I guess I was mistaken in thinking that regulators actually perform their function by independently deciding on rules and enforcing them upon the bodies they are charged to oversee.
We now learn that the Commodity Futures Trading Commission was to vote on a rule to address the risky sovereign debt related trades that MF Global was entering into - partly by restricting their ability to borrow from their own customers to finance them. Ex- Goldman Sachs-er Corzine had decided it was a great idea to invest in the sovereign debt of fiscally outstanding nations such as Italy, Portugal and Spain. The passing of the proposed CFTC rule would have hampered their ability to make the big bets to sufficiently satiate their gambling habit.
The other impacted parties apparently just trotted out their usual lobbying teams to press against it. But MF Global's CEO Corzine directly and privately met with most of the five commissioners to enlighten them. He was obviously very convincing in lecturing them to the effect that such a rule was not needed and would hurt the profitability of firms such as MF Global. He so effectively intimidated, swayed and convinced the commissioners that the vote was delayed.
After the boneheaded bet backfired leading to bankruptcy, the issue of the missing $600 million arises. This, in itself invalidates half of Corzine's argument (that the existing accountability methods were fine and needed no further supervision). This leaves only the would hurt the profitability as being the accurate persuasive stance.
A dictionary definition of the term "regulators" most assuredly does not include bending over to the profitability interests of those regulated against the best interests of the general public. I'm so sure that I won't even bother to look it up. But that is precisely what happened here. A maniacal ego-driven habitual gambler personally co-opted the CTFC commissioners authority - and they let him do it by bowing to his "expertise", reputation and perceived credibility.
As the financial industry has taken over world power, I guess it is now time to add to all dictionary definitions affecting financial matters in any way. Terms such as "regulator" should include additional entries beginning with the phrase "when applied to the financial industry it embodies a differing meaning......".
Yes - in this matter involving a proposed CFTC rule - Corzine might just as well have been the head of the CFTC. And the kicker is that the New York Fed saw fit to add MF Global to its list of primary dealers in February of 2011 in the first place. I wonder what the "true" standards for admission to the group are?
Finally, is there any particular reason why subject CEOs and lobbyists are allowed personal and direct access to regulatory commissioners? Any learning disabled observer could see the opportunity for corruption, graft and flat out vote-buying. Why not restrict them to submitting position papers or arms length questions and answers? Most likely around 80% or more of lobbying efforts come from companies trying to avoid further supervisory measures. So why abandon basic tenets of governance by allowing this set of circumstances to exist? Especially when failure to reign them has been repeatedly been found to be so profoundly damaging
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