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[Swiss Trader]

Under normal circumstance the travails of a mid-sized brokerage firm like MF Global shouldn't be receiving this much attention, particularly when reporters have so many drugged-up hippie Wall Street protesters to interview down at Zuccotti Park. But MF Global -- which is unlikely to survive through the weekend, at least in its current form -- is no ordinary firm and the tale of how it became the latest casualty of mindless risk taking is something that every risk taker on Wall Street could learn from. It begins in March of last year when former Goldman Sachs chairman, Jon Corzine, decided he had enough of New Jersey politics and decided to jump back into the Wall Street game. Times have certainly changed since Corzine was one of the street's top executives. He left (he was actually booted) from Goldman in 1999 after the firm made a series of bad bets on his watch tied to the money-losing trades of the faltering hedge fund, Long-Term Capital Management. The LTCM fiasco was big enough that it affected every major Wall Street firm and required a government bailout to save the financial system, or so we were told (sound familiar?). But it also occurred in the middle of the technology bubble that showered huge profits on the banks and made Corzine a millionaire 500 million times over. Corzine's reputation should have been in tatters; by the end of his days at Goldman, Corzine was regarded as a lousy manager, a poor judge of risk and the reason why Goldman had to delay plans to convert from a partnership to become a public company. But he used his winnings to finance a career in New Jersey politics, first being elected as US senator and later as the state's governor. Meanwhile, the man who booted Corzine from Goldman, Hank Paulson, went on to become Treasury secretary during a period of risk taking unprecedented in modern financial history. And you know how this story ends: The financial crisis of 2007 and 2008, where massive losses tied to housing debt caused the demise of Bear Stearns, Lehman Brothers and nearly every surviving firm before Paulson arranged for the mother of all Wall Street bailouts. With that came a wave of regulation to reduce risk-taking. In many cases, firms simply decided the downside of losing big bucks and going out of business wasn't worth the occasional big score, so they began to reduce risk on their own. But Corzine was clearly asleep during much of the risk-taking years, not to mention the fallout that occurred after the financial system imploded (If you live in New Jersey and witnessed how badly he ran the state, you'll know when I mean). When he took over at MF Global, he vowed to run the firm as if the financial crisis didn't happen. First he threw out the playbook developed by his predecessor Bernie Dan, who was rebuilding MF Global after a trading scandal by cracking down on risk. Under Dan, MF Global would return to its roots as a broker, mainly for commodities, earning fees to execute business on behalf of others. The firm was achieving some degree of success as well. Its balance sheet was clean and some on Wall Street said it was poised to begin earning modest profits. But put a clean balance sheet in the hands of someone who saw the financial crisis as nothing more than a passing storm, and you know what happens. Within minutes of taking the job Corzine began boasting that he was building a mini-Goldman, as he sought to emulate Goldman's business model of taking enormous bets in various markets. There was just one problem with that strategy: it's prone to error. Even the best traders like those at Goldman screw up, as the events of 2007 and 2008 demonstrate. Corzine isn't close to being among the street's best traders. so he didn't waste any time screwing up. Less than a year after taking the job, he and his traders made a calculated bet that Europe wasn't the basket case that we now know it truly is. His traders bought more than $6 billion sovereign debt most of it issued by Italy and Spain, the two countries that are now replacing Greece in the likely to default department. With that, Jon Corzine gambled away MF Global, which is now in a mad dash to sell parts of itself while it moves closer to liquidation, Lehman style. Hundreds of people will likely lose their jobs in the aftermath, which is sad since most have nothing to do with the part of the firm that's causing the problems. Meanwhile, anyone dumb enough to buy Corzine's plan to remake MF Global into Goldman Sachs will lose most if not all of their investment, though analysts tell me those investors want blood and will likely sue Corzine and MF Global when the dust begins to clear next week. It seems that offering documents for a bond deal issued this summer by the firm didn't really mention the size and scope of the MF Global's sovereign debt holdings, so investors will likely make the case that they were misled into think Corzine was running a firm with a clean balance sheet, even if it was neck-deep in the Euro morass. There is some good news to report: MF Global won't be bailed out by the federal government, and will likely fail. Unlike Corzine's old firm, MF Global isn't big enough to be "systemically important" to the nation's economy and the financial system And when it does fail, it will finally end the Wall Street career of Jon Corzine, and finally prove that there are consequences to idiotic risk taking.