The collapse of MF Global, the brokerage dealer headed by former New Jersey Governor and Goldman exec Jon Corzine, may seem like just another case of Wall Street fat cats paying the price for their speculation (actually, though Corzine may have run the firm into the ground, he’s reportedly going to receive a $12 million golden parachute).  The MF Global affair, however, signifies something even deeper:  how crony capitalists like Jon Corzine have used state pension funds for their political and financial benefit.

MF Global has declared Chapter 11 bankruptcy after Corzine led the firm to buy big holdings of debt from Spain, Italy, Portugal, Belgium, and Ireland at a discount.  Now federal regulators are investigating how hundreds of millions in customer money has gone missing.  But these were not simply financiers.  Some of Corzine’s biggest clients were pension funds for teachers, public employees, and others.   The fifth largest shareholder was TIAA-CREF, which owned 6% of the stock (MF Global’s Bankruptcy Petition is here).  In 2008,  before Corzine arrived, MF Global was sued by numerous pension funds over losses they had sustained because of MF Global trades, including the Iowa Public Employees’ Retirement System, Policemen’s Annuity Benefit Fund of Chicago, Southeast and Southwest Areas Pension Fund, and the State-Boston Retirement System.  MF Global settled the suit for $90 million.

The MF Global bankruptcy will cost pension funds a lot.  Pension funds around the country will likely take severe hits as their shares in the firm, bonds, or other holdings suffer huge losses.  The Oregon pension fund had a heavy stake MF Global.  Others are likely to follow. (more…)

From the Associated Press:

Treasury Secretary Timothy Geithner is telling Congress that he will halt investments in two big government pension plans Monday to allow the government to continue borrowing money for the next few months.

Geithner says the government will reach its $14.3 trillion borrowing limit on Monday. Republicans have held back supporting an increase in the borrowing limit, saying they want Congress first to approve more spending cuts.

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