• / Free eNewsletters & Magazine
  • / My Account
Home>Practice Management>Fiduciary Focus>Has Anything Changed Since the Credit Crisis?

Related Content

  1. Videos
  2. Articles
  1. Five High-Yield Funds for a Caution-Worthy Market

    With yield spreads back to pre-crisis levels, there is less room for error in the high-yield market today, says Morningstar director of fixed-income research Eric Jacobson.

  2. Unearthing Value in Bonds

    Panel discussion: TCW's Laird Landmann, Loomis Sayles' Elaine Stokes, and Gibson Smith of Janus explore potential areas of opportunity in the credit markets, the prospect of a liquidity crisis, and more.

  3. Finding Value in a Challenging Market Environment

    In this special one-hour presentation, Morningstar experts share their takes on how investors can navigate a world with slightly overvalued stocks , an uncertain interest - rate environment, and a slow-growing economy.

  4. Sharpen Your Portfolio Plan for 2014 and Beyond

    Roundtable Report: At the outset of 2014, Morningstar strategists dig into the market's current valuation and expected return, seek out high-quality U.S. and foreign stock opportunities, size up the role of cash today, assess the Fed's impact on the market , and reveal the best ways to fight inflation.

Has Anything Changed Since the Credit Crisis?

What we can learn from the failure of MF Global.

Jordan Mamorsky, 02/28/2012

"Looking ahead, I am certain, very certain of this: we CANNOT let this event destroy the long-term trust and confidence upon which market participants rely."(1)

--Gerald F. Corcoran, Chairman and CEO of R.J. O'Brien & Associates speaking on MF Global

How can $1.2 billion be lost overnight?

Former MF Global executives, appointed bankruptcy trustees, financial regulators, and industry insiders are admittedly without a clue. In today's culture of lax government oversight, exotic derivative structured transactions, and speculative Wall Street gambling, anything goes. Only the investor loses. And in the case of MF Global, they lost over a billion dollars.

2008 was supposed to be the end of the road for balance sheet manipulation, marginalization of risk protocols, and deviant executive breaches of fiduciary duties. Yet, the recent failure and bankruptcy of MF Global suggests that many of the same practices that led to the demise of Bear Stearns, Lehman Brothers, and Merrill Lynch still plague the financial system today.

MF Global was traditionally a future commodities merchant ("FCM") that traced its roots to 18th century London. The story of the proud brokerage's demise includes the firing of whistle-blower personnel, ineffectual regulatory governance, repeated failures to act, and dangerous off-balance sheet risk.

Efficient capital markets require investor faith that their money is safe. Accordingly, MF Global's bankruptcy and shortfall of $1.2 billion customer funds only makes it more imperative that investor trust is renewed through reforms of the current financial regulatory regime that include enhanced governance, stricter derivative regulation, and ethical imperatives for Wall Street.

Here's how it unraveled for Jon Corzine and MF Global:

©2017 Morningstar Advisor. All right reserved.