Bank Crimes Once Stopped by Glass-Steagall Keep Getting Worse

Oct. 10, 2019 (EIRNS)—Even by the standards of Wall Street banksters, the Federal charges recently lodged against JPMorgan Chase are unique. Federal prosecutors have charged that the precious metals trading desk at Wall Street’s biggest universal bank has been a criminal RICO, a Racketeer-Influenced and Corrupt Organization, its primary activity having been attempts to rig the markets for gold, silver and other precious metals.

Since Morgan was already “on probation” under non-prosecution agreements for other crimes, and this one is particularly serious, it should now lose its U.S. banking license and have to reorganize under new management to try to regain it. But that is very unlikely to happen.

Here’s what ultimately made this crime possible: Bank holding companies’ involvement in owning and trading commoditiesand/or commodity infrastructure (such as oil tankers) for their own accounts, was banned by both the 1933 Glass-Steagall Act and by the 1957 Bank Holding Companies Act. Since large banks could otherwise become very large-scale holders of commodities and commodity infrastructure, they could potentially manipulate prices in the same markets in which they were trading, even if only “for their customers.”

When Glass-Steagall was eliminated in 1999, the 1957 act still prohibited such ownership; so the Federal Reserve proceeded to issue exemptions from that act’s commodity-ownership prohibition, to all the major Wall Street universal banks by 2004.

Gold and other precious metals are commodities of course. This is not the first case of such manipulation since 2004. Morgan Stanley became one of the biggest owners of oil companies, oil refineries and tankers. JPMorgan Chase owned electricity infrastructure on the West Coast and was found to have manipulated electricity prices after the collapse of Enron’s criminal scheme. Goldman Sachs was repeatedly sued by aluminum users, for rigging aluminum supply and price in the 2000s by dominating warehouse storage capacity for the metal.

Maintaining Glass-Steagall—now, restoring it—is much more effective than prosecuting individual bankers after the fact for the crimes they will absolutely commit.