Goldman Sachs has 1.5 million tons of aluminum ingots in
storage, enough to drive up the
price of aluminum, says David Kocieniewski of the New York Times.
It’s what used to be called “cornering the market” to pocket
profits.
It’s what farmers suspected grain traders were doing,
prompting them to lobby for creation of the Canadian Wheat Board.
In the United States, it prompted politicians to enact the
Bank Holding Company Act, designed to keep banks from owning commodities.
That act and other regulations that curbed the banks are
gone, swept aside in the rush to deregulation and reduced taxation in the
1990s.
But even with relaxed regulation, it seems that Goldman
Sachs stepped over the line.
Global trading rules say banks can only hold minerals for a
certain length of time – a regulation designed to keep them from stockpiling so
much that the market is short and prices rise.
Goldman Sachs, says Kocieniewski, skirted around this
regulation by paying truckers to move its aluminum ingots among warehouses near
Detroit.
JP Morgan Chase, another big bank, is facing a $500-million
fine for manipulating the electricity markets in California and Michigan.
Barclay’s Bank was recently fined $435 million for
manipulating the energy market in California.
Greed results in these kinds of abuses; it’s why regulations are required to keep greed in check.
Who's keeping watch on the greed of Canada's marketing boards? It seems to me that Glenn Black out there on Manitoulin Island got a better handle on the greed involved in combining cost-of-production pricing in the poultry industry and inflated feed costs than years of regulatory neglect by the likes of the Ontario Farm Products Marketing Commission and the Farm Products Council of Canada.
