MF Global and the Meaning of Chutzpah

Like schlemiel1 and schlimazel2, chutzpah is one of those Yiddish words that lacks a good English counterpart. A good example of it is the old joke about the guy who kills his parents and then demands leniency because he is now an orphan. When hearing about the possibility of three former MF Global executives3 receiving sizable (I know, half a million is bupkis4 by Wall Street standards) bonuses if approved by the bankruptcy trustee, former FBI Director Louis Freeh, the word chutzpah popped into my mind and it hasn’t left since.

               Just to review, MF Global is the futures brokerage firm that was headed by New Jersey’s ex-governor/ex-senator Jon Corzine of Goldman Sachs pedigree. Mr. Corzine placed some ill-fated bets on European debt that blew up not just the firm but also its clients to the tune of $1.6 billion. The raiding of customer accounts to pay off MF Global’s counterparties was an act of malfeasance of breathtaking magnitude (I don’t think there is even a Yiddish word for it!). The repercussions of this gross violation of the separation between firm assets and client assets will be felt in the financial services industry for many years to come. As for the nauseating testimony given by Corzine and his partners in crime to the congressional committee, we are forced to believe that they are either incredibly incompetent or unbelievably dishonest.

               The rationale given for these payouts is the usual shpiel5 about how these are the people with unique knowledge who can help recover the missing money. The fact that the regulators and forensic accountants are unable to accomplish this on their own does not speak well to their abilities. If they are the schlemiels, then we taxpayers are the schlimazels.

               We at Index Funds Advisors, Inc. applaud Senators Amy Klobuchar of Minnesota and Jon Tester of Montana whose constituency includes a number of farmers and ranchers who were financially raped by the executives of MF Global. They have correctly deemed the bonus plan as “unacceptable” and “outrageous.” The only bonus these folks should receive is an extra few years in the slammer, but we will not hold our breath waiting for that to happen.

 


1schlemiel: an inept clumsy person.

2schlimazel: a chronically unlucky person; in a classic Vaudeville skit, the schlemiel spills his hot soup in the schlimazel’s lap.

3Bradley Abelow (chief operating officer), Henri Steenkamp (chief financial officer), and Laurie Ferber (general counsel)

4bupkis: chump change.

5shpiel: a sales pitch or speech intended to persuade.