Created by J. Michael McBride on 11/1/2012
It is clear now that the causes for the collapse and eventual insolvency of MF Global were numerous and diverse. Obvious reasons include CEO John Corzine’s decision to invest in European debt and poor financial controls at the derivatives broker. One less obvious culprit may have been the federal reserve. The Fed’s zero interest policy for short term investments made it increasingly more difficult for financial middlemen, who previously invested in short term low yield investments, to turn a profit. This forced brokerage houses to invest in longer term higher yield investments which proved to be more risky.
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