of MF Global. Download Corzine's testimony here {PDF}

"I appear at today’s hearing with great sadness. My sadness, of course, pales in comparison to the losses and hardships that customers, employees and investors have suffered as a result of MF Global’s bankruptcy. Their plight weighs on my mind every day –- every hour. And, as the chief executive officer of MF Global at the time of its bankruptcy, I apologize to all those affected."

Below, opening statements from House Agriculture Committee Chair Frank Lucas (R-OK), and Ranking Member Collin Peterson (D-MN).

Witness list:

Panel 1

The Honorable Jill Sommers, Commissioner, Commodity Futures Trading Commission, Washington, D.C.

Mr. James Kobak, Lead Counsel for the Trustee for the Liquidation of MF Global Inc., New York, New York

Panel 2

The Honorable Jon Corzine, Former CEO, MF Global Inc., New York, New York

Panel 3

Mr. John Fletcher, General Manager, Central Missouri AGRIService LLC, on behalf of the National Grain and Feed Association, Marshall, Missouri

Mr. Terrence Duffy, Executive Chairman, CME Group, Inc., Chicago, Illinois

Mr. William J. Brodsky, Chairman and CEO, Chicago Board Options Exchange, Chicago, Illinois
Mr. Dan Roth, President and CEO, National Futures Association, Chicago, Illinois

Mr. Stephen Luparello, Vice Chairman, Financial Industry Regulatory Authority, Washington, D.C.

Mr. Gerry Corcoran, Chairman and CEO, R.J. O’Brien & Associates, on behalf of the Commodity Markets Council, Chicago, Illinois

Chair Lucas's statement, as prepared for delivery:

Thank you for joining us for this important hearing. I'd first like to thank the Ranking Member and his staff for their help in pulling this hearing together. I'd also like to thank our witnesses for being here.

Each Member of this Committee understands the importance of the futures markets for farmers and ranchers across the country.

For decades, futures markets have been a trusted tool for businesses seeking to manage risk. The bedrock of their trust in these markets is based on the fundamental protections provided by mandatory segregation of customer funds.

This has supported explosive growth and innovation in futures products in recent years, providing farmers, ranchers and businesses throughout the economy with risk management tools. These tools allow businesses to reduce the volatility in the price of goods and services for consumers.

Unfortunately, the very cornerstone of the futures markets, customer funds segregation, has been severely and suddenly called into question.

On October 31, 2011, MF Global Holdings filed for bankruptcy, after revealing that a substantial amount of customer funds were missing. There are now reports that as much as much as $1.2 billion may have disappeared.

Dozens of my constituents have been left not only without their property, but also without answers about why and how this happened. I know my colleagues have all heard similar stories from constituents who now lack confidence in the system that has served them well for years.

Today, this Committee will examine the bankruptcy of MF Global. From the start, I'd like to make it clear that our intent is not to sensationalize the events that have unfolded. And we are not here today to simply or haphazardly point fingers and place blame.

We take seriously that we have asked both the Trustee and the relevant regulatory organizations to appear before us. And we realize that this inevitably diverts their time and resources from the most critical objective at this time: to recover and return to customers the property that belongs to them.

However, it is critical that this Committee shed light on the circumstances surrounding the bankruptcy, to insert additional facts and information into the public domain and to dispel much of the confusion and misinformation that exists.

A deeper and more comprehensive understanding of the facts will put us all in a better position to address this situation and begin to restore confidence in the futures markets. This is the objective of the hearing today.

To that end, last week this Committee took extraordinary action to compel witness testimony that is essential to understanding the whole picture and building a comprehensive record.

I assure you, both the Ranking Member and I do not take this action lightly.

Lastly, it is important to stress that this hearing is not simply a check-the-box exercise. This Committee will continue to monitor the investigation into MF Global's actions and will work to ensure that customers receive fair treatment throughout this process.
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Rep. Peterson's opening statement, as prepared for delivery:

“Good morning and thank you Chairman Lucas.

“As the Chairman said, today’s hearing is to review the bankruptcy of MF Global, potentially the eighth largest bankruptcy in history. Given that futures customers, particularly those in agriculture, were affected by MF Global’s collapse it is necessary that we hear directly from all those involved and find out who knew what, and when they knew it.

“I want to thank Chairman Lucas for granting my request to have this hearing. The Committee has held plenty of hearings about problems that may or may not occur regarding the implementation of Dodd-Frank. Given the serious problem that currently exists for the thousands of futures customers of MF Global, I think it is appropriate that we refocus our attention.

“After the bankruptcies of Bear Stearns and Lehman Brothers, the subsequent financial collapse in 2008, and the passage of historic financial reform legislation, it is pretty amazing that we’re in this situation. It appears to me that no one has learned a thing; that Wall Street is operating as if 2008 never happened. From all accounts, MF Global was leveraged as much as 40 to 1, far higher than either Bear Stearns or Lehman Brothers when they folded. Ironically, it is very possible that there is nothing in Dodd-Frank that would have prevented MF Global’s financial collapse. That’s why I think we should tread very cautiously before rolling back Dodd-Frank’s protections. Given what happened here we should probably be talking about strengthening Dodd-Frank, not weakening it. Three big financial firm bankruptcies over a three year period is not a track record that should be extended.

“During the 2008 financial crisis, futures markets continued to function smoothly. When Refco and Lehman failed, their regulated commodity customer accounts were transferred to other futures commission merchants with no disruption. Wall Street, apparently not content to sully its own reputation, has now stained our well-run futures markets by apparently violating the supreme law – protection of customer funds.

“The futures industry helps farmers, manufacturers, energy companies, and a host of other industries mitigate risk so they can go about growing, producing, generating, and making the things that make this country run. We need to get to the bottom of what happened with MF Global as quickly as possible in order to restore a confidence that has been greatly shaken. We cannot let one company succeed in undermining an industry that has operated safely for customers for decades.

“Unfortunately, some of my friends on the other side of the Capitol seem hell-bent and ready to assign blame for MF Global to the CFTC for what they perceive as failing to do their jobs. Do we blame the police officer the day after our house gets broken into? Of course not. The futures world operates with a self-regulatory system of oversight because the CFTC cannot afford to put a watchdog into every futures commission merchant. And, if these Members had their way, the Commission would get even less funds than they do now. This blind rush to judgment fails to take into account how the self-regulatory system works, and in my view, undermines it.

“On a personal note, I find the press accounts expressing surprise that the Agriculture Committee could approve something as serious as a Congressional subpoena, unanimously on a bipartisan basis, quite amusing. The Committee’s oversight of the futures and derivatives markets is a responsibility that I do not take lightly. On these issues, the Committee– more often than not – will work across party lines because when it comes to matters affecting the financial health and stability of our country, partisan games have no place. I know that’s not something the press is used to seeing from Congress, but it’s how we do things on the Ag Committee.

“Here at the House Agriculture Committee, we are focused on the facts. It is the facts that will tell us what happened, who knew about it, and consequently, who was responsible. Only by uncovering the facts, can we prepare ourselves for policy responses that are necessary to address what has happened. That is what this hearing is all about.

“Again, I thank the Chair for holding today’s hearing and am hopeful that today’s witnesses will shed some light on what exactly was happening at MF Global.”

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Senate Adjourns Without Finishing 2012 Ag Appropriations; Votes On Potatoes & Millionaires

FY 2012 Agriculture Appropriations Bill awaits completion...
The Senate adjourned on Friday for a weeklong recess without a final vote on the FY 2012 Agriculture Appropriations bill. The gang did manage to get two pieces of business accomplished: White potatoes got a free pass, and Ag subsidies for millionaires got the ax.

Earlier today, the Senate voted 84-15 to bar individuals with more than $1 million in adjusted gross income from getting agriculture subsidies. The current limit is $1.25 million in adjusted gross income. Senate Agriculture Committee Chairman Debbie Stabenow (D-Mich) urged her colleagues to vote against the measure, arguing that the Senate and House Agriculture committees are working on a proposal to address the direct payments issue within 10 days. The two committees sent a joint letter to the Super Committee on Monday.

On Wednesday, the Senate by unanimous consent approved an amendment that weakens the nutrition standards for the National School Lunch and Breakfast programs, sponsored by Sen. Mark Udall (D-Colo) and Sen. Susan Collins (R-ME) with the gracious assistance of the National Potato Council's massive PR campaign. Read all about it here.

Senate, House Agriculture Committees Send Recommendation Letter To Super Committee

Bipartisan, bicameral call for $23 billion cut to mandatory spending within the committees’ jurisdiction...
Below, the press release from the office of Senate Agriculture Committee Chair Sen. Debbie Stabenow (D-MI):

Washington, DC: Today the leaders of the Senate and House Agriculture Committees sent a letter to the Joint Select Committee on Deficit Reduction recommending a $23 billion cut to mandatory spending within the committees’ jurisdiction. Senators Debbie Stabenow (D-MI) and Pat Roberts (R-KS), Chair and Ranking Member of the Senate Agriculture Committee, and Representatives Frank Lucas (R-OK) and Collin Peterson (D-MN), Chair and Ranking Member of the House Agriculture Committee, will continue working together on the details of the spending cuts in the same bipartisan fashion that has defined the process to date.

The four lawmakers issued the following joint statement:

“Agriculture has a long legacy of bipartisanship and today the House and Senate Agriculture Committees are preserving that tradition. In the coming weeks, we will continue working with our House and Senate colleagues to provide the Joint Select Committee a detailed set of policy recommendations for achieving these important savings.”

The text of the letter:

October 14, 2011

The Honorable Patty Murray
Co-Chair
Joint Select Committee on Deficit Reduction
The Capitol
Washington, DC

The Honorable Jeb Hensarling
Co-Chair
Joint Select Committee on Deficit Reduction
The Capitol
Washington, DC

Dear Chairwoman Murray and Chairman Hensarling:

Pursuant to Section 401(b)(3)(ii) of the Budget Control Act of 2011, the Chair and Ranking Member of the Senate Committee on Agriculture, Nutrition and Forestry and the Chair and Ranking Member of the House Committee on Agriculture (the Agriculture Committees) recommend to the Joint Select Committee on Deficit Reduction (the Joint Committee) $23 billion in net deficit reduction from mandatory programs within our jurisdiction.

As you know, the Agriculture Committees reauthorize most of the mandatory and discretionary spending programs in our jurisdiction every five years through omnibus legislation commonly known as the Farm Bill. The current Farm Bill expires in 2012, and the Agriculture Committees have been working diligently on the many important policies we consider in this reauthorization process.

America’s farmers and ranchers face a daunting challenge producing the food, fiber, and fuel for a rapidly growing global population. Farming and ranching are extremely high-risk undertakings – as clearly demonstrated by the devastating weather events across the nation this year. America’s producers need tools to manage their risk in case of natural disasters and increasingly volatile prices; the Farm Bill provides those tools.

But the Farm Bill has a much broader focus than only production agriculture. Conservation efforts in the Farm Bill ensure the long-term productivity of our soil, keep our waterways clean, and support the restoration of wildlife habitats across the country. Nutrition programs provide food for hungry children and are more important than ever for families who are struggling in these difficult economic times.

Commodity program spending represents less than one quarter of one percent of the Federal Budget, and actual Commodity Title spending has been almost $25 billion below Congressional Budget Office projections at the time the 2002 and 2008 Farm Bills were passed. Crop insurance underwent $6 billion in reductions through the most recent renegotiation of the Standard Reinsurance Agreement, $6 billion in cuts in the last Farm Bill and $2 billion in the 2002 Farm Bill. This totals $14 billion since the passage of the Agriculture Risk Protection Act in 2000. Conservation has been cut by over $3 billion during the last five years. The Supplemental Nutrition Assistance Program (SNAP) was cut by nearly $12 billion in the last Congress to offset other spending. In addition, there are also 37 programs, totaling nearly $10 billion, which expire and have no baseline into future years.

We are currently finalizing the policies that would achieve $23 billion in deficit reduction and will provide a complete legislative package by November 1, 2011. Deficit savings at this level is more than any sequestration process would achieve and should absolve the programs in our jurisdiction from any further reductions. We welcome the opportunity to explain this recommendation and the forthcoming legislative proposal upon request from the Joint Committee.

Sincerely,

Rep. Frank Lucas, Chairman
Sen. Debbie Stabenow, Chairwoman
Rep. Collin Peterson, Ranking Member
Sen. Pat Roberts, Ranking Member

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