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Monday, February 17, 2014

The Loophole That Ate the World

Very worth your time is Matt Taibbi's deep-dive in the February 27 issue of Rolling Stone into how a teeny-tiny provision in the vast de-regulatory hand-out to Wall Street known as the Financial Services Modernization Act of 1999 has led to "a wholesale merger of high finance with heavy industry," and higher prices for everything from food products to metals. Not even lawmakers like then-Congressman Sherrod Brown--who voted for the bill and is now a leading voice against those hidden provisions--realized their votes were giving Wall Street the go-ahead for "ruthless campaigns of world domination." And all it took were these five words allowing commercial banks to delve into any activity that  is “complementary to a financial activity and does not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally.”

From the article:
Today, banks like Morgan Stanley, JPMorgan Chase and Goldman Sachs own oil tankers, run airports and control huge quantities of coal, natural gas, heating oil, electric power and precious metals. They likewise can now be found exerting direct control over the supply of a whole galaxy of raw materials crucial to world industry and to society in general, including everything from food products to metals like zinc, copper, tin, nickel and, most infamously thanks to a recent high-profile scandal, aluminum. 

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.
--Barbara Bedway

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