THE LEHMAN BANKRUPTCY THREE YEARS LATER. It’s amazing that the MF Global bankruptcy—only three years after the Lehman bankruptcy—is so similar to that disaster. It shows how little has been learned by players who are able to do enormous damage. The only saving factor is that MF Global was much smaller so that the damage has not been as great. Some similarities: With liquidity trouble brewing, neither company took action to scale down their bets or to increase their liquidity. I don’t understand why MF Global didn’t sell some the bonds in their six billion dollar bet. Second, “too complicated to fail” includes the effect that a company’s failure will have on a large number of counterparties and customers. Gambles should not put at risk a lot of people who didn’t sign up for the gamble, as did the activities of Lehman and MF Global. Third, as with Lehman, the accounts can’t be straightened out. The new reports are that the discrepancy at MF Global, three weeks after the bankruptcy, has grown to be $1.2 billion from $600 million.
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