Distorting markets: The aluminum racket
Washington, which allowed big Wall Street banks to enter nonfinancial businesses, now must stop their gross distortion of commodities markets, which is adding billions of dollars to their bottom lines — at manufacturers' and consumers' expense.
The New York Times reports that Goldman Sachs, for example, exploits London Metal Exchange pricing rules “by shuffling tons of aluminum each day among the 27 warehouses it controls in the Detroit area,” housing more than a quarter of the market supply. That enables the warehouses to charge more rent for storing aluminum longer — and their customers' average wait for aluminum delivery to factories, six weeks before Goldman took over the warehouses three years ago, has grown to more than 16 months.
As a result, a larger “premium” is added to spot-market aluminum prices, so all aluminum users pay more — including more than $5 billion in additional costs for U.S. consumers.
The Commodity Futures Trading Commission and the Senate are investigating. But the Federal Reserve is reportedly unlikely to reverse its 2003 determination that let Wall Street banks enter the commodities market — and the Securities and Exchange Commission late last year OK'd Goldman (which has since withdrawn) and two other firms buying up to 80 percent of available copper.
Washington must stop allowing such Wall Street market distortion and cornering — and put manufacturers, consumers, the economy and, above all, unperverted markets first.
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments â either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.