Thursday, April 5, 2012

JP Morgan`s Blythe Masters enters defense mode

Blythe Masters, the famous and infamous, depending on who you`re talking to, head of commodity trading desk at J.P. Morgan, made a rare appearance on CNBC today.

She denied blogosphere rumors about J.P. Morgan being involved in silver manipulation, saying "it would be wrong and we don`t do it". She made the case that it might appear so from the outside due to hedging of client positions by having short positions to offset price volatility.

However, it would be most interesting to know who exactly are all those clients she`s talking about. One of the accusations brought about against J.P. Morgan is that the FED is using JP as a proxy to manipulate the silver price. If this is true, J.P. Morgan doesn`t do anything by itself but rather representing a client(the FED), acting as a tool. It`s a well known fact that J.P. Morgan is part of all those closed door FED meetings as you can see in this article written by Lynn Forester de Rothschild and in the picture below. Take note that not only that J.P Morgan shows up among the banks that held closed door FED meetings but it outmatches the other banks by far when it comes to the sheer number of held meetings. 

Blythe concludes the interview on an interesting note, dismissing the need for certain transparency after pandering to the politically correct crowd:

"..the key is to ensure that that regulation is good regulation and with this type of topic the devil is almost always in the details. So in the interest of greater transparency, less systemic risk in the system, less connectivity between major players...on all of those things we feel great strides have been made in advancing regulation to promote those objectives. Having said that, we have to aware of unintended consequences and there`s a real risk of those unintended consequences. For example: if you make it difficult for institution to transact in commodity markets by excessively exposing their actions to the public domain too quickly, it would actually drain liquidity and make it harder for those institutions to hedge."

Of course, if the rumor claiming J.P. Morgan is acting as FED`s proxy in manipulating silver and gold prices is true, "exposing their actions" would severely hamper their ability to play the market.

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