As a followup to yesterday's "CFTC's Chilton Sees 'Fraudulent Efforts' to Control Silver Prices" (JPM; SLV)", I didn't just put Morgan's symbol in the headline on a whim.
From Jesse's Café Américain:
The spectacular silver rally and current price is no bubble. HSBC and JPM stopped shorting the market so vigorously and began to actually cover some of their positions as a result of CFTC investigations.
Since the CFTC had previously investigated the market and done nothing, one might speculate that the publicity had provoked some behind the scenes discussions. JPM recently shut down its proprietary trading unit under Blythe Masters.
I will be absolutely stunned if anything except for a wristslap with no admission of wrongdoing is the result. However behind the scenes we might see a less oppressive domination of the silver market by these TBTF banks. But the profiteering will continue here and elsewhere. This is no reform administration and the Republicans were the primary authors of much of the crony capitalism so there is little relief to be found there.
What the masters of the universe seem to have not quite figured out yet is that you cannot keep skimming about 8 percent of M1 off each year as Wall Street bonuses, gimmicking and distorting the financial system to enable their control frauds, and maintain robust real economic activity. There were quiet coup d'etats in the UK and US, but the people do not yet realize it. At some point they will see the necessity of reform, and then we might have a sustained recovery. Until then, welcome to Zombieland.
CFTC scans JP Morgan's silver trading business
By Sakthi Prasad in Bangalore
Wed Oct 27, 2010 2:13am EDT
(Reuters) - The U.S. commodity futures regulator is looking into claims by a trader in London that JPMorgan Chase & Co (JPM.N) was involved in manipulative silver trading, the Wall Street Journal reported, citing a person close to the situation.
In recent months, U.S. Commodity Futures Trading Commission (CFTC) lawyers have interviewed employees of JPMorgan in its metals trading business, the newspaper said, citing a person familiar with the situation....MORE
Here's the Wall Street Journal's take:
Act Now, CFTC Is Urged
A Commodity Futures Trading Commission regulator is putting pressure on the agency to take action in a high-profile, two-year-old investigation of the silver market.
At a CFTC hearing Tuesday to consider new rules to strengthen its commodity-enforcement powers, commissioner Bart Chilton said market players have made "repeated" and "fraudulent efforts to persuade and deviously control" silver prices. Mr. Chilton said he believed there have been violations of CFTC rules that should be prosecuted, though he couldn't publicly disclose trader names.
CFTC Chairman Gary Gensler declined to comment on the silver investigation or Mr. Chilton's comments.
The call to action on the silver investigation comes as the CFTC faces increasing pressure because of its expanded role overseeing derivatives trading under the new financial-overhaul law. For years, lawmakers have criticized the agency for failing to aggressively police the commodities markets.
In its 36-year history, the CFTC has reached settlements in more than three dozen manipulation-related cases, though it has successfully concluded just one manipulation case from trial through appeal. To win manipulation cases in the past, the CFTC had to prove that a trader intended to manipulate prices. Under the financial overhaul's new fraud-based manipulation powers, the CFTC's burden of proof would be lower.
The CFTC's investigation of silver has heated up in recent weeks. The agency's enforcement staff has circulated a packet of information to CFTC lawyers and commissioners, outlining some of its findings in the silver probe, including documents that could suggest there have been attempts to manipulate prices. In recent days, the commissioners have been discussing how to proceed in the investigation, but they haven't made a decision....
Earlier this year, the investigation took a new twist when the CFTC began looking into allegations by a trader in London who contended that J.P. Morgan Chase & Co., one of the largest silver traders, was involved in manipulative silver trading, a person close to the situation says.
In recent months, CFTC lawyers have interviewed employees of J.P. Morgan in its metals-trading business as well as industry traders, commodity executives, experts and employees of other metals-trading firms, a person familiar with the situation says.
J.P. Morgan and HSBC Holdings PLC traditionally have been big players in the silver market. A CFTC weekly report for Oct. 19, the most recent period, shows that less than four market players hold 24.3% of all net bearish bets in the silver market. J.P. Morgan and HSBC are among those market participants, according to silver traders and a person close to the investigation. In recent months, however, the banks with large futures positions have sharply reduced the size of their holdings.
Both J.P. Morgan and HSBC declined to comment on any aspect of the investigation....MORE