Wall Street Vultures Drive Up Food Prices While Billions Starve

While people around the globe struggled to put food on the table in 2012, banking giant Goldman Sachs reaped a bountiful harvest. According to a new report by the UK-based anti-poverty group, World Development Movement (WDM), Goldman Sachs made approximately $400M in profits last year by betting on the prices of food staples like wheat, corn and soy.

“Goldman Sachs is the global leader in a trade that is driving food prices up while nearly a billion people are hungry,” says WDM campaigner Christine Haigh. “The bank lobbied for the financial deregulation that made it possible to pour billions into the commodity derivative markets, created the necessary financial instruments and is now raking in the profits. Speculation is fueling volatility and food price spikes, hurting people who struggle to afford food across the world.”

The report goes on to conclude that the only thing that will stop banks from gambling on hunger is tough regulation, something that Wall Street is fiercely fighting against.

n 2011, the Goldman-Sachs-aligned International Swaps and Derivatives Association and the Securities Industry and Financial Markets Association joined in a lawsuit against the United States Commodity Futures Trading Commission (CFTC). The purpose of the suit was to challenge a portion of the Dodd-Frank Wall Street Reform and Consumer Protection Act that imposes limits on the number of contracts a trader can hold for 28 physical commodities, including wheat, corn, cotton and sugar.

On September 28, less than a month before the rules were set to take effect, Obama-appointed United States District Judge Robert Wilkins ruled in favor of the plaintiffs, saying that the CFTC had no “clear and unambiguous mandate” to set limits on speculative positions under the Dodd-Frank Act.

“The position limits rule is vacated and remanded to the commission for further proceedings consistent with this opinion,” ruled Wilkins. In doing so, the judge single-handedly relegated the matter to a perpetual state of limbo and gave Wall Street speculators a license to continue manipulating the price of food.

Although other major investment banks like Morgan Stanley and Barclays Capital have also made a killing off food speculation, Goldman Sachs has the distinction of being the architect of this predatory practice.

“In 1991, Goldman bankers, led by their prescient president, Gary Cohn, came up with a new kind of investment product, a derivative that tracked 24 raw materials, from precious metals and energy to coffee, cocoa, cattle, corn, hogs, soy and wheat,” wrote Frederick Kaufman in a recent article for Foreign Policy magazine. “They weighted the investment value of each element, blended and commingled the parts into sums, then reduced what had been a complicated collection of real things into a mathematical formula that could be expressed as a single manifestation, to be known henceforth as the Goldman Sachs Commodity Index (GSCI).

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