State-contingent markets in at least a few things

by on August 7, 2011 at 2:51 am in Economics | Permalink

MF Global Holdings Ltd. (MF) took the cult of the Wall Street chief executive officer to a new level with its sale of bonds that pay a higher rate if Chairman and CEO Jon Corzine quits to take a job from the U.S. president.

The futures broker sold $325 million of five-year unsecured notes, the company said today in a statement. The notes will pay an extra percentage point of interest if Corzine is named to a federal post and confirmed by the Senate before July 2013, New York-based MF Global said yesterday in a regulatory filing.

Here is more.

1 WTF August 7, 2011 at 3:20 am

Wow, this is the post that deserves the Sad Sentences title. When government is the route to “success”…

The parasites are realizing that the host has a crippled, disfigured future, and the only thing left to do is feast on its diminishing carcass with renewed enthusiasm. Be the right kind of sucker. Be a parasite, not a host.

2 k August 7, 2011 at 5:04 am

it’s not success, i think. it’s failure if the CEO does leave and take the job. why would a company offer a higher rate other than because the business is going to be riskier?

3 WTF August 7, 2011 at 6:39 am

Could be.

Could also be that the company prefers debt financing, but knows that investors want an upside if the CEO gets into the government. Promising to raise the rate on their bonds helps their debt sale compete with the alternative of investors acquiring an equity stake.

4 Matthew C. August 7, 2011 at 7:09 am

Yeah, that’s pretty much what America has become.

Fortunately, the hard reset is almost upon us. You can almost see the whites of its eyes. The long-belated S&P downgrade is likely the pebble that starts the avalanche.

Everyone can still buy gold for Friday’s prices online — This afternoon / evening the spot market will reopen and likely jump $100 in the beginning of an uncontrolled moonshoot over the next year. . .

5 Andrew' August 7, 2011 at 6:08 am

I thought about making a joke about driving 90 to deal with the serious business of Don Imus, but “MF Global Holdings?” (MF)?

6 Andrew' August 7, 2011 at 6:17 am

To beat it on the nose, does Obama really want to appoint someone from a hedge fund named “Motherf…..”?

7 Someone from the other side August 7, 2011 at 6:18 am

Moral hazard much?

8 SanityCheque August 7, 2011 at 7:36 am

Were the bonds bought by Mr. Corzine?

9 Bill August 7, 2011 at 8:02 am

Good conflict and incentive question. Great question–he would be paying himself to go into government.

10 Bill August 7, 2011 at 7:57 am

There are new revenue opportunities here to close the deficit and raise more money.

Can I buy a US treasury bond that pays out more interest to cover the risk if Michele Bachman or Sarah Palindrome is elected President.

11 Bill August 7, 2011 at 7:59 am

Sorry, Palin , not Palindrome. Typing from an iPad

12 Anon August 7, 2011 at 8:01 am

Oh, I thought you meant Palindrone.

13 Bill August 7, 2011 at 9:52 am

No, then I would have said candidate Otto Ada Uwu

14 Jay August 7, 2011 at 3:31 pm

Only if I can get one that pays out more interest if 0B0MB3R gets reelected. And I want another 1% when 0B0MB3R sets the record for most troops killed in Afghanistan in 2014.

15 Anon August 10, 2011 at 12:30 am

Let me rewrite this article:

“Hey big investors, buy these bonds. They are odd, so maybe they will only be concentrated in the hands of a few of you. However, the few of you should really bundle a lot of donations for Mr. Obama- only a moderate amount will be out of your pocket, and your asset will appreciate significantly with his re-election. You can even lie to acquaintances and members of the media in order to make Mr. Obama (and, by extension) your bonds, seem more worthwhile. And just so we are clear on what we are doing, we are not making this contingent on the loss of Mr. Corzine- no, instead we are making it clear this is contingent on the loss of him to a Democratic president so it has more to do with an election than with Mr. Corzine. And this is legal. Woohoo!”

16 TGGP August 10, 2011 at 2:11 am

Reminds me of Robin Hanson’s fire-the-CEO markets.

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