We had the story about a month ago regarding the future of TSec Tim Geithner. The suggestion was that post a debt ceiling deal good old Tim would be out of a job. That might be in the works.
I’m not sure who to blame for the fiasco in DC the past few weeks. I think a lot of folks have their hands dirty in this mess. But certainly Geithner deserves his share of the blame. Tim is also a vestige from another era. He is as responsible as anyone for TARP. The case for sending him packing is pretty strong.
The question is when, and who will replace him. I found something in a bond offering that gives a clue. I’ve not seen this kind of language before. I think it tells us where this is headed.
MF Global is coming to market with $300mm of senior notes. By itself, this is a routine deal. But this one has some kickers to it that have me scratching my head. Jon Corzine is the CEO over at MF. Jon is ex Goldman and ex governor of NJ. A very powerful guy. He is also a solid Democrat and big supporter of Obama.
There is a unique feature in the MF Global deal. The interest rate on the bonds rise a full one per cent if one conditions is met in the future. What is that condition?
The issue carries a notable “key man event” trigger, mandating a 100 bps increase in the interest rate if the company’s chief executive officer, Jon Corzine, is appointed by the President of the United States and confirmed for a role in the federal government before July 1, 2013.
Lawyers pore over bond deals. This one is no exception. As part of the due diligence someone must have asked Corzine how long he would be the CEO at MF. His answer must have been, “I’m staying until the President calls me with an offer”. The language in the bond deal has to mean that Corzine is already talking with the White House.
Corzine is a big shot (he had equal responsibilities at Goldie as did Hank Paulson). He would not consider a low level job in DC. So it has to be Tsec that he is after.
Let the dust settle for a month or so on both the debt deal and the MS bond offering and we are going to see a new guy at Treasury. Another Goldmanite. Just what we need….