Jon Corzine’s MF Global Brokerage Files for Bankruptcy
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Jon Corzine’s MF Global Holdings Files for Bankruptcy

November 7, 2011

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MF Global Holdings, a brokerage firm run by former New Jersey Governor John Corzine, filed for bankruptcy this week. The company’s filing represents the seventh-largest Chapter 11 bankruptcy filing, by total assets, in United States history.

According to a report from CNBC, MF Global was forced into bankruptcy after making several bad gambles on European debt, particularly sovereign debt held by down-on-their-luck countries like Italy, Spain, and Portugal.

The bankruptcy filing may signal the end of Corzine’s ambitions to turn MF Global into an internationally renowned brokerage firm, a feat he had previously accomplished during his former tenure at Goldman Sachs.

The firm’s public failings became apparent recently after regulators asked MF Global to release information surrounding its purchase of billions of dollars of sovereign debt.

Once the firm disclosed these unstable sovereign debt purchases, its credit rating was quickly downgraded to "junk," and Corzine was unable to sell the company’s assets to skeptical buyers.

Sources indicate that the bankruptcy may have caught Corzine by surprise. The former governor, who also had a stint as a U.S. senator, was famous for taking big, but ultimately successful, financial risks.

The news will also have a significant impact on the firm’s 2,870 employees, who may face months of uncertainty, particularly in light of the Federal Reserve Bank of New York’s decision to suspend MF Global from conducting any business with the important central bank.

Despite the potential pain for employees of the firm, experts predict that the firm’s bankruptcy won’t have the same widespread market effect of similar bankruptcies like the one that struck Lehman Brothers in 2008.

In addition, some observers are optimistic that the bankruptcy filing will make selling the company easier for the embattled Corzine. If he can find a suitable buyer, Corzine may be able to repay the debts that have pulled his company into bankruptcy court.

In accordance with bankruptcy laws, the company will have to offer a transparent summary of its finances, which could allow potential buyers to obtain more information about the firm than they otherwise would be able to gather.

Moreover, the bankruptcy judge may allow MF Global to restructure its entire organization, which could allow Corzine to create a leaner, more effective company in the long run.

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