By Stephen Foleyin new york
The ambitious investment bank MF Global, one of 22 elite "primary dealers" licensed to trade with the Federal Reserve, yesterday collapsed into bankruptcy after disastrous bets on eurozone government debt, marking the humiliating end of a Wall Street comeback for former Goldman Sachs boss Jon Corzine.
The spectacular failure came after a weekend of fruitless sale talks, and underscored the fragile nature of confidence in financial institutions and the dangers of placing big wagers with a bank's own money.
MF Global, with a history that stretches back more than two centuries, unravelled with extraordinary speed over the course of a week, as its bonds were downgraded to junk and it admitted spiralling losses in its trading division.
Clients and trading partners began pulling their money and their business from the firm last week, and MF Global derivatives traders were yesterday refused entry to the Chicago Board of Trade. The New York Federal Reserve withdrew the company's prime brokerage licence because it had burnt through its capital cushion and was no longer a safe trading partner. Exchanges around the world said they would only deal with MF Global clients who were closing their accounts, rather than conducting any new trades. The company's shares were halted by the New York Stock Exchange, pending news that optimists still hoped might include a sale of the business.
But then, before lunchtime in New York, the company formally filed for Chapter 11 bankruptcy protection.
The company had assets of $41bn and debt of almost $40bn as of last month, according to its Bankruptcy Court filing, putting it seventh on the list of the largest bankruptcies in US history, after the likes of Lehman Brothers, WorldCom and Enron. JPMorgan Chase and Deutsche Bank are among the firm's largest unsecured creditors.
The company has its origins in a broking business founded more than 200 years ago in London by James Man, which focused mainly on trading sugar and other commodities.