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Giant Banks Take Over Real Economy As Well As Financial System … Enabling Manipulation On a Vast Scale

George Washington's picture




 

Top economists, financial experts and bankers say that the big banks are too large … and their very size is threatening the economy.

They say we need to break up the big banks to stabilize the economy.

They say that too much interconnectedness leads to financial instability.

They also say that the big financial players are able to manipulate virtually every market in the world.

And that the government has given the banks huge subsidies ... which they are using for speculation and other things which don't help the economy.

But the big banks have only gotten bigger – and more interconnected – than before the phony financial “reform” legislation was passed a couple of years ago.

As if that wasn’t bad enough, four congressmen point out that the big banks are now taking over the tangible economy as well … which allows them to control and manipulate the markets.

Specifically, Congressman Grayson wrote – and Congressmen Conyers, Ellison and Grijalva co-signed – a letter to the Federal Reserve which, in the words of a congressional aide:

Ask[ed] why large banks are engaged in a host of commercial activities, including power production, management of ports, oil drilling and distribution, and uranium mining. These activities have nothing to do with the business of banking and it’s unclear how the Fed or other bank regulators can actually regulate them. There’s useful and somewhat crazy information in the 10Ks of the banks about what they are currently doing. You can find that in the footnotes of the letter.

Here is their letter:

June 27, 2013

The Honorable Ben Bernanke
Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue N.W.
Washington, D.C. 20551

Dear Chairman Bernanke,

We write in regards to the expansion of large banks into what had traditionally been non-financial commercial spheres. Specifically, we are concerned about how large banks have recently expanded their businesses into such fields as electric power production, oil refining and distribution, owning and operating of public assets such as ports and airports, and even uranium mining. [Isn't that a national security issue?]

Here are a few examples. Morgan Stanley imported 4 million barrels of oil and petroleum products into the United States in June, 2012.[i] Goldman Sachs stores aluminum in vast warehouses in Detroit as well as serving as a commodities derivatives dealer.[ii] This “bank” is also expanding into the ownership and operation of airports, toll roads, and ports.[iii] JP Morgan markets electricity in California.

In other words, Goldman Sachs, JP Morgan, and Morgan Stanley are no longer just banks – they have effectively become oil companies, port and airport operators, commodities dealers, and electric utilities as well. This is causing unforeseen problems for the industrial sector of the economy. For example, Coca Cola has filed a complaint with the London Metal Exchange that Goldman Sachs was hoarding aluminum. JP Morgan is currently being probed by regulators for manipulating power prices in California, where the “bank” was marketing electricity from power plants it controlled. We don’t know what other price manipulation could be occurring due to potential informational advantages accruing to derivatives dealers who also market and sell commodities. The long shadow of Enron could loom in these activities.

According to legal scholar Saule Omarova, over the past five years, there has been a “quiet transformation of U.S. financial holding companies.” These financial services companies have become global merchants that seek to extract rent from any commercial or financial business activity within their reach.[iv]  They have used legal authority in Graham-Leach-Bliley to subvert the “foundational principle of separation of banking from commerce”. This shift has many consequences for our economy, and for bank regulators. We wonder how the Federal Reserve is responding to this shift.

It seems like there is a significant macro-economic risk in having a massive entity like, say JP Morgan, both issuing credit cards and mortgages, managing municipal bond offerings, selling gasoline and electric power, running large oil tankers, trading derivatives, and owning and operating airports, in multiple countries. Such a dramatic intertwining of the industrial economy and supply chain with the financial system creates systemic risk, since there is effectively no regulatory entity that can oversee what is happening within these sprawling global entities.

Our questions are as follows:

1)      What is the Federal Reserve’s current position with respect to allowing Goldman Sachs and Morgan Stanley to continue trading in physical commodities and holding commodity-related assets after the expiration of the statutory grace period during which they, as newly registered bank holding companies, must conform all of their activities to the Bank Holding Company Act of 1956? What is the legal justification for this position?

2)      Has the Federal Reserve been investigating the full range of risks, costs, and benefits – to the national economy and broader society – of allowing these institutions (and, possibly, other large financial holding companies) to engage in trade intermediation and commercial activities that go far beyond pure financial services?  If so, please share the results of your investigation. If not, why not?

3)      What types of data do you collect about the regulated financial holding companies’ non-financial activities? How does the Federal Reserve interact with non-bank regulators who are in charge of overseeing the areas and markets in which banking institutions conduct their non-financial activities?

4)      How do your examiners review, monitor, and evaluate banking organizations’ management of potential conflicts of interest between their physical commodity businesses and their derivatives trading?

5)      If such an entity were to become insolvent, what complications are likely to arise in resolving a company with such a range of activities? Please share your analysis on the implications of resolution authority on the commercial activities of systemically important financial institutions. Please describe how these banks approach this issue in their resolution plans (or “living wills”).

6)      When your examiners work within these large institutions, what framework do they use to, say, consider the possibility that a bank run could ensue from a massive public oil spill by a Goldman Sachs-owned oil tanker or a nuclear accident at a plant owned by a bank?

7)      Does this relatively new corporate structure contribute to the likelihood of industrial supply shocks?

Thank you for your attention to this matter.

Sincerely,

Alan Grayson

Raul Grijalva

John Conyers

Keith Ellison


[i] http://www.morganstanley.com/about/ir/shareholder/10k2012/10k2012.pdf

Morgan Stanley, according to its investment documents, is engaged “in the production, storage, transportation, marketing and trading of several commodities, including metals (base a  nd precious), agricultural products, crude oil, oil products, natural gas, electric power, emission credits, coal, freight, liquefied natural gas and related products and indices. In addition, we are an electricity power marketer in the U.S. and own electricity generating facilities in the U.S. and Europe; we own TransMontaigne Inc. and its subsidiaries, a group of companies operating in the refined petroleum products marketing and distribution business; and we own a minority interest in Heidmar Holdings LLC, which owns a group of companies that provide international marine transportation and U.S. marine logistics services.”

[ii] http://www.goldmansachs.com/investor-relations/financials/current/10k/2012-10-K.pdf

Goldman Sachs, according to its own recent investment reports, is engaged in “the production, storage, transportation, marketing and trading of numerous commodities, including crude oil, oil products, natural gas, electric power, agricultural products, metals (base and precious), minerals (including uranium), emission credits, coal, freight, liquefied natural gas and related products and indices.”

[iii] ibid

[iv] “The Merchants of Wall Street: Banking, Commerce, and Commodities” Omarova, Saule, University of North Carolina at Chapel Hill School of Law http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2180647&download=yes

 

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Sat, 07/13/2013 - 03:31 | 3747738 Clashfan
Wed, 07/10/2013 - 19:26 | 3739525 Notarocketscientist
Notarocketscientist's picture

And who owns the Big Banks? Who owns the Fed?  The tentacles are gripping harder....

Wed, 07/10/2013 - 13:55 | 3738216 Peter Pan
Peter Pan's picture

At this pace, banks will get to the point of having first option on any deal that needs financing. And given that they have a lower cost of funding, the customer will always come off seond best.

Wed, 07/10/2013 - 13:25 | 3738091 WTFUD
WTFUD's picture

15 months ago i penned a small request asking for someone more market savvy than myself to take a look at the share ownership of the big companies around the globe ( mining, power etc. . ) to witness that the usual plethora of banks had 60pc +
Bens easy money has increased this percentage ( thanks ben!)
Karen Hudes world bank whistleblower say IT'S ALL ONE GLOBAL CABAL ANYHOW

Wed, 07/10/2013 - 13:11 | 3738014 Jumbotron
Jumbotron's picture

It seems too late for this realization......

It was never about Socialism vs Capitalism.....or Communism vs. Capitalism....

It's was and is now all about CENTRALISM.

Wed, 07/10/2013 - 11:03 | 3737399 Hongcha
Hongcha's picture

The only thing they have not been able to pull in, is the guns; and they have created several false flag events to try to outrage the peeps into turning themselves and their neighbors in.  So we got that going for us.  And, they have not entirely reigned in the media.  That's my thumbnail damage survey.  As far as I am concerned they have all the resources and can throw switches to turn off internet, power, cash flow, water, you name it.

Why do they want SO badly to protect the people by repealing law allowing gun ownership?

Why do they want to move to a cash-free society?

They want total and complete control.  It is the highest of highs and these humans are hooked on it.

Wed, 07/10/2013 - 18:31 | 3739282 failsafe
failsafe's picture

I get the point, I do. But...I wish I were as certain about media. I am seeing the wisdom of the many different folks here urging, as I am, the solution as opt out, a refusal to engage in the system. A kind of starving them out by gradually becoming less and less dependent on anything required for material survival so that gradually they have all the power over nothing I need and honestly can't even confirm I exist. In many cases just not a possibility and sadly lots and lots of innocent people are going to suffer. But overt action at this point just seems less and less viable although I am willing to hear and try just about anything.

Wed, 07/10/2013 - 10:51 | 3737344 dcb
dcb's picture

george you forgot some key things. they get access to cheap fed reserve funds to buy in the industrial sector that others don't. it's a nice subsidy again for these too big to fail institutionas

Wed, 07/10/2013 - 10:40 | 3737296 joego1
joego1's picture

Ben is printing some fresh trillions for his banker buddies to buy up the world with. How thoughtful of him.

Wed, 07/10/2013 - 10:24 | 3737236 the grateful un...
the grateful unemployed's picture

what you should say to the Fed is, now that you've empowered the banks, and the 1% what are you going to do about this?

no mention of the biggest financial fund intrusion into the consumer economy, which is housing. the next decade will see waves of gentrification, (plenty of bribery of local government to achieve those permits) and lots of poor people being priced out of the market and more slum dwellers (see Mike Davis Planet of Slums to see the global picture)

 the fed has not only empowered them they've instructed them, [buy your own bonds at auction to drive up the price]. you can front run any market. imagine yourself at the supermarket where you reach for an apple and the JP Morgan designated shopper reaches ahead of you and then offers you the apple for five cents more.

or imagine buying a gun and there is no ammunition for sale, or the price of gold drops but there is none to buy, hey wait didn't that already happen?

Wed, 07/10/2013 - 09:35 | 3737102 ITrustMyGut
ITrustMyGut's picture

sadly, this is just more evidence of the true end game. Monopolization.

 

not communism/ socialism.. blah blah.. no.. W Va coal mine status for us serfs... but Globally...

 

they know exactly what they are doing.

Wed, 07/10/2013 - 10:17 | 3737215 De minimus
De minimus's picture

I absolutely disagree with you. The beneficiaries, the movers here within government, through whom all things must now be passed and judged by are Marxist to their core. You have only to look at the AVAILABLE VIDEO...... PRODUCED BY THEM.......

They are the nexus, the fulcrum and the reason they are winning and freedom and free markets are losing, not to mention the rest of us, is because they control education but more importantly, the media and the courts, and none of that was accomplished by accident. Lies can only succeed in the absence of truth and facts, which as we know are not readily available to the ordinary person.

Wed, 07/10/2013 - 09:31 | 3737096 Spigot
Spigot's picture

What else did you think they were doing with the $14 god damn TRILLION they got from the FED, huh? What? Lending to businesses? hahahahahahahahaha... they are now buying the whole god damned everything, because YOU HAVE TO HAVE COLLATERAL to re-hypothicate, and the REAL ECONOMY is the only place left to leverage this fraud. They don't give a shit about aluminum bars or BTUs, they want this stuff as collateral for their dark pools.

Wed, 07/10/2013 - 11:31 | 3737535 dirtbagger
dirtbagger's picture

What makes this doubly dangerous is all of the re-hpothicated collateral is leveraged 20:1 and is interest rate sensitive.   When, if ever the FED stops its ZIRP manipulation and the bond vigilantes reappear, the financial instituions will be toast and the S&P at 600. 

Wed, 07/10/2013 - 09:47 | 3737132 Hubbs
Hubbs's picture

trtanslation: The banks know all the 1's and 0's on their electronic  register/balance sheet are just that, so they have to launder all these into real tangible assets.

 

The preppers are ridiculed for holding tangibles...but looky looky what the banks are doing.

Wed, 07/10/2013 - 13:52 | 3738208 Panafrican Funk...
Panafrican Funktron Robot's picture

Indeed, watch what they do, not what they say.

Wed, 07/10/2013 - 09:23 | 3737084 nickels
nickels's picture

 Your business is very important to us. Please hold for the next avaiable representative. Your wait time is--forever.

Wed, 07/10/2013 - 09:13 | 3737058 Hubbs
Hubbs's picture

Dudes, we are owned.

Wed, 07/10/2013 - 12:30 | 3737816 Cathartes Aura
Cathartes Aura's picture

since birth, generations past.

Wed, 07/10/2013 - 08:54 | 3736996 lakecity55
lakecity55's picture

Fascism/Communism in Action.

USSA!
USSA!
USSA!

Wed, 07/10/2013 - 08:45 | 3736976 Badabing
Badabing's picture

Buy it all up for pennies on the dollar

Wed, 07/10/2013 - 10:48 | 3737331 Mr. Hudson
Mr. Hudson's picture

I remember reading the comments a while back by forum members on Liberty Forest who said that the banks would never buy up assets for pennies on the dollar, and that the Central Banks didn't own any gold. Boy, we're they wrong!

Wed, 07/10/2013 - 08:38 | 3736959 Duude
Duude's picture

When did investment banks not make these types of investments in the economy? Should they be making home loans? Leave that to the Wells Fargos of the world.

Wed, 07/10/2013 - 13:54 | 3738214 Panafrican Funk...
Panafrican Funktron Robot's picture

I think you're missing the forest for the trees.  I-banks investing in this stuff, in the absence of a taxpayer/ordinary depositor backstop, is perfectly fine.  

Wed, 07/10/2013 - 08:36 | 3736957 Ranger4564
Ranger4564's picture

You cannot have a dictatorship unless you control the resources. We have never been as free / fair as many had imagined, but we have descended into an accelerated state of control. It won't matter how much anyone protests by mail / appeals to reason, the henchmen will take it by force / legal mandate / economic chicanery. The condition most people are struggling with is that the entire system has always been immoral, so they cannot chastise these players on ethical or moral ground... there is none.

We have got to take back control. They have almost won the entire war. The casualties are everywhere, if one only looks.

Wed, 07/10/2013 - 08:15 | 3736910 MrBoompi
MrBoompi's picture

I assume these Congressmen have studied The Federal Reserve Act and the Federal Reserve system. If so, they know the Federal Reserve is owned by the banks in question. If the activities these organizations are engaged in are profitable, if anyone from the Fed dares to nose around in their business and make waves, they will politely and immediately to told to fuck off, or else something far more serious will happen to them. The Federal Reserve and its member banks are not a part of the Federal government. Congress has no current authority over them. In fact, I would dare to say the bankers have control over the US government. So called oversight is a joke. I would like the American people, through its elected representatives in Congress, to take back the monetary authority it once had, but this seems next to impossible now.

Wed, 07/10/2013 - 19:27 | 3739527 Notarocketscientist
Notarocketscientist's picture

If you oppose this you will be labelled a terrorist.... and dealt with accordingly

Wed, 07/10/2013 - 12:29 | 3737810 Cathartes Aura
Cathartes Aura's picture

of course they know this, it's the fine print in their job description.

they're just doing what they've always done, distracting their voters, pretending "outrage" to prolong the game perpetually.

meanwhile, few realise just how owned they are.

Wed, 07/10/2013 - 11:32 | 3737546 Stoploss
Stoploss's picture

The Federal Reserve Act was concieved by five men (bank owners) in a moving lone rail car in the dead of night somewhere in NJ.

That was the first insider trade by the way. 

The FED is a sham hidden with the words:  "Federal" and "Reserve" being independent of each other.

When you speak the words, Federal Reserve, and add System to them, you have the final closed loop of fraud with a very official sounding name.

The Federal Reserve System is, was, and has always been a bank fraud. 

now see, IRS...........

200 years of tyranny is coming to a head.

Wed, 07/10/2013 - 09:58 | 3737154 pndr4495
pndr4495's picture

FACT

Wed, 07/10/2013 - 07:59 | 3736883 Mototard at Large
Mototard at Large's picture

It is called the financialization of the economy.  No surprises here. 

Wed, 07/10/2013 - 12:43 | 3737859 putaipan
putaipan's picture

i just reread this last night. great essay on the subject by one of my faves-

http://truth-out.org/news/item/13718-the-financial-war-against-the-econo...

Wed, 07/10/2013 - 08:48 | 3736984 Dingleberry
Dingleberry's picture

When the FIRE economy doubles as part of historical GDP, you know the deal.  Banks went from being an economic utility to parasite. There is no hope. You saw what Repubs did. You now see what "the party of the people" democrats did....

NOTHING!

Now go back to arguing about more important stuff like gay marriage, the Kardashians and how many NFLers will go to jail this year.

Wed, 07/10/2013 - 10:57 | 3737377 joego1
joego1's picture

I knew it was game over when they railroaded Ron Paul and changed the rules for the GOP so that no grass roots candidates from individual states could ever run again. The candidates must be selected at the national level ensuring that the muppet masters will never have to deal with another ugly insurection from the sheeple again.

http://www.ronpaul.com/2012-08-30/teleprompter-decides-most-controversia...

Wed, 07/10/2013 - 07:51 | 3736872 Navymugsy
Navymugsy's picture

I guess when keith Ellison isn't pimping for radical muslim causes he's harrassing Americas banks. Hey Keith, STFU and let these people do Gods work okay?????

Wed, 07/10/2013 - 11:02 | 3737394 joego1
joego1's picture

So having his name on the letter just gives ammo to the puppet masters.

Wed, 07/10/2013 - 07:34 | 3736850 flacorps
flacorps's picture

"As if that wasn’t bad enough, four congressmen point out that the big banks are not taking over the tangible economy as well … which allows them to control and manipulate the markets."

Not shoild be "now", no?

Wed, 07/10/2013 - 10:33 | 3737267 duo
duo's picture

Wait until JPM and Goldman start selling health insurance.

Wed, 07/10/2013 - 08:38 | 3736961 j0nx
j0nx's picture

Yes I stopped reading there myself. If the writer cares so little to proof read his own report before publishing it then I care that little to read it.

Wed, 07/10/2013 - 09:15 | 3737063 Black Swan 9
Black Swan 9's picture

You'll be missing out on a lot of good info.. First typo I can recall, and I've been reading GW's blog/articles for years.

I used to be a Nazi grammar/punctuation editor, too, especially with
its/it's/its':

its = possessive form
it's = always a contraction
its' = doesn't exist

But it's really not that important in times like these.. the information is.

Thu, 07/11/2013 - 08:36 | 3740953 j0nx
j0nx's picture

Attention to detail and appreciation for one's art will always be important. More so now than ever.

Wed, 07/10/2013 - 08:04 | 3736892 Sparkey
Sparkey's picture

Yes it shoild! you right, again ain't ya!

Wed, 07/10/2013 - 07:45 | 3736864 Dulcinea
Dulcinea's picture

Had to read that twice myself.

 

Wed, 07/10/2013 - 09:04 | 3737028 Black Swan 9
Black Swan 9's picture

3x for me.

Wed, 07/10/2013 - 07:11 | 3736812 failsafe
failsafe's picture

To make sure I am a good citizen I am going to keep a prospective diary of my future thought crimes so I can turn myself in ahead of time. Like I already know the unpatriotic thoughts I am going to be having when three or four people/"families" own it all with options on future resources in undiscovered galaxies. But first I better report that I am going to sllloooowwwwwwwwly start minimizing my life style and using as few automated purchasing mechanisms as physically possible. oh and PS I am going to exceed the speed limit a little bit tomorrow when I ride my bike to work b/c they lowered the speed limit on the downside of a hill near my house to 10 mph.

Wed, 07/10/2013 - 10:54 | 3737365 Hongcha
Hongcha's picture

"To make sure I am a good citizen I am going to keep a prospective diary of my future thought crimes so I can turn myself in ahead of time."

Almost verbatim the mindset among Youth during the Chinese Cultural Revo.  So it's got that far at least once before.

Wed, 07/10/2013 - 15:58 | 3738774 failsafe
failsafe's picture

Thank you, did not know that bit of history! Excellent. Now even scarier.

Wed, 07/10/2013 - 05:18 | 3736758 new game
new game's picture

money, power, all corrupting - thank the supreme court - a corporation is indeed a human, oh a greedy power hungry one at that!

nice, check and balance supreme thinkers. oh, whilst i'm chatting about your supreme thinking, thanks for granting the federal gub the opp to bill me for -ocare garbage health insurance-nice constitutional conflict spliced with some fancy word dance.

I'll opt out, but damn if i'll pay to avoid garbage insurance for over eaters and general pigs for humans...

Wed, 07/10/2013 - 02:59 | 3736673 disabledvet
disabledvet's picture

I think it's going to take time for these said "merchants" to understand that there's a new game in town...and they game is called as it was in the 90's "reach out to the world and start selling." my understanding of the policy post 9/11 is that we were never at war with Islam. indeed I would like to think when we see our values being expressed (Egypt does come to mind to me) that we are not afraid while expressing abhorrence at the violence stating an understanding of the aspirational needs...and trying to engage those who clearly want to move the ball forward. to be...on their side simply put. the same goes for Brazil and Turkey and China and all the others seeking greater openness and transparency in their public dealings. I really fail to understand how working with these folks isn't helping us. the fact that it is doable...that We the People really do have something positive to offer here...strikes memasmthe making of an imperative. this is what the USA MUST do.

Wed, 07/10/2013 - 08:57 | 3737005 lakecity55
lakecity55's picture

"We have always been at war with the American People"

Yours,

The Red Shield Klan

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