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Why Banks Should Not Be Allowed To Manipulate Metals Markets In 4 Simple Points
As Day 2 of Carl Levin's Senate hearing on the fact that banks did indeed corner and rig the physical commodity markets - with the erosion of the line separating banking from commercial activities leading to the detriment of consumers and the financial system - we thought the world needed a 'dummy's guide' to why the biggest banks should not be allowed to do this... or in legalese, here are the four most negative effects of allowing FHCs to engage in Complementary Commodity Activities.
Re: Comment letter on Advanced Notice of Proposed Rulemaking regarding "Complementary Activities, Merchant Banking Activities, and Other Activities of Financial Holding Companies related to Physical Commodities" (Docket No. R-1479)
Dear Mr. Frierson:
Questions 16 and 17 of the ANPR ask whether allowing FHCs to engage in Complementary Commodities Activities creates "conflicts of interest" or other "adverse effects." We believe a number of adverse effects have arisen in the aluminum market due to FHCs simultaneously owning physical metal, trading in metal derivatives, and owning official LME storage warehouses of the metal. We further believe the negative dynamics occurring in the aluminum market also appear in the markets for other industrial metals, and could appear in markets for other commodities.
Four negative effects of allowing FHCs to engage in Complementary Commodity Activities stand out in particular (and for further detail, please see http://www.sunesiscapital.com/aluminum):
1) FHCs have been permitted to own an outsize share of official LME metals warehousing. With such warehouse market power, they can exercise manipulative control over aluminum prices and stifle competition. Anyone who buys metal on the LME and wishes to take possession of it is forced to do so through an LME warehouse. Warehouse owners with such outsize market power have driven up wait times for these buyers to hundreds of days, and have increased rents on their metal during the wait. This behavior constricts supply and drives up the costs of getting metal out of the LME system. In turn, this creates a distortive force on the broader market for metal—thereby driving up industrial costs, which are passed down to consumers in the form of higher prices. The LME system—a so-called market of last resort—should be a force for keeping industrial premiums down, but it has ceased to function in this role.
Additionally, with the profits from higher rents flowing from longer queues, FHCs can incentivize producers to sell more aluminum into their warehouses, and thereby compete with industry and bid up the price of metal—again, driving up aluminum prices. As J. Christopher Giancarlo said in a confirmation hearing before the United States Senate Committee on Agriculture, Nutrition, and Forestry, "Absolute dominance can lead to absolute abuses." Sharon Bowen, at the same hearing, echoed these sentiments: "Any time you can control both the demand and supply of a commodity, that. . . needs to be looked at, because it could be recipe for manipulation,"
2) Allowing FHCs to own metal, trade derivatives, and own the LME warehouses in which metal is stored gives FHCs the ability to gain insider information about the future moves of metal in and out of the market, and then trade on such information. The rest of us, who don't own warehouses, cannot do the same. Insider trading in equities markets is illegal. Those laws are designed to prevent individuals from profiting from non-public information. But no such laws exist in commodities markets, thereby misaligning incentives, and, most importantly, eroding public trust in commodities markets. If a CEO can't sell his company's shares because he knows the company is about to report small profits, why can a trader sell metals futures right before he knows his company is about to dump large amounts of metal on the market?
3) Allowing FHCs to own metal, trade derivatives, and control warehouses allows FHCs to profit by quickly moving large amounts of metal in and out of the LME market system. When large quantities of metal leave or enter the system, the broader market perceives shifts in supply and demand. A FHC with outsize stocks of metal could take advantage of such a scenario by buying futures, moving a large quantity of metal off LME warrant (signaling a greater demand and reduced supply, causing prices to rise), and then selling the futures at a higher price. But the metal may have never left the warehouse at all. There is, in reality, no industrial demand for the metal, but its price has gone up.
4) And all of this behavior is financed by the American taxpayer. Owning and trading in physical metal requires significant upfront capital, which is typically borrowed. Because FHCs have access to the discount window, and benefit from an implied "too big to fail" loan guarantee, they have a government subsidized advantage over industrial buyers and smaller traders who must pay higher financing fees. Quite ironically then, it is the American taxpayer who is subsidizing FHC activity that causes higher prices on the everyday goods purchased by those same taxpayers.
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an interesting hearing, btw
Nothing will happen. We live in a crony capitalist system, a bankster controlled fascist state, where the insiders are always protected.
i wanna motor boat your avatar so bad right now
we groomed mister levin for this very purpose
http://en.wikipedia.org/wiki/Carl_Levin#Early_life.2C_education_and_career
hugs,
tptb
And here I was thinking that point 1 would be that it is illegal.
Silly me.
pods
They will pay an insignificant fine and move on to a different industry...
Owning REIT's and issuing mortgages and commercial property loans,
Owning mining companies and manipulating the price of gold and silver via the issuance or withdraw of futures,
Owning oil transport or exploration companies while controlling the rpice ni the same way as gold and silver,
The banks are definitely too big to fail...they can obviously make money wherever they choose.
Not quite nothing, there will be thousands of words written about it....all sound and fury, signifying nothing....
Shakespeare in the CONgress.
An American, not US subject.
More like professional wrestling.
Correct. Notice how no politician asks the obvious question;
"If near zero rates are required, why can't productive main street businesses that are in the black access millions or billions of dollars at 0.01% interest like the too big to fail banks and primary dealers?"
A real simple question that speaks to the ongoing fraud.
"If near zero rates are required, why can't productive main street businesses that are in the black access millions or billions of dollars at 0.01% interest like the too big to fail banks and primary dealers?"
“In times of universal deceit, telling the truth will be a revolutionary act.” George Orwell
“Truth is treason in an empire of lies.” – Ron Paul
An American, not US subject.
All this market manipulation, oil, metals, etc., was done to recapitalize the banks. It was done on purpose with government approval.
So why these meetings and why now?
1. The Democrats want to hand the Republicans a "turd" as this will be the Republicans problem come January.
2. Alternative trading platforms are popping up in the East. Need to attempt to maintain some credibility in Western markets.
"an interesting hearing, btw"
Yesterday as well. Carl Levin is like a dog with bone. I can't get over just how skanky the Goldman camp is...
This is the NWO, markets are made by the banks for the banks. I would think this point should be obvious by now. The points made in the letter are known to everyone, it's like complaining because you don't like the rules in football - they are what they are, learn to live with them.
What all banks don't hire a huge amount of truck drivers who drive commodities around in circles so they can manipulate prices?
I thought that was one of those utility functions of a bank, like servicing mortgages....
yeah, right...
http://www.kitco.com/charts/livesilver.html
And, in other news, the sun rose this morning, and will disappear in the evening.
When i was growing up ..all the banks had huge warehouses full of metals....that was called banking...its not where you had a savings account..or got a home loan....lol..sarc on bigtime..
Banks shouldn't be allowed to manipulate ANYTHING, especially our representatives. But we all know that's a pipe dream.
Let me control the money of a nation and I care not who writes the laws.
-Some Satanic asshole and his minion tribe.
EDIT: Except our Supreme (laughter) Court says corporations (banks) are people. So unlimited graft and theft is allowed via our SO CALLED representation.
How about this,
because it is fraud.
Thats a four letter word, for Joe Biden anyways.
WHY OK FOR gubbmint TO MANIPULATE economy AND HEALTHCARE .....it's also FRAUD
Banks aren't the only ones manipulating metals markets. Governments do it too. The whole idea that trying to corner these markets isn't a suicide mission is something the Great Senator of the Cornering State of Illinois simply isn't going to bring up. After sticking his State with a trillion in debt he clearly believes "there's always another sucker."
Stay long treasuries.
Have a nice day.
Even if you don't like our fraud, you can keep our fraud.
How bout Banks not allowed to manipulate anything in one single point....... Jail
translated: FUCK YOU! PAY ME!
Silver chart hilarious today. I like to execute my orders at the market in the thinest part of the day.
Getting an early start on building those 2016 campaign war chests...
If you were long billions in bonds that appreciated in value every time interest rates declined, you would have powerful motivation to manipulate the metals down. It gives the appearance of deflation, and gives cover for the Fed to lower rates more. Inflationary expectatioins are a part of the equation than can be controlled by giving erroneous signals in the metals markets. Bond speculation, and the massive profits it can create are our undoing.
The chief cures and evil of the present banking system is the law that years ago was instigated by Wall Street, under which a large portion of the entire cash of the country held by the banks, nearly one-third of it, by means of the reserve system is concentrated in a few big Wall Street banks where much of it is used by the stock gamblers to fleece the People in flotation schemes and dishonest manipulation of the prices of listed stocks.
Sound familier? ........................
Written 102 years ago....
So you think Wall Street shenanigans are coming to an end... I don't think so Tim.
Mr Levin is retiring as of Jan 15, his nra grade rate is -.0, since 1978.
Well, when all the fraud is exposed, and the fraudsters have their wrists 'slapped' ....it will mean no more than all the other fraudsters getting their wrists 'slapped' .....except each and every expose adds fuel to the eventual fire that will burn indescriminately through the entire rotten structure. Get your fire insurance up to date ...keep stacking, hold cash....and plenty of ammo (and , oh yeah, move the hell away from the cities!