Dear Mr. Chilton, RE the Gold Market In NY This Morning

"If you follow issues like Too-Big-To-Fail or Wall Street corruption long enough, you realize that the reason things don't get done about them by our government has very little to do with ideology or even politics, in the way most of us understand politics.

Instead, it's a bizarre, almost tribal mentality that rules our capital city – a kind of groupthink that makes extreme myopia and a willingness to ignore the tribe's ostensible connection to the people who elected them a condition for social advancement within."

Matt Taibbi, Neil Barofsky's Adventure in Groupthink

Personally I think this is the corrosive influence of the credibility trap, the amorality of careerism, and of course, an ambivalence towards white collar corruption as the inherent entitlement of privilege.  There seems to have been a shift in perspective amongst the new ruling class from noblesse oblige to droit du seigneur.   This is what Robert Johnson calls 'the audacious oligarchy.'

While it is recovering much of this sudden, five minute loss even now, with spot back to 1680 already, the hit on the gold market in the New York trade this morning was fairly blatant.

Perhaps it was just some innocent who had the desire to drop a boatload of contracts into a quiet market, and knock the price down while maximizing their selling loss.  Or another 'fat finger' mishap, which seem to happen quite a bit around option expiration for example.

Or perhaps it was some wiseguy trader who looked at the market, having some advantageous insight into the order books, and decided to 'run the stops.'

Thank God the US has the CFTC, whose job it is to look at this sort of thing and to tell us whether it was legitimate, or not.

And we should hear back about this, perhaps as early as January, 2017. And maybe even sooner on this one: 24 Tonnes of Paper Gold Dumped at Market

But it is nice to see that the CFTC is doing something. They are asking the court to overturn the $30 million fine on the Amaranth trader who was caught manipulating the natural gas market, because another regulator did their job for them.

And how is that MF Global investigation going by the way?

Curiouser and Curiouser: Missing MF Global Customer Funds May Be 'Massive Ploy'

And it appears that investor outrage is prompting a reaction amongst the regulators, as well it should. It is good to see that the CFTC is taking this seriously, and it is always good to hear from the 'can-do commissioner' Bart Chilton of the CFTC.

And it probably doesn't hurt to have SIPC on the hook for the funds as well.

Jon Corzine is a prominent Democrat who was said to be a candidate to replace Tim Geithner as Treasury Secretary.

Massive hide and seek ploy. This is getting interesting.

Bloomberg
MF Global’s Missing Funds May Be ‘Massive’ Ploy: CFTC’s Chilton
By Silla Brush
Nov 10, 2011 5:31 PM ET

The $593 million shortfall in client money at MF Global Holdings Ltd., the broker that filed for bankruptcy on Oct. 31, appears to result from a “massive hide- and-seek ploy,” Bart Chilton, a commissioner at the U.S. Commodity Futures Trading Commission, said today.

The agency took the rare step of publicly announcing its investigation, which began on Oct. 31, saying it was in the public interest to confirm the enforcement action. Jill E. Sommers was named as the senior commissioner during the probe, after Gary Gensler, the agency’s chairman, recused himself.

“This isn’t just a lost and found inquiry; it’s a full-on effort to get to the bottom of what appears to be a massive hide-and-seek ploy,” Chilton, a Democrat, said in an e-mail.

“It’s a distinct possibility, some would say probability, that somebody has done something with the money, and that it’s not going to be ‘all of a sudden discovered’ with an innocent explanation,” Chilton said. “If that’s the case, it’s patently illegal. I don’t know yet. Our investigation will uncover that, and we’re aggressively pursuing this.”

Gensler recused himself from the investigation because of his history with Jon S. Corzine, the former head of MF Global. Gensler worked with Corzine at Goldman Sachs Group Inc. and during his time as a Senate aide, while Corzine represented New Jersey as a U.S. senator.

‘Get to the Bottom’

“I have complete confidence in the dedicated men and women in enforcement to carry out the necessary investigation to get to the bottom of what happened,” Sommers, a Republican, said in a statement.

The probe of MF Global’s cash movements is being conducted by the U.S. Justice Department, the Commodity Futures Trading Commission, the Securities and Exchange Commission and the bankruptcy trustee’s staff in cooperation with the Securities Investor Protection Corp., James W. Giddens, the trustee, said on his website.

The CFTC also began a review of futures brokers to determine if client funds are properly segregated. The initial review will include between 10 and 12 futures brokers and the CFTC hasn’t set a deadline for the review, a person familiar with the review said.

Diana DeSocio, a spokeswoman for MF Global, didn’t respond to requests for comment. Steven Goldberg, a spokesman for Corzine in New York, said he had no immediate comment."

Full Text of CFTC Commissioner Bart Chilton's Statement on Market Manipulation

Has the US financial media mentioned or even discussed this? Today the Bloomberg television news people are busy discussing the World Wrestling Federation, a caricature of sport analagous to the Comex and NYSE as financial markets.

Statement of Commissioner Bart Chilton
U.S. Commodity Futures Trading Commission
Public Hearing on Anti-Manipulation and Disruptive Trading Practices
Washington, D.C.
Tuesday, October 26, 2010

I take this opportunity to comment on the precious metals markets and in particular the silver markets.

More than two years ago the agency began an investigation into silver markets. I have been urging the agency to say something on the matter for months. The public deserves some answers to their concerns that silver markets are being, and have been, manipulated.

The legal definition of manipulation under the law is a high bar to prove. It is a much different test than what the average person might consider as manipulation. Under existing law, to prove manipulation, the government is required to demonstrate not only specific intent; we also need to prove that as a result of the intent and market control, that activity caused an artificial price -- a point that can certainly be debated by economists.

Attempted manipulation is less difficult to prove -- requiring an intent to manipulate and some overt act in furtherance of that intent. There are also other violations of law that could contort markets and distort prices.

I believe that there have been repeated attempts to influence prices in the silver markets. There have been fraudulent efforts to persuade and deviously control that price. Based on what I have been told by members of the public and reviewed in publicly available documents, I believe violations to the Commodity Exchange Act have taken place in silver markets and that any such violation of the law in this regard should be prosecuted.

In saying this, I am fully aware of the prohibition from divulging trader names or information about their positions I am extremely careful not to violate the law in this, or any, regard. I also cannot pre-judge anything the agency may do with regard to our silver investigation, or any other matter.

The Wall Street Reform and Consumer Protection Act, which I strongly supported, contains new manipulation provisions as well as anti-disruptive trading rules. These new authorities, along with the implementation of thoughtful position limits in metals, will go a long way toward ensuring more efficient and effective metals markets devoid of fraud, abuse, and manipulation.

Thoughtful investigations take time. The CFTC staff has worked extremely hard on the silver investigation. That said, there is a point at which it is our responsibility to say something. Within the law, I have done so. I am hopeful that the agency will speak publicly about the investigation in the very near future and when they do so that it will be in a more granular fashion than I am permitted from doing at this time.

CFTC Commissioner Raises Alarm Over Silver Market Manipulation

The manipulation in the silver market with two or three banks holding enormous undeliverable short positions was obvious, for years.

The CFTC was complicit in turning a blind eye to this, stonewalling and whitewashing the corruption, as were many market commentators and participants. Ted Butler and GATA did a wonderful job of highlighting this enormous fraud but were ignored and even vilified for the past twelve years in the same vein as whistle blower Harry Markopolos was in raising concerns about Madoff's investment scheme.

Bart Chilton is speaking out as he said a few weeks ago he would if the CFTC was not making progress in correct this travesty. This is the sort of reform that the people were seeking when they swept the Democrats into office, a reform which they never received.

This obviously should be investigated by an independent body, given the regulatory capture held by the banks who manipulated the market to the detriment of the world in suppressing prices and creating an artificial shortage that will be painful to unwind.

This is not a partisan issue, but involves politicians of both parties going back twenty years or more, in both London and New York. And the corruption is pervasive and ongoing in multiple US finanical and commodity markets.  The regulators and ratings agencies have not been doing their jobs.

Some will attempt to dismiss what Mr. Chilton is saying here as inconclusive. Keep in mind that he is a high profile CFTC official, and what he says comes through a 50,000 watt megaphone, so he must choose his words with great care. But this is almost unprecedented for an official to speak out against his own administration.

The response to these sorts of revelations seem to be a blanket of media silence and whispered character assassination, which is the mark in trade of those who have no sense of duty, honor, and country. Their crime is betrayal of the public trust, and the public's fault is apathetic complicity.  'Silver did not rally on the news, it must not be significant. I did not hear about this on television, so it must not be true.'

But the dominos are starting to fall, and more revelations are to come. 

CFTC's Chilton raises alarm about silver market
WASHINGTON
Tue Oct 26, 2010 9:30am EDT

Oct 26 (Reuters) - There have been repeated attempts to influence prices in silver markets, Bart Chilton, a commissioner at the U.S. futures regulator, said on Tuesday.

"There have been fraudulent efforts to persuade and deviously control that price," Chilton said in prepared remarks before a Commodity Futures Trading Commission meeting.

Chilton said he could not pre-judge the outcome of the CFTC's ongoing investigation of the silver markets, but said public deserves some answers to their concerns.

Gold and silver are no bubbles. It is a reverse Ponzi scheme that goes back for decades, that has sold many more ounces of metal than can possibly be delivered at today's artificially low prices, that was tolerated and even promoted by those who were running a monetary control fraud, quite probably the greatest in history. The banks and insiders are trapped and desperate, trying to bluff and buy themselves out of another fraud yet again. They will never give up, but will have to be rooted out. It is unlikely that reform can come from within, since the righteous anger of the people and the will to change will be co-opted by those very forces that have manipulated the system and perpetrated the fraud.

Fortunes will be made and lost, and careers ruined, as the revelations of manipulation and corruption are made over the next ten years. And this will make for dangerous times, as an empire of deceit collapses not at once, but in stages. There will be new threats and more bailouts for the banks to be paid by 'austerity' for the common person who is caught up in their own web of petty diversions, apathetic cynicism and denial. There is little better example of this than Britain but America is not far behind.

But the tide has turned and change is in the wind.

Banks short 20,000 tonnes of gold.

Embry: Commercial Signal Failure in the Metals May Be Imminent

"A single breaker may recede; but the tide is evidently coming in."
Thomas B. Macaulay

CFTC's Bart Chilton On Financial Reform, Position Limits, and Curbing 'Disruptive Practices'

Actions will speak much louder than words, especially given the many disappointments in the past from the SEC and CFTC. Position limits are a good idea. Let's see how long banks like JPM and HSBC have to implement them if they are covered at all. And as for 'disruptive practices' in the market, I will be impressed if Goldman Sachs and Citigroup are ever called out for their abusive market practices in the US as they have been in Europe and Asia.

I like Bart Chilton, quite a bit actually. If he delivers on these promises, I would work for him to be elected or appointed to higher office. But after the great disappointment of Obama, it will take actions first to gain people's enthusiasm for a reformer.

We are all for you Bart, but now you must deliver.

Here is an introduction to this presentation by Bart Chilton from another good guy, GATA's Chris Powell:

"The member of the U.S. Commodity Futures Trading Commission who has been advocating imposing position limits on traders in the precious metals markets, Bart Chilton, has made a video explaining why he thinks the financial regulation law just enacted by Congress and President Obama promises great progress, particularly in making the commodity markets freer and more transparent. The law, Chilton explains, requires the CFTC to establish position limits and authorizes the commission to prosecute "disruptive trading practices." Chilton says he is especially pleased with that, because the commission's market manipulation standards have failed almost completely for many years.

Chilton has been amazingly conscientious on the precious metals manipulation issue and has been amazingly responsive to gold and silver investors who have complained to the CFTC about market manipulation. He'll need their support as the CFTC writes the position limits regulations required by the new law. The big commercial shorts are sure to be heard as the commission continues to take public comment, so gold and silver investors can't let up yet."

NY Precious Metals Prices Pressured into Futures Options Expiration

As gold and silver trading in the states moves into another futures option expiration and the rollover from the April contract with first delivery notice time approaching, the paper gold market deviates once again from the world market for bullion.

As John Brimelow notes:

Intriguingly, so also may be China. Mitsui-HK today explicitly says:
“While euro tried to pull the yellow metal lower, Chinese buying wanted to push it higher”

More concretely, the Shanghai market closed at a $6.08 premium to world gold of $1,091.98, the second day of unusually high premiums. At the equivalent of 8,469 NY lots, volume actually exceeded TOCOM for the first time I can remember. Andy Smith of Bache suggested the other day that China might resort to buying gold to groom its foreign trade statistics, which he pointed out was done by Japan in the 80s and Taiwan in the 90s. Official action would not show in Shanghai, of course, but maybe the hive mind is at work.

Local Vietnam gold stood at a $27.89 premium to world gold of $1,087.20 early today (Wednesday $24.41/$1,104.20).

While on day session volume equivalent to 7,804 NY contracts TOCOM open interest slipped 2.9 tonnes (900 NY), the public added 3.67 tonnes (6.8%) to their long. The active contract added 15 yen and world gold rose $1.25 during the session to go out $3 above NY’s depressed Wednesday 4PM level.

Gold in Euros rallied fairly smoothly from the end of yesterdays’ NY aftermarket until the European open, then moved approximately sideways until 10AM NY. $US gold did the same, but more erratically. At its intraday high around 7-30 AM it was up $6.80. A raid seems now to be underway. Estimated volume at 9AM is reported to be an eye-popping 206,132 lots which if not an error will need some explaining; the CME website indicates volume at 10 AM was roughly 87,000 of which about half was done before the floor session.

With the option expiry still pending price resistance in NY is to be expected, which will greatly please the now clearly activated Eastern physical buyers.

Do you think they were banging the price lower with heavy short selling in the early hours to depress the price below the key strike prices around 1090 and more importantly, 1100? When there are no limits on positions and you have deep pockets in a fairly thin market, the opportunities for manipulating price action becomes a rather compelling temptation, especially if you think the Fed 'has your back' and expect to be bailed out by them or the Exchanges if you are ever cornered for delivery of what you have already sold.

While traders can make money just following the momentum of the big trading desks on this obvious price pattern, it does not foster confidence to see the markets so obviously pushed around, and for the regulators to be so obviously asleep at their desks (or surfing porn, as the recent investigations of the SEC have disclosed).

This is not to say that there are no government officials and regulators trying to do the right thing for the public which they serve and the oaths which they have taken. Elizabeth Warren, Chair of the TARP Oversight Program, and Bart Chilton, a CFTC Commissioner, and a Bush nominee no less, who are providing outstanding leadership on the subject of market reforms. It is would be good to see them receive more visible support from this Administration, to encourage the many in government who would be more than wiling to act, given the appropriate encouragement and leadership.

Gold April Futures Hourly Chart



Gold June Futures Hourly Chart



Gold Weekly Chart



Silver Weekly Chart



Mining Index

A New Year's Resolution on US Financial Markets from the Incoming Administration

These are strong, almost startling words from Bart Chilton, part of Obama's incoming administration, currently on the CFTC.

The message is good and to the point. The illustration of the performance of the regulators over the past ten (not eight) years is remarkable, an indictment of the existing Federal regulatory system as a whole.

Actions will speak louder than words. We will all look forward to seeing what happens in Washington over the next few months, and in particular, what is done by the CFTC and the SEC in reforming US financial markets.

Washington
Time to restore mission of regulators
By Bart Chilton
January 1, 2009

In the building that currently houses the president-elect's transition team, there used to be an imposing bronze plaque with the visage of the Securities and Exchange Commission's redoubtable third chairman, William O. Douglas. It was emblazoned with the inspiring legend, "We are the Investor's Advocate."

For many decades, the SEC enjoyed the reputation of living up to the noble standard of public service. The plaque no longer graces the entryway of the SEC's new quarters, and with the recent revelations of failure to detect and prosecute incidents of egregious securities fraud and abuse, both internally and externally, the agency's reputation has been severely tarnished.

These types of disclosures make us as public servants ask some fundamental questions: Why are we here? The Founding Fathers had the answer: We are employed to protect the common wealth and serve the public good. We are not here to serve amorphous philosophical, economic or ideological concepts such as "financial markets" or "economies."

Our task is to serve the public -- those people in the hinterlands, many of whom have recently lost 30 percent or more of their retirement funds and/or home values and who now face losing their jobs. Our "client," our "constituent," is the American consumer and worker, the businessman or woman who generates and uses the products and services that comprise our "markets" and our "economy." If we fail to protect, first and foremost, these individual Americans, we cannot succeed in assuring the strength of our economy, nor in protecting the integrity of our financial market system.

Do we need to have statutes and regulations in place to ensure reliability of the marketplace? Of course we do, but over the past decade "the marketplace" has been exalted to a position perceived as virtually omnipotent and omniscient, while consumer protections have been generally neglected. The consequence lies scattered around us.

By veering too sharply to the right and letting go of the regulatory reins, we provided neither the market nor the consumer a great service. Rather we harmed both, and have a long hike to escape the resulting global economic meltdown. We must be careful not to over-correct -- not to go so far in the other direction that we stifle innovation and market growth. But it is clearly time for federal financial regulators to re-evaluate our current statutes and regulations, and to put "common sense rules of the road," as the president-elect has suggested, in place to protect consumers and bring our economy back into balance.

The SEC isn't the only federal financial regulator to have failed in serving the public. The Treasury Department appears to have lost its way as well, when a $700 billion bailout package, purportedly written to ensure against unconscionable executive compensation was, within weeks after passage, found to have a loophole allowing such compensation.

Federal banking regulators seem to be off course, permitting casino-like buying and selling of trillions of dollars worth of virtually worthless transactions. When gasoline topped $4 a gallon, the Commodity Futures Trading Commission dropped the ball, unable to oversee speculation's uneconomic role in the U.S. commodities markets.

In decades past, the CFTC has been charged with being too tied to the industry, too closely aligned with the regulated, and overly concerned with protecting "markets" rather than consumers. We've made good progress, and there are very fine people in all of these agencies and departments, but we too can and must do much better.

I have advocated a comprehensive legislative reform of the laws governing over-the-counter trading, and requested that authority over these critically important markets be vested in the Commodity Futures Trading Commission. The CFTC, a small agency in comparison to the SEC, has exclusive jurisdiction over risk-management markets in the United States, and has in recent years carved several significant notches in its enforcement belt.

At any one time, this small agency, with one-tenth the enforcement staff of the SEC, is investigating or prosecuting anywhere between 750 and 1,000 individuals or entities for violations of the Commodity Exchange Act. The agency has, just in the past year, tagged bad actors with more than $630 million in fines and settlements, in actions involving fraud, manipulation and other misconduct. Not a bad record for a small agency operating on a shoestring budget -- and we'd be able to do even more if given the authority.

With the collapse of the economy, the transition of government already under way with the new Obama administration, and the appointment of an excellent new federal financial regulatory team, it will soon be time to implement this new legislation, and similar consumer protection initiatives.

Also, we need to restore the clarity of our own mission in government: that we are here to assure financial opportunity and market fairness to the public. We need to regain the public trust.

With a shared vision of our mission and much needed reforms, our duties and responsibilities will flow clearly. Chief among these duties is a strong and aggressive enforcement arm. Markets must be free from fraud and manipulation for them to operate as they should -- for all Americans. This baseline approach to enforcement protects consumers and allows for open and free markets that are able to grow and innovate.

Investor's Advocate: A good legend, apparently forgotten. All federal financial regulators should use a new door sign: Consumers First. Everything else will follow.

Bart Chilton is a commissioner on the Commodity Futures Trading Commission, a Democrat, and a member of the Obama transition team.