Banking, Warehousing, Shipping, Generating Electricity, Metals Marketing

All of the foregoing activities are activities of the banking powerhouses.  So what happens when one of them fails?  Of course, we'll bail them out for, if we don't, not only will the financial world suffer but people using electricity, fuel, metals, etc. will suffer.  So, the banking fiasco will affect the daily lives of many people beyond the financial aspect of their lives.  Yet, that's the risk we are running and the Federal Reserve let it happen when in 2003 they determined that "certain commodity activities are complementary to financial activities and thus permissible for bank holding companies.”

The banks have become truly too big to manage.  They have assets in the trillions, operate around the world, and operate oil tankers, coal mines, electrical generating plants and zinc warehouses.  This is costing us today and will cost even more tomorrow.  

Sunday's NY Times told how Goldman Sachs manipulates aluminum in its warehouses so that companies have to pay more to get their orders filled quickly or wait up to 18 months. 

Morgan Stanley has constructed power plants in Georgia, Alabama and Nevada, allowing it to become a major electricity seller. In 2006, it acquired “full ownership of Heidmar Inc., a Connecticut-based global operator of commercial oil tankers. 

JPMorgan Chase runs a significant network of electric power generating facilities, trades oil, deals in metals globally and owns power and gas businesses. 

Fortunately, the Fed is reconsidering its 2003 decision.