Money & Company
Tracking the market and economic trends that shape your finances.
October 31, 2011 | 8:16 am
The Wall Street firm run by former Goldman Sachs Chairman and New Jersey Gov. Jon Corzine filed for bankruptcy Monday morning, making it the first big American casualty of the European debt crisis.
The firm, MF Global, had come under increasing strain in recent weeks due to $6.3 billion in outstanding bets on the sovereign debt of some of Europe’s most troubled economies, including Spain and Italy.
Last week the European Union announced a plan to help prop up the economies of its weaker members, but the plan will not insulate financial institutions like MF Global from losses on holdings of European sovereign debt. In early October a large Belgian bank was rescued from bankruptcy after sustaining big losses on such holdings.
In an echo of the demise of Bear Stearns and Lehman Brothers in 2008, questions about MF Global’s bad bets led investors to grow afraid of trading or transacting with the firm, sending the stock price down, scaring off investors further. Just last week the company’s stock fell 67%.
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