John Corzine\’s gamble

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 thoughts on “John Corzine\’s gamble”

  1. So Much For Subtlety

    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. “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. 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.

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