John Corzine took control of MF Global in March 2010. In eighteen months, his speculation on European derivatives drove the credit rating of this 200 year old company to junk status. Greed and power suited this former New Jersey governor and former head of Goldman Sachs. This is the beginning of the consequences of a $616 trillion dollar currency and derivative market that is collapsing. Too bad Mr. Corzine could not buy off the ISDA as the EU did to “solve” the Greek financial crisis.
As these large banks and brokerage houses are shifting their derivative losses to the taxpayers, it would appear that they are starting to realize that time is short. Last week’s transfer of $53 trillion derivatives from Merrill Lynch to Bank of America was another example. How about JP Morgan’s exposure back in 2008:
So where does that leave our savings when the derivatives collapse across the world? Greece may actually be looking good compared to the rest of the world when this happens.
Some customers are moving money away from struggling futures brokerage MF Global Holdings Ltd, according to hedge funds, rivals, and analysts, though the extent of the outflows is unclear.
Any substantial departures will likely put further pressure on MF Global Chief Executive Jon Corzine, a former New Jersey governor and former head of Goldman Sachs, to sell all or part of the company.
MF Global, whose shares slumped 15.9 percent on Thursday and have lost more than 60 percent of their value this week, had been trying to transform from a brokerage that mainly places customers’ trades on exchanges into an investment bank that bet with its own capital.
But its bets on bonds from euro zone countries, including those issued by Italy, Spain, Portugal and Ireland, have gone bad, prompting regulators to press it to boost capital and two rating agencies to cut the company’s debt rating to junk status.
MF Global’s history dates back over 200 years, to a sugar broker that started in London. The company, formerly known as Man Financial, acquired Refco’s U.S. futures business in 2005 after that broker collapsed in an accounting scandal.
For years, MF Global focused on futures brokerage, but Corzine, who took over as CEO in March 2010, looked to build the company into an investment bank that made more bets with its own funds.
The company took substantial positions in European sovereign debt. As of the end of September, MF Global held $6.3 billion of European debt maturing by the end of 2012. The market value of those positions dropped over the summer as the European debt crisis worsened, and the Financial Industry Regulatory Authority, an industry regulator, pressed the company to boost its capital levels.