Our battles against the Obama administration over documents related to the government’s hysterical and unprecedented response to the financial crisis continues.
Last week we filed a Freedom of Information Act (FOIA) lawsuit against the Securities Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) seeking records related to internal discussions involving the bankrupt company MF Global Holdings Ltd.
Our FOIA lawsuit, filed on behalf of Vern McKinley, focuses specifically on an October 31, 2011, meeting of the Treasury Department’s Financial Stability Oversight Council (FSOC), during which MF Global was reportedly discussed. (As a reminder, Vern McKinley is a former employee of the Board of Governors of the Federal Reserve and the Federal Deposit Insurance Corporation and author of Financing Failure: A Century of Bailouts.)
Here’s what we’re after from these agencies pursuant to our original April 24, 2012, FOIA requests:
…copies of any and all records concerning this update of MF Global, the discussion of the implications for the broader financial system, and any follow up contact and discussions on public statements. Such records include, but are not limited to, detailed meeting minutes, meeting notes, supporting memoranda, communications, and electronic messages and attachments.
The CFTC acknowledged receiving our FOIA request on April 25, 2012, and was required to issue a final response by May 23, 2012. To date, the CFTC has failed to respond to the request in accordance with FOIA law.
The SEC acknowledged receiving the FOIA request on April 25, 2012, and was required to issue a final response by May 23, 2012. To date, the SEC has failed to respond to the request in accordance with FOIA law. (The SEC indicated in an interim response on May 18, 2012, that it had uncovered a two-page document responsive to Judicial Watch’s request, but withheld the document in full.)
The FSOC was established under the disaster known as the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Council is charged with “identifying threats to the financial stability of the United States; promoting market discipline; and responding to emerging risks to the stability of the United States financial system.” It hasn’t worked.
Per Reuter’s, on October 31, 2011, the FSOC held a conference call to discuss MF Global Holdings Ltd. the same day the company filed for bankruptcy: “The Financial Stability Oversight Council, which is headed by the Treasury Department, received ‘a series of oral reports’ from the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Federal Reserve, the official said. No other details of the call were provided.”
So the FSOC decided to get on the case at MF Global the very day the company filed for bankruptcy. Not much of an advanced warning system is it? (For more information on the failure of the FSOC to anticipate the MF Global meltdown, see this op-ed I co-authored with Vern McKinley for Forbes back in July.)
While financial crisis has claimed larger victims, “for sheer speed and chutzpah, the actions of MF Global’s management may stand alone” in the “annals of Wall Street,” wrote Bloomberg.
MF Global was forced to file bankruptcy after what has been described as “one of the most egregious violations of trust on Wall Street.” The company allegedly stole $1.6 billion from customer accounts in an attempt to cover the company’s losses and lied to bondholders about the financial condition of the company.
Former U.S Senator and New Jersey Governor John Corzine, who is also a top Obama campaign bundler, was forced to resign in disgrace as CEO at MF Global for his alleged role in the improprieties at the company. Corzine, for his part, told a Senate panel he has absolutely no idea what happened to the $1.6 billion.
Opinions are split as to whether or not Corzine will face criminal charges. Filling Obama’s campaign war chest will certainly enhance his chances of escaping accountability. However, according to The New York Post, a recent report by MF Global’s Trustee James Giddens indicates that Corzine may have perjured himself in his congressional testimony.
Corzine’s “Sgt. Schultz” defense at recent congressional hearings on the demise of MF Global and the looting of $1.6 billion from customer accounts seemed a brilliant way to avoid the embarrassment of taking the Fifth while also dodging any perjury trap.
By playing dumb on key questions, Corzine seemed to shield himself from the serious charge of lying under oath. But he did get specific about a few things — one of which is clearly contradicted by the recent trustee’s report on MF Global’s demise.
Here’s the issue. Corzine reportedly testified that after he drastically changed MF Global’s business model to one that favored riskier investments, he also “upgraded” the company’s compliance and control system.
Not true says the trustee report: “Notwithstanding the increased demands on global money management and liquidity, the firm’s Treasury Department, which was involved in implementing the transfers of funds, did not expand or modernize . . . technology for recording and tracking transactions and liquidity did not materially change. These critical functions remained essentially as they had been prior to Mr. Corzine’s arrival.”
The FSOC, which is supposed to be anticipating catastrophes in the financial sector, appears to be just another expensive bureaucratic boondoggle. Clearly it has failed to provide the financial stability and oversight promised by its congressional mandate. The American people deserve to know the truth about what FSOC officials knew about the epic failure of MF Global and when they knew it. But once again, the Obama administration refuses to provide basic information related to its supposed “oversight” of the private sector. I suspect it is because that this “oversight” is more about politics than about the public interest.
Judicial Watch has launched a comprehensive investigation to determine under what legal authorities and lawful rationales the federal government initiated the Wall Street bailouts and has filed a number of lawsuits on behalf of Mr. McKinley. Check it out.
You can find more information on this investigation in my New York Times bestselling book, The Corruption Chronicles.