[Congressional Record (Bound Edition), Volume 157 (2011), Part 14]
[Senate]
[Pages 19214-19215]
[From the U.S. Government Publishing Office, www.gpo.gov]




                       THE COLLAPSE OF MF GLOBAL

  Ms. KLOBUCHAR. Mr. President, I rise today to discuss the collapse of 
MF Global. While its demise hasn't triggered the sort of economic 
turmoil we saw in 2008, let me assure you it is having a devastating 
impact on the livelihoods and savings of many in my State.
  Sadly, the story of MF Global is all too familiar. It is the story of 
another overleveraged financial firm that took on too much risk and did 
little to disclose its bets. Once again, the folks whom the system was 
supposed to protect have been left holding the short end of the stick. 
Three years after the U.S. financial system was nearly toppled by this 
sort of recklessness, it seems little has changed on Wall Street.
  Today, Mr. Corzine appeared before the House Agriculture Committee to 
testify on events that led to the bankruptcy of MF Global--the firm he 
led--as well as the whereabouts of roughly $1.2 billion in customer 
funds that remain missing. While taking responsibility for the collapse 
of the firm in his testimony today, Mr. Corzine chose to use much of 
his testimony defending the strategy that ultimately led to the firm's 
demise and that left many in my State with their life savings on the 
line. In regard to the missing customer funds, he responded that, as 
CEO of MF

[[Page 19215]]

Global, he wasn't really in the position to know what happened.
  If executives at MF Global were willing to steer their ship into 
dangerous waters, they should be able to account for the safety of 
their customers' funds held in segregated accounts--something 
considered sacred within these markets.
  If anybody still doubts that Wall Street has not learned from its 
mistakes, I would have you talk with the farmers in my State who can't 
access their life savings and aren't sure when or how much of it they 
will ever get back.
  Dean Tofteland, from Luverne, MN, a town of 4,600 people--his family 
grows corn, soybeans, and raises pigs on their farm in southwest 
Minnesota. He currently has over $200,000 in what was supposed to be a 
segregated MF Global account, which he cannot access and which he may 
never fully recover. He is not a speculator. He invested to reduce his 
risk--locking in prices ahead of the growing season so he is protected 
from price fluctuations that can eat into his profits.
  Talk to Dennis Magnuson, a pork producer from Austin, MN, who had a 
substantial amount of money with MF Global that he used to stabilize 
the cost of feed for his pigs. Both Senators in the Chamber are from 
States that have livestock, and they know the cost of feed has been 
escalating. That is why he vested. He knows the risks--price swings, 
poor crops, bad weather. These are all part of farming. But his account 
at MF Global was supposed to help manage those risks, not become one.
  It is not just individual farmers; the effects of MF Global's 
collapse are rippling through the whole agricultural community.
  Here is a letter from Philip Deal, who writes:

       I am the CEO and General Manager of Wheaton-Dumont Co-Op 
     Elevator in Wheaton, MN.
       Wheaton is located on the western edge of Minnesota by the 
     North Dakota/South Dakota border. Our cooperative has 
     approximately 1,200 active members and a total membership of 
     more than 5,000. So the MF Global situation affects a great 
     number of people here.
       We employ about 115 people, and we are easily the largest 
     nongovernment employer in all of the communities we operate 
     in.
       Our business uses a Chicago Mercantile Exchange and 
     Minneapolis Grain Exchange to hedge grain purchases and 
     sales. We do not speculate. We have always relied on the 
     implied fiduciary responsibility of the Commodity Futures 
     Trading Commission and the Chicago Mercantile Exchange to 
     safeguard our segregated funds.
       The impact to our business has been huge. We have been 
     forced to double-margin the missing funds. This has increased 
     our interest expenses and decreased our ability to buy and 
     sell grain.
       Simply put, we cannot afford to lose any money on this 
     deal. On a local level, the very future of our business is at 
     stake. On a larger level, if segregated funds are lost, 
     market participants will leave the market, open interest will 
     decline, and market liquidity will fall. Everyone loses.

  Sadly, Philip Deal is correct. The failure of MF Global has caused 
millions in investor losses, created significant uncertainty in the 
markets, and has left many in my State confused and angry--and they 
should be angry. Just 3 years after the 2008 financial collapse, and 
what has changed? How can ordinary folks trust this system? Who can 
they trust to protect them?
  Two weeks after the collapse of MF Global, it was announced the 
Commodity Futures Trading Commission, which is leading the 
investigation into the missing funds, will receive only two-thirds of 
their budget request for 2012, potentially limiting the agency's 
ability to do its job at a time when the markets they oversee are 
expanding exponentially. This is not acceptable. We need to make sure 
our regulatory agencies aren't allowing Wall Street bankers to go down 
the street in their Ferraris while those standing up for the middle 
class--those at the agencies that are supposed to regulate them--are 
not following behind in a Model T Ford.
  We don't know with certainty what the ongoing investigations into MF 
Global will find, but there is little doubt Congress has work to do. 
Already the CFTC, after our hearing in the Senate Agriculture Committee 
last week, has come up with some changes they are proposing to how 
these funds can be invested. I think more needs to be done. There are 
also rules of disclosure being considered and that were discussed today 
at a House hearing, as well as in our Senate Agriculture hearing, that 
need to be changed. These changes were made to the CFTC rules in 2000 
and in 2005 they loosened the rules and expanded things. They need to 
go back to where they once were, where they protected investor savings.
  Investor trust in segregated accounts is vital to market confidence 
and is the cornerstone of customer protection in the commodity futures 
market. This trust has been breached. I urge my colleagues to join me 
in demanding those responsible for the MF Global failure be held 
accountable for their actions and that steps are taken to prevent this 
from ever happening again.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER (Ms. Klobuchar). The Senator from Wyoming.
  Mr. ENZI. Madam President, I ask unanimous consent to speak as in 
morning business for whatever time I might use.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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