WASHINGTON Lawmakers examining the collapse of MF Global skewered the top U.S. futures regulator for sitting out his agency's probe of the bankrupt brokerage, whose former chief executive, Jon Corzine, is due to face his own drubbing later this week.
Republican senators accused Commodity Futures Trading Commission Chairman Gary Gensler of "ducking" his responsibilities by recusing himself from an examination of MF Global.
Gensler, who appeared pained by the repeated questioning during the Senate Banking Committee hearing on Tuesday, said he stepped aside from the MF Global investigation in early November so that he would not become a distraction or risk creating an appearance of a conflict of interest.
Gensler worked with Corzine at Goldman Sachs in the late 1990s, and also in the Senate on the Sarbanes-Oxley reform act of 2002.
The senators asked whether Gensler was trying to preserve his reputation rather than take the heat for MF Global's collapse and as much as $1.2 billion in missing customer money.
"To me it looks like you are ducking the responsibilities of your job," said Senator Mike Johanns. "As President Truman so famously observed, the buck stops with you."
Gensler said he "made a judgment" that it was best to step aside when it became clear that the CFTC's probe could target "specific individuals."
The hearing that put Gensler on the hot seat is largely a precursor to what is expected to be a more dramatic hearing on Thursday in which Corzine is due to testify, according to a witness list released on Tuesday.
The House Agriculture Committee was forced to subpoena Corzine to sensure his attendance. Corzine has been out of public view since he resigned as CEO in early November.
Neither MF Global nor its executives have been charged with wrongdoing.
MF Global collapsed in late October after it was forced to reveal that it had made a $6.3 billion bet on European sovereign debt. Investigators are searching for up to $1.2 billion in missing customer money, and are probing whether MF Global raided customer funds for firm use. The FBI also has shown an interest in the missing funds.
Multiple congressional panels are probing whether regulators, including the CFTC, failed to police MF Global, and why such a large amount of customer money seemingly vanished.
Corzine has also been called to testify before the Senate Agriculture Committee on December 13 and a House Financial Services subcommittee on December 15.
The Senate Agriculture panel unanimously voted on Tuesday to issue its own subpoena for Corzine, who was a senator from 2001-2006 before becoming the governor of New Jersey.
"Status and privilege as a former member of this body, state governor or financial industry leader should not place anybody, anyone, above voluntary volunteering and appearing before any congressional committee," said Kansas Senator Pat Roberts, the top Republican on the Senate Agriculture Committee.
It is unclear if Corzine will invoke his right to avoid self-incrimination under the Fifth Amendment of the U.S. Constitution.
Steven Goldberg, a spokesman for Corzine, declined to comment.
Republican senators took turns on Tuesday pressing Gensler on whether MF Global got preferential treatment before its collapse and about his decision to recuse himself, despite the fact that a fellow Republican senator, Charles Grassley, had called for Gensler's recusal in early November.
Richard Shelby, the top Republican on the Senate Banking Committee, questioned how often Corzine got face time with Gensler.
Gensler said he had a "courtesy meeting" with Corzine when Corzine became CEO of MF Global in spring of 2010, and said there was one other staff call with MF Global that he joined.
He said the agency has met more than 1,100 times with industry officials and the public since the Dodd-Frank financial oversight law was enacted last year.
Senators then dug into Gensler for not removing himself earlier from MF Global matters if he believed his involvement could be a distraction.
"It never occurred to you prior to November 3 that you shouldn't be participating regarding MF Global?" Senator Johanns asked.
Gensler responded that he recused himself as soon as it turned into an enforcement matter.
He added that he has sat out other investigations into specific individuals during his time as head of the CFTC. He did not elaborate.
"It feels to me like you panicked, and it's more about a career-enhancing situation to avoid accountability," Senator Bob Corker told Gensler.
"I made a judgment," Gensler responded. "It was certainly not for the reasons you are saying."
Shelby has requested that the CFTC's inspector general look into the agency's oversight of MF Global including Gensler's decision to recuse himself from the investigation.