If a kid in a hoodie held up a store for $15, he’d soon be in the custody of Sheriff Sue. A well-connected guy in a business suit “loses” $1.6 billion in other people’s money? He’s still free. “Equal justice under law”? That’s rich.
Last fall, MF Global, headed by former New Jersey Governor and Senator Jon Corzine (and Goldman Sachs alum) collapsed. MF Global was a major broker of derivatives, you know, the weapons of financial mass destruction, and a primary dealer in Treasury securities. Apparently in trouble over bets made over the eurozone crisis, MF Global transferred some $700 million to cover shortfalls in the U.K. This was allegedly customers’ money, not funds from the firm itself — a big no-no even in the deregulated Wild West of Wall Street.
As usual, the case is highly complex and the investigation slow. Today, a House committee is holding the third congressional hearing on the ripoff. According to the Wall Street Journal, Corzine was in “direct contact” with JPMorgan about putting $175 million into a Morgan account to cover an overdraft. Yet assurances were apparently never satisfied that the money didn’t belong to customers.
Here we go again. Two major frustrations overarch this case. First that there’s so much capital out there being used simply for gambling rather than creating jobs and funding productive enterprises. That’s what one gets with such low and lax tax rates. Second, that no matter how many times this happens, we’re told how difficult it is to prove a crime in a white-collar case. Yet the laws are never changed to make it easy.
Mr. Corzine is innocent until proved guilty. But a hypothetical person who committed a similar crime outside the corporate world, and especially lacking big-time lawyers and friends in D.C., would be serving hard time with an unpleasant, heavily tattooed cellmate. Allowing this to continue is very bad for capitalism.
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Today’s Econ Haiku:
You know what bugs me?
Learning the ingredients
Of a Starbucks drink