Former Democratic politician Jon Corzine’s financial firm MF Global collapsed over the weekend in a spectacular bankruptcy that provided an insider’s glimpse into how finance and politics work today.
The telling detail about MF Global’s business can be found in the contracts it signed with its biggest lenders, so-called “senior creditors.” These creditors, in effect, knocked a whole percentage point off the interest rate they charged MF Global solely because Corzine was at the helm. Under what is known as a “key man provision” in the contract, bondholders would get an extra point of interest in the case of “the departure of Mr. Corzine as our full time chief executive officer due to his appointment to a federal position by the President of the United States and the confirmation of that appointment by the United States Senate.”
