Thursday, February 13, 2014

The Vampire Squid Strikes Again: The Mega Banks' Most Devious Scam Yet

I am not sure how this stuff does not cause outrage of americans?

The Vampire Squid Strikes Again: The Mega Banks' Most Devious Scam Yet | Matt Taibbi | Rolling Stone

"Today, banks like Morgan Stanley, JPMorgan Chase and Goldman Sachs
own oil tankers, run airports and control huge quantities of coal,
natural gas, heating oil, electric power and precious metals. They
likewise can now be found exerting direct control over the supply of a
whole galaxy of raw materials crucial to world industry and to society
in general, including everything from food products to metals like zinc,
copper, tin, nickel and, most infamously thanks to a recent
high-profile scandal, aluminum. And they're doing it not just here but
abroad as well: In Denmark, thousands took to the streets in protest in
recent weeks, vampire-squid banners in hand, when news came out that
Goldman Sachs was about to buy a 19 percent stake in Dong Energy, a
national electric provider. The furor inspired mass resignations of
ministers from the government's ruling coalition, as the Danish public
wondered how an American investment bank could possibly hold so much
influence over the state energy grid.

There are more eclectic interests, too. After 9/11, we found it
worrisome when foreigners started to get into the business of running
ports, but there's been little controversy as banks have done the same,
or even started dabbling in other activities with national-security
implications – Goldman Sachs, for instance, is apparently now in the
uranium business, a piece of news that attracted few headlines.

But banks aren't just buying stuff, they're buying whole industrial
processes. They're buying oil that's still in the ground, the tankers
that move it across the sea, the refineries that turn it into fuel, and
the pipelines that bring it to your home. Then, just for kicks, they're
also betting on the timing and efficiency of these same industrial
processes in the financial markets – buying and selling oil stocks on
the stock exchange, oil futures on the futures market, swaps on the
swaps market, etc.

Allowing one company to control the supply of crucial physical
commodities, and also trade in the financial products that might be
related to those markets, is an open invitation to commit mass
manipulation. It's something akin to letting casino owners who take book
on NFL games during the week also coach all the teams on Sundays.

The situation has opened a Pandora's box of horrifying new corruption
possibilities, but it's been hard for the public to notice, since
regulators have struggled to put even the slightest dent in Wall
Street's older, more familiar scams. In just the past few years we've
seen an explosion of scandals – from the multitrillion-dollar Libor saga
(major international banks gaming world interest rates), to the more
recent foreign-currency-exchange fiasco (many of the same banks
suspected of rigging prices in the $5.3-trillion-a-day currency
markets), to lesser scandals involving manipulation of interest-rate
swaps, and gold and silver prices.

But those are purely financial schemes. In these new, even scarier
kinds of manipulations, banks that own whole chains of physical business
interests have been caught rigging prices in those industries. For
instance, in just the past two years, fines in excess of $400 million
have been levied against both JPMorgan Chase and Barclays for allegedly
manipulating the delivery of electricity in several states, including
California. In the case of Barclays, which is contesting the fine,
regulators claim prices were manipulated to help the bank win financial
bets it had made on those same energy markets.

And last summer, The New York Times described how Goldman
Sachs was caught systematically delaying the delivery of metals out of a
network of warehouses it owned in order to jack up rents and
artificially boost prices.

You might not have been surprised that Goldman got caught scamming
the world again, but it was certainly news to a lot of people that an
investment bank with no industrial expertise, just five years removed
from a federal bailout, stores and controls enough of America's aluminum
supply to affect world prices."

"Do we even have a regulatory structure in place to look out for these
new forms of manipulation? (Answer: We don't.) And given that the
banking sector that came so close to ruining the world economy five
years ago has now vastly expanded its footprint, who's in charge of
preventing the next crash?"