One more example of how the big banks threaten the economy

November 20, 2014 at 8:41 am Leave a comment

Before the mortgage meltdown I was a proud free market extremist who would patiently explain to a misguided dinner guest how the Free-Market was a better regulator of businesses and the financial system than government ever could be. Then I watched as the Captains of Capitalism were bailed just out as the Free Market was about to punish them for their mistakes. When it comes to Wall Street’s behemoths we have a “Heads I win tails you lose” system in which the American taxpayer\consumer is the looser. Still there are those who continue to believe that if only Government didn’t regulate Wall Street so much all would be better in the world.

If anyone still questions the need for regulation they need look no further than our present day banking system. Credit unions and smaller banks struggle to comply with a host of regulations designed in reaction to the last financial crisis while the behemoths that got us into this mess brazenly flout regulations and distort legitimate banking activities in the name of “liquidity.”

The latest example that we increasingly have a financial system that Vladimir Putin would be proud of comes courtesy of a 396 page report released yesterday by the Senate’s Permanent Subcommittee On Investigations. It investigated the purchase of physical commodities by JP Morgan Chase, Goldman Sachs and Morgan Stanley.  In a bipartisan report it concluded that Wall Street banks have become so heavily involved with the physical commodities market that their activities pose risks for the markets, consumers and the financial system.

Just how involved in the commodities market are the behemoths? According to the report

“Until recently, Morgan Stanley controlled over 55 million barrels of oil

storage capacity, 100 oil tankers, and 6,000 miles of pipeline. JP Morgan built a copper

inventory that peaked at $2.7 billion, and, at one point, included at least 213,000 metric tons of

copper, comprising nearly 60% of the available physical copper on the world’s premier copper

trading exchange, the London Metal Exchange (LME). In 2012, Goldman owned 1.5 million

metric tons of aluminum worth $3 billion, about 25% of the entire U.S. annual consumption.

Goldman also owned warehouses which, in 2014, controlled 85% of the LME aluminum storage

business in the United States. Those large holdings illustrate the significant increase in

participation and power of the financial holding companies active in physical commodity


That’s right, at the same time credit unions were trying to figure out how to provide Qualified Mortgages and were being badgered about building plans (apparently because examiners were certain credit unions had  top-secret plans to become landlords), these institutions were buying huge amounts of commodities and regulators were too timid to act.

This country has to do something about our financial system and quick. Whether you are a Democrat or Republican, libertarian or communist a system in which banks are too big to fail, too big to prosecute, too big to regulate and apparently too big to keep from buying and selling goods that have nothing to do with traditional banking activities is bad for a country of laws ultimately governed by its citizens as opposed to financial oligarchs.

Here is a link to the report:

If your compliance person is still struggling with the Ability to Repay and Qualified Mortgage Rules the FDIC wants to help. Yesterday it released the first of what it promises will be three videos for persons charged with complying with the mortgage regulations. I will be watching the video as soon as I am done with this blog. I really am a wild and crazy guy. Here is the link.


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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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