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Jon Corzine -- From the State House to the Big House?

Will Jon Corzine go to jail? Some of the smartest players on Wall Street say yes, and here’s why: the country wants to see a banker sent to prison. 

While there were many more players culpable for the meltdown of the subprime mortgage market and though the subsequent financial crisis was much more devastating, nearly everyone was caught in the same great error – expecting housing prices to continue marching upwards. It was a colossal countrywide (so to speak) event, in which it is hard to single out a scapegoat. 

In the bankruptcy of MF Global, one person seems responsible – for the giant bet on European sovereign debt that wrecked the firm, and for the loss of $1.2 billion of customer money. That person would be former MF Global CEO Jon Corzine.

Politics also may come into play. Thanks to the disastrous Operation Fast and Furious, Attorney General Eric Holder is in trouble; more than 57 Representatives in the House have now called for his resignation. What better way to pump up the credibility of the Department of Justice than turn on one of his party’s own? 

At the same time, despite several quarters of losses, the Federal Reserve deemed MF Global worthy to enjoy hallowed status as a “primary bond dealer” – a status revoked only when the firm went under. Being a primary dealer meant that MF Global had access to plenty of cheap money, which it used to leverage its bets. Democrat fairy dust seems to have been liberally sprinkled over the troubled firm.

Finally, the victims in the housing meltdown included many who foolishly bet large in order to trade properties for gain. No one is moved by the condo buyer who borrowed heavily in order to quickly flip his property. On the other hand, everyone will be sympathetic to the farmer whose livelihood is now at risk.

Sending Corzine to the slammer might surely be the vote of the frustrated senators recently questioning the MF Global exec and his colleagues. Despite their demands to “Show us the Money!”, Corzine and his underlings pleaded dumb and dumber. Some $1.2 billion in customer money has gone...Poof! and no one at MF Global has any idea where to look for it. The truth is, the money is not sitting in a file drawer somewhere. It has been lost – and whoever was on the other side of the MF Global trade is that much richer.

Some think Corzine will be tried for illegally snatching money from segregated customer accounts or for signing off on inaccurate financial statements as CEO, which is a crime under Sarbanes-Oxley. 

Blockbuster testimony from CME official Terrence Duffy suggesting that Mr. Corzine knew of the misuse of client money raises the possibility of the feds making the former charge.

In his recent appearances before Senate and House hearings on the country’s eighth-largest bankruptcy, staying out of jail appeared uppermost in Mr. Corzine’s mind. He and his underlings carefully skirted any admission that he knowingly broke the law by misappropriating customer funds. Instead, he repeatedly used the phrase “I did not intend” to cover the supposed misdeeds. It is of course proving “intent” that is such a challenge to prosecutors.

No one is fooled. The reality is that Mr. Corzine didn’t “intend” to be wrong on his trades. Like so many of his brethren, the former Goldman exec does not suffer from an excess of humility; he was confident that he was right and that the uncooperative markets were wrong. 

Like others before him (think Bernie Madoff) Mr. Corzine doubtless felt that given just a little more time, his judgment would prove correct. Panicked that the firm was sinking, and apparently capital short because the FSA in London demanded the firm keep excess liquidity in that country, money was evidently swapped out of client accounts to plug the drain; those responsible were sure that the markets would turn in their favor and the misappropriated funds would be replaced.

Ironically, after his time as governor of New Jersey, Mr. Corzine became quite the conscience of Wall Street. Speaking a little over one year ago at the Bendheim Center for Finance at Princeton University, Corzine criticized not only the loose regulations governing banks, but the high pay, high risk-taking culture. Astonishingly, he complained about the creation of “too many Goldman Sachs millionaires”; this from a man who pocketed $400 million when Goldman went public. He also lauded the newly proposed Dodd-Frank legislation. He saw the new rules as likely to leading to “deleveraging and derisking” of the banking system.

Not quite. Nothing in Dodd-Frank protects clients from crooks. Unhappily, the laws of the land also don’t protect investors in commodities trading accounts. While stock brokerage accounts are insured by the SIPC, there is no such safeguard for commodities traders. Since many of the accounts link to farmers and grain operators, many small businesses in our agricultural sector may be hurt. In addition to the $1.2 billion gone missing, there is another $2.1 billion in customer accounts that has been frozen by the bankruptcy judge.

Reports of delayed seed purchases and crop plantings are beginning to surface. Pig farmers and corn growers find themselves short of cash, and also less able to hedge against future swings in commodities prices. The ramifications could be widespread, even impacting crop prices and perhaps extending all the way to the grocery store. Though extensive fall-out is unlikely, such prospects could firm the resolve of those wanting retribution.

Jon Corzine almost died in a traffic accident on the Garden State Parkway in 2007. He wasn’t wearing a seat belt and his SUV was clocked going 91 miles per hour. Excess risk taking almost killed Corzine; it did kill MF Global.

Liz Peek is aFoxNews.com contributor and a financial columnist who writes for The Fiscal Times. For more visit LizPeek.com.

Liz Peek is a writer who contributes frequently to FoxNews.com. She is a financial columnist who also writes for The Fiscal Times. For more visit LizPeek.com. Follow her on Twitter@LizPeek.