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Senate hearing on MF Global bankruptcy
December 13, 2011 / 3:41 PM / in 6 years

Senate hearing on MF Global bankruptcy

(Reuters) - The following comments were made on Tuesday at a Senate Agriculture Committee hearing to examine the bankruptcy of futures brokerage MF Global.

It is the second hearing to feature former MF Global Chief Executive Jon Corzine, who has said he does not know what happened to hundreds of millions of dollars in missing customer money.

Tuesday’s hearing is also hearing from farmers who have been harmed by the firm’s collapse and two MF Global executives - Chief Operating Officer Bradley Abelow and Chief Financial Officer Henri Steenkamp.

The futures brokerage filed for bankruptcy on October 31, after it was forced to reveal it bet $6.3 billion on European sovereign debt. That disclosure spooked investors and led to ratings downgrades that ultimately doomed the firm.

Here are highlights from comments made at the hearing:

STEENKAMP ON THE SEARCH FOR THE FUNDS:

“I unfortunately have limited knowledge of the specific movement of funds at the U.S. broker-dealer subsidiary, MF Global Inc, during the last two or three hectic business days prior to the bankruptcy filing.”

“I was not aware of any problems concerning segregated funds or the applicable calculations until Sunday, October 30th, when the issue being investigated by this Committee was brought to my attention. For that reason, I do not know why these funds cannot be accounted for, but based on the fact that no shortfalls had been reported to me previously, it appears that any irregularities were likely caused by events that occurred shortly before the bankruptcy filing.”

ABELOW ON THE MISSING MONEY:

“I am deeply troubled by the fact that customer funds are missing, and I can assure you that I share your interest, and the public’s interest, in finding out exactly what happened. At this time, however, I do not know the answers to those questions.”

ABELOW ON WHAT LED TO THE FIRM‘S COLLAPSE:

“The combination of those three events - increased concern about exposure to European sovereign debt, a series of ratings downgrades, and disappointing earnings - created an extremely negative perception in the market resulting in a large number of the firm’s trading and financing counterparts pulling away from MF, which dramatically reduced the firm’s liquidity.”

CORZINE ON NOT KNOWING:

”I simply do not know where the money is, or why the accounts have not been reconciled... There were an extraordinary number of transactions during MF Global’s last few days“.”

CHAIRWOMAN DEBBIE STABENOW ON FRUSTRATION OVER LACK OF ANSWERS:

“It’s now been a month and a half since the firm collapsed and customer money is still nowhere to be found. This isn’t the Dark Ages. MF Global didn’t keep their books with feather quills and dusty ledgers. The rules about keeping customer money segregated are pretty straightforward. That it’s been over a month, and teams of lawyers and forensic accountants still can’t figure out what happened, raises very troubling questions.”

RANKING MEMBER PAT ROBERTS ON WHAT HAPPENED:

“Funds don’t simply disappear. Someone took action, whether legal or illegal, to move that money. And the effect of that decision is being felt across the countryside.”

“The buck stops somewhere, and between the three witnesses from MF Global here today, I hope we find out where those hundreds of millions of dollars landed.”

ROGER HUPFER, PRESIDENT OF FREELAND BEAN & GRAIN, ON THE IMPACT ON FARMERS:

“How will we be able to effectively manage the increased volatility and price risk and place our hedges with confidence if the very integrity of exchange-based futures trading is in jeopardy?”

Reporting by Alexandra Alper, Aruna Viswanatha, Christopher Doering, Lily Kuo and Karey Wutkowski; Editing by Tim Dobbyn

Our Standards:The Thomson Reuters Trust Principles.
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