Jon Corzine's MF Global went bankrupt, and $1.2 billion in customer deposits are unaccounted for. A tempest on Wall Street? Hardly, many of these deposits represent the receipts from pre-sales of smaller grain farmers and cattle ranchers in the Great Plains and inter-Mountain West.
Farmers and Ranchers have been hedging against the vagaries of their profession on the Chicago Mercantile Exchange for more than a century. They sell future contract for delivery, permitting the price of a harvest to guaranteed and the capital for the current season expenses raised.
Farmers and Ranchers have iconic importance and massive charisma (far exceeding their actual numbers) in these states. Social solidarity with them brings whole communities to their defense, and elections won and loss on their issues.
No electoral map that abandons key Plains and Inter-Mountain states produces an electoral win for Obama.
The Administration's kid-glove silence on Jon Corzine's mis-appropriation is playing into the Republican strategy to win these states. The narrative- which can be found endlessly repeated in local western papers and television-- is that Obama is protecting Corzine because he is a "liberal".
I argue that a forceful and clearheaded response to the collapse of farm credit and Corzine's particular crime would change the dynamic for Obama in these states. He is truely missing a crucial electoral test by hiding in a foxhole on this issue.
The electoral map includes Colorado (9) and Iowa (6) commonly cited as 2012 "toss-up" In the lean Obama column are Wisconsin (10), Minnesota (10) and 1 district in Nebraska. A marginal Likely state is New Mexico (5). Ohio is affected by corn/pig farmer issues, but farmer-voter solidarity is less important due industrialization.
Jon Corzine is closely tied to administration. He (likely deliberately) floated the idea he was the heir-presumptive to be Treasury Secretary. The massive leveraged bet on European debt had a key-man clause that would raise the return if he was confirmed as Secretary.
Jon Corzine personally lobbied (in July 2011) the CFTC (Commodity Futures) and its head Gary Gensler to relax the rules that ring-fenced customer deposits. It is widely speculated that the MF Global raid on customer deposits was already underway, and Corzine was seeking to ex-post-facto legalize the mis-appropriation.
Tim Geithner toured Europe in July 2011 to promote a massive backstop on private Euro debt, a la the US TARP. It is also widely speculated that Geithner and Corzine consulted on this plan, and the Corzine-MF Global bet was an arbitrage play on what it felt was a US Treasury guarantee.
Since the MF Global bankruptcy, Corzine has not spoken to the press (not surprising). He will be subpoenaed for a partisan House committee grilling on Dec 15. Gensler is also on the witness list, but may decline (according to press reports).
Gensler has recused himself from the CFTC investigation citing an appearance of conflict. The appearance of conflict did little to reduce his willingness to meet Corzine before things went south.
More crucially, Geithner and Obama have not responded to the MF Global Bankruptcy in any fashion. There is truly a "cone of silence" descended over the Treasury and WH on this issue. This fox-hole strategy is a poor one, electorally and morally.
Partisans dismissing my 'concern' maintain that is inappropriate for the WH and Treasury to interfere in an "active investigation". Undoubtedly, but a clear response does not necessarily involve stepping on G-Men toes.
First, the White House and Treasury need to re-iterate that customer money deposits are "off limits" now and in the future. The unseemly personal lobbying by Corzine on his old buddies Gensler and Geithner must be repudiated and rejected with clear policy direction.
Second, the White House can describe how it is prioritizing the investigation within its administration. The opaqueness of the timeline for charges and recovery is only playing into the Republican narrative that Corzine is being "protected". A simple statement, by Obama, like "A federal Grand Jury is investigating and expects to report on Dec 15" would dispel much of the rampant suspicion that Corzine is getting special treatment. It appears much of the stolen money has moved off-shore, international cooperation in its recovery is a WH-State Dept speciality.
Third, the White House can build a bridge to the Commodity Exchange community. The MF Global bankruptcy has crushed market liquidity and trade-- because of a lack of trust. This explains the "voluntary" guarantee of $550 Million the CME has offered to backstop the theft. White House and Treasury involvement in creating bridge liquidity directed to bona fide ranchers and farmers seeking to make crop sales would bring their acknowledgement of concern.
Wed Dec 07, 2011 at 4:59 PM PT: Minnesota farm politics, remember MN is "lean" Obama in polls.
http://www.reuters.com/...
Wed Dec 07, 2011 at 9:43 PM PT: Long detailed Thompson Reuters article says "rehypothecation" has magnified the losses four-fold. The money is gone.
http://newsandinsight.thomsonreuters.com/...
Thu Dec 08, 2011 at 7:02 AM PT: Corzine testimony: "I simply don't know.."
http://www.businessinsider.com/...
Tue Dec 13, 2011 at 12:41 PM PT: Minn farmers testify on MF Global theft:
http://www.startribune.com/...
Wed Dec 14, 2011 at 10:42 AM PT: CME CEO says Corzine Lied in his testimony
http://www.suntimes.com/...
Wed Dec 14, 2011 at 6:40 PM PT: NPR interviews rancher on MF Global impact.
http://www.npr.org/...
Sat Dec 17, 2011 at 11:15 PM PT: Nebraska ranchers spitting mad.
http://journalstar.com/...
Wed Dec 21, 2011 at 8:16 AM PT: NYT reporting email chain on customer transfers started with Corzine
http://dealbook.nytimes.com/...
Fri Dec 30, 2011 at 8:03 PM PT: Year end review: Corzine's crime affects farmers -
http://www.hpj.com/...
Tue Jan 03, 2012 at 8:19 PM PT: Goldman Sachs bought MF Global assets pre-bankruptcy
http://www.chicagotribune.com/...
Tue Jan 10, 2012 at 11:54 AM PT: Front Page in Montana: Wheat Farmers sue Corzine
http://www.greatfallstribune.com/...
Thu Jan 19, 2012 at 4:43 AM PT: Goldman, JP Morgan, and Corzine! oh my!
http://www.reuters.com/...