House Report Details Collapse of MF Global
WASHINGTON — Congressional Republicans on Thursday delivered a long-awaited “autopsy” report on MF Global, sharply criticizing regulators for failing to share information as the brokerage firm was reeling.
The 100-page report, from Republican members of the House Financial Services Committee’s oversight panel, highlights a “disorganized and haphazard” approach to regulatory oversight in the week before MF Global collapsed in 2011. The Commodity Futures Trading Commission and the Securities and Exchange Commission, according to the report, failed to coordinate as the firm was on the brink.
Two days before the collapse of the firm, top S.E.C. officials joked about three conference calls among regulators being scheduled for 10 a.m. “Ahhhh, coordination in action!” Mary L. Schapiro, the chairwoman of the S.E.C., wrote in an e-mail to Robert Cook, the agency’s head of trading and markets.
In the final hours before bankruptcy, the report said, MF Global officials said the C.F.T.C. “pressured” it to transfer $ 220 million to plug a hole in customer accounts. It did so over the objections of the S.E.C. and other regulators. When Ms. Schapiro, learned of the C.F.T.C.’s orders, she responded in an e-mail to a colleague, “Without telling us? That is unacceptable.”
The e-mails underscored the breakdown in communication among federal officials that, according to the report, contributed to the firm’s demise. The report also took aim at the Federal Reserve Bank of New York, saying the regulator “should have exercised greater caution” when approving MF Global’s application for the coveted status of selling securities on the Fed’s behalf.
Lawmakers suggested that investors and customers would have been better served if the S.E.C. and the C.F.T.C. streamlined their operations or combined into a single agency that oversaw all capital markets, citing “an apparent inability” of the regulators to coordinate their actions.
“We didn’t need additional regulation. We needed regulators actually doing their job,” Randy Neugebauer, a Republican from Texas who led the investigation as chairman of the oversight panel, said at a press conference on Thursday.
C.F.T.C. officials declined to comment. A spokesman for the S.E.C. wasn’t immediately available for comment.
The report, a sort of public shaming of MF Global’s employees and federal watchdogs, further traced the debacle to the firm’s top executives. Republicans placed blame on chief executive, Jon S. Corzine, who they say ratcheted up a bet on European debt without regard for internal controls or the danger to clients. The report also argued that the firm was not “forthright with regulators or the public” about the massive trade and its broader health.
Republicans released the report months later than anticipated and without the support of House Democrats.
Some dissent was sowed in Congressional hearings that at times featured political bickering among members. On Wednesday, the oversight panel’s top Democrat declined to endorse Mr. Neugebauer’s findings, saying he agreed with a number of the conclusions but needed additional time to review the document. Michael Capuano, a Democrat from Massachusetts, said he would soon file an “addendum” to the report.
For the targets of the report, the splintered support provides a path to undermining the findings. Democratic regulators and Jon S. Corzine, the MF Global’s former chief executive and a onetime Democratic senator from New Jersey, could dismiss the investigation as a partisan attack.
House Republicans, however, say the examination relied on an exhaustive review of evidence rather than political motivations.
The report, the outgrowth of several Congressional hearings with MF Global’s executives and other officials, is the culmination of a yearlong investigation that sought to chronicle the firm’s undoing and rebuke those at fault. The House panel cobbled together its findings from dozens of interviews with former employees and more than 240,000 documents.
While short on new revelations, the document is the government’s most significant effort yet to seek redress for MF Global’s errors.
Criminal authorities investigating MF Global’s collapse are leery of filing charges against the top executives, suspecting that chaos and lax controls caused the customer money to go missing. And while regulators are still pursuing civil enforcement actions, in which the legal bar is lower, officials have not yet decided a course.
Even after a year of overlapping investigations, MF Global’s customers remain in the lurch. Farmers and ranchers, who traded futures contracts through MF Global to protect themselves from the price swings of their crops, have recouped about 82 percent of their money but are still owed millions of dollars.
James Giddens, the court-appointed trustee seeking to recover money for MF Global’s customers, has joined a lawsuit against several top MF Global executives, including Mr. Corzine, to make up for the missing funds. In a report that largely tracks the findings issued by Congressional Republicans, Mr. Giddens lambasted MF Global employees for tapping customer money to pay the firm’s own bills in a last-ditch bid for survival.