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Friday, November 04, 2011

"Wall Street Won Another Battle"

 Regulatory capture:

As Regulators Pressed Changes, Corzine Pushed Back, and Won, by Azam Ahmed and Ben Protess, NY Times: Months before MF Global teetered on the brink, federal regulators were seeking to rein in the types of risky trades that contributed to the firm’s collapse. But they faced opposition from an influential opponent: Jon S. Corzine, the head of the then little-known brokerage firm.
As a former United States senator and a former governor of New Jersey, as well as the leader of Goldman Sachs in the 1990s, Mr. Corzine carried significant weight in the worlds of Washington and Wall Street. While other financial firms employed teams of lobbyists to fight the new regulation, MF Global’s chief executive in meetings over the last year personally pressed regulators to halt their plans.
The agency proposing the rule, the Commodity Futures Trading Commission, relented. Wall Street, which has been working to curb many financial regulations, won another battle.
Yet with ... $630 million in missing customer funds, Mr. Corzine’s effort may come back to haunt him.
The proposed rule would have restricted a complicated transaction that allowed MF Global in essence to borrow money from its own customers. ... While such financing is not unknown on Wall Street, it carries substantial risk. ... Regulators are now examining whether these transactions explain the missing money at MF Global. ...

    Posted by on Friday, November 4, 2011 at 12:24 AM in Economics, Financial System, Regulation | Permalink  Comments (13)


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