08/02/2013 archive

Boron Group

Aluminium occurs widely on earth, and indeed is the third most abundant element in the Earth’s crust (8.3%).

Goldman Sachs’s Aluminum Pile

By THE EDITORIAL BOARD, The New York Times

Published: July 26, 2013

Unlike investors in the past that bought up the commodities they were trying to control, Goldman is not buying the world’s aluminum. Rather, it is storing the metal for other banks, traders and aluminum producers in a complex of warehouses outside Detroit that it acquired in 2010. The problem, as described in The Times by David Kocieniewski, is that since the bank entered this business, the time it takes buyers to get the metal from those warehouses has shot up to more than 16 months, from 6 weeks. Goldman has attributed the delays to a shortage of trucks and forklift drivers. But Goldman also pays incentives to owners of the metal to keep it in the bank’s warehouses.

Those delays have bolstered Goldman’s profits, because the bank earns more rent the longer metal stays in its warehouses. However, companies that use aluminum argue that the delays hurt them by making them wait for deliveries and can also raise the spot price of aluminum because that price is calculated by a formula that includes a premium based on storage costs. An official at MillerCoors told a Senate committee that the difficulty in getting metal supplies had cost it and other companies $3 billion last year.

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Banks and their supporters say they should be in the commodity business because it is closely related to their trading activities. But that is also a cause for concern because banks might be able to take unfair advantage of their access to important information in the physical market to benefit themselves when they trade commodities in financial markets.

Policy makers must thoroughly investigate the aluminum warehousing strategies to determine whether Goldman and other warehouse operators distorted prices. They should also take a fresh look at whether banks should really be in the business of owning warehouses and other physical infrastructure. Bankers like to emphasize the benefits of such activities, but their involvement also entails risks for the market.

A Shuffle of Aluminum, but to Banks, Pure Gold

By DAVID KOCIENIEWSKI, The New York Times

Published: July 20, 2013

The story of how this works begins in 27 industrial warehouses in the Detroit area where a Goldman subsidiary stores customers’ aluminum. Each day, a fleet of trucks shuffles 1,500-pound bars of the metal among the warehouses. Two or three times a day, sometimes more, the drivers make the same circuits. They load in one warehouse. They unload in another. And then they do it again.

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Using special exemptions granted by the Federal Reserve Bank and relaxed regulations approved by Congress, the banks have bought huge swaths of infrastructure used to store commodities and deliver them to consumers – from pipelines and refineries in Oklahoma, Louisiana and Texas; to fleets of more than 100 double-hulled oil tankers at sea around the globe; to companies that control operations at major ports like Oakland, Calif., and Seattle.

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For much of the last century, Congress tried to keep a wall between banking and commerce. Banks were forbidden from owning nonfinancial businesses (and vice versa) to minimize the risks they take and, ultimately, to protect depositors. Congress strengthened those regulations in the 1950s, but by the 1980s, a wave of deregulation began to build and banks have in some cases been transformed into merchants, according to Saule T. Omarova, a law professor at the University of North Carolina and expert in regulation of financial institutions. Goldman and other firms won regulatory approval to buy companies that traded in oil and other commodities. Other restrictions were weakened or eliminated during the 1990s, when some banks were allowed to expand into storing and transporting commodities.

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Next Up: Copper

As Goldman has benefited from its wildly lucrative foray into the aluminum market, JPMorgan has been moving ahead with plans to establish its own profit center involving an even more crucial metal: copper, an industrial commodity that is so widely used in homes, electronics, cars and other products that many economists track it as a barometer for the global economy.

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JPMorgan, which also controls metal warehouses, began seeking approval of a plan that would ultimately allow it, Goldman Sachs and BlackRock, a large money management firm, to buy 80 percent of the copper available on the market on behalf of investors and hold it in warehouses. The firms have told regulators that these stockpiles, which would be used to back new copper exchange-traded funds, would not affect copper prices. But manufacturers and copper wholesalers warned that the arrangement would squeeze the market and send prices soaring. They asked the S.E.C. to reject the proposal.

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After an intensive lobbying campaign by the banks, Mary L. Schapiro, the S.E.C.’s chairwoman, approved the new copper funds last December, during her final days in office. S.E.C. officials said they believed the funds would track the price of copper, not propel it, and concurred with the firms’ contention – disputed by some economists – that reducing the amount of copper on the market would not drive up prices.

Others now fear that Wall Street banks will repeat or revise the tactics that have run up prices in the aluminum market. Such an outcome, they caution, would ripple through the economy. Consumers would end up paying more for goods as varied as home plumbing equipment, autos, cellphones and flat-screen televisions.

“Punting the Pundits” is an Open Thread. It is a selection of editorials and opinions from around the news medium and the internet blogs. The intent is to provide a forum for your reactions and opinions, not just to the opinions presented, but to what ever you find important.

Thanks to ek hornbeck, click on the link and you can access all the past “Punting the Pundits”.

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Paul Krugman: Sex, Money and Gravitas

Can a woman effectively run the Federal Reserve? That shouldn’t even be a question. And Janet Yellen, the vice chairwoman of the Fed’s Board of Governors, isn’t just up to the job; by any objective standard, she’s the best-qualified person in America to take over when Ben Bernanke steps down as chairman.

Yet there are not one but two sexist campaigns under way against Ms. Yellen. One is a whisper campaign whose sexism is implicit, while the other involves raw misogyny. And both campaigns manage to combine sexism with very bad economic analysis.

Widney Brown: Time to Focus on US Government’s Unlawful Behavior, Not Snowden

The drama of the five weeks since Snowden’s arrival in Russia has distracted attention from the key issue: how the ever-burgeoning security apparatus in the US has used secret courts to undertake massive, sweeping and systematic invasions into the right to privacy of people living in the USA

Let’s not lose sight of why Snowden was forced to seek asylum in Russia. Once he disclosed the full scope of the US government’s actions, they cancelled his passport and called him a criminal.

Freedom of expression – a fundamental human right – protects speech that reveals credible evidence of unlawful government action. Under both international law and the 4th Amendment to the US Constitution, the US government’s actions are unlawful.

This is your morning Open Thread. Pour a cup of your favorite morning beverage and review the past and comment on the future.

August 2 is the 214th day of the year (215th in leap years) in the Gregorian calendar. There are 151 days remaining until the end of the year.

On this day in 1776, members of Congress affix their signatures to an enlarged copy of the Declaration of Independence.

Fifty-six congressional delegates in total signed the document, including some who were not present at the vote approving the declaration. The delegates signed by state from North to South, beginning with Josiah Bartlett of New Hampshire and ending with George Walton of Georgia. John Dickinson of Pennsylvania and James Duane, Robert Livingston and John Jay of New York refused to sign. Carter Braxton of Virginia; Robert Morris of Pennsylvania; George Reed of Delaware; and Edward Rutledge of South Carolina opposed the document but signed in order to give the impression of a unanimous Congress. Five delegates were absent: Generals George Washington, John Sullivan, James Clinton and Christopher Gadsden and Virginia Governor Patrick Henry.

The United States Declaration of Independence is a statement adopted by the Continental Congress on July 4, 1776, which announced that the thirteen American colonies then at war with Great Britain were now independent states, and thus no longer a part of the British Empire. Written primarily by Thomas Jefferson, the Declaration is a formal explanation of why Congress had voted on July 2 to declare independence from Great Britain, more than a year after the outbreak of the American Revolutionary War. The birthday of the United States of America-Independence Day-is celebrated on July 4, the day the wording of the Declaration was approved by Congress.

The Declaration justified the independence of the United States by listing colonial grievances against King George III, and by asserting certain natural rights, including a right of revolution. Having served its original purpose in announcing independence, the text of the Declaration was initially ignored after the American Revolution. Its stature grew over the years, particularly the second sentence, a sweeping statement of individual human rights:

   We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

This sentence has been called “one of the best-known sentences in the English language” and “the most potent and consequential words in American history”.

After finalizing the text on July 4, Congress issued the Declaration of Independence in several forms. It was initially published as a printed broadside that was widely distributed and read to the public. The most famous version of the Declaration, a signed copy that is usually regarded as the Declaration of Independence, is on display at the National Archives in Washington, D.C. Although the wording of the Declaration was approved on July 4, the date of its signing has been disputed. Most historians have concluded that it was signed nearly a month after its adoption, on August 2, 1776, and not on July 4 as is commonly believed. The sources and interpretation of the Declaration have been the subject of much scholarly inquiry.

The famous wording of the Declaration has often been invoked to protect the rights of individuals and marginalized groups, and has come to represent for many people a moral standard for which the United States should strive. This view was greatly influenced by Abraham Lincoln, who considered the Declaration to be the foundation of his political philosophy, and who promoted the idea that the Declaration is a statement of principles through which the United States Constitution should be interpreted.

The US is very disappointed with Russia. Russia has granted Edward Snowden temporary asylum for one year and he has left the airport for an undisclosed location.

Edward Snowden asylum: US ‘disappointed’ by Russian decision

by  Alec Luhn in Moscow, Luke Harding, and Paul Lewis in Washington, The Guardian

White House says Moscow should hand back whistleblower and hints Barack Obama might boycott Vladimir Putin meeting

White House spokesman Jay Carney said the US was “extremely disappointed” by the decision, almost certainly taken personally by President Vladimir Putin. He said Moscow should hand Snowden back and hinted that Barack Obama might now boycott a bilateral meeting with Putin in September, due to be held when the US president travels to Russia for a G20 summit. [..]

With US-Russian relations now at a cold war-style low, Snowden slipped out of Sheremetyevo airport on Thursday afternoon. His lawyer, Anatoly Kucherena, said Russia’s federal migration service had granted him temporary asylum for one year. Snowden had left the airport to stay at an undisclosed location with expatriate Americans, he added.

Putin made no immediate comment. But having weighed Russia’s options for some weeks, he appears to have decided that Snowden’s propaganda value outweighs any possible US repercussions. Obama’s already floundering attempts to “reset”, or improve, relations with Moscow are in effect over.

Back on Capitol Hill, senators from both sides of the aisle expressed their dismay over intelligence disclosures of NSA policies.

US senators rail against intelligence disclosures over NSA practices

by Spencer Ackerman, The Guardian

Officials say bulk phone records collection was not ‘the most important tool’ – contradicting previous statements to Congress

Two senators said they now planned to introduce new legislation before the August recess that would significantly transform the transparency and oversight of the bulk surveillance program. The chairman of the committee has already advocated for ending the bulk phone records collection and plans his own legislative push to shut it down.v[..]

Patrick Leahy, a Vermont Democrat and chairman of the Senate judiciary committee, said: “We need straightforward answers, and I’m concerned we’re not getting them.”

Leahy, joined by ranking Republican Chuck Grassley of Iowa, criticised director of national intelligence James Clapper for making untruthful statements to Congress in March about the bulk phone records collection on Americans, and NSA director Keith Alexander for overstating the usefulness of that collection for stopping terrorist attacks.

Grassley called Clapper’s recent apology to senator Ron Wyden and the intelligence community “especially disturbing”.

The Guardian’s Spencer Ackerman and investigative reporter James Branford joined Amy Goodman on Democracy Now! to discuss these latest developments.

Testifying before the Senate on Wednesday, National Security Agency Deputy Director John Inglis conceded that the bulk collection of phone records of millions of Americans under Section 215 of the USA PATRIOT Act has been key in stopping only one terror plot – not the dozens officials had previously said. Ahead of Wednesday’s Senate hearing, the Obama administration released three heavily censored documents related to its surveillance efforts, but the White House has refused to declassify the legal arguments underlying the dragnet or the original rulings by the U.S. Foreign Intelligence Surveillance Court, on which the released order to collect phone records was based. Meanwhile, the head of the NSA, General Keith Alexander, was repeatedly interrupted by critics of government surveillance in a speech Wednesday before the Black Hat conference, a gathering of hackers and cybersecurity professionals in Las Vegas.

How fast the US is fast becoming the 21st century;s Soviet Union.