Democrats: Corzine not only to blame for MF Global collapse

By Peter Schroeder - 12/03/12 02:15 PM ET

Republicans were wrong to lay blame for the high-profile collapse of MF Global primarily at the feet of its former head, Jon Corzine, according to a report from House Democrats released Monday.

Rather, there are plenty of people who share the blame for the futures firm's collapse, including MF Global's board and financial regulators, Democrats claim in their dissection of the bankruptcy that left more than $1 billion in customer funds missing.

The report comes from Rep. Michael Capuano (D-Mass.), the ranking member of the Oversight subcommittee of the House Financial Services Committee. Capuano failed to sign on to a report issued in November by Republicans on the panel, saying he did not have enough time to review its findings and some of the points required initial commentary.

One major difference he draws is how much blame to pin on Corzine, the former Democratic lawmaker who served New Jersey both as a senator and a governor. The GOP report claimed that decisions by Corzine were ultimately what caused the firm to collapse, noting his push to heavily invest in risky European debt as a way to beef up the returns of the company.

Capuano agreed that Corzine was partly to blame, but argued that the GOP's findings overshot the mark.

"A reasonable person could read the majority staff report and conclude that Corzine was solely responsible for MF Global's collapse and the loss of customer funds," the addendum stated.

Capuano argued that the firm's board bears a "significant share" of the responsibility by approving Corzine's actions and setting risk parameters. Furthermore, he contends that no person could have done what Corzine did if rules had been tighter and enforcement more stringent.

Capuano also tempered the criticism of the credit rating agencies. Republicans argued credit raters missed the mark in evaluating MF Global's financial stability, but Capuano argued the raters saw MF Global's debt as "essentially junk" from the beginning.

While drawing distinctions, Capuano does find several areas of agreement with his Republican counterparts. For one, he agreed with the call to change accounting practices employed by MF Global that helped customer funds go missing, and with the recommendation to at least consider combining the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC). Capuano recently co-sponsored a measure to merge the two with Rep. Barney Frank (D-Mass.), the ranking member of the panel, who did not seek reelection in 2010.

"We can’t stop every individual looking to circumvent the system, but we can put enough safeguards in place so that the bad actors are thwarted in their efforts," said Capuano.