document<\/a> focuses on the role of three of the largest banks\u2014Goldman Sachs, Morgan Stanley and JPMorgan Chase\u2014in the physical control of commodities, including energy resources and metals. \u201cThe current level of bank involvement with critical raw materials, power generation and the food supply appears to be unprecedented in US history,\u201d the report states.<\/p>\nAfter the deregulation of the commodities markets in the late 1990s\u2014part of a broader banking deregulation under the Clinton administration\u2014trading in commodity-related assets increased enormously. A vast array of derivatives were developed to allow for speculation on commodities, with the market in these assets increasingly divorced from its initial purpose of enabling producers and buyers to hedge against shifts in commodity prices. Markets such as the Commodity Mercantile Exchange in Chicago are now dominated by speculators, who control as much as 70 percent of all assets.<\/p>\n
A great deal of money is made buying and selling financial instruments tied to the prices of such basic necessities as oil and wheat. The growth in the direct control of physical goods by banks has allowed them not only to influence the prices consumers pay, but also to leverage their control of commodities to manipulate the prices of the financial instruments on which they gamble. The consequences can be deadly. Speculation in food prices, for example, is a major factor in price swings that can throw millions of people into poverty and hunger all over the world.<\/p>\n
Some figures from the report give a sense of what is involved. At one point, the investment bank Morgan Stanley \u201ccontrolled over 55 million barrels of oil storage capacity, 100 oil tankers, and 6,000 miles of pipeline.\u201d<\/p>\n
JPMorgan built up a significant stake in the copper market, with \u201ca copper inventory\u2026 comprising nearly 60 percent of the available physical copper on the world\u2019s premier copper trading exchange.\u201d Other activities of the banks documented in the report include trading in uranium, selling jet fuel to airlines, and owning mines and power plants.<\/p>\n
One focus of the Senate subcommittee report is the control of the aluminum market by Goldman Sachs, which has been sued by dozens of companies accusing the bank of deliberately manipulating supply to increase aluminum prices and its own profits.<\/p>\n
In 2010, Goldman purchased Metro International, a Detroit-area warehousing company that stores about 85 percent of exchange-traded aluminum in the United States. Goldman proceeded to implement complex new rules and incentives at its subsidiary to bottleneck supplies, according to the report.<\/p>\n
The bank \u201capproved \u2018merry-go-round\u2019 transactions in which warehouse clients [including banks and financial institutions such as Deutsche Bank and the London hedge fund Red Kite] were paid cash incentives to transfer aluminum from one Metro warehouse to another.\u201d The result was curtailed supply and increased prices, which the bank and its financial trading arm could anticipate because they were directly responsible.<\/p>\n
Wednesday\u2019s report is only the latest in a long string of revelations of nefarious activities by Wall Street banks, including three major documents released by the Senate Permanent Subcommittee on Investigations over the past three-and-a-half years.<\/p>\n
The most significant thing about these expos\u00e9s is that they have no repercussions. Detailed and damning evidence is presented showing that the likes of JPMorgan, Goldman, Morgan Stanley, Bank of America, Citigroup, etc.\u2014and their top executives\u2014lied, cheated, broke laws and, in general, profited handsomely from the economic and social disasters produced by their actions. But no bank or top banker is prosecuted, let alone jailed. No measures are taken to rein in the banks. The sporadic expos\u00e9s assume the character of harmless rituals. The banks are and remain above the law.<\/p>\n
At most, the banks are made to pay fines that amount to a small fraction of their revenues (and far less than the handouts and subsidies they have received from the government) in settlements that have been worked out between the banks and the government in closed-door negotiations\u2014amounts the banks discount as the cost of doing business.<\/p>\n
Just last week, JPMorgan, Citigroup, Bank of America, UBS, Royal Bank of Scotland and HSBC agreed to a collective fine of $4 billion for their role in manipulating foreign exchange rates. This followed similar settlements over the banks\u2019 manipulation of the most important interest rate in the world, the London Interbank Offer Rate (Libor).<\/p>\n
Previous deals were reached to settle charges of money-laundering for drug cartels, deceit and fraud in the sale of mortgage-backed securities, concealment of losses from derivatives trading, complicity in the Bernard Madoff Ponzi scheme, fraud in the foreclosure of homes, and other crimes.<\/p>\n
After the Permanent Subcommittee\u2019s release of a 640-page document in 2011 on the 2008 financial collapse, the committee\u2019s chairman, Senator Carl Levin, declared that the investigation had found \u201ca financial snake pit rife with greed, conflicts of interests and wrongdoing.\u201d The longest chapter of the report was a detailed, fact-filled review of Goldman Sach\u2019s unloading of toxic sub-prime loans in 2007 and 2008 to counterparties who were not informed that Goldman was betting against the very securities it was hailing as sound investments.<\/p>\n
Nevertheless, the Obama administration announced in 2012 that it was ending its investigation of Goldman Sachs for manipulating the sub-prime mortgage market and would file no charges against the bank.<\/p>\n
The Subcommittee\u2019s second major report on banking fraud, published in 2013, focused on fraud and deception by JPMorgan Chase over $6.2 billion in losses from speculative trades in financial derivatives (the so-called \u201cLondon whale\u201d trades). Despite documentary evidence that the bank\u2019s top management, including Chairman and CEO Jamie Dimon, deliberately concealed information from investors about the loss, no one was prosecuted or held accountable.<\/p>\n
This latest report will produce similar results. That the Senate committee has no intention of seriously pressing for a criminal investigation is shown by its failure to summon a single top bank executive to testify at two days of hearings it is holding on its investigation into the banks\u2019 commodities dealings.<\/p>\n
The functionaries who populate the state apparatus, Democratic and Republican, are either directly or indirectly on the payroll of the banks and corporations whose interests they safeguard. The so-called regulatory agencies are staffed by former or future officers of the very banks they are supposed to be policing. They run interference for the financial mafia.<\/p>\n
The inescapable conclusion from this cesspool of corruption and criminality is that the financial system cannot be reformed. The dictatorship of the banks can be broken only through the independent, revolutionary mobilization of the working class. Among the very first tasks of a workers\u2019 state will be the expropriation of the banks, their transformation into public utilities under the democratic control of the working class, and the prosecution of all those who have amassed unimaginable wealth on the basis of parasitism and fraud.<\/p>\n
Go to Original \u2013 wsws.org<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"On Wednesday [19 Nov 2014], the US Senate Permanent Subcommittee on Investigations released a detailed report documenting yet another aspect of the insider dealing, price-fixing and general criminality that pervades the American financial system.<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[55],"tags":[],"class_list":["post-50039","post","type-post","status-publish","format-standard","hentry","category-capitalism"],"_links":{"self":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/50039","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/comments?post=50039"}],"version-history":[{"count":0,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/50039\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media?parent=50039"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/categories?post=50039"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/tags?post=50039"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}