The top Democrat and Republican on a key Senate panel say Congress should look deeply into what led to the collapse of MF Global, a trading firm run by one of their former colleagues.
Sen. Debbie Stabenow, the chairman of the Senate Agriculture Committee, said at a hearing Thursday that the firm's failure has shaken investors' confidence. Sen. Pat Roberts of Kansas, the panel's ranking Republican, called it a serious problem.
Sen. Jon Corzine, a New Jersey Democrat who served with both senators during his one term, led MF Global until last month. The firm sought bankruptcy protection in October after making a disastrous bet on European government debt.
An estimated $1.2 billion or may be missing from MF Global customer accounts. The Commodity Futures Trading Commission and other regulators are investigating whether the firm used money from clients' accounts for its own purposes as its financial condition worsened. That would violate securities rules.
The FBI is also investigating whether New York-based MF Global violated any criminal laws.
Roberts and other senators on the panel said they've heard concerns raised by farmers, ranchers and small businessmen who use the futures markets to hedge against risks. Many said they've lost money that they had deposited with MF Global.
Sen. Max Baucus, D-Mont., said those he's spoken with say they have recovered about 60 percent of their funds. They doubt they'll get much more back, he said.
Roberts said people "have been severely damaged. They want to know what happened and see it doesn't happen again."
Customers used the accounts for trading commodity futures and derivatives. MF Global was one of the biggest players in the derivatives market, where investors trade securities that are based on the value of an underlying asset, such as interest rates, oil prices or currency rates.
Stabenow said the MF Global affair "has shattered the faith of many in the futures markets."
Mary Schapiro, chairman of the Securities and Exchange Commission, said her agency is investigating MF Global's disclosures to investors of its holdings of risky debt and its accounting before it failed.
Gary Gensler, the chairman of the Commodity Futures Trading Commission, stepped aside from his agency's probe last month. He cited his past relationship with Corzine as the reason. The two had worked together at Goldman Sachs.
One questioned Gensler's decision.
"It looks to me like you're trying to avoid the heat," Sen. Mike Johanns, R-Neb., told Gensler. He asked whether the CFTC had failed in its oversight of the firm.
"I take very seriously the responsibility that I have" to ensure protection of customers and funds, Gensler said.
Corzine has been asked to testify before the panel on Dec. 13. Stabenow said he has yet to let the committee know if he will appear.
"I fully anticipate that he will," she said. But she would not rule out issuing a subpoena if he declines.
"Everything's on the table," Stabenow said.