An ominous development in the financial world ?

I don't particularly like to read, much less blog about, articles written for the financial/investment world, because so much of it is unadulterated trash - hyping certain investments, pimping for gold, and mindless chart analysis.

But on Friday after the market closed, I read a bit about a firm called "MF Global."  There was more in a column yesterday in the New York Times:

Federal regulators have discovered that hundreds of millions of dollars in customer money has gone missing from MF Global in recent days, prompting an investigation into the brokerage firm, which is run by Jon S. Corzine, the former New Jersey governor...

Now, the inquiry threatens to tarnish further the reputation of Mr. Corzine, the former Goldman Sachs executive who had sought to revive his Wall Street career last year just a few months after being defeated for re-election as New Jersey’s governor...

MF Global was seen as having taken on an enormous amount of risk with little room for error given its size. By Friday evening, MF Global was under pressure to put up more money to support its trading positions, threatening to drain the firm’s remaining cash. The collapse of MF Global underscores the extent of investor anxiety over Europe’s debt crisis. Other financial institutions have been buffeted in recent months because of their holdings of debt issued by weak European countries...

There are implications that this could echo well beyond this specific firm, because the last major crash was triggered in part by hedge fund losses at Lehman Brothers.

If indeed there has been misappropriation of customer funds at MF, how many customers are going to withdraw their funds from other commodities accounts as well as from standard stock/bond brokers, after selling their holdings first? Especially after the frustrating decade-plus we have experienced in the financial markets, why shouldn’t people just move to direct ownership of Treasurys and into FDIC-insured bank deposits?

The story could hardly be worse. MF Global was not just any old futures firm. It was run by a stalwart of the Democratic establishment and the former leader of Goldman Sachs... A major “risk-off” move could be in the making.

In my world, BTW, a statement that something or someone is/was associated with Goldman Sachs is neither a compliment nor reassuring.  I'm not offering any recommendations about this incident or investments in general, and don't want to contribute to fearmongering.  Just want to encourage people to be alert and cautious.