Today we learn that JPMorgan is in exclusive talks to buy RBS Sempra. Sempra, together with energy interests, primarily trades in a full range of commodities ranging from oil and gas to metals and agricultural products. Sempra is owned 51% by the Royal Bank of Scotland, which is being forced by European regulators, given the market's turmoil, to divest its holdings in the company. Where are our regulators? And why is a bank such as JP Morgan, supported by myriad government programs and, under the guise of being a bank having access to virtually costfree money at the Fed window, permitted to gamble with that money in the commodities arena?
Banks are supposed to be vigilantly lending money to support a badly debilitated economy. That is meant to be their mandate and why heaven and earth was moved to rescue the sector. Instead public policy permits those with banking charters to use their depositors money, deposits in many ways guaranteed by taxpayer programs such as the FDIC, as well as access to myriad Fed programs to play commodity casino. What benefit is served, as one example, when a bank such as JPMorgan takes these funds, charters super tankers, fills them with millions of barrels of oil, and keeps them at anchor for months at a time, thereby:
a) tying up hundreds of millions of dollars floating idly at sea when industry, homeowners and Main Street are clamoring for help and financial sustenance from the likes of JP Morgan et al.
b) By squirreling away millions of barrels of oil, they are impacting the day to day traded price of oil by taking it off the market and supporting ever higher levels. Thereby the consumer pays twice - in higher prices for oil and oil products and funding the programs that support the banks place at the roulette table.
Here we have a clear example of the total breakdown of our financial sector's priorities. JP Morgan, instead of positioning itself to be of maximum aid and assistance to the economy at large is seeking to add to its existing commodities business to challenge 'market leaders' Goldman Sachs and Morgan Stanley. Is that what our banks have come to? Isn't it time to reconsider their qualifications as Bank Holding Companies, or as 'Banks' altogether if playing commodities casino is their focus rather than functioning as banks and the primordial responsibilities that function entails in this deeply weakened economy. And is it not time for Washington and its hapless regulators to wake up?
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