Courtesy of Benzinga.
MF Global (NYSE: MF) filed for Chapter 11 bankruptcy protection on Monday morning after a potential acquisition by Interactive Brokers (NASDAQ: IBKR) fell through at around 5 a.m. EST. The embattled futures brokerage was sunk by proprietary positions in European sovereign debt. The firm posted a massive quarterly loss last week and had its credit ratings cut to junk status. MF Global’s CEO Jon Corzine, who is also a former Goldman Sachs (NYSE: GS) CEO and New Jersey Governor, had been trying to work out a transaction that would allow the firm to be saved, but it appears that MF’s large positions in European sovereign debt made a deal too risky on such short notice.
Just three weeks ago, Corzine made some ominous comments about the EU situation on CNBC. He told the network, "Bankers don’t change their attitude towards risk as quickly as other elements of our society, where they see demand for goods flowing out of their warehourse, boards of directors are cautious," he said. "It takes a while to see the regeneration of risk taking in a financial system after a financial crisis which is why people are so focused on the European banking crisis."
Corzine added, "If we have another one and push this even further there are a lot of people that would argue that, not only in the U.S., not only in Japan, but now in Europe you are going to have one of these long drawn-out recovery periods as people avoid risk. That’s why it’s so important that there is a staunching of the risk in the banking systems here in Europe quickly."
Shares of MF Global have been halted on the New York Stock Exchange and are not trading on Monday. They closed last week at $1.20. The Chicago Mercantile Exchange said that it is no longer recognizing the firm as a guarantor for floor trading, and business is currently limited to MF customers liquidating their trading positions and getting their money out of the firm.
