Perhaps like no other person on this list, save another Goldman Sachs CEO, Robert Rubin (#41), Jon Corzine exemplifies the incestuous coven that exists between the country’s political and financial elites. Before briefly discussing the larger issue of Corzine’s personification of the corrupt bargain that governs today’s elites, Corzine’s actions as Goldman CEO also provide a template for Goldman’s business practices for the next twenty years and counting.
In September 1998, the high-flying hedge fund, Long Term Capital Management (LTCM), was in dire straits. After a few years of huge success, the fund was now hemorrhaging money. Because of its previous successes, Goldman – along with another Wall Street insider and one of the country’s leading crony capitalists, Warren Buffet – were considering buying LTCM. At the same time, the Federal Reserve Bank of New York was attempting to organize a bailout of LTCM. As part of the bailout it was trying to organize, the NY Fed convinced LTCM to open its trading book for review. In this way, prospective buyers would know what was under the proverbial trading hood. Evidence seems to indicate that of all the Wall Street firms that were given access to this most proprietary information, only Goldman took advantage of it to trade against LTCM!
By mid-September, Goldman had an entire team in LTCM’s Greenwich, CT office that was tasked with finding everything it could about LTCM’s trades. This team was led by a Goldman employee named Jacob Goldfield, who would later work for George Soros. Within a week of Goldfield’s team setting up shop in LTCM’s office, it seems likely that Goldman used its newly acquired knowledge of LTCM’s trading positions to begin trading against these positions. A Salomon Smith Barney executive heard from his traders in Japan that Goldman was “banging the sh*t” out of LTCM trades and causing LTCM enormous trading losses (and trading profits for Goldman). What is known and is a verified fact is that on September 21, 1998 LTCM lost $533-million. This was more than it had lost the previous month and was one-third of what remained of the company’s investment capital. Goldman Sachs apologists would have us believe that it was a mere coincidence that just a few days after Goldman had access to LTCM’s trading positions, LTCM would lose more in one day of trading than it had in the previous month. Regardless of whether Goldman’s dirty deeds can ever be proven or not, September 21, 1998 sealed the fate of LTCM.
LTCM was overleveraged and bleeding money. More importantly, in an industry where personal grudges fester for years on end, during its go-go years the firm had done little to win friends. The MIT PhDs running LTCM were not bashful about letting the rest of Wall Street know how much smarter they were than everyone else. As a result, if Goldman hadn’t been the first jackal to attempt to steal off with a piece of LTCM’s financial carcass, some other Wall Street firm most likely would have. However, none of this explains Goldman’s double dealings with the rest of the large Wall Street banks.
As previously mentioned, the NY Fed was trying to organize an industry bailout of LTCM. The NY Fed was asking for contributions of approximately $300-million per Wall Street bank. With so many competitors now being asked to work together, the negotiations – which were conducted over just a few days - were fraught with enormous risk and mutual distrust. Of course, there was a considerable amount of distrust because of the widespread belief that Goldman was continuing to profit from its detailed knowledge of LTCM’s trades by trading against LTCM. Sandy Weil (#48) was reported to be “seething” with anger because he believed Goldman continued to do this even as the negotiations were on-going. However, what produced the greatest amount of distrust was Goldman’s eleventh hour revelation that not only was it negotiating with the rest of Wall Street on an industry bailout, but Goldman and Warren Buffet were also considering purchasing LTCM outright! The assembled Wall Street CEOs were dumbstruck. David Solo of UBS spoke for many of those assembled when he angrily asked, “I thought we were all in this together.”
Goldman’s attempt to purchase LTCM didn’t go anywhere and eventually Goldman did participate in the September 23, 1998 bailout. (Bear Stearns, led by its CEO Jimmy Cayne (#10), was the only Wall Street firm not to participate in the bailout.) In 1999, Corzine lost a power struggle with Henry Paulson (#38) over the control of the firm. Because of the individuals, involved, the power struggle could not have featured soaring intellects or profound ideas. Paulson was likely upset that Corzine agreed to participate in the LTCM bailout. In 2000 – and after spending tens of millions of his own money – Corzine was elected to the US senate from New Jersey. Before even finishing his term, Corzine decided to run for governor in 2005 and was successful. However, he only served one term and lost his bid for re-election in 2009.
Away from Goldman Sachs and the constant succor and support provided to Wall Street by the Fed, Corzine’s true colors could come out at another financial services firm, MF Global. Corzine was named CEO of MF Global, in March 2010 and by October 2011 the firm was in the process of collapsing into one of the ten largest bankruptcies in US history. There were allegations that Corzine ordered customer funds to be used to meet the margin calls resulting from the firm’s enormous trading losses. The Commodities Futures Trading Commission (CFTC) recommended to President Obama’s Department of Justice (DOJ) that Corzine be prosecuted. Of course, after being a power broker in the Democrat party - in addition to being a governor and US senator, Corzine chaired the Democratic Senatorial Campaign Committee – Corzine was never prosecuted. In the same way that Franklin Raines (#40) was spared prosecution for his activities as Fannie Mae CEO because of his friends in high political places, Corzine was also spared prosecution. Eric Holder’s DOJ rejected the CFTC’s recommendation to prosecute Corzine. However, Corzine was given a lifetime ban by the CFTC. Corzine still appears on CNBC.
Every Goldman Sachs CEO since 1990 merits a place on this list. For the others see Lloyd Blankfein (#4), Steve Friedman (#22), Henry Paulson (#38) and Robert Rubin (#41). See Alan Greenspan (#29) for his disastrous reaction to LTCM’s collapse.