What happened to the $600 million missing from customer accounts at MF Global, the investment firm run by former New Jersey governor and Barack Obama confidante Jon Corzine?  After three weeks of intense investigation, no one seems able to find it — and it’s beginning to look like MF Global burned through it in an attempt to cover their own losses.  The New York Times has two reports from the last two days covering the probe, and in the first, the Commodity Futures Trading Commission seems ready to give up hope of finding the cash:

Nearly three weeks after $600 million in customer money went missing from MF Global, the search for the cash has been hampered by the bankrupt brokerage firm’s sloppy record-keeping, an increasingly worrisome situation that has left regulators frustrated and customers in the lurch.

The round-the-clock effort has consumed an alphabet soup of federal regulators and criminal investigators, with lawyers sleeping at open desks and each agency commandeering a different conference room at the firm’s offices. But as authorities comb through some 38,000 customer accounts, they are growing more suspicious about what went wrong at MF Global, the commodities powerhouse once run by Jon S. Corzine, the former Democratic governor of New Jersey.

“The lost money is sort of like a lost child,” said Bart Chilton, a Democratic member of the Commodity Futures Trading Commission. “Every day that passes is more and more concerning, and there’s less and less hope.”

MF Global didn’t bother to track its transactions, something that should have raised suspicions before the collapse:

As part of the effort, the Federal Bureau of Investigation has taken the lead in the interviews of former employees who can explain MF Global’s inner workings. The federal authorities have also taken control of an off-site emergency recovery system, where e-mail and phone records from MF Global were stored, said two people who also spoke on condition of anonymity.

Authorities are particularly focused on the final days of MF Global. In the run-up to the bankruptcy filing, clients withdrew their assets, trading partners closed out trades and others demanded more collateral.

Amid the flurry of activity, MF Global failed to register all the transactions in its books. Regulators must now reconstruct the ledger, dollar by dollar.

In today’s report, the Times states definitively that MF Global raided customer accounts to cover its own losses:

MF Global improperly diverted customers’ cash for its own use in the days before its bankruptcy, an act that regulators believe may help explain why $600 million of customer funds remains missing, people briefed on the investigation say.

Investigators have now zeroed in on hundreds of millions of dollars in suspect borrowing at the commodities and derivatives brokerage firm, which at the time of its collapse was run by Jon S. Corzine, the former Democratic governor of New Jersey. At least some of that money was used to cover trading losses at MF Global, regulators suspect, meaning the money may no longer be simply missing. It may be gone.

MF Global, like other brokers, can use customer cash if it puts up sufficient collateral. But the firm did not provide enough backing in late October, essentially taking free loans, said the people briefed on the investigation, who spoke on the condition of anonymity because the inquiry was continuing.

Investigators hope to find some cash, but it’s starting to look pretty bad.  They’re now speaking of finding “some” of the $600 million, perhaps in cash accounts from the frenetic trading that took place in the final days of the firm.  If they can’t find it, those “free loans” will look a lot more like embezzling, and there will be a lot of former customers that will be looking for blood as well as money in the weeks and months ahead.

Meanwhile, my colleague at The Week, Robert Shrum, rushes to Corzine’s defense:

Friendship has its claims; so does fairness. And in the wake of the bankruptcy of brokerage firm MF Global, the media’s portrayal of Jon Corzine, MF’s ex-CEO and a former Democratic senator and governor in New Jersey, strikes me as profoundly unfair — and not just because he’s a friend.

Corzine, one of the most principled and capable people I met in 40 years in politics, is a genuine progressive who ran for office for all the right reasons. He did so many right things. And now he’s been turned into a poster boy for all that’s wrong with Wall Street. Jon Stewart called Corzine “the one man [who] could embody the corporate-government-industrial complex in all its clusterf***-itude.”

The Murdoch press was eager to join in. What could be better for the propaganda machine than to hold up Corzine as the proof point for right-wing populism. One typical New York Post story led with a phrase —“Screw you, Jon Corzine” — that revealed as much about the paper’s inveterate hostility to his politics as it did to his company’s fate.

I think there’s some truth in this.  Corzine’s obvious and deep links not just to the Democratic Party but also to Barack Obama — he was Obama’s personal envoy to Wall Street this summer to drum up donations — made him an easy target for the Right.  Corzine hasn’t been charged with any crime, at least not yet, and it’s still possible that the missing customer money will be found, albeit a possibility that seems to shrink rapidly with every passing day.  It doesn’t hurt to refrain from jumping to conclusions until all of the evidence is on the table.

However, Shrum’s defense is entirely comprised of the political motivation he finds unacceptable in criticism of Corzine.  He extols Corzine not for his innocence in what is certainly a massive failure and possibly a massive theft, but because Corzine supported same-sex marriage and his opposition to the war in Iraq, among a laundry list of other political positions.  It’s a non-sequitur in this context, although Shrum is on more solid ground when he talks about his personal friendship for Corzine.

Shrum also omits one important part of the context of this criticism, which is the Obama administration’s class-warfare rhetoric over the last couple of months and the encouragement by Democrats of the Occupy movement, at least until the polling numbers fell off.  Obama picked Corzine to represent him on Wall Street while MF Global was busy crumbling from within; the Right didn’t do that.  Joe Biden bragged on more than one occasion that Corzine was the first person to whom they turned for economic advice.  Even if Corzine was nothing worse than incompetent and lost $600 million of customer money honestly, that’s still fair game for criticism.

And if a Republican President had linked hands with a man like Corzine and extolled his financial advice while demonizing Democrats as shills for the corporate 1%, something tells me that Shrum would be the first to scoff at the kind of defense that he offers in this essay.  In fact, we don’t even need to imagine it; let’s not forget how anxious the Left was to tie George Bush to Enron’s Ken Lay, thanks to Lay’s fundraising for Bush.  Sauce for the goose is still sauce for the gander, assuming that the gander gets cooked at some point in the MF Global meltdown.