Goldman Customer Service versus MF Global Customer Service

The very public resignation letter of a disillusioned former Goldman employee, Greg Smith, has attracted a lot of attention since it appeared in The New York Times a couple weeks ago.  While outrage mounts at the alleged lack of respect Goldman gives its clients, former Goldman rival, MF Global, raises more troubling questions about how customers are treated.  Customers of MF Global would happily endure being called “muppets” if they could simply have their money back.  The reaction to Mr. Smith’s charges about Goldman seems disproportionate when viewed in the light of MF Global.

Among Mr. Smith’s accusations were Goldman’s complete lack of concern for the needs of its customers and its obsession with profit-making.  He pointed out that customer service and earning profits actually complement one another, as financial institutions should find it beneficial to their bottom line to care about their customers.  If Goldman’s sophisticated hedge fund and institutional money manager clients believe Mr. Smith’s characterization of the Goldman culture and do not feel properly cared for, they can move on.

By contrast, MF Global customers, many of whom are farmers and other small investors, certainly have been mistreated, but they are stuck.  Up to $1.6 billion in customer funds seem to have disappeared in the final week before bankruptcy, as the firm scrambled to meet its obligations, attempt to sell itself, and accommodate multiple on-site regulators.  MF Global employees apparently unlawfully took customer money and used it to pay the firm’s bills.  It is troubling that the many on-site regulators were not paying close attention to money flows at the dying firm.  MF Global customers are still hoping that some of this money can be retrieved.  For the time being, a portion of customer funds remains locked up, and it is unlikely that customers will get all of their money back. 

On Wednesday, MF Global officials will appear on Capitol Hill for the latest in a series of hearings on the company’s demise.  Perhaps the hearing will remind people that stealing customers’ funds is a lot more serious than name calling.