In the span of two weeks we have seen a success of capitalism and a growing failure of state capitalism.
On Aug. 1 came news that computers at Knight Capital went nuts, automatically buying more than $4 billion of securities the company had not meant to buy. In less than one hour Knight Capital's glitchy computers had cost the company $440 million in losses.
Now comes news the U.S. Treasury Department has revised up its estimate of the federal government's probable loss from its auto company bailouts. The loss is estimated at $25.1 billion, up more than $3 billion from the last estimate. More losses are possible.
The Knight Capital losses could have ruined the company, which until that day was the nation's largest trader in U.S. equities. Company executives went begging to Securities and Exchange Commission Chairman Mary Schapiro for permission to back out of the trades. She said no.
But Knight Capital did not fail, even though failure would have been fine in a capitalist system. Companies that mess up big time should pay a price.
But it's also fine in a capitalist system for investors to take advantage of the mistakes of others, and this they have done. A group of companies has put up $400 million to keep Knight Capital in business. The new investors receive stakes in the company and seats on its board of directors.
Read more: http://news.investors.com/article/622824/201208201809/real-capitalism-fixes-problems-crony-capitalism-causes-them.htm
On Aug. 1 came news that computers at Knight Capital went nuts, automatically buying more than $4 billion of securities the company had not meant to buy. In less than one hour Knight Capital's glitchy computers had cost the company $440 million in losses.
Now comes news the U.S. Treasury Department has revised up its estimate of the federal government's probable loss from its auto company bailouts. The loss is estimated at $25.1 billion, up more than $3 billion from the last estimate. More losses are possible.
The Knight Capital losses could have ruined the company, which until that day was the nation's largest trader in U.S. equities. Company executives went begging to Securities and Exchange Commission Chairman Mary Schapiro for permission to back out of the trades. She said no.
But Knight Capital did not fail, even though failure would have been fine in a capitalist system. Companies that mess up big time should pay a price.
But it's also fine in a capitalist system for investors to take advantage of the mistakes of others, and this they have done. A group of companies has put up $400 million to keep Knight Capital in business. The new investors receive stakes in the company and seats on its board of directors.
Read more: http://news.investors.com/article/622824/201208201809/real-capitalism-fixes-problems-crony-capitalism-causes-them.htm
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