A stunning collapse
Published Oct 21, 2005 10:53 PM
Refco, a giant Wall Street brokerage firm, declared bankruptcy the week of
Oct. 12. On that day it was revealed that the head of the company had embezzled
$430 million in company funds.
Refco CEO Phillip Bennett reportedly
repaid the $430 million the next day (how nice—did it come out of his
petty cash?), but the company’s stock price began to fall and by the end
of the week, it was in full collapse. That swooshing sound was the
fourth-biggest bankruptcy in U.S. history.
Corruption, graft,
embezzlement—who’s surprised? That’s pretty much business as
usual on Wall Street.
So why did Refco collapse? It was actually reported
to be in good financial shape and the embezzled funds were quickly
restored.
When the capitalist economy is strong, the big money on Wall
Street will take almost anything in stride. All part of doing business. If
Bennett thought it was safe to embezzle that much, you can be sure his pals were
doing it, too.
But when the economy is in trouble, when the capitalist
boom turns bad, confidence is lost. Wall Street gets nervous, maybe even scared.
Not because workers will be getting pink slips, but because their investments
could go bad.
We pay attention. They know better than most the
instability of capitalism.
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