Frustration flows as members search for answers on MF Global

Frustration came early and often Wednesday for lawmakers probing the high-profile bankruptcy of financial firm MF Global.

Lawmakers on the investigations subcommittee of the Financial Services Committee opened the highly-anticipated hearing by saying they were all focused on simply getting to the bottom of the eighth-largest bankruptcy in American history, and in particular what happened to up to $1.6 billion in customer funds that went missing in the meltdown.

{mosads}But members quickly grew frustrated with the MF Global executives brought to testify, who each said they did not know what happened to the funds and that it did not happen on their watch — or refused to answer questions at all.

“I honestly don’t have a clue what to ask you,” said Rep. Michael Capuano (D-Mass.), the ranking member on the panel. “How am I supposed to ask questions if none of you apparently knew what was going on?”

“It’s utterly disgraceful,” said Rep. Stephen Lynch (D-Mass.).

“Shame on you,” added Rep. Steve Pearce (R-N.M.).

Lawmakers immediately hit a wall shortly after the hearing began when Edith O’Brien, an assistant treasurer with the firm, refused to answer questions, invoking the Fifth Amendment of the Constitution.

“On the advice of my counsel, I respectfully decline to answer based on my constitutional right,” she said when asked if she assured transfers of company funds met segregation rules.

After refusing to answer a followup and vowing to do the same for any future questions, she was dismissed from the hearing.

“We’re extremely disappointed that you’ve chosen to do that … I believe you have important knowledge,” said Rep. Randy Neugebauer (R-Texas), who chaired the hearing.

The Wall Street Journal reported Tuesday that O’Brien was looking to strike a deal with the Justice Department where she would be granted immunity from criminal charges in exchange for information. She declined to answer a question on that at the hearing. The other three MF Global executives called to testify cooperated with lawmakers’ questioning.

Wednesday’s hearing marked the third by the panel, and the fifth overall, by lawmakers looking into the bankruptcy. The event has attracted substantial attention in large part due to the fact that its former head was Jon Corzine, who previously served as governor of New Jersey and its Democratic senator.

House Financial Services Committee Chairman Spencer Bachus (R-Ala.) laid the blame for the firm’s collapse squarely at his feet Wednesday, saying he “short-circuited” the firm’s internal controls.

“And while not all of the facts are yet known about the role that [Corzine] played in its spectacular collapse, the subcommittee’s investigation leaves little doubt that MF Global was in many ways his corporate alter ego, and that ultimate responsibility for what happened in the firm’s chaotic final days rests with him,” he said.

Lawmakers did not reserve their scorn for the witnesses, tossing partisan barbs at each other as well.

Lynch opened the hearing by accusing the Republican members of the panel of being “unacceptably slow” in sharing documents tied to the panel’s investigation.

Republican members hit partisan points as well. Rep. Francisco “Quico” Canseco (R-Texas) criticized the Obama administration for not prosecuting Corzine, and Rep. Ed Royce (R-Calif.) used the collapse to argue the Dodd-Frank financial reform law came up short.

Capuano hit back following those statements.

“‘I know we’re all out here to make political points, I’m a politician too. But let’s stick to the matter at hand,” he said. “If you want to make political points, there are microphones out in the hall.”