Wednesday, December 7, 2011

Jon Corzine's Relationship with CFTC Chair Gary Gensler Probed

This is from Matt Taibbi, who could screw up a report of the Second Coming, even if it happened right in front of him, so with that caution, I report what he thinks he has:
Getting a lot of calls about Jon Corzine [of MF Global] and his relationship with Commodity Futures Trading Commission (CFTC) chairman Gary Gensler.

Both Corzine and Gensler worked at Goldman back in the day, and the word is that Corzine personally lobbied Gensler to delay the implementation of new rules that would have helped prevent Corzine from raiding his own clients' funds.

This whole issue smacks of the improper communications between other former Wall Street co-workers like Hank Paulson and Lloyd Blankfein. More and more, it appears that, as a matter of routine, federal regulators like Paulson (in 2008) and, later, Gensler reach out to old friends on Wall Street to negotiate/discuss the timing and the form of various policy changes, bailouts, and other regulatory matters.
Bottom line: If you create power centers (like the CFTC)the unscrupulous will attempt to influence the power centers. Bernie Madoff was close to the SEC and now this possible Corzine relationship with Gensler.

Even Taibbi seems to get the problem with power centers:
This is one of those issues where there's no point in calling for more regulations. No matter what laws we have, we can't have regulatory heads breezily chatting about their enforcement plans with former co-workers who have huge financial interests resting upon their decisions
BTW, Goldman recruited Gensler hard, when he was getting his MBA at Wharton. Back in 2009, I reported:
A friend who attended Wharton with Gensler tells me he was the smartest student in the class. When Goldman visited the campus the year Gensler graduated, Gensler was the only student that they wanted to talk to.

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