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Video - In a major banking scandal, the commodities and derivatives brokerage house MF Global filed one of the largest bankruptcies in American corporate history, with almost $40 billion in liabilities. It was the largest failure on Wall Street since the collapse of Lehman Brothers in 2008. The chairman and chief executive officer of MF Global is Jon Corzine, a former New Jersey governor and U.S. senator. Corzine is also the former CEO of Goldman Sachs. The firm is the biggest U.S. casualty so far of the European debt crisis.

Democracy Now | AMY GOODMAN: We’re going to go to Oakland to find out about this first general strike since 1946. But first, from the economy in Europe, we turn now to a major banking scandal here in the United States. On Monday, the commodities and derivatives brokerage house MF Global Holdings filed one of the largest bankruptcies in American corporate history, with almost $40 billion in liabilities. It’s the largest failure on Wall Street since the collapse of Lehman Brothers in 2008.

The chair and the chief executive officer of MF Global Holdings is Jon Corzine, the former New Jersey governor, U.S. senator. Corzine is also the former CEO of Goldman Sachs.

MF Global is also the biggest U.S. casualty so far of the European debt crisis. MF Global filed for bankruptcy in part because of risky bets on debt issued by Italy, Portugal and Spain. MF Global shocked markets last week after disclosing a $191 million quarterly loss. This saw its shares fall by two-thirds and its credit rating cut exponentially. The firm had made big bets on sovereign bonds issued by European countries, but the unsteady future of the eurozone meant investors downgraded the firm’s prospects.

Yesterday, regulators noted MF Global did not separate its customers’ money from its own funds, although required to do so by law. They also said the firm may have transferred hundreds of millions of dollars in customer funds to avoid detection by authorities. In a Bloomberg article called "Others Pay Price for Corzine’s Risky Revenge," journalist William Cohan writes, "More than three years after the collapse of Lehman Brothers and the onset of the financial crisis, we don’t have in place anything close to necessary regulations to try to prevent companies like MF Global from exploding."

So we’re going to William Cohan right now. He lives right here in New York City. He’s in our studio, contributing editor to Vanity Fair, author of several books, including Money and Power: How Goldman Sachs Came to Rule the World.

William Cohan, welcome to Democracy Now!

WILLIAM COHAN: Thank you, Amy. Nice to be here.

AMY GOODMAN: The significance of this bankruptcy?

WILLIAM COHAN: Well, I mean, it’s extraordinary—that’s the thing—because it didn’t have to happen. You have a former CEO of Goldman Sachs, albeit he left in 1999, and between now and then he was a senator from New Jersey and a governor from New Jersey, as you pointed out. He hadn’t done, himself, a trade since 1986, so he was somewhat removed. But this was all about his own psychological need for redemption, to get back what he lost by getting canned from Goldman Sachs in 1999, his desire to be a major player again on Wall Street. He decided to swing for the fences, make a huge bet on these European bonds, which, by the way, may turn out to be correct. We don’t know yet, because as you were saying in your previous reports, you know, this is all in flux. However, the markets, once they heard about the size of the bet—and Corzine should have known better, because he’s lived through 2008—once they heard about the size of the bets, they realized that this is essentially a house of cards, and they had lost total confidence in his leadership and his ability to pay their debts when they became due.

AMY GOODMAN: The FBI is now investigating?

WILLIAM COHAN: The FBI is investigating because, you know, one of the no-nos on Wall Street is using your customers’ funds for your own corporate needs. Those are supposed to be segregated. It’s unclear still—I mean, let’s not jump to too many conclusions here. They’re investigating it. It’s unclear. It could be bad accounting. It could be bad reconciliation of those accounts. But at the moment, it’s looking like funds are missing and that they were used—customer funds were used to try to shore up their own internal problems.

AMY GOODMAN: You interviewed Jon Corzine in MF Global, right?

WILLIAM COHAN: Yes, at his offices. He had one—he took over the old offices, and then he moved them to new offices, to Park Avenue Plaza on East 52nd Street, which is a, you know, sort of notorious Wall Street building. And basically, his whole strategy—he was very clear—

AMY GOODMAN: You mean, Occupy encampment is in the wrong place?

WILLIAM COHAN: Well, I would say yes. That’s a whole 'nother subject, but yes. Wall Street is in midtown, not downtown anymore. But Corzine was—we were talking about Goldman Sachs, obviously, in the course of my book, but he was very clear about what he was going to do at MF Global. He was going to take basically a sleepy, backwater—basically a clearing operation and really juice it in terms of risk taking. And this was all a plan. I mean, he, in his—he was brought into MF Global by another former Goldman Sachs senior partner, a guy by the name of Chris Flowers, who is now a private equity—a successful private equity investor, who had been a colleague of Jon Corzine's at Goldman when Corzine was the CEO. This fellow, Flowers, owns about a 10 percent stake in MF Global. He’s one of its biggest investors. And so, he thought bringing Corzine in would, again, help change the strategy, juice the strategy, and encourage the firm to take more risk.

AMY GOODMAN: And what’s Corzine’s relationship with Goldman right now?

WILLIAM COHAN: Well, he’s just an ex-senior partner who, you know, benefited to the tune of something like $300 or $400 million in Goldman Sachs stock when Goldman went public in 1999.

AMY GOODMAN: What about the $700 million that are missing?

WILLIAM COHAN: Well, that number seems to be shifting all the time. But again, that’s the customer accounts. In other words, if I was doing business with MF Global, and I now wanted to get my money out, they’re telling me, "Oh, either your account is blocked, or we can’t get that to you. We don’t know where that money is." Well, that is a major no-no on Wall Street, and probably criminal if it’s found out that they intentionally did this to cover their own losses on these investments that they made in these bonds.