Guest Author Blog by Leah McGrath Goodman, Author of: "THE ASYLUM: The Renegades Who Hijacked The World’s Oil Market"
“It’s the side of Wall Street Wall Street doesn’t want you to see,” one high-level banker warned me before I ventured down the rabbit hole that would become my seven-year sojourn to the heart of the oil market.
I will be honest: I expected the drugs, the corruption, the fistfights and the territorial death matches over money. It wasn’t surprising that the traders who ruled over the New York Mercantile Exchange, the world's most powerful oil market, imbibed illegal substances and brought guns, strippers and pornographic material into the trading pits.
As many of the market's inhabitants had come from nothing, their riches effectively overwhelmed them, leaving them with a feeling of omnipotence, a sense that real-world consequences did not apply to them. Much of the oral history of the men and women who built the global oil market, as related in “The Asylum,”invariably touches on their struggle with these things.
What I could not get over, however, was that most of the bad behavior appeared to be well-known to the nation's top market regulators, the New York Police Department and some of the highest-ranking officials of the U.S. government. Yet as oil prices streaked to nearly $150 a barrel in 2008, no one did anything about it. To the contrary, there was mass denial and the desertion of many key "regulators" from their posts.
I had known the New York oil traders for years, ever since I'd started writing about the energy market in 2003 for Dow Jones Newswires, Barron's and The Wall Street Journal. They were fond of gossiping about behind-the-scenes battles raging in the trading pits and telling their war stories. It seemed strange that no one had ever bothered to write them down. After all, these were the chosen few who started out trading potatoes and now called the shots on what the world paid every day for a gallon of gas or a barrel of oil. Despite their tough exteriors, they had much to say.
Bizarrely, the oil market’s main watchdog agency, The Commodity Futures Trading Commissionin Washington, also did not seem to be doing much about the situation. What its chairmen and commissioners mostly cared about was using their proximity to the private sector to snag high-paying jobs on Wall Street, rather than fulfilling their public mission (which, lest anyone forget, is to protect U.S. consumers and troubleshoot market corruption). Congress, judges, U.S. presidents all, have followed suit in throwing up their hands.
Until this past year, committing fraud in the largest part of the energy market was not illegal.
But how did this happen?
That was my question. Who was benefiting and what were the human motivations behind these ills?
In my experience, nothing can be explained by greed alone. There is always more.
I had seen the oil traders; they would go to jail for each other. It was the relationships – profitable relationships – that undergirded everything. And this, I found, led me to my answers in writing this book.
The solutions to the problems ailing us are known. The challenge is, are we willing to take our medicine? Americans need to take seriously what has been widely reported: the foxes are guarding the henhouse. More disturbing, the foxes have been guarding the henhouse for so long, the foxes and the hens can no longer tell each other apart.
To read an excerpt and to learn more about "THE ASYLUM: The Renegades Who Hijacked The World’s Oil Market" click here.