Thursday, June 9, 2011

Big Bank – Casino Finance

I saw this as a story on the front page of the WSJ finance page.  When you go online, it is not one of the featured headlines.  Someone must have complained.
Carolyn Cui and Dan Fitzpatrick, Wall Street Journal, 2 June 2011

A group of 10 large banks—including Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Citigroup Inc., Bank of America Corp. and Barclays PLC—saw their commodities revenues increase by 55% in the first quarter, according to Coalition, a firm that analyzes the performance of investment banks. After a disappointing 2010, commodities was the fastest-growing segment in banks' fixed-income businesses in the first three months of this year, even though it still accounts for just 7% of banks' total fixed-income revenues, Coalition said.
Commodities trading is a bright spot for institutions that face new regulatory clampdowns on practices that previously fattened bank profit margins, such as trading with their own capital and slapping customers with hefty "overdraft" fees. Oil is up about 10% so far this year, settling at $100.29 a barrel Wednesday, and commodities such as gold and copper are close to all-time highs.
 So we rescued the Big Banks so that they could become commodity speculators?   Obviously the “clampdowns” noted at the top of the second paragraph are having a rather limited effect.
These banks make both proprietary trades (betting their own money) and various services in commodity trading to their clients.  So they are making both speculative profits and fees.  But it does make you wonder how they use their client’s information when they are making their own trades.


Anonymous said...


Anonymous said...

Great I can only comment as anonymous. I've really enjoyed your blog and have had my post disappear three times trying to tell you that. That google id just eats them. To bad they where insightful intelligent post. Now you just get my drivel and whine. So we give the banks very low interest loans at taxpayer expense and they use the money to drive up oil prices. Good thing the recession ended in 2009. A thing like that could really hurt a country. Thanks Dennis

russell1200 said...

Thanks Dennis, and you are not alone in having posts eaten up.

I have been having the same problem at my other computer. The other day I could not even post at my own blog. It is an issue with a lot blogger sites.

Sometimes I have been able to get around it by posting on the "name-URL" combination. If you don't have your own URL, you can always borrow one.

Since I can post with one computer on blogger and not others, I suspect that it is a computer setup issue. Hopefully, the powers that be will get around to fixing it.

russell1200 said...

As to your understandably truncated due to frustration comment, I have seen a allusions in even the big media to the idea that the manipulations of the market in 2008 were a cause of the food riots around the world.

I suspect if you went to the local countries media, that manipulation would feature much more prominently.

The U.S. pays zero attention to it of course. And then wonders why we are so resented. We are very often not the country we like to think we are. What is unfortunate is that the people who report these issues in this country (certain elements of the hard left usually) also tend to be the types who dislike the United States regardless of what we do - thus the news is discounted because of the source.