Occupy Wall Street – Compliance Building

The Rise and Fall of Jon Corzine

Bryan Burrough, William D. Cohan and Bethany McLean have a piece in this month’s Vanity Fair on Jon Corzine, the man behind the spectacular crash of MF Global. It doesn’t provide much insight into what happened at MF Global or where the missing money went. But is does paint an interesting picture of the captain of the ship.

Unlike a nautical captain who drowns when his ship sinks, Corzine may escape. According the article, he had only a small percentage of his wealth in the firm. His wealth did not vaporize. The lawyers and class action suits against Corzine will likely take a big chunk of his remaining wealth. His career as a trader and money manager are likely over.

In piecing together earlier episodes in his career, one stuck out at me from a compliance and risk perspective. While a young trader at Goldman Sachs, Corzine was involved in a screwed up trade that was mishandled and exceeded the firm’s risk limits. In the end, the trade ended up making money, but that won no accolades. The trade violated compliance and risk policies and was non grata. We generally only hear about rogue traders when they lose money. At the time, at least according to the article, Goldman took a dim view on rogue traders who made money.

The other item that emerged is the Corzine was self-made. He is certainly part of the 1% now, but didn’t start out that way. One thing that has bothered me about the Occupy Wall Street movement is a somewhat misguided rage against the 1%. When looking at the income discrepancies over the last twenty years, I think people miss the fact that the people in the 1% are not all the same people that were int he 1% twenty years ago.

Unlike aristocracy, you do not need to be born into the 1% to become part of the 1%. (Sure, it usually helps to start off well-to-do.) It seems to me that combining lots of hard work, lots of education, and little bit of good luck can get you an entrance ticket to the 1%.

Sources:

Jon Corzine’s Riskiest Business by Bryan Burrough, William D. Cohan and Bethany McLean in Vanity Fair
The full text of the article is not currently on-line.

Occupy the SEC

I will admit that I have been personally dismissive of the Occupy Wall Street movement and the splinter group of Occupy Boston that I pass by on the way to the office. Yesterday’s post on Occupy LEGO Land was an example. They lack a message and I personally think most of their message are off base. (Down with Evil Corporations)

One thing that caught my eye was infrastructure. Occupy Boston has a wooden street right down the middle of their tent city. There is a food tent and a legal tent. (There’s probably more examples of physical infrastructure.) That means collective decision-making and an allocation of resources. That means a community has formed from the mob of the 99%.

That collective decision-making can be seen in the General Assembly Meeting that happens every night. There is a participatory democracy, with everyone given a right to speak.

Why not take that model to the regulators? Why not make the Securities and Exchange Commission listen to the comments from everyone?

…What’s that? … They do that? … Where?

Actually, the SEC allows anyone to submit comments on their proposals. Take for example the hundreds (thousands?) of comments the SEC received on Definitions Contained in Title VII of Dodd-Frank Wall Street Reform and Consumer Protection Act. Anyone can submit a comment by sending a letter, using the web, or sending an email.

Will they listen? I assume they read each and every comment letter. The participatory democracy of a few hundred campers on the Greenway does not scale to the complex economy of a few million. Regulators need to choose among competing interests that protect the public, yet give the regulated the guidance they need. Everyone’s voice can still be heard.

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