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I would like to welcome our second panel witness to the table the honorable John Corzine former CEO FM global incorporated New York, New York.
Corzine which you -- stand for administering the oath which will be administered to the rest of the witnesses in this hearing.
Please raise your right -- Please state your name for the record.
Do you solemnly swear that the testimony you're about to give before this committee.
In the matters under consideration on this day.
The December 8 2011.
Is the truth.
The whole truth and nothing but we'll -- Do you know you have the right to counsel.
And please activate your microphone senator I do or is your counsel in the room -- counselors.
Would you please state his name for the record.
Andrew -- vendor.
Thank you senator.
Corzine please Begin your testimony when you were ready.
Thank -- chairman chairman Lucas ranking member Peterson and distinguished members of the committee.
Like all of you I am devastated by the enormous impact.
On many people's lives resulting from the surrounding the -- global bankruptcy.
Of course my distress.
And sadness pale in comparison to -- losses -- of yours.
-- customers farmers and ranchers and others employees and investors have suffered.
Their -- weighs on my mind every day.
As the Chief Executive Officer of them have global.
The time its bankruptcy.
And truly apologize -- all those affected.
-- address what happened I must make it clear that -- my departure from mammoth global on November 3.
This year -- not had access to many of the relevant documents which are essential to -- being able to testify accurately.
About the chaotic days proceeding the declaration.
The members should also understand that committee turned down our request to testify voluntarily and January.
I had hoped that by that time I wouldn't have detained in reviewed relevant records so that it could be more helpful to the committee.
While I intend to be responsive to the best of my ability today without adequate time and materials.
Prepare and maybe April may be unable to respond to various questions members might votes.
Other questions -- my specific role in the company will be questions for which I simply have no personal knowledge.
Make it very clear many of your questions may wealthy ones I myself had a when I joined the company in late march 2010.
MF global was primarily of course based broker that provided execution and and clearing services.
For products traded in derivatives markets and exchanges around the world.
The firm had reported losses in five consecutive quarters before arrived and and lost money in each of the previous three years.
Upon my arrival -- MF global management and the board.
Advised by an outside consultant devised a new business plan.
Plan was communicated to the public and provide it in substance.
And MF -- would involve into a broker dealer and ultimately into an investment.
The implementation of the plan was expected to take three to five years.
I was hopeful about the prospects for the company and I invested in it personally.
Much of my compensation was in the form of options to purchase stock which would have value only if the company prospered.
In addition on a number of occasions I purchased shares of the company with my own funds and never sold any stock.
In the summer of 2010.
I met several times with MF global.
Senior traders to discuss ways to improve the company's revenues and profitability.
One of the ideas discussed was for MF global to purchase short term European sovereign debt.
Using -- to maturity known as RTMs.
Before a kingdom of global firm had engaged in billions of dollars of RTM's.
With regard to US treasury securities US agencies.
Bonds and corporate debt.
But it also previously held billions of dollars of foreign sovereign debt positions.
In the summer of 2010 we decided to draw on these experiences and to engage in -- GM's involving short term foreign sovereign yeah.
In these transactions MF global purchase foreign sovereign debt.
From a seller and sold the same to a counterparty.
With an agreement to repurchase the securities from the counterparty.
At the maturity of the -- When MF global entered into the transactions.
I believe that its investments and short term European debt securities were prudent investments.
MF global invested in RTMs with respect to the -- of Belgium Italy Spain Ireland and Portugal.
The first three of these were rated double a or better when MF global invested.
Even today -- three remain a rated or better.
Ireland and Portugal were lower rated but they were largely backed by the European Financial Stability Facility and the IMF.
I accept responsibility.
For the are -- young Turks.
-- strongly advocated that trading strategy.
Nevertheless it is important to recognized that -- -- investment in these positions.
Was the subject of internal to cut discussions.
With senior managers.
Traders and with MF global -- of directors.
Indeed the trades were described analyzed and debated at multiple board meetings.
I believe that the board members all of -- showing -- board before -- -- MF global -- independent and sophisticated.
They ask hard questions and raised concerns.
The directors -- sovereign risk women for these RT entrance.
The time of the bankruptcy -- global is within -- -- women's.
The RTM positions were also publicly disclosed both in the periodic financial statements which were reviewed by the company's counsel and accountants.
And other public statements including press releases and earnings calls.
As of today none of the foreign debt securities -- MF global used to engage in -- TM trade has defaulted or been restructured.
All of those securities that reached maturity while they were part of the RTM position paid in -- In my written statement I have attempted to describe.
The relevant contacts with regulators during my time at MF global.
As explained in that statement I did not exert on do or improper influence on regulators.
My communications were typically in the presence of various members of the regulatory staff as well as my own politics.
The late summer and fall of 2011.
Were extraordinarily difficult times in financial markets for almost all market participants.
And October 17 2011.
The Wall Street Journal published an article.
That described a general ruling regarding the capital treatment or TM physicians.
Which MF global had disclosed on September 1 2011.
Other news stories -- On Monday October 24.
Rating agencies began to cut MF global ratings.
MF portal announced its quarterly earnings on October 25.
The announcement revealed that MF global had lost a 191.
Point six million dollars in the quarter.
That ended September 30.
In light of the attention.
Has been given to -- TMs and the reports that attributed MF callables lost -- TMs involving European debt securities.
It's important to note that the loss was not -- repeat not related to those positions.
-- I as I've explained in my written statement the lion's share of the quarterly loss was a write off.
419 point four million dollars -- related to tax losses accumulated largely in the years before the higher raw.
Shortly following the earnings announcement that ratings downgrade some clients and counter parties withdrew their business from the firm.
Others require increased march.
Firm's stock traded at sharply higher volumes and lower prices.
Despite our best efforts to sell assets and generate liquidity the marketplace lost confidence in the front.
Obviously on the forefront of everyone's mind.
And the varying reports that customer counts -- not been reconciled.
I was stunned when I was told -- -- Sunday October 30 2011.
That MF could not MF global could not.
Count for many hundreds of millions of dollars client.
I remain deeply concerned about the impact that the -- reconciled in frozen funds have on MF global customers and others.
Simply do not know where the money yes -- -- the accounts have not been reconciled today.
As the Chief Executive Officer of the MF global holding company.
Ultimately had overall responsibility.
For the -- I did not however generally involve myself from the mechanics of the clearing and settlement of trades from the movement cash and collateral.
Nor was -- an expert.
Complicated rules and regulations governing the various.
Different operating businesses that comprised MF global.
And little expertise or experience in those operational aspects.
In short I do not know which accounts or -- reconciled or whether on reconciled accounts were.
Even subjects of the segregation rules.
Moreover there were an extraordinary number of transactions.
During -- -- Period the last few days of them -- -- And I do not know for example whether there were operational errors.
-- MF global or elsewhere.
Or whether banks and counter parties have held on -- funds.
That should rightfully have been returned to hammer -- -- I am sure that the trusting -- bankruptcy.
-- receiver and the regulators are working to answer these questions.
And understand precisely what happened during the firm's last days and hours.
As the Chief Executive Officer of them up global I tried to exercise my best judgment on behalf.
-- client's employees and shareholders.
Once again let me go back to where started.
I apologize both personally and on behalf of the company.
To our customers.
-- employees and our investors.
I truly know they are bearing the brunt.
The impact of the firm's bankruptcy.
Prepared remarks and I'm willing to answer.
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