You're watching...
NewEdge Senior Director Lawrence McDonald on MF Global’s impact on the future of Wall Street.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
Felt.
Turning out and that's global Jon Corzine's bankrupt securities firm.
The FBI now reportedly -- believe it or not and earlier today.
The head of Chicago Mercantile Exchange revealed MF global mixed clients' money with the firm's own accounts.
Which -- it's a big time known -- -- -- in the securities industry.
With 41 billion dollars in assets in that global is the eighth biggest bankruptcy in history believe -- -- not joining me now Larry McDonald senior director at news that news -- He's the former Lehman Brothers executives and the author of the bestselling book.
A colossal failure of common sense the inside story of the collapse of Lehman Brothers.
So my big question for you Larry is this.
This is this gonna bring down the whole system I had my first worry was -- this one of those events.
They create so much trouble in the market that other institutions.
Falter and bail.
Well the one thing it does he -- manifests itself today in the markets.
Is it makes other investors around the world that look at banks that look at financial institutions they're wondering okay.
Who else is exposed to sovereign debt.
And as you know there's a lot of banks in Europe that are exposed to sovereign debt and that's of Italy Spain.
And and -- And and -- -- appear Larry for just a second what you're describing here Corzine made a big -- On sovereign -- some six point three billion dollars justice -- bad out there because that's what you're talking about go right ahead.
Yeah I mean the risk management is the key.
To what we're looking at the markets but more importantly I think investors are looking at us right now for -- what's the future hold.
I think.
You really seeing a secular change in the business we -- I think.
Companies going forward -- gonna have to take less risk.
Are gonna have to get between customers and trade buy and sell instead of taking directional bets Lehman Brothers as -- talk -- -- book my book.
Right but -- strategy here because he say they gonna make a big change in the way they do business said that for a long time.
It never happens while it happen.
Well you start to see already banks are using much less leverage.
And I think you know the G -- meeting this weekend.
You've got the regulatory front -- -- election for next year's -- lot of politicians are gonna use this I think is a real steam -- In companies like -- -- alleged we we we don't take direction directional bets we buy and sell for customers.
And that's the way the business really work to the seventies and eighties I think it's going back.
-- -- old school that's what you talking about I wanna show folks some numbers on the leverage here because that's what you're talking about the danger.
MF global 33 times leverage network of one point 23 billion assets of 41 billion.
But isn't all highly levered they borrowed against it over and over and over again and that's where the danger comes in because if anything goes wrong.
The company it is gone in a nano second.
What does this do to Jon Corzine here's a guy.
Granite state of New Jersey -- Goldman Sachs you got to assume that what he was doing with MF global was rebuilding.
His reputation.
What does it mean for him now.
Well you know there's a lot of people MF global right now I really my my heart goes out to some of these people there's a lot of jobs that have been lost.
Of them that the firm -- -- lost its way somewhat but it is really human element to this right now such as mr.
Corzine.
It's all those employees that it that are that that firm that have been -- -- of the firms -- the last couple years.
And I think the real is the real human element of this.
Quickly add I do have an interest in -- because I'm wondering.
If his Peter going to be held -- the fire if he actually used client assets.
To shore up his own business could he be in trouble is it criminal.
Well you know we're a long way away -- from really figuring that out -- a lot of work that has to be done.
I think if you look at the financial crisis.
As a talk about my book they'll.
Things were we're really look there -- -- mistakes but a lot of those executives.
From the 2008.
Crisis have not been held accountable so at some point executives I think we'll have to face a higher level of scrutiny -- -- in this case or not.
Well you make a -- point out that people haven't been well that fact.
Larry thanks for coming on -- really appreciate your thanks Jerry make Twitter handles at convert bond.
