Intraday commentary here.
It looks like there will not be a criminal case in the MF Global theft of customer funds, but they could face a fine of up to $140,000.
The viral moral hazard unleashed by TARP continues to multiply and reverberate through US financial markets to their detriment. It has a marked dampening effect on market participants, and encourages unethical behaviour and a spirit of lawlessness. In that sense MF Global is just one symptom among many of a major set of policy errors committed by the Fed, the Congress, and the last two administrations at least.
"In economic theory, moral hazard is a tendency to take undue risks because the costs are not borne by the party taking the risk. The term defines a situation where the behavior of one party may change to the detriment of another after a transaction has taken place...Economists explain moral hazard as a special case of information asymmetry, a situation in which one party in a transaction has more information than another. In particular, moral hazard may occur if a party that is insulated from risk has more information about its actions and intentions than the party paying for the negative consequences of the risk. More broadly, moral hazard occurs when the party with more information about its actions or intentions has a tendency or incentive to behave inappropriately from the perspective of the party with less information."
From a practical standpoint, I guess this clears the way for Corzine to be the next Treasury Secretary, a fitting replacement for Geithner the amoral technocrat.
Hide your women, children, IRA's and 401k's. The economic hitmen are coming to town.