default would be mercifully quick, but they are going for the protracted agony, reinforcing talos' allusion to SM.

here's a taste of an excellent article which documents and explains a lot.

Peak Money Arrives | The Agonist

MF Global had made a very large bet on European government bonds, and didn't want to be restricted by the US limits on re-hypothecation, so it notified its customers that it was transferring their accounts to MF Global's subsidiary in London, since England has no limits on re-hypothecation. This meant a single customer account could be pledged as collateral multiple times to different banks. MF Global did not notify its customers that it intended to use their margin as its own collateral for its own trading activity.

The result was that MF Global was able to use customer margin multiple times with different bank lenders. This is the practice of using leverage to boost a firm's profits, but leverage also increases a firm's vulnerability to market losses. MF Global may have taken $1.2 billion in customer margin and pledged it as collateral to five different lenders, allowing it to create a position in European government bonds worth $5.0 billion. When these bonds sunk in value on the markets, the lenders watched their margin cushion shrink to the point where contractually they had to call for more margin from MF Global. At first MF Global was able to comply, but when five lenders are seeking more collateral from a firm that has little cash cushion in the first place, and when losses on the bond positions are mounting, a mad scramble takes place among the banks to seize whatever assets MF Global has, at the same time liquidating their trading positions to prevent any further losses.

Some lucky banks may have been holding on to the margin accounts that MF Global controlled (MF Global was not a bank and so could not itself maintain margin deposits). These banks might have requested permission to seize the margin accounts, or they may be done so unilaterally and risked the consequences afterward (the party holding on to cash in a bankruptcy is always in a superior position). However it happened, thousands of individual investors were absolute pawns in a brutal game of self-protection played by the big banks.

read the rest, it's all connected...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty