Credit where it’s due: This piece is one of a string of big-foot investigative work done by the Times that has probed some of the world’s most powerful corporations and done so squarely with agenda-changing stories. Among the work that comes to mind are David Barstow’s WalMart bribery stunner last year, a classic (Pulitzer-winning) investigative work in any era; the Foxconn story, also last year, by Charles Duhigg and David Barboza; Kocieniewski’s (also) Pulitzer winning GE tax story the year before.
While we’re on the subject of Goldman, it was the Times that broke the news during the throes of the crisis that the AIG bailout was essentially a pass-through to Wall Street firms, especially Goldman, as well as, in 2010, that it helped create the designed-to-fail Abacus housing CDO.
It’s not that other news organizations aren’t doing blockbusters. The WSJ’s Matt Day had a fine piece in April about two firms amassing big chunks of the copper business. But the NYT’s are a cut above. Whatever else is going on over there, somebody is doing something right.
The most promising thing about the Times’s Goldman piece may be that it’s the first in a series, the “House Edge,” on Wall Street and consumer prices.
[UPDATE: As hinted at, Reuters, I learn, published a 2,600-word piece on Goldman’s grip on the aluminum storage business back in July 2011. The story, by Pratima Desai, Clare Baldwin, Susan Thomas, and Melanie Burton, is very good and includes many, but certainly not all, of the major elements of the Times story. Among them: that since Goldman had acquired the Detroit-area warehouse business, a shipping bottleneck had developed; and that the “spike” in prices had led to clashes between aluminum buyers, Goldman, and the London exchange. The piece also raises the potential conflict between Goldman’s role as a handler of physical assets and as a commodities trader that could benefit from knowledge gained from its operational role.
Having said all that, the Times story adds several new, important elements. Among those: the government’s regulatory laxity, the London exchange’s conflict, the estimated dollar cost to consumers, the complaint by Coke, and so on. But really, the key to the Times story is the forklift follies, the metal-shuffling of the lead anecdote, which illustrates the absurdity, and wastefulness, of the arrangement and elevates the story to another level. Finally, and there’s a lesson here, the Times piece is framed less as a business conflict and more as a matter of wider public concern. Should the Times have nodded to the Reuters story? It would have been nice, yes.The important thing is that the Times did the story, even if someone got to the subject first, and did it well.]
The aluminum game seems reminiscent of the contango strategies used by the investment banks to hoard oil until the price shot up.
http://online.wsj.com/article/SB119162309507450611.html
In the case of oil, the key is Cushing Oklahoma:
http://www.businessweek.com/articles/2012-09-27/the-oil-hub-where-traders-are-making-millions
Which is where the Keystone pipeline is sending its Canadian oil sands crude.
#1 Posted by Thimbles, CJR on Mon 22 Jul 2013 at 11:03 AM
Looks like all this attention from journalists and government:
http://www.mcclatchydc.com/2013/03/25/186867/oil-and-electricity-a-compare.html
is having an affect.
http://www.reuters.com/article/2013/07/22/commodities-banks-idUSL6N0FS01F20130722
"Wall Street's most powerful banks have accelerated efforts to transform the structure and focus of their commodity trading desks to preserve their multibillion-dollar empires from tightening regulation.
Scrutiny of their activities in electricity markets, metals warehousing and oil trading is reaching fever pitch ahead of a Federal Reserve decision in September that may decide how deeply banks can delve into the world of gasoline tankers, piles of copper and power plants.
Mounting regulatory and political pressure has already forced Morgan Stanley, Goldman Sachs Group Inc, and JPMorgan Chase & Co, the three Wall Street banks known for their commodities trading prowess in the past decade, to openly consider exiting key businesses.
Morgan Stanley explored selling its vaunted commodities trading desk last year; Goldman Sachs has already sold off its power plant division, and both Goldman and JPMorgan Chase are now considering a sale of their metal warehousing firms, sources said.
Wall Street firms have also adopted more subtle maneuvers, reconfiguring operations to placate regulators, expanding into new markets, and trying to find ways to preserve the value of their investments if they are forced to sell or spin them off, according to a Reuters review of regulatory filings and more than a dozen interviews with top traders and bankers."
I'm starting to figure that certain folks are getting right worried about the pressure Elizabeth Warren is putting out there for a return to Glass Steagal. That would put a kink in the commodities trading desk.
#2 Posted by Thimbles, CJR on Mon 22 Jul 2013 at 11:54 AM
So Goldman Sucks continues its gutting and killing spree as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." Isn't it squid hunting season yet?
#3 Posted by Impishparrot, CJR on Mon 22 Jul 2013 at 05:14 PM
obviously, aluminum smells like money.
#4 Posted by Edward Ericson Jr., CJR on Tue 23 Jul 2013 at 01:42 PM
"I'm starting to figure that certain folks are getting right worried about the pressure Elizabeth Warren is putting out there for a return to Glass Steagal. That would put a kink in the commodities trading desk."
NAILED IT!
http://www.esquire.com/blogs/politics/Senator_Professor_Warren_Declines_To_Go_Along
http://www.businessinsider.com/senate-banking-on-wall-st-commodities-2013-7
"Back in 2003 the Federal Reserve decided to temporarily allow banks to purchase commodities directly. That means oil, power, copper, aluminium etc. This September, that temporary regulatory relaxation is set to expire, and if it does, a big chunk of Wall Street's business will expire with it...
For today's hearing, Senators heard testimony from Ms. Saule Omarova, Associate Professor of Law University of North Carolina at Chapel Hill School of Law; Mr. Joshua Rosner, Managing Director Graham Fisher & Company; Mr. Timothy Weiner, Global Risk Manager Commodities/Metals, MillerCoors LLC; and Mr. Randall D. Guynn, Head of Financial Institutions Group.
Aside from Guynn, all of the witnesses cautioned against renewing the Fed's 2003 decision. Omarava was especially damning, saying that when Congress separated banking from commerce in 1956, they sought to prevent markets like the one we're in.
"In this... over the counter derivative oil market I suspect Goldman Sachs can actually manipulate price," said Omarava. "They could also affect the price of physical oil if they own tankers... I'm all for the DOJ launching an anti-trust investigation into these matters... If this is the market where JP Morgan and Goldman Sachs are playing, it makes me very uncomfortable as a banking attorney."..
The witnesses didn't just talk about prices either, they talked monopolies. Since her rise to prominence as a regulator and then a Senator, Warren has been saying that banks are getting too big, too interconnected, and too complicated. Rosner's testimony corroborated that idea, and added to it the specter of commodities -controlling, all-encompassing banking behemoths backstopped by the government (too big too fail).
It's just more "coddling" from the Fed, he said, later adding... "These institutions have become the equivalent of the government institutions we saw fail during the crisis."
This isn't to say that Warren's going to give up her crusade to bring back Glass-Steagall and pick this up as her mantle — she's not. At the hearing she said that it was just "one tool in a tool box" to bring Wall Street back down to size.
There's a difference between the reinstatement of Glass-Steagall and this commodities issue though, and that difference is all that matters to Wall Street banks.
Where trying to reinstate Glass-Steagall seemed like a matter of lobbying and politicing, taking Wall Street out of the commodities business is seen as a matter of dollars. It impacts the Street's bottom line — if it didn't, Goldman wouldn't have put out a "fact sheet" on its involvement in the aluminum warehouse business.
This actually makes bankers nervous."
On the subject of nervous bankers, I have one word - GOOD.
#5 Posted by Thimbles, CJR on Wed 24 Jul 2013 at 07:23 PM
"the blood funnel has finished with lower-middle class homeowners. "
How about every interest-rate suppressed dollar saver in the world, sacrificed to prop up the vampire squids and their "victims" (whose refinanced mortgages and government bailout programs are only made possible by Fed money printing)?
I think you've misidentified the real sucker/victims here.
#6 Posted by cas127, CJR on Thu 1 Aug 2013 at 09:26 PM