The Dow was down 276 points today. This was on the back of calls from the Greek Prime minster for a public referendum on the new European rescue package. Also leading stocks down today was MF Global Holdings which is the securities firm run by former New Jersey Governor and Goldman Sachs head Jon Corzine. Today the company filed for bankruptcy protection. MF Global Holdings bankruptcy filing is seen as the first major US casualty of the European Debt Crisis.
The is one week after the company announced its biggest ever quarterly loss. The collapse of the firm centres on the Corzine’s decision to make a $6.3 billion bet on European government debt. Corzine is known as a risk taker and for making big bets. It was this aptitude for risk and his gregarious personality that saw him make partner only five years after joining Goldmans bond division. These strengths also helped in his rise to chairman and chief executive in 1994. However this is not the first time however that Corzines aptitude for risk has landed him in trouble. The same year that Corzine made chairmen Goldman announced that it had over $2 billion in losses. This virtually erased any earnings made from the banking side of the company and as a result saw record numbers of partners leave the company. Many laid the blame for these losses at Corzines door.
Some see the latest collapse as a direct result of Corzine over reaching in attempt to bring MF Global Holdings up to the level of Goldman Sachs. MF Global Holdings was already in trouble last week with the share price having dropped some 67%. Pre-market trading in the stock was stopped this morning in advance of the announcement. The Wall Street Journal reports that the bankruptcy filing will be a combination filing and sale. MF Global or parts there in will seek bankruptcy protection. In addition Interactive Brokers Group will purchase some of the companies assets.
The Bankruptcy filing includes fifty of its largest unsecured claims. The largest of these is a bond debt of $1.2 Billion to JP Morgan. Following JP Morgan is Deutsche Bank Trust Company Americas which holds the next four largest claims. The announcement is also bad news for Jon Corzine personally. The 2.5million options he received as a signing bonus which were exercisable as a signing bonus are now under water. As well as this Corzine has made out badly on the 440,000 shares of MF Global Holdings that he purchased in June 2010, and again in June and August of 2011. These shares were purchased at prices between $5.25 a share and $7.00 a share.
The effect of the bankruptcy will not only hurt Corzine financially but politically as well. Before the collapse of his firm he was named as a possible successor to current treasury secretary Timothy Geithner. This would have seen him follow in the path already laid down by his former Goldman colleague Henry Paulson. These hopes are now surely dashed.