Scott D. O’Malia, a member of the Commodity Futures Trading Commission (CFTC), sharply criticized his commission’s response to the collapse of derivatives brokerage MF Global in a speech yesterday at New York Law School’s Center on Financial Services.
O’Malia began his speech comparing the CFTC to an impetuous child. "Instead of taking action to comprehensively identify and address vulnerabilities in futures customer protection," he said, "the Commission continues its all-consuming fixation on swaps regulation."
MF Global, run by Jon Corzine, the former Democratic governor of New Jersey and a major fundraiser for President Barack Obama, was placed into federal trusteeship on Oct. 31, 2011. Government investigators soon discovered that between $600 million and $1.2 billion in customer money was missing from MF Global accounts. Agence France Press reported today that almost all of the money has been located. Why and how the money went missing remains a mystery.
The firm’s spectacular collapse has been blamed on Corzine’s decision to invest billions in European sovereign debt.
O’Malia said he was puzzled that the CFTC, MF Global’s chief regulator, has spent more than three months after its collapse writing new rules governing futures contracts. "MF Global did not result from lack of regulation," O’Malia said.
The House Financial Services Committee will hold a hearing into MF Global’s risk management practices on Feb. 2.