The Fed is apparently reconsidering the exemption given to banks on commodities trading, and as the this weekend’s NYT points out there’s a good reason to end this lunatic experiment. We already know that JPMorgan is about to be FERCed for manipulating electricity markets, but this news about the manipulation of aluminum is downright comical. It gives you some insight into the lengths that banks like Goldman and JPMorgan will go to corner a market and make a buck, or should we as a few $billion bucks. The issue in the Times story revolves around the 27 aluminum warehouses owned by a Goldman subsidiary and how they shuffle physical inventories every day with a fleet of trucks to skirt regulations and skim $billions in profits. A forklift driver at the Goldman warehouses called it “a merry-go-round” of metal“.
“Only a tenth of a cent or so of an aluminum can’s purchase price can be traced back to the strategy. But multiply that amount by the 90 billion aluminum cans consumed in the United States each year — and add the tons of aluminum used in things like cars, electronics and house siding — and the efforts by Goldman and other financial players has cost American consumers more than $5 billion over the last three years, say former industry executives, analysts and consultants.”