The “Chutzpah” of Bear Stearns

"Chutzpah"  (חֻצְפָּה) is a Yiddish word. It is defined as brazen audacity to the nth degree. It is used to describe someone who has over-stepped the boundaries of accepted behavior with no shame.

The Joys of Yiddish gives it an even more visceral definition: "gall, brazen nerve, effrontery, incredible ‘guts,’ presumption plus arrogance such as no other word and no other language can do justice to."

The classic example is someone on trial for murdering both their parents, who asks the court for leniency because they are an orphan. 

David Malpass is chief economist at Bear Stearns. In an astonishingly inappropriate Op-Ed piece in today’s WSJ, Mr. Malpass argues that all is well in the economy, the credit crunch is contained, and Main Street remains totally unconcerned about this.

Talk about Chutzpah.

If there is a more imperfect messenger for telling everyone to "please calm down" than ANYONE from Bear Stearns, I am at a loss to imagine who that might be. Even more ironically, on the same day we read this absurd Op-Ed, we learn that Bear Stearns has decided to liquidate those two (with a possible 3rd on the way) bankrupt hedge funds in the Cayman Islands — instead of New York, in order to limit creditors’/investors’ ability to get their money back.

More Chutzpah.

I haven’t even gotten to the substance of the piece, which is — let me blunt here — idiotically child-like in its bad facts and poor arguments. It is so weak that it relies on the Conference Board’s backward looking, ill thought of sentiment measures, and conveniently ignores the more recent WSJ/NBC poll, which shows two thirds of Americans believe we are already in a recession or will be in a year.

Nothing to see here, move along, move along.

Any analysis — and I hesistate to use that word — which claims "Neither the economy nor job growth has been dependent on housing" is simply a case of reductio ad absurdum.

Beyond Chutzpah.


I’ve been on K&C enough times with Mr. Malpass to know that he is a bright guy who is not so totally blase about reality. I bet that the idiotic idea for this steaming pile of manure came from way higher up the Bear Stearns food chain. I’ll bet he ground his molars down while writing this garbage.

Jimmy Cayne must really want to keep his job in the worst way . . .


UPDATE: August 7, 2007 9:34 am
Interesting conversation about Bear Stearns with a friend who left there years ago: When discussing why this came from Bear Stearns, instead of from Goldie or Morgan or Mother Merrill or even UBS — recall that Bear Stearns — LTCM’s clearing firm and prime broker — was the only major Wall Street firm that refused to participate in the NY Fed orchestrated (but Wall Street funded) bail out.

The book When Genius Failed: The Rise and Fall of Long-Term Capital Management goes over the details of Bear’s relationships to the rest of the Street. Had any other firm asked a competitor to publish a similar piece, it would have been greeted openly. I assume Bear didn’t even ask, but if they did, they would have been told to go jump . . .


Don’t Panic About the Credit Market
WSJ, August 7, 2007; Page A11

Bear Stearns Caymans Filing May Hurt Bankrupt Funds’ Creditors
Jeff St.Onge and Bill Rochelle
Bloomberg, Aug. 7 2007

America’s Economic Mood: Gloomy
WSJ, August 2, 2007; Page A4

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What's been said:

Discussions found on the web:
  1. Sven commented on Aug 7

    Excellent post Barry…I’ve had similar thoughts about Lehman’s Drew Matus over the last month or two. Even though Lehman keeps coming up high on the subprime exposure list he can’t seem to get enough air time to explain all the reasons why things are going to be just fine.

  2. Strasser commented on Aug 7

    Barry, is there a Yiddish word for “criminal”?

  3. ari5000 commented on Aug 7

    Yiddish criminal = farbrekher

  4. Bill commented on Aug 7

    Reminiscent of Powell before the UN.

  5. Winston Munn commented on Aug 7

    I believe this is the Yiddish word for Bear Stearns Hedge Fund Investors: Shtuped.

  6. Kp commented on Aug 7

    Ever new story I read about BS they are attempting political and financial suicide. Is the old man senile?

  7. Josh commented on Aug 7

    And they said the Wall Street Journal wouldn’t lose any integrity with Murdoch as owner…

    Granted its an Op/Ed piece, but it shouldn’t be published.

  8. Gary commented on Aug 7

    Josh, the WSJ editorial page is the worst sewer on the planet . . . even Murdoch couldn’t demean it further (and he hasn’t taken control yet).

    Malpass is a putz, and Paul Gigot is the anti-mensch.

    Oy gevalt! Is Malpass reduced to playing the David Lereah of Bear Stearns?

  9. michael schumacher commented on Aug 7

    from what I’ve heard Cayne could’nt let his golf game be bothered by any of the goings on at BSC……really why they waited until this last weekend to fire the fool who was responsible for the two funds….oh sorry he resigned……sure he did.

    Total Hubris and yet another reason to make you’re own decisions regarding your money.


  10. Stuart commented on Aug 7

    The Chutzpah of S&P
    The Chutzpah of Moodys
    The Chutzpah of Fitch
    The Chutzpah of Merrill
    The Chutzpah of Lehman
    The Chutzpah of JPM
    The Chutzpah of Goldman
    The Chutzpah of Citi
    The Chutzpah of Paulson
    The Chutzpah of Bernanke
    The Chutzpah of Cheney
    The Chutzpah of Gonzales
    The Chutzpah of Bush
    The Chutzpah of………

    and on and on and on…….

  11. Bonghiteric commented on Aug 7

    BS, thou doth protest too much

  12. Florida commented on Aug 7

    For any interested, Bloomberg tv has Barry coming up on Market Pulse for an interview this morning.

  13. jay commented on Aug 7

    It’s amazing how tarnished the Bear name is now. It’s clear a PR department had nothing to do with the op-ed piece, because it’s clear Bear doesn’t have a PR department. For the many talented people working there, it must be so embarassing to flash their business card now.

  14. kl2005 commented on Aug 7

    I use to dislike your Blog.

    Now I LOVE your Blog. Please do not ever change.

    I now have a source that I can count on to either be WRONG or irrelevant. I still need to distinguish between the two, but it is so nice to have a reliable indicator like you.

  15. Red Pill commented on Aug 7

    Long memories and I bet they have even longer knives. This is going to get real interesting.

  16. Sven commented on Aug 7

    Great to see you on BloomBabble this morning. I was surprised to hear you describe yourself as a quant shop that has been miserably long. You had seemed more hedged than that.

    Weirdly, they had you listed as being from Fusion IQ…not RR&A or TBP.

  17. techy2468 commented on Aug 7

    kl2005 can you be more elaborate, please?

  18. Stuart commented on Aug 7

    kl2005 must be David Malpass…..LOL

  19. JArnold commented on Aug 7

    False — “two thirds of Americans think the economy is in recession” the WSJ poll you reference shows no such thing. Also fewer people think the economy is in recession now than thought it was in recession in 2003.


    BR: Here is the line you misquoted: “The more recent WSJ/NBC poll, which shows two thirds of Americans believe we are already in a recession or will be in a year.”

    Here is the WSJ Quote: “More than two-thirds of Americans believe the U.S. economy is either in recession now or will be in the next year, a new Wall Street Journal/NBC News poll shows.”

    Why you would misquote this is beyond me. I guess you wanted to lose commenting privileges.

    (For a more complete explanation, see Disclosures & Terms especially the section on trolls & asshats)

  20. KirkH commented on Aug 7

    Hey JArnold….
    “Polls out in the last couple of weeks have found that the majority of Americans think the economy is in recession, think the country is on the wrong track and his approval rating for handling the economy is only in the mid 40s compared to astronomical numbers on issues of national security.”

  21. John F. commented on Aug 7

    “I haven’t even gotten to the substance of the piece…” What happened, Barry? Did you get distracted? I can learn new Yiddish words on my own; what I’m REALLY interested in is having you address Malpass’s statistics–and the critical double-counting issue.

  22. Ken Houghton commented on Aug 7

    Barry (on the last couple ‘grafs): Got it in one. (Yes, I’ve been pounding that drum for a while, but it’s rather one worth beating.)

  23. test commented on Aug 7

    “Chutzpah” is also a word to describe “Boeing 777” Ben. Ben and Paul will use everything to rescue the market and pump it higher.

  24. Alex Khenkin commented on Aug 7

    I believe this is the Yiddish word for Bear Stearns Hedge Fund Investors: Shtuped.
    There’s an authentic one (well, two): meshugene kopf.

  25. Bob A commented on Aug 7

    Mr. Milpass’s boss to Mr. Milpass:

    This is what you’re gonna do. You’re gonna go on CNBC and in the WSJ and tell them everything’s OK.

    and if you don’t want to do that… there is a guy in the office next door that would love to.

    So forget about the facts. Forget about whether it’s true of whether you even think it’s true. Just do it. Or go home.

  26. Michael Carne commented on Aug 7

    Barry, I’m a regular reader of Dave Malpass’ research and I’ll tell you that the BS position has been bullish for a long time when others were predicting a housing crash induced economic armageddon. Their senior economist Ryding is also on the same page. Just FYI.

  27. PJV commented on Aug 7

    12:12 (Dow Jones) Bear Stearns chief economist David Malpass comes in for some rough treatment in one corner of the blogosphere after today’s WSJ opinion piece, in which he argues the markets are overreacting. “If there is a more imperfect messenger for telling everyone to ‘please calm down’ than anyone from Bear Stearns, I am at a loss to imagine who that might be,” Barry Ritholtz writes at The Big Picture. Prefacing his comments by saying “let me be blunt here,” and adding he knows Malpass is a “bright guy,” he calls the piece “idiotically child-like in its bad facts and poor arguments.” (PJV)

  28. VJ commented on Aug 7

    The Chutzpah just keeps comin’:

    * Last Wednesday, according to SEC filings, American Home Mortgage CEO Michael Strauss SOLD FOUR MILLION SHARES of American Home stock.

    * On Friday, American Home Mortgage said it would lay off more than 6,000 of it 7,000 employees. At the time, Michael Strauss, American Home’s founder and chief executive, said:

    “The employees affected should understand that this is not a reflection on their efforts or their productivity.”

    * On Monday, American Home Mortgage filed for bankruptcy protection.

    Well, isn’t that SPECIAL.

  29. jopo commented on Aug 7

    quick thought about street relationships….who were the firms who were the quickest to negotiate credit agreements once the bs hedge funds got into trouble, and who held out? who is the most of afraid of the repricing of all the ‘toxic waste’. might give you insight into which firms have the most exposure…..

    buy merrill, sell goldman and the rest!

  30. Groty commented on Aug 7

    Goldman’s Alpha fund is down 12% YTD, after being down 6% in 2006. If it is structured like most hedge funds, it has a high water mark that means the PMs aren’t going to get paid until the losses are made up. Goldman boys aren’t accustomed to working for peanuts. I wonder if they liquidate it?

    The press release says its $10 billion in size, but it’s unclear if that is levered or unlevered.

  31. michael schumacher commented on Aug 7


    Not 4 million but almost 3 million and it’s attempt at a footnote is a bit much considering what went on later in the week.

    It “says” that he had to sell because of a margin call………right sure it was..just happened to be three (trading) days before he finalized bankruptcy….

    OT: Did I hear booing when they released the Fed decision?????? Too funny.


  32. bobby orbach commented on Aug 7

    it is dificult to describe “Chutzpah”, you did a ghreat job… enjoyed this blog post

  33. VJ commented on Aug 7


    Not 4 million but almost 3 million and it’s attempt at a footnote is a bit much considering what went on later in the week.


    I musta hit the 4 key instead of the 3 key when I was first typing, then I converted the 4 to four when I posted, and the deed was done.


    As to the Fed, the statement noted that:

    financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing.

    Mr. Obvious rides again.

    The Fed also stated:

    although the downside risks to growth have increased somewhat, the Committee’s predominant policy concern remains the risk that inflation will fail to moderate as expected.

    Stagflation rears it’s ugly head.

  34. Randy commented on Aug 7

    Malpass has a long history of chutzpah. In 94, when he was Bear’s international economist, he said there was no chance that Mexico would devalue, “punto,” which is Spanish for period. After the devaluation, his nickname on Bear’s trading desk became Punto.

  35. Groty commented on Aug 7


    FYI….I just noticed your blog post about Malpass Op-Ed piece was picked up by Dow Jones Newswire and distrubuted under the MARKET TALK heading.

  36. Francine commented on Aug 7

    Hey, Barry: Totally loved this post. Anyone who thinks the people on Main Street aren’t concerned about this is crazy. In the west, anyway, where the main industry is real estate, as soon as lending tightens everything stops. I can’t believe someone from a (supposedly) sophisticated firm like Bear would put out such crap. Clearly we are in trouble in the economy — it just takes a while longer to figure out how or where.
    (Richard Lang’s friend, remember?)

  37. Al Capital commented on Aug 7

    Were you really surprised that BSC would try cover their Bear ass? So why feign surprise at their actions?

    There is another Yiddish word, “Narashkeit” which means silliness, and to think that a predator like BSC would behave in any other way is just silly, or worse.

    Wouldn’t it be more useful to talk about the legal loopholes that need closing and better protection and education for investors? And regarding the number of Americans thinking we are in a recession recall that according to National Geographic:

    “Despite nearly constant news coverage since the war there began in 2003, 63 percent of Americans aged 18 to 24 failed to correctly locate the country on a map of the Middle East. Seventy percent could not find Iran or Israel.”

    An even more relevant statistic is what percent of investors in the bankrupt BSC funds thought they were throwing their money away. As in the geography example, investors need much better tools to evaluate the risk of an investment and the education on how to use those tools. That is called Tikun.

  38. Anon commented on Aug 7

    People get your facts straight! It was not Bear alone that didn’t participate in the LTCM bailout, Lehman did not as wellwell

  39. Bill K commented on Aug 7

    Lehman was so much smaller in 1998 than Goldman, Morgan, Merrill, CSFB, Citi, etc.

  40. A Dash of Insight commented on Aug 7

    Panic, Housing, and the Economy: Ritholtz versus Malpass

    A current theme at A Dash is how people can use various sources of information in doing their homework. Inevitably, we must all make choices about what to read and how to use the information. We are working on some

  41. Barry Ritholtz commented on Aug 8

    Apparently, some people misunderstood the point of that post: The entire WSJ Op-Ed struck me as utterly disingenuous.

    For Bear Stearns to come out and claim “the Credit Crunch will be fine” — on the EXACT SAME DAY they chose the Cayman Islands as the venue for the bankruptcy liquidation of their 2 hedge funds to “limit creditors’ and investors’ ability to get their money back” — well, that simply struck me as unbelievably sleazy.

    That was why the post was titled “The “Chutzpah” of Bear Stearns” . . .

  42. David Malpass commented on Aug 9

    Two articles in Wednesday’s WSJ that should be read in tandem:

    Yesterday’s WSJ had two articles that have to be read in tandem over and over to
    gain a full appreciation – “How Credit Got So Easy And Why It’s Tightening” on the
    front page of the paper, which is a serious look at the origins of this credit cycle and
    how it morphed into an unsustainable excess, and the column on the editorial page
    titled “Don’t Panic About the Credit Market”, which we highly advise that you cut out and tape to your wall (you may want to draw a bulls-eye in the middle of it). The
    first article documents how the mortgage market became populated with product
    that could avoid higher interest rates once the Fed began to tighten in 2004 – “no
    doc loans” with 100% LTV’s, 2/28 subprime loans that locked in ‘teaser rates’ for
    two years, option-ARMs with negative amortization features, and the list goes on.
    This may be worse than just another credit cycle because the subprime market
    collapse has caused the CDO market to virtually evaporate, and CDOs are, as a
    client recently told us, “the backbone of liquidity/demand for the CMBS, high yield
    debt, trust preferred and all of the ABS markets”.

    The impact on the CDO market and the drying up of liquidity in the secondary
    mortgage market did not make it into the second article mentioned above – just a
    lecture on how the housing downturn and spreading impact of the subprime
    fiasco is no big deal. But what really struck us in the first article was this one
    quote from Alan Greenspan – “We tried in 2004 to move long-term rates higher in
    order to get mortgage interest rates up and take some of the fizz out of the
    housing market. But we failed”. There you have it – this cycle was dominated
    only in part by low interest rates but predominantly by widespread pools of
    available credit irrespective of the borrower’s FICO score. So it took 17 policy
    tightenings over two years, totaling 425 basis points, before the Fed extinguished
    the housing and mortgage cycle. As things work in reverse, how far will they
    have to go to put a floor under the situation?

  43. Mark Watkins commented on Aug 9

    Interesting reading, great blog (just discovered it). Now we know why the M3 report was done in. Treasury kept pumping money in to augment the Fed rate policies, and you have a perfect recipe for a huge credit bubble with plausible deniability.

    Also interesting that the post by Mr Malpass right above is blank….

  44. Mark Watkins commented on Aug 9

    My mistake, it is not. My apologies

  45. The Big Picture commented on Dec 20

    Let the litigation begin!

    Thus, It Begins: I believe Barclays is now the first big plaintiff against the major Wall Street brokerage houses. The United Kingdom bank was burned this summer when they lent $400 million to the firm’s funds, whose collapse wiped out $1.6 billion in …

  46. The Big Picture commented on Mar 21

    Who is to Blame for Bear Stearn’s Demise?

    From our Things that make you go Hmmmm department: There is a meme going around about the death of Bear Stearns (BSC). According to some people (mostly current and ex-employees) the collapse of the fifth largest investment bank in the US is the fault o…

  47. la grande poussée commented on Mar 21

    I’m sure you remember Arthur Anderson, going down with Eron. Actually, Anderson assisting their client in one of many creative plans.
    Anderson always set themselves above- a whole level from the other CPA firms. Bear Stearns Also had this distasteful piety and deserves the very best – a place next to Arthur Anderson – and do the employees deserve the same – probably not, except it is common knowledge and generally accepted that no matter how much employer securities you have in your “plans” you diversify – and should never have more than 10% (I’ll be generous 20% of your employers Securities) It’s almost a rule of thumb in financial planning. Who’s to blame – Arrogance,Greed,Pomposity,self-righteousness – All the code elements of the Ugly American.

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