MF Global
Well, I apologize again for being gone so long. What seems to me to have been the longest semester on record is now over…
As many of you know, MF Global has been in the news of late. First and foremost, I believe that Jon Corzine knew of the transfer of customer funds to corporate accounts and should spend the rest of his life in jail. This is the most disgusting type of corporate fraud because it involves violating the customer’s trust in the proper use of their money. One cannot claim laissez faire, buyer-beware should prevail here. How am I to possibly know what they are ACTUALLY doing with my money. Cautious inspection of company credentials, sure, but I cannot monitor their daily activity. So, this egregious violation of the trust of customers must be heavily punished.
Of course, I am speaking about the welfare of those customers…but, more importantly, punishment must be swift and severe for the better functioning of commodity markets in general. Corzine et al. may have done more to damage the long-term functioning of these markets than we can probably anticipate. First, there is the short-run effect of the justifiable outrage and mistrust that individuals will have about the loss of money. Unfortunately, though, that outrage will lead to calls for ever-increasing amounts of regulation. Some (smart) regulation is good, as it promotes fair competition to the benefit of traders, companies, and society. But over-regulation leads to increased costs, reduced market innovation, and, by consequence, less overall risk protection potential for those most in need of the market…the actual producers and users of commodities.