Inside Financial Services

AND PEOPLE WONDER WHY NO ONE TAKES WHAT THE MEDIA HAS TO SAY SERIOUSLY ANYMORE

Oh, please:

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Oh, please :

After countless new rules designed to make Wall Street safer, it’s come to this: Another securities firm has collapsed from risky, poorly disclosed bets.

Not enough, in other words, has changed since the U.S. financial system nearly toppled three years ago.

The bankruptcy filing last week by MF Global Holdings Ltd. didn’t freeze lending and panic investors around the world, as Lehman Brothers’ did in 2008. But the rapid fall of the firm run by former New Jersey Gov. Jon Corzine shows risky behavior persists, despite a vast regulatory overhaul. . . .

“People are making the same dumb bets,” says investor Michael Lewitt of Harch Capital, who calls Washington’s new rules inadequate.

MF Global’s collapse suggests that:

Financial companies are making risky bets with borrowed money and hiding them off their balance sheets. In MF Global’s case, scant disclosure made it harder for people to see the danger until it was too late.

I’d expect this sort of nonsense from those nitwits in Zuccotti Park, but a business columnist from the A.P. ought to know better. Bernard Condon hello! Financial firms are supposed to take risks. That’s how capitalism works. No risk-taking, no next Apple or Facebook. Simple! Obvious corollary: firms that take risks will fail from time to time. The whole history of Wall Street is the story of investment and securities firms, large and small, that prospered and then blew up. Drexel, E.F. Hutton, Bache, Kidder . . . feel free to fill in the rest yourself. The key is to make sure that one failure doesn’t set off a chain reaction that threatens the entire system. That didn’t happen when MF went down. That’s a good outcome, not a bad one. If you think Dodd-Frank should be amended so that it ensures that no financial firm should ever fail, you really should be writing about something else. Maybe gardening. . . P.S. And don’t give me that line about how some types of risk-taking are better than others, and that the risks MF took were somehow illegitimate. Who says? The market can sort that out a lot better than A.P. business writers can. . . .

One Response to “AND PEOPLE WONDER WHY NO ONE TAKES WHAT THE MEDIA HAS TO SAY SERIOUSLY ANYMORE”

  1. David

    This post is patently absurd. Are you at all familiar with what’s going on with MF Global’s customer accounts? Normally, customer accounts at a broker are segregated – this was the case even with Lehman. MF Global, it seems, committed a huge fraud by using money in its customer accounts to take risks. To say that MF Global is “just another financial firm that made bad bets” is extremely misleading – this may actually be the first financial firm of significant size where customers actually lost the money in their accounts – this did not happen with any of the firms that went bust in 2008, and it didn’t happen with Refco. Either your knowledge of the MF Global case is lacking or you are simply making a manipulative argument to justify pre-conceived conclusions.

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