{"id":22220,"date":"2014-12-01T05:27:16","date_gmt":"2014-12-01T04:27:16","guid":{"rendered":"http:\/\/www.w-t-w.org\/en\/?p=22220"},"modified":"2014-12-02T00:45:05","modified_gmt":"2014-12-01T23:45:05","slug":"22220","status":"publish","type":"post","link":"https:\/\/www.w-t-w.org\/en\/22220\/","title":{"rendered":"Wall Street Takes Physical Possession of Commodities"},"content":{"rendered":"

Wall Street firms driving up commodity prices.\u00a0 Machinations by financial firms that have bought up huge swaths of coal mines, aluminum warehouses, or natural gas reserves could be leading to higher prices for consumers and companies that rely on those natural products REPORT-Wall Street Bank Involvement With Physical Commodities<\/a> <\/strong>alleges.<\/p>\n

Furthermore, Wall Street titans may be exposing themselves to huge risks and reaping unfair trading advantages by investing heavily in physical commodities, according to the Senate Permanent Subcommittee on Investigations.<\/p>\n

The report\u2019s main author also criticized regulators for allowing financial firms to take increasing stakes in physical commodities, while those institutions also made hefty trades in the financial markets on those products, and called for an overhaul to limits on such activity.<\/p>\n

\u201cWe simply cannot allow a large, powerful Wall Street bank the power to influence the price of a commodity essential to our economy, especially when that bank is trading in financial products related to that commodity,\u201d said Sen. Carl Levin (D-Mich.).<\/p>\n

The two-year investigation focused on three major financial firms that have made significant investments in commodities: Goldman Sachs, JPMorgan, and Morgan Stanley.<\/p>\n

For example, in 2012 Goldman owned 1.5 million metric tons of aluminum, equal to roughly one-quarter of the nation\u2019s annual usage of the metal. And Levin focused on Goldman, accusing the firm of orchestrating a \u201cmerry-go-round\u201d system aimed at lengthening the lines for providing aluminum, which in turn lead to higher premiums for the metal \u2014 costs that could eventually be passed on to consumers.<\/p>\n

The report claims that after purchasing aluminum warehouses in Detroit, Goldman approved contracts with warehouse clients where they paid them to load and move metal from one warehouse to another. Those repeated movements slowed down clients attempting to remove their aluminum, slowing its delivery and ultimately driving up the premium for the metal, the report claimed.<\/p>\n

In a response to the report, Goldman said that most of the aluminum stored in the facility was not blocked by lengthened lines, and argued that metal movements were independent decisions of clients.<\/p>\n

The 396-page report also delves into a host of other investments by financial firms, such as Goldman\u2019s acquisition of a Colombian coalmine that was briefly shuttered due to protests, Morgan Stanley\u2019s investments in jet fuel, and JPMorgan\u2019s buying spree of power plants.\u00a0 \u201cImagine if BP had been a bank, the liability resulting from the oil spill could have led to its failure and another round of taxpayer bailouts,\u201d said Sen. John McCain (Ariz.), the top Republican on the panel.<\/p>\n

In 2012, a team of Federal Reserve officials looking into commodities activity found that large institutions had a shortfall ranging from $1 billion to $15 billion each in capital and insurance to cover potential catastrophic losses from commodities investments.<\/p>\n

The report also said that allowing banks to invest heavily in physical commodities could give them an unfair edge on trading in financial markets tied to those commodities. Firms could receive inside information about what is happening in those markets thanks to those investments, or even be able to sway how markets move by changing conditions at those physical facilities.<\/p>\n

The report noted that after Goldman acquired the uranium company Nufcor, it increased trading activity in the company tenfold. Goldman said Wednesday it was in the process of whittling down the company\u2019s operations to minimal levels.<\/p>\n

Levin stopped short of specifically saying how regulators should curb physical commodity investments, but said regulators or future Congresses should seriously consider placing stricter limits on the activity.<\/p>\n

Banks do face limits on the amount of physical commodities they can invest in, but the report claimed the Fed was relying on an \u201cuncoordinated, incoherent patchwork\u201d of limits on that activity, allowing banks to expand their investments, and also lacked data key to monitoring and policing that type of activity.\"Wall<\/a><\/p>\n

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Wall Street firms driving up commodity prices.\u00a0 Machinations by financial firms that have bought up huge swaths of coal mines, aluminum warehouses, or natural gas reserves could be leading to higher prices for consumers and companies that rely on those … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":22,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"footnotes":""},"categories":[70,22,13],"tags":[],"class_list":["post-22220","post","type-post","status-publish","format-standard","hentry","category-big-banks","category-corruption","category-finance"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t