(If throwing a contribution Pottersville2's way won't break your budget in these difficult financial times, I really need it, and would wholeheartedly appreciate it. Anything you can afford will make a huge difference in this blog's lifetime.)
Since we know how little the U.S. agencies do now to protect the U.S. consumer interest (being administered by those who benefit from the opposite), I thought it might be enlightening to research what other countries are doing.
And it is.
I read Matt Taibbi.
Religiously.
Thank Matt every day.
By the way, the comments to Taibbi's essay are worth the admission price alone!
By Matt Taibbi, Rolling Stone
17 May 13
e're going to get into this more at a later date, but there was some interesting late-breaking news yesterday.
According to numerous reports, the European Commission regulators yesterday raided the offices of oil companies in London, the Netherlands and Norway as part of an investigation into possible price-rigging in the oil markets. The targeted companies include BP, Shell and the Norweigan company Statoil. The Guardian explains that officials believe that oil companies colluded to manipulate pricing data:
The commission said the alleged price collusion, which may have been going on since 2002, could have had a "huge impact" on the price of petrol at the pumps "potentially harming final consumers".
Lord Oakeshott, former Liberal Democrat Treasury spokesman, said the alleged rigging of oil prices was "as serious as rigging Libor" - which led to banks being fined hundreds of millions of pounds.
The inquiry also involves Platts, the world's largest oil price reporting agency. The concept here is very similar to both the LIBOR scandal, which involved banks manipulating the benchmark rates for interest rates, and to the possible rigging of interest rate swap prices through the manipulation of ISDAfix, the benchmark rate for those instruments, which is also the subject of a regulatory probe.
We wrote about both of those scandals in last month's Rolling Stone article, "Everything is Rigged." In that piece, finance professionals talked about the potential for manipulation in other markets that involve voluntary price reporting:
What other markets out there carry the same potential for manipulation? The answer to that question is far from reassuring, because the potential is almost everywhere. From gold to gas to swaps to interest rates, prices all over the world are dependent upon little private cabals of cigar-chomping insiders we're forced to trust.
"In all the over-the-counter markets, you don't really have pricing except by a bunch of guys getting together," Masters notes glumly.
That includes the markets for gold (where prices are set by five banks in a Libor-ish teleconferencing process that, ironically, was created in part by N M Rothschild & Sons) and silver (whose price is set by just three banks), as well as benchmark rates in numerous other commodities - jet fuel, diesel, electric power, coal, you name it.
One analyst I spoke to for that piece talked specifically about Platts (and another, similar price assessment company), noting that they "do benchmarks for the entire oil market, the entire refined products market" and "you name it" - any of these benchmarks that rely on voluntary reporting could be manipulated.
Everything Is Rigged: The Biggest Financial Scandal Yet
It's not clear yet exactly what is alleged to have occurred, but Europeans have long complained that retail gas prices have not seemed to match wholesale prices. In fact, complaints that wholesale prices at gas stations were noticeably slow to fall when wholesale prices fell prompted the U.K.-based Office of Fair Trading last year to conduct a cursory inquiry into possible anti-competitive behavior in the fuel markets. Early this year, they announced that they hadn't found enough evidence to warrant a full-blown investigation. But complaints persisted.
The story is obviously hugely significant in its own right, just as the LIBOR story was. But both are even more unpleasant in conjunction with each other, and the other price-fixing scandals that have cropped up in the financial markets in the last year or two. We've had other price-fixing scandals involving gas in the U.K. and here in the U.S., just a few weeks ago, it came out that the Federal Energy Regulatory Commission (FERC) concluded that JPMorgan Chase used "manipulative schemes" to tinker with energy prices in Michigan and California.
FERC last year also recommended a massive $470 million fine against Barclays for similar activity. (Barclays has vowed to fight the penalty.) Deutsche Bank, meanwhile, settled with FERC for $1.7 million after the commission alleged that the German bank was involved with manipulation in the California energy markets for several months during 2010.
More on all this later . . .
Comments:
I've always suspected that oil pricing was rigged, going back to the days - roughly 100 lifetimes ago now - when I worked in the Chicago bureau of Business Week when McGraw Hill owned it and Platt's Oilgram.
The Platt's correspondent in the bureau, Herb Hugo and whose office was around the corner from mine, would spend his day phoning oil companies to get their prices for various grades of crude oil and processed petroleum. I personally sat in Herb's office on more than one occasion and often heard him say to whoever was on the phone (in essence), "Oh, OK, so you're 10-cents below what ABC is pricing at and a nickel less than XYZ. Oh, you're going to match XYZ? Thanks!"
If that wasn't price fixing, I don't know what dictionary is being used.
When I suggested to New York editors a story on this, I not only was turned down flat but told to mind my own business.
Matt, the follow up is even more painful to take in, than the original. It's great writing, and ballsy, considering the climate, right now. I'm hoping they press charges, and start the trial next week. There should be hundreds of brokers tossed in jail for hundreds of years, and if somebody's God is watching, trillions of bucks in fines.Little chance of that, I know, but a guy's gotta' dream.
Matt........do you not understand that WAR is rigged too. It does not take a rocket scientist to walk out side and understand and see the ENERGY all around you that is being squandered so that boys can go off to DIE for OIL. Most people are led to believe that their house is their home.....but in reality their house is a energy plant. This market manipulation is only coming to light via the pressure from the fallout of Wikileaks. Drug Barons are no different than Oil barons and Banking barons, just look at how the Taliban clipped the poppy price fixing world wide that resulted in what..??
Let's see, Oil price rigging: Platts; Mortgage backed securities: S&P; Libor rigging: S&P; No Child Left Behind testing: CTB. All divisions of The McGraw_Hill Companies.
Finally somebody is waking up the public. Do you understand how rigged the silver and gold markets happen to be? The COMEX allows naked shorts on gold and silver (mostly silver) that allows for 100 more times available metal to be traded! I other words they sell short 1000 tons while only having 10 tons available to trade. JP Morgan is almost always invovled and it rigs the price down as at will. If the people only knew, they would flip. Keep reporting the fraud Matt, keep reporting it and make sure you have a body guard because these guys are powerful.
Imagine that: "Fined millions of pounds" while they make billions. Small part of overhead. Thanks for all your fine work, Matt.
The term is manage. Most all auction markets are managed for the most part. The goal and result of managed markets is stability, usually. Of course managed markets are not really markets so over longer terms mispricing occurs along with complacency about risk. The other thing is that the managers gain ever more power and wealth. Oddly each crisis that comes from mispricing (think MBS) only gives them more power.
Nobody knows when or where the next crisis will come but the managers are absolutely certain they will be richer and more powerful after it comes.
Ha! Yes, the Invisible Hand shows itself once again, and it's choking the consumer.
The one thing that I can't get my brain around is that European Commission Regulators raided companies which have hundreds of billions of dollars at their fingertips. You don't do that unless you have serious back-up. I mean super serious back up. Otherwise you are stark raving mad.
It must be one small group of the super rich trying to do in another group. Did the artificial price hikes of the energy block do so much damage to some small super rich group who might primarily own manufacturing and retail on a trans national scale--were the price spikes such a threat that the oil monopoly needs to be taken down? BP is the biggest on the planet, isn't it? It must be the most powerful. Did the energy spikes cause so much hunger and destabilize so many small countries that it's becoming apparent to everyone outside oil cartel that they are destabilizing the "system" as a whole and have to be taken out? Relieved of their power.
Or is there one group of the super rich that is taking out everyone else and absorbing them. I keep thinking about (wasn't it?) Matt's article about the banks where he was saying that super big banks are starting to feed on each other, to grow. Who are the "European Commission Regulators?" Who hired them? Who is their boss. Whoever they are they have some serious backup. Can you imagine going after the livelihood of someone worth hundreds of billions of dollars? God, I wouldn't want to be that person.
Can you imagine the numbers of phones that have been ringing since yesterday? It must be in the tens of thousands. The amount of money at stake here--in an oil monopoly --are staggering. Just imagine you could raise the price of oil on the planet by three dollars above what it should be and pocket the difference. Can you imagine how rich some of these dudes are? Can you imagine the hysterical and angry calls that are being made? The threats? The ugly, ugly, threats?
Or it could be that the companies' monumental greed finally went just a little too far to a point where it simply couldn't be ignored. One advantage of the insanely huge bureaucracy of the EU is that it pays attention to insanely huge masses of money (cf.: Microsoft & Google). If you flout too many of its regs, the bureaucracy moves tectonically toward you and forces some sort of accommodation.
Just like Big Pharma, markets a newer drugs after only basic testing and then use the public as lab rats. A few million dollar wrongful death suits are chump-change compared to the massive profits, they're built right into the cost of doing business
IRS
Benghazi
AP bugging
move along , nothing to see here ?!?!?!?
Don't look now, Jack, but those things you mention are a done deal on the official level -- offered up a scapegoat or two, blamed it on mysterious unknown others, and that's all she wrote. All that hollering and squawking and dancing around will maybe get a few more 'redacted' reports and then fade off into NoNo Land, as usual.
I think the EU felt the financial crisis much more than the US
Hell yes. There are sooooo many countries that have had rioting in the streets.
Socialism has failed in the EU
The chickens have finally come to roost
Socialism was doing fine. And then the financeers and super rich hijacked the democracies and sucked all the money out of the system. Post World War II Europe was literally a Utopia for a few decades after World War Two. A whole generation got a free education, free health care, got good jobs, and had a great retirement. And now there's no money for anyone. The super rich have it all.
One other thing the super rich did in Europe when they formed the Euro was to quietly bump up the immigration rates to all the member countries by stunning amounts. A lot of the cities in Europe can't absorb the numbers of people flooding in. You can't create jobs fast enough. That's the biggest reason why there were all those riots outside of Paris a few years back. Nobody has jobs.
Overpopulation. But the rich and the financial institutions thrive off of what they are calling, "violent growth."
This is the Conservative way, steal all you can and blame (insert any liberal here).
IRS
Benghazi
AP bugging move along , nothing to see here ?!?!?!?
IRS: Congress shifts the problem of campaign financing onto the IRS. Yeah, that was never going to work.
Benghazi: Look, I know you guys want to go to war with Iran, but, this won't do it.
AP controversy: This is the first administration to pursue its critics?? Oh wait, every recent administration has. And that fourth amendment was gutted under the Cheney administration anyway.
More manufactured crisis. You can stand around wailing or wonder what end is served in each instance?
Matt might have a monopoly on the biggest story (ies) of our lifetimes - almost all markets are rigged. I'm increasingly becoming convinced this is case with silver and gold, where record demand for precious metals is somehow resulting in prices that are plummeting. The "watch dog regulating agencies" a might very well be complicit or just cowardly. good to see there's at least one journalist who is doing the profession's most important job. Look forward to future reporting and commentary.
These market riggings can be used to bribe politicians and market regulators. No reason to have a bag man pass unmarked 100 dollar bills in brown paper bags in the middle of the night. Just signal when the markets are ready to be manipulated, and when to buy commodities futures (in your own secret accounts). Poof! Make tens of thousands in a few seconds, sell the contracts and take a vacation on the Riviera. Do this over and over for years to come and go for a beach house in the Hamptons.
But of course. With futures contracts, and naked swaps, and the DTCC's Stock Borrow Program, and opaque hedge funds with trillions of dollars at their beck and call (both semi-real and structured finance, i.e., credit derivatives) everything can be and is rigged.
What's amazing here is that the offices have actually been raided and someone's actually doing something bout the price fixing. I'm not shocked that the prices are fixed, but that some government is actually doing something. On Max Keiser not too long ago they discussed the results of a U.S. govt. study that said that the oil spike we had a few years back--where the price of oil went over 100 dollars a barrel for the first time, and we were all spending close to 5 bucks a gallon in America, and the economy went down the toilet--that that was all completely fixed. It was all a fraud. A handful of people got ridiculously wealthy from that. Tens of thousands of gardeners and other small businesses across America went under--because they couldn't make a profit with the high fuel prices. It was all a sham. And of course, no one has ever been prosecuted and no one will go to jail. Thanks for posting this Matt. Christ, this should be on the front page of the L.A. Times. Instead, we get Angelina Jolie. The world is so F'd up.
Regarding the oil price speculation: mostly performed on ICE, or InterContinental Exchange by Goldman Sachs and Morgan Stanley. And who owns ICE? Why, Goldman Sachs, Morgan Stanley and the oil companies (BP, Royal Dutch/Shell, etc., plus a smaller stake by Deutsche Bank). And who is ICE buying recently?
The NYSE. And what does the NYSE own? Along with Goldman Sachs, JPMorgan Chase, and Credit Suisse, the DTCC, of course!
It's ALL rigged . . . .
Furthermore, Tens of thousands of gardeners and other small businesses across America went under... --- it goes even waaaay beyond that.
Thousands of small American businesses, which were publicly traded, were naked short sold out of business by the concentrated short selling of the hedge funds, utilizing the DTCC's Stock Borrow Program, to do a number on stocks which technically and legally couldn't even be in play (that is, the stocks were owned by the companies, and/or individual shareholders who never traded them!).
And much more craziness coming.
Depend on it.
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