MF Global Was Doing Great Until It Wasn’t

By Matt Levine

“Every banker knows that if he has to prove that he is worthy of credit, however good may be his arguments, in fact his credit is gone,” but every banker also seems to forget the modern corollary, which is that, if you have to prove you are worthy of credit, however good may be your arguments, don’t do it over email. Here’s someone who forgot that and does it surprise you to find his name in the same sentence as “House Financial Services Subcommittee on Oversight and Investigations”?:

A week before MF Global Holdings Ltd. collapsed, its chief financial officer told Standard & Poor’s in an e-mail that the futures broker had “never been stronger.”
S&P provided the House Financial Services Subcommittee on Oversight and Investigations with an excerpt of the e-mail from MF Global CFO Henri Steenkamp. S&P also informed the panel that Jon Corzine, then MF Global’s chief executive officer, met with its analysts on Oct. 20 to reassure them that his $6.3 billion bet on European sovereign debt was no threat to the firm, according to a Jan. 17 letter obtained by Bloomberg News.
U.S. lawmakers will turn their attention to the role of the ratings companies in the failure of MF Global at a Feb. 2 hearing after summoning Corzine, the former governor of New Jersey and Goldman Sachs Group Inc. co-chairman, to two hearings in December. S&P ranked MF Global as investment grade until its failure, while Moody’s downgraded it to junk status four days earlier.
“MF Global is in its strongest position ever,” Steenkamp told S&P on Oct. 24, according to the letter to Representative Randy Neugebauer, a Texas Republican, from Craig Parmelee, a managing director at S&P in New York.