The Corner

Angela Merkel 1, Jon Corzine 0

Jon Corzine went from Goldman Sachs, a too-big-to-fail investment bank, to become governor of New Jersey, a (maybe) too-big-to-fail state. 

Corzine was probably smart enough to understand that MF Global, the small securities firm he took over last year, wasn’t too big to fail. 

But, in using his firm’s capital to buy up European sovereign debt at what seemed to be cheap prices, he apparently thought that distressed European nations’ debt was too big to fail.

That is, he figured that Germany and France would step in to save bondholders to Greece, Italy, and Spain, if necessary — down to the last penny. 

As the Journal reports:

In late 2010, Mr. Corzine started making big bets on bonds issued by European countries. He … was convinced that sovereign debt from countries like Italy and Spain with high yields was a steal …. ‘Europe wouldn’t let these countries go down,’ Mr. Corzine … told another executive.”

But Europe is making Greece bondholders take losses. Investors worry the same thing will happen elsewhere in Europe, too.

Yes, there’s a lot wrong with the latest eurozone crisis-resolution agreement. But proving Corzine wrong isn’t one of them.

Hooray for Europe! 

— Nicole Gelinas is a contributing editor of the Manhattan Institute’s City Journal.

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