Perhaps some folks thought that it was a step down for Jon Corzine — former head of Goldman Sachs who also served in the U.S. Senate and was governor of New Jersey — to take the helm of Futures Commission Merchant MF Global but he is excited to be back in the business and optimistic despite the recent economic crisis.
Corzine, speaking at the Managed Funds Association Forum conference in Chicago this week said, “It is a great time to be leading a financial institution because when you have risks, when you have the dynamics of change that are ever present, it creates opportunities and that ought to be good for all of us.”
Corzine spoke about the recent financial crisis and legislative efforts to address it. He said globalization and technological advances helped to increase the interconnectedness of many large institutions and those institutions took on too much risk.
“The banks and financial institutions carried balance sheet risks well beyond prudential levels,” Corzine said. “Financial institutions and regulators embraced complexity and opacity over common sense and transparency.”
He added, “Too many exposures were unhedged — if they were not unhedged, they were not understood. Credit agencies credibility was compromised, politicians turned a blind eye to the moral hazard of government guarantees and most importantly everyone missed the layers of interconnectedness that we have in our marketplace. As a result we built and accepted individual firms that became too big to fail.”
Despite all of the fallout from the crisis that he cited, Corzine said he was optimistic about the future and that America is in better positions to recover sooner.
Corzine, on balance, supports the recently passed financial reform legislation but would change a few things.
“We are in the right zone in regards to this legislation. It certainly can be tinkered with, the rough edges should be taken out,” he said.
One thing he objects to is the so called Volcker rule, which would prohibit banks from engaging in proprietary trading. “The idea of prohibiting proprietary trading in some of our larger institutions, to spin off derivatives books, is not a good idea,” he said.
“Somebody is going to want to have their risk intermediated and it is going to go somewhere, if it is not in the banking system it may go someplace where it is less easy to observe, more expensive to access and may even be offshore,” he added.
“The bill isn’t perfect but it does some reasonable things that would be good for all of us and our industry. The need for organized systematic risk oversight of all meaningful players in the market place is a good thing.”