U.S. Senator Richard Shelby (R-Ala.), ranking Republican on the Committee on Banking, Housing and Urban Affairs, today made the following statement at a hearing on the collapse of MF Global.
Statement of Senator Richard C. Shelby
Committee on Banking, Housing and Urban Affairs
April 24, 2012
“Thank you, Mr. Chairman.
“The collapse of MF Global is one of the largest bankruptcies in U.S. history and the greatest consumer protection failure since the enactment of the Dodd-Frank Act.
“It has been six months since MF Global filed for bankruptcy, and the ownership of 1.6 billion dollars in customer assets remains in dispute. Hundreds of MF Global customers are still waiting to learn how much, if any, of their funds will be returned to them.
“The disorderly failure of MF Global occurred despite the fact that it was regulated by not only the CFTC and the SEC, but also the Financial Industry Regulatory Association, the Chicago Board Options Exchange, the National Futures Association, and the Chicago Mercantile Exchange.
“The job of each of these regulators was to ensure that customer assets were protected. That 1.6 billion dollars in customer assets remain subject to ownership disputes reveals a serious regulatory failure. Accordingly, the purpose of today’s hearing should be to help the Committee determine which regulators failed to do their job, and why.
“To assist this effort, I asked the CFTC’s Inspector General last November to examine the Commission’s oversight and regulation of MF Global. The IG’s findings, along with the other ongoing investigations, should assist Congress in its efforts to hold regulators accountable for any identified failures. I also asked the CFTC’s Inspector General to determine whether Chairman Gensler’s recusal was appropriate and whether he should have recused himself much earlier in the process.
“Prior to MF Global’s bankruptcy, Chairman Gensler had multiple contacts with MF Global and its CEO Jon Corzine concerning the CFTC’s regulation of the firm. If a recusal was appropriate, it seems it would have been more appropriate at the start of Mr. Corzine’s tenure at MF Global than after the firm had failed.
“Furthermore, this Committee’s due diligence has revealed that Chairman Gensler played an active role in the oversight of MF Global during the week leading up to its failure. Yet, Chairman Gensler’s recusal now shields him from explaining his actions. This is unacceptable.
“Chairman Gensler owes the public a full accounting of his role in the fall of MF Global. It appears by his absence today, however, that we will have to wait a bit longer for such an accounting. MF Global certainly will not be the last financial firm to fail. Failure is an inevitable part of the free market system.
“Our goal should not be to protect the private market from failure. Our goal should be to establish a credible regulatory system that protects consumers while leaving the market free to innovate and expand. We must then hold that regulatory system accountable for its failures. This is exceedingly difficult, however, when one of the main participants refuses to speak.
“I look forward to the testimony today and thank our witnesses for appearing. Perhaps, one day, we will hear from Mr. Gensler. Today does not appear to be that day, however.
“Thank you, Mr. Chairman.”