The banks are coming under tremendous pressure in respect to proprietary trading. The days of the merger of Commodity Trading that took over Saloman Brothers in 1981 by Philips Brothers (PhiBro) are coming to an end 31.4 years after they began. JP Morgan has announced it is exiting the commodity business which came 3 days after a Senate banking committee heard that the metals warehouses owned by Wall Street and other commodities traders were distorting markets. This of course is not true. They have alleged gold is suppress by them systemically and that they have been driving up the cost of aluminum cans for beer and soda. There have been arguments that allowing them to trade in physical markets was a risk to the financial system.
The real risk is market manipulation by proprietary trading. They target markets and attack them and move on to the next. They are not capable nor are they interested in unprofitable systemic manipulation to suppress anything for some agenda. They are all about the immediate profit – nothing else.
Proprietary Trading is the huge risk regardless of what the market may be. Banks should not be proprietary traders. The Fed has been informing the banks that they will NOT bail them out again regarding proprietary trading. The $700 billion bill they created the last time shows there is no risk management. They routinely blame “rouge” traders whenever they get caught with even $8 billion losses. In all honesty, if the banks are never held accountable and cannot control their own risk of their own traders, they cannot tare society apart pushing the losses on the people while keeping the profits.
It is time to end proprietary trading for bankers period.