Banks Rule – and Ruin

Matt Taibbi, in his last piece for Rolling Stone, wakes us to the next, higher, floor of corporate corruption:

…banks aren’t just buying stuff, they’re buying whole industrial processes. They’re buying oil that’s still in the ground, the tankers that move it across the sea, the refineries that turn it into fuel, and the pipelines that bring it to your home. Then, just for kicks, they’re also betting on the timing and efficiency of these same industrial processes in the financial markets – buying and selling oil stocks on the stock exchange, oil futures on the futures market, swaps on the swaps market, etc.

Allowing one company to control the supply of crucial physical commodities, and also trade in the financial products that might be related to those markets, is an open invitation to commit mass manipulation. It’s something akin to letting casino owners who take book on NFL games during the week also coach all the teams on Sundays.

The situation has opened a Pandora’s box of horrifying new corruption possibilities, but it’s been hard for the public to notice, since regulators have struggled to put even the slightest dent in Wall Street’s older, more familiar scams. In just the past few years we’ve seen an explosion of scandals – from the multitrillion-dollar Libor saga (major international banks gaming world interest rates), to the more recent foreign-currency-exchange fiasco (many of the same banks suspected of rigging prices in the $5.3-trillion-a-day currency markets), to lesser scandals involving manipulation of interest-rate swaps, and gold and silver prices.

But those are purely financial schemes. In these new, even scarier kinds of manipulations, banks that own whole chains of physical business interests have been caught rigging prices in those industries. For instance, in just the past two years, fines in excess of $400 million have been levied against both JPMorgan Chase and Barclays for allegedly manipulating the delivery of electricity in several states, including California.

Rolling Stone:

Taibbi will be missed.  Here’s a link to his archive.

Geithner’s Treasury a Treasure to Bankers

Timothy Geithner worked hard. No doubt about that.  And in difficult times.  Who’d want such a job?  But before wishing him godspeed in his departure it’s good to take a look at the opportunities missed.  Gretchen Morgenson tallies up the pattern of his friendship with big banks.


Back in 2010, Senator Sherrod Brown, Democrat of Ohio, and Mr. Kaufman were co-sponsors of the Safe Banking Act, which proposed placing tough limits on banks’ size. If it had passed, it would have imposed a strict 10 percent cap on any bank holding company’s share of United States deposits and set a 6 percent limit on leverage.

The act was a way to begin reining in the huge institutions that had caused so much trouble in the credit debacle. It could also have protected taxpayers from having to make future rescues.

A good thing for Main Street, in other words.

But it was not to be. Among the bill’s most aggressive opponents was, yes, [Timothy Geithner’s]Treasury.