From the December 01, 2010 issue of Futures Magazine • Subscribe!

Corzine plots return to his investment banking roots

Jon Corzine, who has known success and failure in both business and politics, is turning his attention to transforming MF Global from a large independent futures broker to a global investment bank. Corzine joined MF Global as chairman and CEO in March, shortly after losing his reelection bid for Governor of New Jersey. He served one term as governor following a term in the Senate. He ran for the Senate after losing out in a power struggle at Goldman Sachs where he served as chairman and co-CEO in the 90s. While some viewed his move to MF Global as a step down from senator, governor and head of Goldman Sachs, Corzine points out that MF Global is larger than Goldman was when he joined it in the 1970s and he sees great growth potential.

imageFutures Magazine: You like to refer to yourself as a recovering politician and recidivist banker. How difficult of a transition has it been getting back into the financial world?

Jon Corzine: I was honored and charged up about being in public service, so I have some sense of loss in not being able to complete what we started in my view. But, I love business, I love what I am doing and I hope that I made that clear in actions. Financial markets and serving clients have been and continue to be exciting and rewarding and, like politics, really involve thinking about issues on a global macro basis. They allow you to translate the details of policy in public life into business strategy. I am a very fortunate individual.

FM: You exited the financial world leading an investment bank, which is quite different than a futures broker. Why did MF Global bring you in and what is your vision for the company?

JC: I joined Goldman Sachs when it had 1,700-1,800 people; we have almost 1,000 more than that here at MF Global. [Goldman] was only a domestic firm in the mid 1970s; MF Global is in 12 countries and has a tremendous global reach. So, in some ways I am starting at a much better position than earlier in my career. Goldman was a tremendous client-driven firm in the years that I was there and I look forward to creating a franchise that is built around the service and needs of our clients. And it so happens that the regulatory environment is making that more attractive for our expertise in clearing and exchange-traded products. It is sort of the central focus of what we do, so I don’t really question why I am here. I am here because there is a real opportunity to build a great company, one that if it were only what it is today I would be disappointed after five or 10 years of work. But, I expect that we are on track to move from a broker to a broker/dealer, to an investment bank, and from being a significant participant in futures and options markets and commodities markets to being a full-fledged, quality player in all of the activities that we choose to be involved – including those that historically involve foreign exchange, equities, currencies, advisory and money management over time.

FM: The financial sector in general and the futures industry in particular have had a long stretch of pretty accommodative regulatory policy. That has ended with the recent financial crisis. How do you see the industry reacting to this new world and does your experience in government give you a competitive edge?

JC: Well, if you accept that the regulatory structure was relatively light touch, there were real consequences to that. A lot of folks went out of business and there were trillions of dollars of value lost, so I am not one that is as critical as some might be of the new regulatory regime. In fact greater safety and soundness inside the system will create for everybody — starting with the clients that invest — greater value. It also will create greater value in the firms that live in a world where there aren’t people taking excessive risks and unmanaged risk that threaten everybody systemically. I am not negative about the direction we are taking. I would like to see the regulations fleshed out, get them written in an expeditious manner so we know the rules of the road. The regulatory environment in general — there are some specifics that concern me — does not bother me and I think it is a net plus for most market participants.

FM: Does the Dodd-Frank Act even the playing field for FCMs?

JC: A lot of the rules need to be written yet and I worry that there could be a lack of coordination between the various agencies. It yet is to be proven that what the objective of the Financial Oversight Counsel was about ends up happening. I am concerned that there could be differences internationally between various regulatory agencies that still leave arbitrage opportunities and advantages for some firms relative to others. That is why we are going to be an active participant in speaking out. [I have the same concerns regarding] small firms and large firms [and whether] the price of entry could be exclusionary. We’re going to be active participants in that debate so that there is as much of a level playing field for people to be able to participate in as possible. It is important for the strategic position of MF Global that there is attention to equal access and equal opportunity to participate in the new world, particularly with the exchanges and the clearinghouses. The rules could be written in terms that are exclusionary and it is incumbent on those of us who have an interest in that to be very vocal about what would appear to be fairness and important in a competitive landscape for our clients.

FM: Your general counsel had commented in a story, as have some of your competitors, that recent limits put out by CME Group favor larger FCMs and create a false barrier to entry in cleared OTC.

JC: I support my lawyer’s position. If one looks at how the insurance market works and has worked for centuries, there is a syndication of risk at different levels that allows for different levels of participation. To put a threshold limit down is exclusionary.

FM: Are you confident that this will change?

JC: If it doesn’t, somebody will create another vehicle for participation because we are not the only ones that are going to suffer from that. It would be a shame because the CME is a great organization, which has good machinery, and we have a lot of confidence in their ability to do things. But, this doesn’t seem like it is consistent with how the rest of their businesses and markets are run.

FM: Do you want CME Group to have a separate clearing structure for OTC products or have it all in one clearinghouse?

JC: To me the rules of access are more important than whether it is separate or in one clearinghouse. If I was a central banker looking to bring oversight to the system, I would prefer one.

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