Wall Street 2: The Return of Corzine

Ex-New Jersey governor is banking that his comeback in finance will be swell

Goldman Sachs bankers like trekking into the wilderness of public service, but once they go, they don’t come home. An executive who becomes a senator, an intelligence adviser, a deputy secretary of state, a central banker, a Fannie Mae chief or a Treasury secretary hardly ever returns to Wall Street. And the second act in finance, if it happens, rarely goes well.

After a legendary 1998 Christmastime palace coup, Jon S. Corzine was ousted from Goldman’s helm. The trader pivoted to a career in New Jersey politics, which ended this January after the senator-turned-governor lost reelection by more than 80,000 votes. “He could retire and go to Florida,” said John Whitehead, the 88-year-old former Goldman Sachs co-chairman. “He could have racehorses. He could have a yacht. He could do whatever he wants. I think he wanted to come back.”

And so he did. On Saturday, March 20, Goldman’s former chief executive was in a New York office building, touring the ninth-floor headquarters of an unremarkable futures brokerage named MF Global. He was smiling. It reminded him of an office he knew when he was a junior Goldman bond trader.

Three days after the tour, he was named chairman and chief executive of the little-known company, which does not look or sound or make money like a serious full-service financial institution. In fact, it’s lost money for four straight quarters. Corzine thinks it can become something very different. It’s already applied, for example, to be one of the few firms that are allowed to deal directly with the Federal Reserve Bank of New York. “When I joined Goldman Sachs in 1975,” he said at the headquarters, “there were a few thousand employees and it had an application pending with the New York Fed to be a primary dealer. Sound familiar?”

Wall Street is not an easy or warm world, but compared to the medieval fiefdoms of New Jersey, it’s a gorgeous bastion of reason and order. It’s going to take time to bring MF Global up to speed, but at least Corzine has a fighting chance.

Corzine, 63, was born to an Illinois grain farmer and an elementary school teacher. After getting his M.B.A. from the University of Chicago, he took a job trading bonds for Goldman Sachs in New Jersey. That was in the mid-1970s, long before bond trading was macho and lucrative.

He was sweater-vested, bearded, avuncular and soft-voiced, but by the end of 1985, he’d been named to Goldman’s management committee.

He became the co-head of fixed income in 1988 and, after then-chairman Stephen Friedman’s abrupt exit six years later, the head of the most important firm on Wall Street. Along with John Mack’s rise a few months earlier at Morgan Stanley, his coronation marked the beginning of the era of the trader.

But his tenure didn’t last long. Amid arguments over taking Goldman public, the dangerous collapse of the hedge fund Long-Term Capital and the direction of the firm’s growth, his management committee hatched the firm’s first cinematic coup. While he spent a family vacation skiing in Telluride, colleagues such as Hank Paulson and John Thain agreed to push Corzine out. He reportedly spent his last days working in his suit from a car parked outside Goldman headquarters.

Friends like Janet Hansen, a former Goldman Sachs fixed-income vice president, were called to his televised appearances to lend support during his early days in politics. “They would send a car for me, and I would calm him down before he spoke,” she said. “It was to cheer him on, and I think he needed that, he really did. He needed his Goldman fan club there. That sounds silly, but it was hard. What he was trying to do was hard.” Family and other friends were there, too, she said. “I think it was saying, ‘You go, guy, go. You can do this.’” Corzine won his Senate seat in November 2000. At $62 million, his campaign doubled the previous record for the most expensive ever. In Washington, he voted prominently against the Iraq war, but the Senate was not a career highlight. “I’m 58 now,” he said in 2005, “and I’m the last person on every committee I sit on. I’d have to stay in Washington until I’m 80 to be a committee chairman.” That November, he won New Jersey’s governorship, though the race wasn’t easy. After the dissolution of his marriage, his wife, whom he’d met in kindergarten, spoke about him as tainted by ambition and state politics. “Jon did let his family down,” she said publicly, “and he’ll probably let New Jersey down, too.”

On April 12, 2007, he was being driven 91 mph in a Chevrolet Tahoe to a meeting with Don Imus and the Rutgers women’s basketball team when the SUV hit a pickup that had swerved to avoid another car. He was not wearing his seat belt. His femur, broken in two places, was sticking through the skin of his left leg. He received 12 pints of blood; spent eight days on a ventilator; and fractured 11 ribs, his sternum, his collarbone and a vertebra.

Joshua Zeitz, a senior policy adviser and now Corzine’s chief of staff, said that the accident was, in retrospect, a minor event in a mostly successful governorship. “To me, it’s not that he’s leaving something that was too tough to handle,” he said, offering that Corzine had cut the size of government while increasing funds for education, avoiding cuts for vulnerable senior citizens and taking steps toward ending the state’s infamous property taxes. “It’s a success story that I think historians will someday appreciate,” he said.

As for his more notable failures, like his attempts to privatize New Jersey’s toll roads, and especially the reelection loss, another source with knowledge of Corzine’s thinking said he doesn’t feel that he was vanquished by New Jersey’s gruesomeness, just that the economy got tremendously horrible. The voters, he feels, were only voting with their pocketbooks.

“For me, it would have been totally debilitating. It wasn’t for him,” said Dan Neidich, a former Goldman Sachs management committee member. “He’s one of those guys who can keep his eye on what he’s trying to achieve.”

It takes seven days to turn a cast-out businessman and exiled politician into a new chief executive. On Tuesday, March 16, a 36-year-old managing director at J.C. Flowers & Co.—the buyout firm founded by, named for and led by the bespectacled former Goldman dealmaker, J. Christopher Flowers—flew to Chicago for a meeting. When the executive, David Schamis, landed, he got a call saying that the CEO of MF Global, which Flowers owns a sizable portion of, was resigning. Schamis went to the hotel and called up his boss. “Chris, we have a problem,” he said. “How do you feel about asking Jon to do this?”

Flowers and his former colleague had been talking, loosely, about working together. On Wednesday, he called Corzine up. Meanwhile, Schamis called MF Global’s board to say he had an idea about a CEO replacement. He called him Mr. X and said he had “extreme credibility.”

When he hung up, he was supposed to go to the Chicago meeting, but he decided there was too much going on in New York. He got back on a plane. When he was standing at the American Airlines gate, he got a call from Corzine.

At a meeting later that day, Corzine was given an annual report to read, which he brought back on Friday with highlights and questions written into the margins. A number of other executives came in. When they left, Schamis asked how the former governor might feel about joining as an interim chief executive. “If I’m going to do this,” he said, “I’m going to do it full time.” Over the weekend, details of his compensation were hammered out— a $1.5 million salary, a $1.5 million signing bonus and a $3 million target bonus for the next fiscal year.

On Tuesday morning, a few hours after Corzine had a 7 a.m. Yale Club breakfast with Schamis and the firm’s outgoing chairwoman, the deal was announced. He is chairman and chief executive of a Wall Street company again—its third in a year and a half.

MF Global has had its troubles. In June 2007, the brokerage firm was spun off from the giant British hedge fund, Man Group, which had built it up after buying the futures arm of the defunct brokerage Refco. The estimated stock price range had been set at $36 to $39, but it debuted at $30 and dropped 10 percent on the opening day.

Things got worse. In late February 2008, the firm disclosed that a 40-year-old man in its Memphis office had made rogue bets on wheat futures that cost the brokerage $141.5 million. MF Global had reportedly removed internal trading limits to speed up electronic trading.

There were rumors that MF Global was losing clients. The company’s stock price dropped from over $28 to under $10, and before the end of the year, to under $2. In December, MF Global was fined another $10 million to settle charges over violations from the previous six years.

After Corzine was announced as the firm’s new leader, its stock price went up to nearly $9, well over its previous 52-week high. “This is a five-year project,” the former governor said in the interview, “if not a decade project.” The idea isn’t to merely clean it up. Corzine wants to grow the futures brokerage into a mini-Goldman—an investment bank like, say, the late Donaldson, Lufkin & Jenrette, big but not too big. The source with knowledge of Corzine’s thinking said MF Global could grow a money-management business, an advisory business, a venture capital fund, an Indian mutual fund!

But he’s also aware of the history of petered-out Wall Street second acts. “I get that. There’s a risk of that,” he said. “But I have confidence that with discipline, steady, focused work, this is a franchise that can be taken from what it is, probably one of the leading futures brokers ever, into an outstanding position in the broader financial services field.” “Sometimes I think we take on jobs where the doing isn’t as much fun as the being,” Neidich said. “I think he’s going to like doing what he’s doing day to day.”

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