Wall Street believed guilty of commodities abuses, driving up prices for everyone
An investigation by the U.S. Senate has found that major Wall Street firms actively drove up the price of key commodities, increasing the price of everything from a can of soda to a barrel of oil.
Bloomberg reports the Senate found the firms most involved in this corrupt practice were JPMorgan Chase & Co., Goldman Sachs, and Morgan Stanley.
In addition to causing unnecessary increases in the cost of goods like aluminum, the abuses also allowed the banks to profit handsomely by placing bets on the value of commodities at a given time. For example, Goldman Sachs was found to have been slowing the processing and delivery of aluminum products after it acquired major aluminum warehouses. By delaying delivery and processing, an artificial shortage was created and the price of aluminum increased. For example large aluminum deliveries that took 20 days suddenly took nearly 120, according to Bloomberg. Knowing that such delays would happen, and that the price of aluminum would go up, Goldman Sachs was able to place the appropriate bets on what the price of aluminum would be. Knowing that prices would go up and when, ensured that Goldman would never lose any money in such trades. Goldman also drove up the price of aluminum by providing incentives to other financial firms involved in the trading of aluminum. These incentives asked that the firms store aluminum in Goldman's warehouse, remove it, and bring it back again, according to Bloomberg. These actions increased the cost of aluminum because other commodities traders were involved, increasing the market share of aluminum involved the fraud. Wall Street's abusive behavior at the expense of the general public and business community at large first came to light when large beverage makers who need aluminum to package their products, such as Coca-Cola and beer companies, complained that their prices for aluminum were increasing for no apparent reason other than delayed deliveries.
