posted on Jul, 23 2013 @ 03:46 PM
When the Federal Reserve gave JPMorgan (JPM) Chase & Co. approval in 2005 for hands-on involvement in commodity markets, it prohibited the bank
from expanding into the storage business because of the risk.
Five years later, JPMorgan bought one of the world’s biggest metal warehouse companies.
While the Fed has never explained why it let that happen, the central bank announced July 19 that it’s reviewing a 2003 precedent that let
deposit-taking banks trade physical commodities.
So storage was explicitly prohibited but the Fed looked the other way
Apparently there was a banking and finance committee hearing on this yesterday. For anyone interested some excerpts below.
Goldman Sachs own the warehouses that they bought from Metro International in 2010. In that time the amount of aluminum stored has gone from
50,000 tons to 1.5 million tons, and normal time for shipment has increased from 6 weeks to around 16 months.
... Aluminum users like MillerCoors are being forced to wait in some cases over 18 months to take physical delivery due to the LME warehouse
practices or pay the high physical premium to get aluminum today. This does not happen with any of the other commodities we purchase, “said
This “grand experiment has gone far better for the banks than it has for the consumers,” Joshua Rosner, managing director of Graham Fisher and
Co., said. “Electricity users appear to pay more because of Wall Street involvement, aluminum for airplanes and soda cans costs more, and some say
gasoline at the pump costs more -- without any measurable benefit to anyone but the banks.”
In defense of Goldman a banking lawyer claims, in part
... that allowing financial holding companies to control commodities, such as aluminum, oil and electricity, is in fact better for the consumer,
because they “increase customer choice, increase competition, act as more effective intermediaries between producers and end-users, provide
increased liquidity to the markets and lower prices to consumers.”
I almost hate to read the news anymore. Crap piled on crap and feeling totally helpless and used. At least you can get rid of a spouse/partner...
how do you walk out on something that touches everything in your life. I am beginning to hate the system, all systems.
Sorry for the mini rant.