Will MF Global Topple the Treasury Dept.?

The MF Global story has many angles, here's one we were playing with.
The latest line from the sell side of the market goes like this: The violation of trust - if not the law - in the FCM community should be exploited to put more funds in SIPC and trade ETFs. Gold, copper, currencies, whatever you need. Double long? Single short? They have you covered, right? What about your old Uncle Sam?
Unlike would be metals hoarders or day trading "macro" hedge funds, the Treasury Dept. has been able to fund the US government machinery because of plain vanilla F.I. futures products. Most of your neighbor's eyes would glaze over if you dared explain the beauty of a constant 25 dollar DV01 for Eurodollars but the design is nothing short of elegant. Treasury futures are obviously an integral part of successful Government placement. What's the bid to cover without deep, wide and resilient product markets? (for profit exchanges and electronic trading not the focus here)
The shear magnitude of one month's issuance eclipses even the most robust combination of grains or metal.The Treasury is pumping out $165 - 171 B in coupons monthly and don't even worry about Bills (350B+/month.) Hedge that process in the TLT (20 yr ETF) and good luck. The importance of these products is confirmed by the ease with which the flood rolls over. We refund, they reschedule; that is THE difference. If a 3x oversubscribed 2 year with a 1.5bp tail garners a "D grade", what's in store next year?
The system is Faith Based. The MF collapse is not an example of markets working as the Fed's Bullard so smugly suggests. This one is gonna leave a mark.

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