Corzine Didn't Kill MF Global

NEW YORK ( TheStreet) -- The argument that Jon Corzine's hefty risk appetite put MF Global Holdings ( MF) on the path to bankruptcy sounds plausible, but it isn't entirely true.

Looking at the firm's financial statements, under Corzine -- the former Goldman Sachs ( GS) co-head and ex-New Jersey governor -- MF reduced its exposure to foreign government debt while it lowered its leverage, assets and debt. At the same time, MF Global built up its long-term capital and even took leverage to record lows at one point in Corzine's tenure, signaling that he actually was stabilizing the firm.

Jon Corzine

MF Global did have a large proprietary European debt holding, but a key factor to Corzine's strategy likely was extremely low interest rates that ate at a traditional revenue source. MF Global's business model fell victim to ZIRP -- more widely known as the Federal Reserve's "zero interest rate policy" -- which cut the federal funds rate to nearly zero in an effort by the U.S. central bank to spur risk-taking.

So Corzine's failure isn't that he destroyed MF Global -- it's that his strategy simply couldn't save the firm.

MF Global filed for Chapter 11 bankruptcy, listing $39.7 billion in liabilities and $41 billion in assets -- making it the eighth-largest bankruptcy in U.S. history, according to Bankruptcydata.com. Finacial markets tanked, but so far, the bankruptcy hasn't precipitated a Lehman moment .

In the company's filing, MF also listed as many as 50,000 burned creditors with JPMorgan Chase ( JPM) and Deutsche Bank ( DB) being the largest. The narrative about the company's demise so far today is as follows: MF Global hired Corzine in March 2010. He then tried to turn the commodity broker firm to an investment bank and took up a giant position in European sovereign debt out of ambition and the recklessness of a bond trader with a fancy for speeding, which brought the firm to its knees and culminated in Monday's bankruptcy filing.

MF Global's problems worsened last week when the New York-based commodities brokerage disclosed it had lost more than $190 million in its most recent quarter and that its exposure to European sovereign debt was $6.3 billion, a larger risk position to the creditworthiness of European governments than better capitalized firms like Morgan Stanley ( MS).

On the news of the loss, the company's credit ratings were cut to junk by Moody's ( MCO) and Fitch and its future was jeopardized. The company's stock fell nearly 70% in a week's time, and sale rumors of last-ditch saviors like Interactive Brokers ( IBKR), Goldman Sachs, State Street ( STT) and Australia-based Macquarie circulated.

Those rumors weren't realized, and after trading suspensions at the Federal Reserve, and in clearinghouses and exchanges like ICE Trust ( ICE) and the CME ( CME), the company had no alternative but to file for bankruptcy.

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