Corzine: too big to succeed on smaller scale

October 31, 2011 11:19 AM

There was a rumor going around — later confirmed by multiple sources — that during Jon Corzine’s initial conversation with MF Global’s vast network of brokers shortly after he took the helm of the large futures broker, he became perplexed with numerous references to MF Global’s IBs.

At one point he stopped and asked why all these references to Investment Banking? The joke at the time was that Corzine came in with a lot of experience operating an investment bank but was a neophyte in the world of futures and didn’t know he was addressing MF’s vast network of introducing brokers.

 Turned out that Corzine may have just had investment banking on his mind as he would quickly lay out a plan to transform MF Global to an investment bank. He discussed this with Futures: “Corzine plots return to investment banking roots.”

That process seemed to be moving along last February when MF Global gained primary dealer status with the New York Fed. And word was — last week —  if Corzine was able to sell the futures brokerage business that would free up capital for him to better reach his goal of becoming an investment bank. Not sure how Chapter 11 works into the plan.

But the episode highlights a risk in bringing in a high profile operator into a firm like MF Global. He may have grand plans but perhaps not a lot at stake and certainly no skin in the game for maintaining what had been a pretty strong business.

When we spoke to Corzine a year ago he said, “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.”

While that may not have seemed alarming at the time, in retrospect it does. Many people at MF Global viewed it as a great company and while every firm wants to grow, they also would like to survive. He went on, “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.”

Such lofty goals are admirable but it seems that Corzine realized that to put himself back on top after a bitter election defeat he needed to do something big. That meant, perhaps, he was willing to risk everything that MF Global was and had built over many years to turn it into something much larger. Anything less he may have viewed as failure.

About the Author

Editor-in-Chief of Modern Trader, Daniel Collins is a 25-year veteran of the futures industry having worked on the trading floors of both the Chicago Board of Trade and Chicago Mercantile Exchange.