Carney, Corzine, and cronyism

Upcoming John Locke Foundation Headliner Timothy P. Carney devotes some attention in a new Washington Examiner article to former New Jersey governor and Obama crony Jon Corzine.

Former Democratic politician Jon Corzine’s financial firm MF Global collapsed over the weekend in a spectacular bankruptcy that provided an insider’s glimpse into how finance and politics work today.

The telling detail about MF Global’s business can be found in the contracts it signed with its biggest lenders, so-called “senior creditors.” These creditors, in effect, knocked a whole percentage point off the interest rate they charged MF Global solely because Corzine was at the helm. Under what is known as a “key man provision” in the contract, bondholders would get an extra point of interest in the case of “the departure of Mr. Corzine as our full time chief executive officer due to his appointment to a federal position by the President of the United States and the confirmation of that appointment by the United States Senate.”

This isn’t a normal provision for bond contracts. “It’s unique,” said Alex Diaz-Matos of Covenant Review, a firm specializing in bond agreements. “It’s like nothing that I’ve seen before, and I read a lot of these.”

So what made Corzine uniquely indispensable? Diaz-Matos suspects it’s mostly Corzine’s Goldman Sachs experience, and the prospect that he could turn MF Global into a “mini-Goldman.” But the details of the key man provision give us a clue toward another Corzine asset: his political connections.

Why did bondholders suspect Obama might hire Corzine? Because Corzine, a former Democratic U.S. senator and governor, was once a colleague of Obama’s. He raised money for him, campaigned for him and made personal donations to him. Obama, in fact, called Corzine “our Wall Street guy.”

Mitch Kokai / Senior Political Analyst

Mitch Kokai is senior political analyst for the John Locke Foundation. He joined JLF in December 2005 as director of communications. That followed more than four years as chie...

Reader Comments