Rep. Maxine Waters, D-Los Angeles, the top Democrat on the panel’s subcommittee that oversees capital markets, said she was very concerned about the volatility triggered by Knight. She supports hearings on the broader effects of the incident and other recent trading troubles.
“Like the problems with the Facebook initial public offering, events like this only further serve to undermine investor confidence in the markets,” Waters said. “Though we don’t yet know exactly what caused the problem with Knight Capital, with a drumbeat of financial market snafus continuing, it’s clear that the industry, with guidance from regulators, needs to strengthen their internal controls.”
Indeed, investors have stuck mostly to the sidelines after suffering crippling stock losses during the financial crisis. Many people have steered clear of sinking money into stocks, worried that big institutional investors and their high-speed tools can manipulate the market.
Knight’s losses reaffirmed Los Angeles retiree Robert Altman’s decision to pull nearly all of his investments out of stocks. Altman said his distaste for the market’s wild swings and technical glitches may confirm industry fears that recent Wall Street technical mishaps could scare off retail investors.
“I’m out of it,” said Altman, 73, who has plowed his savings into municipal bonds. “The little guy has no business in the market anymore.”
Business ethics would seem to dictate that investors’ money should be handled with care. After all, the human beings who invest have interests like long term returns to enable them to live a decent life. But as we can see from the headlines, stock market investment is more a matter of being sheared like a sheep than a fair deal . We’ve had enough scandals to call on the government to act. However, the interests that make money by these methods are well placed, very influential. If you want a safe investment, there are better places to go.