Sticking with the theme
of milestones, we’ve just crossed a few important anniversary dates that
relate to silver that taken in proper perspective point to a disturbing
conclusion. That conclusion is that the US commodities regulator, the CFTC,
has done more public harm than good over the past few years. Simply put, the
public and our markets would have been better off had the agency not been run
by the commissioners in place, specifically including Chairman Gensler and
Commissioner Chilton. In fact, rarely has so much promise for genuine
regulatory reform been squandered as badly as has been the case over the past
few years.
Four years ago tomorrow,
Gary Gensler was sworn in as chairman of the CFTC, following the financial
crisis that brought the system to the brink. He hit the road running and
immediately began to speak publicly in terms of position limits and
concentration that paralleled exactly what I had been espousing for more than
20 years. Gensler followed up his public speeches with a series of
unprecedented public meetings designed to garner industry consensus for how
to prevent concentration and manipulation and how to institute legitimate
speculative position limits in those commodities where they did not exist,
such as silver.
To say I was awestruck
would be an understatement and I began referring to him as the greatest
chairman in CFTC history, much to the dismay of many. The issue of position
limits and of prohibiting the big banks from speculating in the markets (the
Volker Rule) reached a culmination in the passage of the Dodd-Frank Act, the
commodities areas of which Gensler spearheaded through Congress. Finally,
position limits were a part of commodity law all set out on a rigid timeline.
Then it all fell apart. Years after the passage of Dodd-Frank, we are further
away from instituting legitimate position limits than ever before. Whereas
Gensler deserved great credit for including position limits as a matter of
law, with much support from Commissioner Chilton, they must both share the
blame for the matter blowing up in their faces. What went wrong? In simple
terms, both lacked the courage necessary to deal in specifics when required.
Bart Chilton goes back
longer than Gensler, having become a commissioner in mid-2007. Perhaps
Chilton’s greatest strength was his willingness to correspond with members of
the public who contacted him. I started writing to him in 2007 after his
public speech in which he likened the agency to a tough “cop on the beat.” I
assumed he was unaware of the allegations of concentration and manipulation
in COMEX silver on the short side, the very same issues that have remained to
this day. (This was before JPMorgan became the big silver short crook when
the bank acquired Bear Stearns in 2008). http://www.investmentrarities.com/ted_butler_comentary/11-13-07.htmlI stayed in communication with
Chilton until the second CFTC public letter of May 2008 (another unfortunate
anniversary) which denied any manipulation in silver but that omitted any
mention that the biggest COMEX silver short, Bear Stearns, went bankrupt
before the report was published. For the past few years, I have sent to
Chilton and to all the other commissioners copies of
my articles, as I do with JPMorgan and the CME Group.
Despite Commissioner
Chilton’s and the agency’s insistence that all was well in silver in
accordance with the May 2008 second public letter, the price of silver fell
more than 50% that year after JPMorgan added to the Bear Stearns short
position it inherited. The release of the August 2008 Bank Participation
Report resulted in a third silver investigation initiated by the Commission,
one that exists to this day.
Another unfortunate
anniversary was that of the manipulative price smash of two years ago, in
which silver fell an unprecedented $6 on the Sunday evening of May 1, 2011
and $15 (30%) for the week. There would be another 30%+ price smash that
September. Although such price declines were unprecedented, neither Chairman
Gensler nor Commissioner Chilton would publicly comment on them.
I know that silver was
never the prime focus of the agency’s push for financial reform, but I also
knew that no market was more in need of position limits than COMEX silver.
And the public provided Gensler and Chilton with more official comments and
private e-mails about manipulation in silver and the need for position limits
than for all other commodities combined. Sadly, Gensler and Chilton largely
ignored the public or gave lip service to the many thousands of public
requests.
Chilton seemed to come to
his senses in late 2010 when he began to publicly reference the obvious
concentration on the short side of COMEX silver and his comments appeared to
result in a civil class action lawsuit being filed against JPMorgan. But then
Chilton began to distance himself from his previous comments about
concentration in COMEX silver and just as quickly, the lawsuit floundered.
I single out Gensler and Chilton
because they were once the good guys on the Commission or the only ones
pushing for position limits. Since they have allowed position limits, the
silver investigation and the unprecedented price declines in silver to fade
into the sunset unresolved, they must be held to the greatest standards of
failure. In a very real sense, Gensler and Chilton have done more harm as a
result of first championing the important issues and then abandoning them.
In fact, this whole
Dodd-Frank experience looks like a colossal failure because neither was
strong enough to speak out publicly about how the large banks and JPMorgan in
particular had corrupted the process. By them cow tailing to JPM we are
actually worse off today than if Dodd-Frank had never come up. As I said, I
think it’s a matter of Gensler and Chilton not being courageous enough. Where
each could have used the bully pulpit to hammer the issues home, they
squandered precious public TV time (Chilton in particular) talking about a
variety of issues away from position limits and concentration and
manipulation. The only plausible explanation is that someone got to them on
silver and persuaded them not to intercede in the ongoing manipulation.
I wrote all of the above
yesterday in preparation for today’s article, but the disturbing news out of
Cleveland and the rescue of the decade-long kidnapping and rape of three
young women is the prime influence for what follows. It’s hard to believe
that human beings can be so cruel to other people and I found the news reports
shocking. Most disturbing is the appearance that the local police had prior
opportunities to discover and save the young women, but failed to do so. I’ve
been tossing and turning all night contemplating that potential failure and
comparing it to the CFTC’s failure to end the ongoing silver manipulation.
Yes, I know that the
physical imprisonment and torture of human beings is different than the
financial rape and torture experienced by silver investors due to the actions
of JPMorgan and the CME Group and the complicity of the CFTC. That said, on
many other levels what has occurred in silver is actually worse. Please hear
me out.
It appears that the
police in Cleveland only had a few opportunities to discover and rescue the
women and while it is alarming that they may not have properly utilized those
opportunities, it’s actually much worse in silver. I have petitioned the CFTC
for more than 27 years about the silver manipulation in every way imaginable.
For more than 4 years, I have sent to all the commissioners, the CEO of
JPMorgan (Jamie Dimon) and the top regulatory officials at the CME Group
(including Terry Duffy since the previous CEO was sacked), copies of all my
articles in which I refer to JPM and the CME as crooks and criminal
enterprises. Since I write two articles a week, the total amount of articles
sent numbers in the many hundreds.
I’m very careful to
include Gensler and the other commissioners and Dimon and Duffy on the same
email sent so that they all know who else got the articles. I don’t know if
they read my articles (Chilton “boasted” a while back that he doesn’t read my
stuff), but I have never had an email returned as undeliverable. These are
all intelligent and powerful officials and they all know how unprecedented it
is to have two of the most powerful financial institutions in the world being
openly and continuously accused of criminal activity by an ordinary citizen.
I’m not trying to pat myself on the back, but one thinks twice before calling
JPMorgan and the CME crooks and signing your real name. I would only do so if
the facts warranted it. The police in Cleveland had maybe a few chances to
crack the case; the CFTC has had many hundreds of chances to crack the silver
manipulation and has not done so. That makes the CFTC look much worse than
the Cleveland police.
Supposedly, the police
went to the house where the women were imprisoned but left when no one
answered the door. Certainly, there was no formal investigation ever
initiated against the perpetrators. Contrast that to the CFTC’s actions. In
the last 9 years alone, the agency has conducted three formal reviews into
whether silver was manipulated by the big shorts. In the first two, the
agency concluded no manipulation existed. Yet the idea that a silver
manipulation exists is more widely embraced than ever. The current open
formal investigation by the Enforcement Division is now more than 4.5 years
old, making it perhaps the longest investigation in US Government history.
Although I was directly responsible for all these reviews being initiated, I
have never heard from the agency. This is some great way of conducting an
investigation, never seeking input from the person who prompted the
investigation in the first place. Not even the local police would think of
such behavior.
The important point is
that the issues that I raised that prompted the silver investigations must
have been substantive enough to warrant the continuous reviews; otherwise a
federal agency would just be squandering limited and valuable resources in
their pursuit. It’s hard to reach any other conclusion than the CFTC felt it
must investigate silver given the facts in their own data but had
predetermined that the outcome would find nothing beforehand. When it comes
to silver, the agency has no intention of judging the matter objectively.
This jibes with the
behavior of the agency regarding the truly unprecedented two silver 30% price
smashes of 2011 and the recent 20% smash of mid-April. It is inconceivable
that the CFTC would sit by and say nothing if any other regulated futures
market fell as much as silver did (twice) in 2011 and a few weeks ago. The
same goes for the CME which is the designated self-regulatory organization
for COMEX silver. The inescapable conclusion is that the CFTC and CME know
full well that silver is manipulated in price by JPMorgan and none of them
has any intention of doing anything about it. Everyone in Cleveland wanted
the women rescued, including the police. Because of this, it’s hard to reach
any conclusion other than the CFTC, CME and JPMorgan are corrupt beyond
measure. This has nothing to do with the CFTC’s competence; this strictly
concerns the agency’s intent to enforce the law which doesn’t exist when it
comes to silver.
Just so there is no
misunderstanding about the issues involved; it’s really quite simple when
viewing the official data. JPMorgan holds such a large concentrated short
position in COMEX silver that it is automatically manipulative to the price.
Even after a reduction in this concentrated short position of nearly 50% over
the past few months, JPMorgan is short 126% of the entire total commercial
net short position in COMEX silver futures. In other words, without
JPMorgan’s net short position of 18,000 contracts (90 million oz), there
would be no commercial net short position in COMEX silver (all data as of COT
of April 30). It was precisely JPMorgan’s concentrated short position that
caused the CFTC to start the formal silver investigation in September 2008
and it is still JPM’s concentrated short position that backs my allegations
to this day.
Throw in the daily HFT
trading scam and it’s easy to see that the price of silver is not taking its
cue from real supply and demand. Rather it is the crooked COMEX dictating
prices to the real world. Of all the regulators around, the CFTC knows this
better than anyone, yet they refuse to do anything about it. This is what
makes the agency the worst regulator possible.
What is it that the CFTC
should be doing? For starters, they should be resolving the matter once and
for all. No federal agency should announce, with great fanfare, a formal
enforcement investigation, complete with periodic updates saying the
investigation continues, with no resolution. That undermines public
confidence in and of itself. Worse, the price action
in silver (to this day) has been so extreme and unprecedented and suggestive
of manipulation while the supposed investigation has taken place that the
agency’s continued silence also undermines public confidence. And someone
please tell Bart Chilton to stop saying in private emails that the agency is
looking into it when it is clear that is the last thing they are doing.
It is time for the CFTC
to come clean about silver and stop pretending it is investigating. It will
be better for everyone (except holders of long COMEX contracts) for the CFTC
to simply shut down this crooked exchange instead of letting the manipulation
continue. At one time I did think the exchange could be reformed, but I no
longer feel that is possible. The corruption goes too deep. It’s bad enough
that an important American financial institution is corrupt beyond repair,
but it is more a loss that the COMEX has dragged the CFTC down with it.
In my latest article, I
referred to the commissioners and other high officials of the agency as
traitors to the American people. I still feel that way. Not only are none of
them fit to hold their current positions, they should never hold any other
public office again. Not even with the Cleveland police. I do plan on upping
the pressure on these people. Some readers asked me to include the
appropriate e-mail addresses.
Ted Butler
May 8, 2013
ggensler@cftc.gov
bchilton@cftc.gov
jsommers@cftc.gov
somalia@cftc.gov
mwetjen@cftc.gov
dmeister@cftc.gov
jamie.dimon@jpmchase.com
terry.duffy@cmegroup.com
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