Two of the most hated names in global finance are Jon Corzine and George Soros.
Scorn is heaped upon Corzine, a former U.S. senator, New Jersey governor and head of Goldman Sachs, because he drove his company, MF Global, into bankrupty.
Soros is despised not only for reaping a fortune by shorting the British pound in 1992, but for his politics. He represents liberalism in the same way the Koch brothers embody conservatism.
The tie that binds Corzine and Soros? They made the same bet.
Under Corzine’s leadership, MF Global acquired $6.3 billion in short-term European debt. As the situation in Europe worsened, investors, ratings agencies and regulators began to worry that the firm was overexposed. The company, unable to meet regulators’ heightened capital requirements, filed for bankruptcy protection on Oct. 31.
According to the Wall Street Journal, Soros’s family fund then picked up about $2 billion of the bonds at below-market cost.
Beyond price, the two men’s bets varied in a couple of ways.
Their timing, of course, was different. Optimists interpret Soros’s later investment as a sign that he believes European leaders can avoid default.
(Soros had nowhere near the same faith in MF Global. An SEC filing shows that his investment in the company at the end of the third quarter totalled just $158,000.)
But the reason that Corzine’s risk-taking is under intense scrutiny while Soros’s is not is simple: Corzine was betting other people’s money. Soros used his own.
Soros decided earlier this year to return investors’ cash and run Soros Fund Management as a family fund.
When the decision was announced in July, Bloomberg wrote that it signalled Soros’s transformation from speculator to “philanthropist statesman.”
But it also gave him the freedom to take big risks without being encumbered by stockholders or government oversight.
So now Corzine is devoting his time to congressional hearings, bankruptcy proceedings and lawsuits.
Soros just has to worry about losing $2 billion.