Two of MF Global’s former chief risk officers testified before Congress today and the focus, according the Wall Street Journal, was on one document — the Break The Glass Report.
In short, Break The Glass was MF Global’s doomsday scenario in the event that the firm’s rating was downgraded or it ran out of cash (among other things). One of the witnesses, Michael Stockman, was chief risk officer when the report was prepared on October 13th, and he was drilled especially hard about its content and the timing of its preparation at the hearing.
Stockman said he knew about the document, but that it was handled by a senior member of the treasury and finance teams and he didn’t see it until MF Global declared bankruptcy on October 31.
Pointing to upbeat comments made by Mr. Corzine in an Oct. 25 earnings conference call, Mr. Neugebauer (Representative Randy Neugebauer, R-TX) asked Mr. Stockman whether there was a discrepancy between those comments and the need to prepare the “Break the Glass” document…Mr. Stockman said he “had no reason” to doubt Mr. Corzine’s comments.
“You wouldn’t doubt it, and that’s your testimony, and … days later the company goes bankrupt?” Mr. Neugebauer asked.
Mr. Stockman replied that the “downfall of MF Global in those final weeks is a very complex issue” involving a poor earnings report and a series of downgrades by ratings firms, among other things.
Here’s the chart that shows the different scenarios MF Global was considering, the full report (via Fox Business) is embedded below that: