And It Continues...

 

JP Morgan Wins: CFTC Position Limits Do Not Apply (To Them)

 So apparently when Frank-Dodd was passed, its was supposed to empower the CFTC (Commodity Futures Trading Commission) to: 

limit the amount of positions, other than bona fide hedge positions, that may be held by any person with respect to commodity futures and option contracts...

For the past few months, there has been a lot of hype going around about how JP Morgan could be literally taken down by buying large amounts of silver.  The rationality was that they were supposedly short on silver futures by about 3.3 billion ounces.  The theory is that JP Morgan is acting on the Fed's behalf to keep the price of silver low and in order to keep the value of the dollar from falling.

So what happens when the government steps up in the name of consumer protection in order to stop this kind of fraudulent behavior?  Side with their friends in JP Morgan of course!  According to the ZeroHedge article, the five members of the CFTC voted 4 to 1 to grandfather in JP Morgan to their new requirements rather than impose them on the supposed silver shorts.

Exemptions for bona fide hedging transactions (based on the Dodd-Frank Act’s new requirements for such transactions) and for positions that are established in good faith prior to the effective date of specific limits adopted pursuant to the proposed regulations.

So basically, the current big banks are protected while government regulations keep competitors from posing any significant challenge, thus preserving the status quo in the banking industry.  Since I am not a finance expert, I am a little wary of the prospect of taking down one of the biggest banks in the country by just buying silver.  Mish is wary as well and asks why JP would keep silver artificially cheap when they own so much of it and points out that they are hedged against it anyway.

All this CFTC ruling does is show just how embedded the big banks are in with the regulators and why a return to free banking is necessary.  Look for my first Mises Daily article Monday (hopefully) to show how connected they have become just within the past month.  Some, such as the author of the article Tyler Durden, have determined that the recent drop in silver prices by $2 is due to the ruling.  I would relate it to a variety of factors including the dollar appreciating due to Bernanke money flowing and giving the expectation of strong economic growth and the chaos in Europe right now.  But hey, what do I know?  I will probably look into this issue more to understand it better and see if I missed anything so look for updates.