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2011 Jackass Of The Year

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There were so many contenders for TheCenterLane.com’s 2011 Jackass Of The Year award, I was ready to give up on making a decision.  Former Congressman Anthony Weiner (who never even “got lucky” with any of the women who received his “Peter Tweets”) was certainly a contender.  Another runner-up was Arnold Schwarzenegger, who chose to have an affair with his unattractive housekeeper – apparently just because she was there.

This year’s winner is Jon S. Corzine, the former Senator and Governor of New Jersey – in addition to having been the former CEO of Goldman Sachs.  Most infamously, Corzine was named chairman and CEO of MF Global in March of 2010.  It took Corzine only 20 months to drive the firm into bankruptcy.  As Stephen Foley of The Independent reported, Corzine gambled $6 billion of the firm’s money on his belief that Italy would not default on its government bonds.  When that wager was exposed, MF Global’s clients and trading partners stopped doing business with the firm.  Within a few days, MF Global went belly-up, in what became one of the ten biggest bankruptcies in American history.

On Halloween, the Deal Book blog at The New York Times discussed what happened after a discovery by federal regulators that hundreds of millions of dollars (perhaps 950) in MF Global customers’ money had gone missing:

The recognition that money was missing scuttled at the 11th hour an agreement to sell a major part of MF Global to a rival brokerage firm.  MF Global had staked its survival on completing the deal. Instead, the New York-based firm filed for bankruptcy on Monday.

Regulators are examining whether MF Global diverted some customer funds to support its own trades as the firm teetered on the brink of collapse.

One of those customers was a gentleman named Gerald Celente.  On December 17, Mr. Celente appeared on Max Keiser’s television program, On the Edge to describe what happened with his contract (placed through MF Global in April) to purchase an undisclosed quantity of December gold for an amount slightly in excess of $1,400 per ounce.  Celente skewered more individuals than Jon Corzine while describing a travesty which exposed even more of the ways by which the Commodity Futures Modernization Act has been destroying America.  Be sure to watch the interview.

On the same day as the Celente interview, The Washington Post published a piece by Barry Ritholtz, which focused on six astonishing elements of the MF Global story.  Let’s take a look at a few of those elements:

3.  As a result of MF Global’s lobbying, key rules were deregulated.  This allowed the firm to use client money to buy risky sovereign debt.

4.  In 2010, someone from the Commodities Futures Trading Commission recognized these prior deregulations had dramatically ramped clients’ exposure to risk and proposed changing those rules. Jon Corzine, MF Global’s chief executive, successfully prevented the tightening of these regulations.  Had the regulations been tightened, it would have prevented the kind of bets that lost MF Global’s segregated client monies.

5.  None of MF Global’s Canadian clients lost any money thanks to tighter regulations there.

One would think that someone in Jon Corzine’s position would have learned something from the mistakes (such as excessive leveraging and risky bets) which contributed to the financial crisis.  He didn’t.  That’s why Jon S. Corzine is the winner of TheCenterLane.com’s 2011 Jackass Of The Year award.  Congratulations, Jackass!


 

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A Look Ahead

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December 7, 2009

As 2010 approaches, expect the usual bombardment of prognostications from the stars of the info-tainment industry, concerning everything from celebrity divorces to the nuclear ambitions of Iran.   Meanwhile, those of us preferring quality news reporting must increasingly rely on internet-based venues to seek out the views of more trustworthy sources on the many serious subjects confronting the world.  On October 29, I discussed the most recent GMO Quarterly Newsletter from financial wizard Jeremy Grantham and his expectation that the stock market will undergo a

“correction” or drop of approximately 20 percent next year.   Grantham’s paper inspired others to ponder the future of the troubled American economy and the overheated stock market.  Mark Hulbert, editor of The Hulbert Financial Digest, wrote a piece for the December 5 edition of The New York Times, picking up on Jeremy Grantham’s stock performance expectations.  Hulbert noted Grantham’s continuing emphasis on “high-quality, blue chip” stocks as the most likely to perform well in the coming year.  Grantham’s rationale is based on the fact that the recent stock market rally was excessively biased in favor of junk stocks, rather than the higher-quality “blue chips”, such as Wal-Mart.  Hulbert noted how Wal-mart shares gained only 14 percent since March 9, while the shares of the debt-laden electronics services firm, Sanmina-SCI, have risen more than 600 percent during that same period.  Hulbert pointed out that the conclusion to be reached from this information should be pretty obvious:

As an unintended consequence, Mr. Grantham said, high-quality stocks today are about as cheap as they have ever been relative to shares of firms with weaker finances.

It’s almost a certain bet that high-quality blue chips will outperform lower-quality stocks over the longer term,” he said.

My favorite reaction to Jeremy Grantham’s newsletter came from Paul Farrell of MarketWatch, who emphasized Grantham’s broader view for the economy as a whole, rather than taking a limited focus on stock performance.  Farrell targeted President Obama’s “predictably irrational” economic policies by presenting us with a handy outline of Grantham’s criticism of those policies.  Farrell prefaced his outline with this statement:

So please listen closely to his 14-point analysis of the rampant irrationality at the highest level of American government today, because what he is also predicting is another catastrophic meltdown dead ahead.

At the first point in the outline, Farrell made this observation:

If Grantham ever was a fan, he’s clearly disillusioned with the president.   His 14 points expose the extremely irrational behavior of Obama breaking promises by turning Washington over to Wall Street, a blunder that will trigger the Great Depression 2.

Farrell’s discussion included a reference to the latest article by Matt Taibbi for Rolling Stone, entitled “Obama’s Big Sellout”.  The Rolling Stone website described Taibbi’s latest essay in these terms:

In “Obama’s Big Sellout”, Matt Taibbi argues that President Obama has packed his economic team with Wall Street insiders intent on turning the bailout into an all-out giveaway.  Rather than keeping his progressive campaign advisers on board, Taibbi says Obama gave key economic positions in the White House to the very people who caused the economic crisis in the first place.  Taibbi also points to the ties Obama’s appointees have to one main in particular:  Bob Rubin, the former Goldman Sachs co-chairman who served as Treasury secretary under Bill Clinton.

Since the article is not available online yet, you will have to purchase the latest issue of Rolling Stone or wait patiently for the release of their next issue, at which time “Obama’s Big Sellout” should be online.  In the mean time, they have provided this brief video of Matt Taibbi’s discussion of the piece.

The new year will also bring us a new book by Danny Schecter, entitled The Crime of Our Time.  Mr. Schecter recently discussed this book in a live interview with Max Keiser.  (The interview begins at 16:55 into the video.)  In discussing the book, Schecter explained how “the financial industry essentially de-regulated its own marketplace.  They got rid of the laws that required disclosure and accountability …” and created a “shadow banking system”.  Shechter’s previous book, Plunder, has now become a film that will be released soon.  In Plunder, he described how the subprime mortgage crisis nearly destroyed the American economy.  The interview by Max Keiser contains a short clip from the upcoming film.  Danny also directed the movie based on (and named after) his 2006 book, In Debt We Trust, wherein he predicted the bursting of the credit bubble.

It was right at this point last year when Danny’s father died.  The event is easy for me to remember because my own father died one week later.  At that time, I was comforted by reading Danny’s eloquent piece about his father’s death.  Danny was kind enough to respond to the e-mail I had sent him since, as an old fan from his days at WBCN radio in Boston, during the early 1970s, my friends and I tried our best to provide Danny with any leads we came across.  These days, it’s good to see that Danny Schechter “The News Dissector” is still at it with the same vigor he demonstrated more than thirty-five years ago.  I look forward to his new book and the new film.



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