3 Times Wall Street Manipulated the Market

When I first heard about the “GameStop uprising,” I had no idea what it was. But then the news lit up with stories about how a bunch of regular Joes decided to play Wall Street’s own game and caused quite a ruckus. Although I don’t condone risking your own finances just to make somebody else mad or to prove a point, I understand why people did it.

Wall Street has been manipulating the market unfairly for years, and no one says much about it. For them to have a meltdown over regular people playing the same game they play every day is a bit ironic. But I digress. If you’re on the fence and feel like perhaps Wall Street really is the victim, you may not know as much about Wall Street as you think you do. Here are three distinct times Wall Street manipulated the market on purpose and got away with it (while making lots of money in the process).

1. The Aluminum Price-Fixing Conspiracy

Between 2010 and 2013, Goldman Sachs came up with the idea to price-fix aluminum for their own benefit. The action later became known as The Aluminum Price-Fixing Conspiracy. JPMorgan Chase & Co., and Glencore Xstrata joined in the scheme. Together, they inflated aluminum prices by artificially creating shortages in supply at their various aluminum warehouses. They would intentionally release only a small amount of aluminum at a time so they could charge exorbitant prices.

The United States Justice Department later became aware of the scheme, which is estimated to have cost consumers in America nearly $5,000,000,000. The big guys made big bucks while the little guys paid an inflated amount for a material that was intentionally manipulated to decrease its supply.

2. JP Morgan Chase Power Manipulation

Back in 2013, JP Morgan Chase was ordered to pay a fine of $410,000,000 to settle charges that the energy unit of the company manipulated energy prices in California. The massive Wall Street company drove up the electric bills of millions of Americans in a dishonest way. JP Morgan was so good at this manipulation that they ended up getting California utility companies to pay $999 per megawatt-hour. At the time, the going rate was just $12 per megawatt-hour. If that’s not blatant fleecing, I don’t know what is.

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3. The Great Recession of 2008

Many people still don’t realize this, but Wall Street's manipulation of the markets was what ultimately led to the Great Recession of 2008. I remember that year like it was yesterday, and many of you probably do, too.

Before the 2008 recession, the housing market was going strong. However, banks were taking on millions of home mortgages during that time (many of which came from people who couldn’t actually afford their mortgages). Then, the banks bundled the mortgages into packages also known as mortgage securities.

JPMorgan knowingly sold those mortgage securities to investors, despite knowing that many of the mortgages weren’t any good. At the same time JPMorgan was selling those packages to investors, it was making its own bets that the investments it just sold would lose value. When the market collapsed, those mortgage packages became almost entirely worthless—just as JPMorgan predicted they would.

When questioned about whether they felt any regret for their actions, certain JPMorgan executives refused to admit they felt any remorse or did anything wrong. And yet, they nearly single-handedly tanked the entire United States economy.

So, while I’m not here to tell you to go out and buy up a bunch of random stocks to stick it to the big guys, I do think it’s important to understand that the economy is largely controlled by a few conniving people on Wall Street. To keep yourself financially secure in the event of another manipulated market collapse, I recommend building up a healthy savings, paying off your debts, and diversifying your investments.

Craig C. Thompson - February 17, 2021

Very insightful……….

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