Implode-o-Meter News - The Real Bombshell in the MF Global Post Mortem

It turns out the [repo-to-maturity] description of the [killer MF Global] trade isn't accurate. It never was a real repo to maturity, as in maturity match funded externally. The funding was two days shorter than the maturity of the asset. But, no joke, MF Global dressed that up internally and somehow got accountants and regulators to buy off on this bogus characterization. And even worse, this scheme produced book profits at the expense of liquidity, the real scarce commodity at the firm...
Query whether [the accounting] disclosure was adequate. While it does flag the exposure to default risk and adverse price movements, it does not mention the hazard that proved fatal, namely, that this trade produced accounting (and hopefully in the end actual) profits but with ongoing liquidity demands that an astute reader would not anticipate existed with a trade that was a true (as opposed to internal) repo to maturity.

Top management looks even more out-to-lunch than previously thought, since MF Global had experienced large margin calls due to unfavorable price changes in the bonds used in these trades, the first time in October 2010 on some Irish sovereign debt, and an even larger haircut on Irish and Portuguese sovereign debt in September 2011.

Relevant:

The Real Bombshell in the MF Global Post Mortem