Former Senator Jon Corzine faces a House Agriculture Committee panel today, where he will testify that he doesn’t know “where the money is” from customer accounts that was used by his former company, MF Global, to trade on the company account.

Joe Weisenthal points us in the direction of Corzine’s testimony, which he will give without pleading the 5th Amendment, despite still being liable for criminal charges in the MF Global case. Here’s the key section:

Obviously on the forefront of everyone’s mind – including mine – are the varying reports that customer accounts have not been reconciled. I was stunned when I was told on Sunday, October 30, 2011, that MF Global could not account for many hundreds of millions of dollars of client money. I remain deeply concerned about the impact that the unreconciled and frozen funds have had on MF Global’s customers and others.

As the chief executive officer of MF Global, I ultimately had overall responsibility for
the firm. I did not, however, generally involve myself in the mechanics of the clearing and
settlement of trades, or in the movement of cash and collateral [...]

I simply do not know where the money is, or why the accounts have not been reconciled to date. I do not know which accounts are unreconciled or whether the unreconciled accounts were or were not subject to the segregation rules. Moreover, there were an extraordinary number of transactions during MF Global’s last few days, and I do not know, for example, whether there were operational errors at MF Global or elsewhere, or whether banks and counterparties have held onto funds that should rightfully have been returned to MF Global. I am sure that the trustee in bankruptcy, the SIPC receiver, and the regulators are working to answer these questions and to understand precisely what happened during the firm’s last days and hours.

This is the crux of the problem, for which Corzine faces legal exposure. The CFTC just banned the practice of using depositor funds for trading with the company account, but that doesn’t mean MF Global didn’t break any laws.

There’s also an amusing section where Corzine has to explain away all the contacts he had with federal regulators in social settings over the past few months. Corzine admits to meetings with CFTC head Gary Gensler, his former colleague at Goldman Sachs, as well as having Gensler in to guest lecture his class at Princeton, seeing him at a conference put together by an investment bank, and a chance meeting at a friend’s wedding. There’s an insight here into the global elite, and in this case, the two members of the elite in question are supposed to be on opposite sides of the law. Matt Taibbi wrote about this yesterday:

Both Corzine and Gensler worked at Goldman back in the day, and the word is that Corzine personally lobbied Gensler to delay the implementation of new rules that would have helped prevent Corzine from raiding his own clients’ funds.

This whole issue smacks of the improper communications between other former Wall Street co-workers like Hank Paulson and Lloyd Blankfein. More and more, it appears that, as a matter of routine, federal regulators like Paulson (in 2008) and, later, Gensler reach out to old friends on Wall Street to negotiate/discuss the timing and the form of various policy changes, bailouts, and other regulatory matters. Inside information seemingly is traded with remarkable casualness.

This is one of those issues where there’s no point in calling for more regulations. No matter what laws we have, we can’t have regulatory heads breezily chatting about their enforcement plans with former co-workers who have huge financial interests resting upon their decisions.

I imagine Corzine will face tough questioning today from members on both sides of the aisle. But the system needs a pretty thorough review as well.