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Science Finally Proves What We Already Knew About Bankers

19 | By Shah Gilani

“Business culture in the banking industry is favoring, or at least tolerating, fraudulent or unethical behaviors.”

That’s what Ernst Fehr told reporters in a telephone interview this week.
Fehr is an economist at the University of Zürich in Switzerland who co-led a study about business behavior.

Fehr’s study proves what we’ve all long knew – but it wasn’t the only piece of news last week that demonstrates the crookedness of bankers.

Today I’ll show you how Wall Street‘s manipulations are affecting the prices we pay for everything from the cars we drive to our pots and pans.

So you know you want to know more about this…

The Robber Baron Class

The prospectus of Fehr’s study, which was published in Nature, can be found here.

According to Reuters, “Fehr’s team conducted a laboratory game with bankers, then repeated it with other types of workers as comparisons. Participants were asked to toss a coin 10 times, unobserved, and report the results. For each toss they knew whether heads or tail would yield a $20 reward. They were told they could keep their winnings if they were more than or equal to those of a randomly selected subject from a pilot study. The results showed the control group reported 51.6 percent winning tosses and the treatment group – whose banking identity had been emphasized to them – reported 58.2 percent as wins, giving a misrepresentation rate of 16 percent. The proportion of subjects cheating was 26 percent. The same experiments with employees in other sectors – including manufacturing, telecoms and pharmaceuticals – showed they don’t become more dishonest when their professional identity or banking-related information is emphasized.”

With that as background, here’s another news flash.

The U.S. Senate Permanent Subcommittee on Investigations is finishing up a two-day hearing today on whether banks like Goldman Sachs Group Inc. (NYSE: GS), J.P. Morgan Chase & Co. (NYSE: JPM) and Morgan Stanley (NYSE: MS) should be restricted from owning or trading physical commodities such as oil and metals.

While the hearings weren’t prompted by the University of Zürich’s research, it feels like they could have been.

The Senate subcommittee has been investigating whether banks’ participation in markets, where they also control infrastructure assets, influence prices and harm consumers. Some lawmakers argue such activity – particularly banks’ ownership of power plants, shipping containers and metals warehouses – creates the potential for anticompetitive behavior.

Others looking at the same facts and figures extrapolate out their findings a step further. I’ll speak for them, because I am one of them.

Banks don’t own all these hard-asset facilities just because they are profitable businesses to own and run. Banks own them to manipulate prices and markets, which is infinitely more profitable than just owning storage and transportation facilities.

Yesterday, Sen. Carl Levin (D-Mich.), chairman of the subcommittee, spent three hours accusing two witnesses from Goldman Sachs of manipulating aluminum markets. He then asked J.P. Morgan Chase and Morgan Stanley why they had tried to hide their supposed “investments” in metals and natural gas from regulators.

Levin’s rhetorical quote of the day was, “If you liked what Wall Street did for the housing market, you’ll love what they’re doing for commodities.”

A good part of the hearings yesterday focused on activity at a Goldman aluminum-warehousing subsidiary, Metro International Trade Services LLC.

The Wall Street Journal today reported this from the hearings, “A pair of Goldman Sachs executives said their actions didn’t affect those prices (aluminum) and they were acting on orders from clients. In a series of testy exchanges with Messrs. Levin and Senator John McCain, the executives acknowledged the warehouse firm introduced a new transaction structure after Goldman bought it in 2010, causing metal transfers between warehouses that created a logjam and drove up wait times for customers to withdraw aluminum. Metro International’s chief executive, Chris Wibbelman, said another part of Goldman, its commodity-trading arm, ordered withdrawals of 300,000 tons of aluminum from the warehouses and further extended wait times in 2012.”

No, there’s no manipulation there.

We don’t need international research studies to tell us banks are greedy, manipulative liars and cheats. We live it 24/7 and have ample proof they aren’t just robber barons.

They are something much worse.

They are an institutionalized, protected criminal class who run the United States – and too many other supposedly free nations – for their personal benefit.

If we aren’t jailing these criminals, ask yourself, “Why not?”

19 Responses to Science Finally Proves What We Already Knew About Bankers

  1. Rob says:

    I manage a multi-million dollar project investigating bancassurance market practices. I have compelling evidence that banks are unethical and rely on fraudulent conduct on a scale that is hard to believe, and worse, questions why regulators have not acted to stop it.

    • Ron Slade says:

      I have long wondered the same thing. Firstly, we know that the regulatory agencies aren’t very good at what they do. Rudi Guiliani embarassed Hell out of them when he discovered case after case of fraud right under their noses.
      Secondly, I believe that there is a degree of acceptance on the part of people like the SEC. Wall St. and environs has always been home to Mafia, charlatans, and fraudsters, so all but the most egregious criminal activities go unaddressed. They are perfectly willing to tolerate some degree of criminal activity.
      Then, there are the political consequences of actually punishing financial crime. Huge political contributions make that difficult. Even then, the punishment, if it occurs at all, usually rewards the thugs, most of whom are willing to serve a year or two in jail for, say, $2 million.
      Crime, in cases of financial industry crime, does pay.

  2. RUSS SMITH says:

    Hi!, Patrons Of Shah Gilani’s Wall Street Insights And Indictments:
    The banks’ fraud goes much deeper folks, because the banks use leverage called Fractional Reserve Banking, in order to administer funding to their poisonous purposes which permeates all of Society lock, stock & barrel. Their Newest business references are extending their parasitical tentacles into every sphere of business and whatever else are considered to be enterprises without anyone noticing their extrapolations to the extreme which automatically suppresses public opinion of their monetarily confiscatory operations everywhere worldwide. So far it works, because they have not been caught with their pants down through reforms including jail. This represents an open invitation by all of US to allow them to strong arm everyone into conformity to their actions or we don’t get OUR loan or OUR money back with the exact same purchasing power. This provides all of US another part time job attempting to find avenue through which to invest depreciating funds, in a vain attempt to keep abreast of their depreciating OUR lone, domestic currency we call the US $ or more clearly Federal Reserve Note which denotes interest rate debt in holding them to the bankers. That automatically makes the US far worse than broke but also ravenously in debt to the banks who decide in what depreciated shape they will return OUR money to US when we ask them for it and besides pay nothing of interest in holding OUR funds for which they charge high interest rates to their qualifying borrowers. I received one such offer in the mail last week asking me to pay 185% interest and you can guess the first guess exactly where that offer ended up. What ever happened to the Constitutional Gold/Silver Standard which guarantees to we the people gold and silver (specie) coins only from OUR US Mint we can see and read in Article 1; Section 10 of OUR US Constitution? It looks to me folks like we either get back to OUR realistic Constitutional roots or we can kiss OUR $%&@ and Country goodbye. The State Of Calif. use to abide by usury laws which restricted all loans to no more than 10% interest but OUR friends the banks lobbied to have those restrictions removed from them; while it still applies to ordinary citizens and so go figure everyone!!

    RUSS S., CA. (One Of Our Broke, Fiat Corrupt Money States)

  3. Peter says:

    What does this indicate about the land of the free?
    How does this equate with government of the people, for the people, by the people?
    Do the people count for anything anymore?
    The Nations Financial indications as published, show the most wealthy accumulating ever increasing amounts of the national wealth, while the wage earning section of the population are getting less and less of the national wealth.
    At which point will the less well off decide that they now have so little of the national wealth pie, their situation has become untenable to the point of either A, giving up, or B, deciding to take matters into their own hands and take to the streets?
    I do not think the people, in general, will accept the status quo in the manner that the people portrayed in the “Grapes of Wrath” did.
    Looking at the vast size of the US government debts and debt obligations, it is impossible for the average person to see how it can be met. There is talk of passing an unmeetable debt load onto our children, but there is also talk of the government debt as it now stands being in the position of never being able to be paid off. What about the future amount of new debt being added to the current obligations?
    Watching the rise of the eastern nations, I foresee a time when they will no longer need the west for anything, as they will be able to forge an economic entity among themselves. If this comes to pass, will the US government be obliged to declare themselves unable to meet their obligations, coin a new currency, declare the old currency exchangeable at a new, much diminished value and make a new start from the bottom?
    As working man with a few bucks saved, I am pretty anxious about what the future holds.

  4. PeterW says:

    All Empires start out with only a few Crooks, but their example, tells others that why should they be honest, thus stealing in all its forms become ubiquitous, thus, that is when the Empire starts to collapse.

    Thus the West is in Collapse.

    Printing Money and Lowering interests to try to save the Empire,
    will and is failing.

    Game over – TILT

    Try to secure a chair, before the Music stops.

    PeterW

  5. Edouard D'Orange says:

    Why not, indeed. Mortgage loan manipulation and securitization, derivatives trading, now, recently exposed by Shah, sub-prime auto lending. What won’t bankers do for a buck?

  6. Rob Anderson says:

    Is it because the jailers are on the take as well? Who would have thought. The inquiries are just a charade to keep the people hopeful. Our keepers have to take good care of us!

  7. David White says:

    Right on. Banksters should go to jail for life and have their personal assets given to the people they cheated. The government could protect depositors in the criminal banks while the stock holders and bond holders are wiped out. Then the economy could begin to recover.

  8. Martin says:

    Thank you as always. We’ve known about the aluminium (etc etc) scams for years, but the politicians are beginning to get there, slowly slowly. In any case the Treasury and Fed want their money back from the banks soon or everything they stand for will go down the whatsit.

    Banks, like water-provision, are (or should be) a public utility, providing and safeguarding our cash; they need to be run as such, with government control of retail banks. They could nationalise a few – they almost own some banks anyway. That would be a start. I would rather bank with the government, fully backed up by the Treasury, than with bankster-scammers, gamblers, crooks and fly-by-nighters.

  9. Duane says:

    The banksters know how to manipulate and buy influence from government politicians and the regulators. They probably even run cost/benefit analysis’s to see if possible fines from breaking the laws still allow good returns for them on their law breaking behaviors. Part of the problem is public apathy in demanding that “truth, justice, and the American way” be enforced on banksters, regulators, and politicians alike. Nowadays we are a culture that when we see something wrong going on, most of us look away and say something like “meh, not my problem”.

  10. Kevin Beck says:

    I appreciate that someone (you) is speaking out for those that are able to do some of the extrapolation, but don’t have the same megaphone to the outside world.

    And I don’t like what those unindicted criminals have done for housing in America for the past three decades (at least); there should be special prisons for them. But hey, Wall Street is also financing prison construction (another long story).

    Maybe some of those construction funds will be for their new homes, but I doubt that.

  11. fallingman says:

    Why aren’t we jailing the bankers? Because they own the government and control the “regulators,” which means they can commit the most egregious, wide-ranging, and far-reaching assortment of crimes with impunity. They never get more than a slap on the wrist.

    And, as the research results prove, bankers tend to be sociopaths.

    So … we have country run by sociopaths getting rich by screwing the 99% while a complicit Congress postures and does nothing

    Is this a great country or what?

    USA … USA … USA!

    Or, shouldn’t it be USSA … USSA … USSA! ?

    After all, it doesn’t matter what kind of government a country starts with or says it has. It always devolves to fascism. Always. The rule of the few connected and sociopathic lording it over the rest of us.

  12. Dave A. says:

    In the Wizard of Oz, there was a man controling the action from behind the curtain and later He was exposed. In the financial world, and legal world of today, I am afraid the man behind the curtain had a heart attack and there is nobody to enforce the morality of the action. Harry Marcopolis as detailed in His book ” Nobody would listen” for over a decade detailed wrongdoing to the SEC over Bernie Madoff and still did nothing. It was only the corrosive effects of a collapsing economy of the late 2000’s that toppled the ponzi scheme and Bernie needed protection from His creditors and turned Himself in that brought Him to justice.
    I think that FIAT money is justified by the monitary authorities and is not subject to the constraints of Our constitution simply because it is not money as as defined by article 1 section 10 – it, the dollar, is simply a tool to be used until it is worn out and no longer useful destined to be disgarded and replaced by whatever tool works going forward such as , perhaps, binary numbers stored in a computer somewhere?
    Bernies business worked because it was a deception operating in an environment of deception

  13. Rick Barrera says:

    All great commentary. I am in complete agreement with the analysis and identification of the issues and problem.

    We are intelligent men and women. How do we solve this? What is our course of action? How do we take back our country?

  14. Andrew says:

    First, kill all the lawyers……no, wait….first, kill all the bankers, THEN kill all the lawyers…..THEN the politicians….oh hell, just line them all up against the wall and let’s have done!

  15. Bruce R Porter Sr says:

    Read an article written in 2011. Lady questioned a taxidriver who was the owner and filling in for one of his drivers about Anthony Weiner and his sexting. the guy lived in Weiner’s borough and didn’t even know who he was.
    With this level of ignorance and disregard what do we expect?
    Let’s be honest, nobody really cares.
    Except us few.

  16. Chris Shannon says:

    Re-inact Glass Stegall . Now that might mean a whole lot of people would lose their jobs and stature, but you can’t make an omlet without breaking some eggs.

    We need to also pay attention to the fact that China has been buying gold like it is going out of style, which brings us to the sinking price of gold. How exactly is that happening when China and India buy as much as they can get their hands on. Maybe time to do that audit on Fort Knox, not to mention the Federal Reserve.

    The system has become so corrupted and insulated that there are few options left short of dissasembling it and rebuilding, hence Glass-Stegall, it worked before it can work again.

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