MF Global bankruptcy showing nothing has changed

Brad Delong has a wonkish post about the MF Global bankruptcy here:

MF Global bankruptcy analysis

I heard that MF Global was leveraged something like 40:1.   Lets say investors gave them $100.  They then went to a bank and borrowed $4,000 to buy debt floated by countries in southern Europe.  Well, that failed.  Now what is happening is that the people settling the bankruptcy cannot find all of the initial $100.  So really their leverage was greater than 40:1.

Why this annoys me, and it doesn't seem like the media is really laying this out, is that this sort of thing is almost EXACTLY what was going on constantly between 2005 and 2008, and is apparently still going on.  Highly leveraged, highly speculative bets being placed all over the place with the risk being masked and spread out to regular investors.

The largest single line of credit floated to MF global was securitized and sold off, probably to investors who didn't understand the real nature of what they were buying.  So these people who were told that they were buying investment grade bonds are now getting screwed.

The initial investors to MF global are getting screwed, and not in the acceptable way.  When you invest somewhere, you risk losing your money if the investment goes poorly.  However, it is different when you lose your money because your principle can't even be found.  It loos like $1.2B is missing.

What remains to be seen is how screwed John Corzine will be.  The FBI is investigating him and the firm to see how badly they went astray of various laws.