MF Global “was felled by over-the-top leverage and bad derivative bets on debt-weakened European countries.”.

-New York Times.

(Quoted by ISDA)

The main issue is that some segregated funds are apparently missing. Complex economies rely on trust. If actors cannot trust counterparties, intermediaries or legal constructs, the scope and pace of activity will decline, and all actors will suffer.

The Lehman debacle's aftermath concentrated the commanding heights of US finance into a menagerie of TBTF above-the-law cronies.

The control frauds at the GSEs, AIG, and others have gone conspicuously unpunished.

A broad sustainable ramp up in living standards and asset values requires capital allocators to have faith laws and regs and rules and norms will be honored. (For some recent research on this see for example, Zingales: Measuring Trust ).

So don't blame the highly leveraged players. First they came for the highly leveraged specs, and I said nothing…..

James Lackey writes: 

JPM could have said we have a couple billion here on Monday night, or on Tuesday Open; or even Tuesday at 3 would have been nice.. Wednesday goes by,  Thursday, Friday.. Oh Friday how nice.. That was no, let's wait to report we have a few billion from MF here.. Let's imply it was lost or stolen. Of course this doesn't bother hedged unleveraged fee-collectors.





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