Wall Street continues in its ways unabated. Here we have a nation with 9% plus unemployment, an economy that is deep in recession and at the precipice of worse with a government that protects one sector of the economy, the financial sector, to the vast expense of the working stiffs who keep the country functioning on a day to day basis.
And now, to bring insult to injury, J.P. Morgan Chase with all its access to taxpayer funded programs and Beltway agencies, ranging from the TARP bailout of the financial sector, access to the Federal Reserve window and its de minimus cost of money, the mortgage backstop of the Freddie Mac and Fannie Mae programs, its depositors monies guaranteed by the Federal Deposit Insurance Corporation and on, has now outdone itself reaching the Herculean heights previously scaled when its policies led to foreclosure on the homes and families of servicemen on active duty in Afghanistan and Iraq.
Not content to play in the casino with its access to money chips underwritten in large measure by the myriad government programs referred to above, J.P. Morgan Chase has now gone one step further and is buying an important stake in the Casino itself. As reported by Bloomberg buying a stake from MF Global (a provenance that speaks for itself) in the London Metals Exchange that will make it the largest single share holder ahead of guess who? Right, Goldman Sachs!
Now what exactly is an institution that calls itself a bank at this critical time in the nation's economic crisis -- with its urgent need for an accommodating banking sector -- doing using resources made available to it in large measure by taxpayer funded programs buying a stake in the gaming tables themselves? Might it have anything to do with that tidbit of information reported just under a year ago by the Telegraph revealing that J.P. Morgan Chase was the "mystery trader" that bought £1billion-worth of copper on the LME. That purchase, according to the Telegraph, pushed up the price of copper at the time to the highest level since the financial crisis in October 2008.
Bravo, that's just what a bank with all its access to those government programs is meant to do. Speculate on the exchanges, be it copper, oil, food grains and on, to make life more expensive for all of us. And this is but one example of the distortion enabled by commodity exchanges, such as the LME and their willing gamblers such as J.P. Morgan Chase who are neither consumers nor producers of the commodity traded, but like hanging out at and playing the blackjack or roulette tables.
One only need go back to the comments Leon Hess, the legendary founder of Hess Oil and then the dean of the oil industry, made to the Senate Committee on Government Affairs on November 1, 1990. " I'm an old man but I'd bet my life if the Merc (the New York Mercantile Exchange) was not in operation there would be ample oil and reasonable prices all over the world without this volatility." Things have only gone downhill ever since. May Leon Hess rest in peace.
Which raises the question, why are we letting these 'banks' play roulette with what, given all the government's involvement, is our money, and now they are positioning themselves to buy the roulette table? Is it not long past time that the moniker of 'bank' is lifted from them, with all it means in its access to myriad public funding programs. If they want to gamble, they, as any of us should be free to do so. But the rest of us do it with our money, at our own risk, not piggy backing on public financed initiatives with these banks', "Heads I win, tails you lose", ethos.
Follow Raymond J. Learsy on Twitter: www.twitter.com/raymondLearsy
the mainstream media has been silent on this epic corruption of our police force. Who do you think NYPD is going to look out for the regular guy on the street or the Wall Street bankster that just paid for his new cruiser and new cans of pepper spray. Wall Street is in essence privatizing the police force to do their bidding, when does it end, when a Wall Street gets brought into the E.R hours after you do and they get ushered in to see the doctor on a stretcher like they own the place.
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Because, when the crisis was at its peak in 2008 and serious financial reform had broad support, Obama punted to Summers and Geithner, architects of the demise in the first place.
We still have a crisis, but it appears less acute, it's hard to understand, and the Congress has changed.
The moment was there, and then lost.
Until Jamie Dimon and his obsequious Board know this, do not expect behavior changes.
That means we the public have to develop immunity to all the misunderstood fearmongering drummed up when to socialize Bank's losses..
Despite our anger, too many of us remain psycholigically vulnerable and succumb to the dooms mongering that gets peddled religiously and maliciously when Too Big To Fail comes up in mainstream media and general audiences.
It turns out it is in our best long term interest that all the bondholders, creditors and shareholders around the world are sufficiently daisy-chained together at the waist. When the domino of TBTF are allowed to fail (come on Europe !!), it forces an outcome preventing the Bank Enablers to “rescue†the bondholders and creditors.
Afterwards, we'll move past our anxiety, paper losses on inflated assets,periodic economic hiccups and disruptions. It will be worth the pain. Then we quickly - far quicker than the doomsmongerers want you to know - implement a domestic and global banking system that serves the producing and service economy, rather than casino gambling transactions.
The TBTF banks must be allowed to fail and their creditors and bondholders must eat 100% of their losses!
JPM was 'gifted' the assets of the former WAMU Bank in late 2008 despite the FACT that WAMU was better capitalized, had more usable assets, and was in less financial trouble that JPM if their books were reviewed. JPM was given access to >100 billion in assets, cash, and tax offsets controlled by WAMU while having to take almost none of the WAMU liabilities - for the paltry sum of ~1.9 billion.
JPM was given access to TARP funds, and the Fed lending window carte blanche - and used that money to 'gamble' in commodities. Given a huge loan at essentially zero interest, they would have had to work hard to screw up enough to NOT make money.
Allegedly - JPM has a huge, uncovered market short on silver.
JPM was already part of the casino. And we taxpayers have been covering their gambling debts for years now.
Second, banks are definitely playing with taxpayer dollars. At the discount window, the amount of money they're borrowing for essentially free, is clearly out of proportion to what they're using to "help" consumer/small business lending. It's being invested in risk, taxpayer dollars for private profit. Raise the interest rate immediately. It won't hurt us, as they're not using it to help us in the first place. Also, JPMorgan and others are into metal warehousing, with its arcane shipping rules. So now, with some metals prices as high as they are, the inventory of available metal is higher than it's ever been. It's not a matter of the banks not using our money to help us, it's them using our money to destroy us. Time to separate banks from the casinos.
http://agmetalminer.com/2011/06/29/are-glencore-jp-morgan-and-goldman-sachs-scamming-the-lme-warehouse-system/
FDIC deposit insurance is funded by the banks themselves (not the Federal Government) at an adjustable rate necessary to fund any bank failures with funds from the banks. See the Federal Deposit Insurance Corporation’s own website to review the FDIC's history (p.43):
http://www.fdic.gov/bank/historical/brief/brhist.pdf
At most, there is an implicit Federal guarantee to backstop total banking failure - that doesn’t cost anything now and can always be made up by increasing future assessments the way every insurance company does when losses exceed premium income.
The Federal Government’s own self interest requires a successful financial sector that chooses (unlike a large part of the manufacturing sector) to remain in the US and pay US taxes. See: elsa.berkeley.edu/~auerbach/AJA_CESifo_revised.pdf
“over the period 1991-2003, financial corporations accounted for roughly one quarter of all corporate tax revenues.â€
But simply put, they don't make their money investing in the US economy in ANY way. Whatever on-the-ground investing they do is done overseas; all their action here is on derivatives, repo's, CDO's and other made-up instruments.
Sadly our government -- led by the Department of Treasury -- is fully corrupt. If we can not get money and corporations out of our elections -- we may lose our democracy forever.
To those who wonder what the "Occupy" movement is about - this is one of the reasons!
From a smart business' perspective, this is simply insurance. You pay a premium to reduce volatility. That's all it really is. E.g. a few years ago, Southwest was getting major kudos for having locked up fuel contracts before oil went through the roof. That's the wrong outlook. The truth is, it was a good move because it allowed them some stability with respect to one of their major costs. Even if the price of fuel had gone down, it would still be a smart move on SW's part to pay the premium for the option. That's how most businesses use these securities.
MF Global's on the other hand sin was Corzine trying to turn it into Goldman instead of remaining a facilitator in the commodities market. He used client funds for it as well from what it looks like (probably illegal). However this means nothing wrt the commodities market in general. Most companies use it properly. (The only exception to this is probably CDOs since there is no way to unwind them cleanly.)
So JP Morgan buying a share of the exchange isn't an issue unless they also start investing client funds in it. Otherwise they just want a cut of the fees required to do business on the exchange.