Friday, February 3

Receiving Wide Coverage ...

‘A Lowly Clerk’: Lawmakers grilled Michael Stockman, who was chief risk officer of MF Global when the brokerage collapsed last year, in a tense hearing Thursday. (OK, that sounds a little hackneyed – are these hearings ever anything other than “tense” and “testy”?) One lawmaker called Stockman a “yes man.” Another said Stockman was apparently hired to tell Jon Corzine “what he wanted to hear,” and chided him that he should have controlled the CEO’s risk-taking: “You were not a lowly clerk.” Some of the headlines make much of the revelation that in early October, weeks before its bankruptcy filing, MF Global drew up a “break-the-glass” emergency plan mapping out what the firm would do if it got downgraded to junk. But this kind of what-if contingency planning seems fairly standard, or at least we’d think it should be; what’s more surprising to us is that, according to the Journal, Stockman told lawmakers “he had little role in its preparation and didn't see it before MF Global's Oct. 31 bankruptcy declaration. He said the firm's treasury and finance departments were primarily responsible for the document but added that a senior member of the risk-management team was involved in its preparation.” Uh, isn’t this exactly the kind of exercise the chief risk officer should be intimately involved in preparing? Also at the hearing, Stockman’s predecessor, Michael Roseman, described his unsuccessful attempt to warn the board about the dangers of Corzine’s gambles on European sovereign debt (which was around the same time Corzine began the search to replace Roseman, a search that ultimately led to Stockman's hiring). Even though we’ve already plugged not one, but two, DealBreaker stories this week, we’re going to give the last word on this to that site’s Matt Levine, because we can’t resist a headline like this: “Jon Corzine Was The Mark Zuckerberg Of MF Global, But In A Bad Way.” Noting that only about six months ago Corzine “was viewed as essential to MF Global’s business plan, so much so that they were going to pay bondholders more if he left,” Levine quips: “in hindsight maybe they should have paid bondholders more when Roseman left.”

Wall Street Journal

The Journal considers the hefty contribution that releases of loan-loss reserves have been making to banks’ profits. These “rainy day funds,” the article says, are being depleted, and fundamentals don’t bode well for operating profits.

An update on Liborgate: The Swiss Competition Commission is investigating 12 banks over allegations they colluded to manipulate the London (and Tokyo) interbank offered rates. U.S. and European Union regulators have been conducting similar probes.