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Ex-Democratic Senator / Governor Bankrupts Billions, Walks Away with Millions

Good thing those #OccupyWallStreet folks are a bunch of hypocritical partisans and left-wing cranks.  Completely ignoring this news would just make them look like they don’t have a clue.

Jon S. Corzine, whose political ambitions came to a halt nearly two years ago when he was defeated for re-election as governor of New Jersey, is running out of time to prevent his revived Wall Street career from collapsing in failure.

His firm, MF Global — a powerhouse in the world of commodities and derivatives trading but little known outside Wall Street — was working frantically toward a potential sale late on Sunday.

Those discussions, which narrowed to one bidder, Interactive Brokers, came after investors — worried that MF Global was too vulnerable to the fallout from Europe’s debt crisis — deserted the firm, making it the first American financial institution to fall victim to those sovereign debt woes.

If the firm is unable to sell itself, other options, including bankruptcy, await. MF Global has hired restructuring and bankruptcy law firms including Skadden, Arps, Slate, Meagher & Flom, said people briefed on the matter but unauthorized to speak publicly. One option is for MF Global to follow a precedent set by Lehman Brothers in 2008 by seeking bankruptcy protection for the parent company while selling some assets to Interactive Brokers.

Other Wall Street firms have not been spared damage from the European debt crisis. Shares at firms as large as Morgan Stanley fell this month over concerns that they were exposed to Europe’s troubles. And investment banks and brokerage firms are still licking their wounds from market volatility that has hurt trading operations.

MF Global began buying the debt of European countries like Italy, Portugal, Spain and Ireland last year, in a bet that the discounted prices of those bonds would soon recover. The gamble, though, went sour, and MF Global was hard hit as Greece’s troubled economy spread woes across the Continent. Although European leaders appeared to make progress last week toward resolving those problems, and other firms rebounded, MF Global continued to suffer.

The last-ditch rescue effort is a major blow to the reputation of Mr. Corzine, 64, who formerly co-led Goldman Sachs and was also a United States senator. With a sale of MF Global, Mr. Corzine’s role at the firm will almost certainly end, though he is expected to receive a severance payment of nearly $12.1 million.

My, that’s some golden parachute.  I’m sure Chuck Schumer and the rest of those wanting to demagogue Wall Street will jump all over this one.

Right?

Also, federal regulators have no idea where the money went.  Roughly $700 million is reportedly “missing.”

What began as nearly $1 billion missing had dropped to less than $700 million by late Monday. It is unclear where the money went, and some money is expected to trickle in over the coming days as the firm sorts through the bankruptcy process, the people said.

But regulators are examining whether MF Global diverted some customer money to support its own trades as the firm teetered on the brink of collapse. If that was the case, it could violate a fundamental tenet of Wall Street regulation: Customers’ money must be kept separate from company money.

Such a finding would move the discussion from sloppy internal controls at MF Global to something more troubling. While the investigation is in its early days, it raises the specter that regulators could sanction the firm or the employees responsible.

MF Global and Mr. Corzine have not been accused of any wrongdoing.

So far.

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  • Cindy K

    Ok, you reprinted too much of those links for my liking, but I must admit: it’s one heck of a story.