MF Global:Wall Street Reforms Fail: Update

Three new reports on MF Global’s Bankruptcy and its Impact on Financial Policy are worth noting:
NYTimes – Gretchen Morgenstern, who has been instrumental in exposed recent Financial Follies, describes the damage to the credibility of current financial regulatory reforms and how the current European financial crisis impacts American banks and financial institutions as a consequence.
Marketwatch – David Widener takes a not often repeated Wall Street view – that key Wall Street institutions and players are allowed to fail over and over often at the cost to shareholders and now tax payers too. He blames both political parties that have become beholden to Wall Street billionaires campaign funding and lobby $ muscle. Hmmm, sounds almost identically the same as Occupy Wall Street protesters.
BloombergWilliam Cohan describes how MF Global bankruptcy puts an end to Wall Streets own financing sources as short-term funds have sunk  Bear Sterns, Lehman and now MF Global among others.


The original story:
MF Global is a futures trader and broker that went bankrupt to the tune $44  billion on Monday. MF Global is a repeat of Bear Sterns and Lehman Brothers bankruptcies from 2007-2008. It is slightly smaller in magnitude but  but not quite as much counterparty, interconnected financial instruments. However the implications for Wall Street are broad as Business Week catches the financially filthy facts on this bankruptcy:

In the end, Jon Corzine was little more than an unsupervised rogue trader. His disproportionately reckless $6.3 billion bet on the credit quality of a few European nations bankrupted MF Global Holdings Ltd. over the course of three dramatic days after the short-term credit markets quickly lost confidence in him and his firm. His gamble will cost MF’s shareholders and creditors billions of dollars and, virtually overnight, put the careers of MF’s almost 3,000 employees in jeopardy.
MF Global now has the distinction of being one of the largest bankruptcies in American corporate history, with almost $40 billion in liabilities. There is also the matter of the hundreds of millions of dollars of customers’ money that regulators have reported to be missing from the firm’s coffers.

It is Wall Street once again proving that Fiduciary Trust is a fiction and that self-regulation is non-existent. Financial Self Control let alone Regulation and Reforms have failed again. The Street fails to self-regulate so the Federal Government has to be called in again:
1) First for a bankruptcy filing in the billions of dollars;
2)For criminal charges associated with the fact that clients accounts to the tune of $700 million are unaccounted for;
3)For regulatory review because MF Global had mixed customers accounts and money with their own. Also MF Globals leverage at 40-1 versus Bear Sterns at 30-1 and lehhman at 35-1 once again raises the issue of control of capitalization;
4)Again for regulatory transgressions in mixing own and client accounts.

Increasingly wild bets are again being made on Wall Street as the false culture of “Masters of the Financial Universe” survives. Financial media have been attacking the Occupy Wall Street movement for making a mess – when the real pooper-scoopers are deeply embedded in a Street Culture gone awry with greedy risk taking. The Street is increasingly a gambling den of rogue traders going for the big Paulson-like payoff while handcuffing the agencies trying to temper these extremes. John Corzine and MF Global is is the poster child for the Volker Rule and tougher Financial Reforms as the Financial Communities own self-regulations have proved incapable of reining in misbehaving major players. But of course it is these exact regulations the Financial elites are working overtime to dismantle. Suddenly Occupy Wall Street is making a lot more sense.

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