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Think of powerful, multi-billion dollar corporations, and many come readily to mind. Wal-Mart. General Electric. Exxon Mobil. Bank of America. McDonald's. Apple. We recognize their logos, know what they sell and how to buy it -- or how to not buy it if we choose.

But for all their riches and ubiquity, when it comes to sheer raw power, these high-profile behemoths are eclipsed by a company that most of us have never heard of.

cme crime scene

Above, some of protesters outside Chicago's City Hall prior to a November 9, 2011 meeting of the Chicago City Council. The large protests, as well as aldermanic criticisms of Mayor Emanuel's regressive budget and refusal to release TIF dollars to the schools, were ignored by Chicago's corporate media. Substance photo by Kenzo Shibata. Story City Hall declared a 'crime scene' as groups challenge mayor's budget on TIFs, Mercantile Exchange
Meet CME Group. Last fall, Forbes revealed "The Four Companies That Control the 147 Companies That Own Everything," in which contributor Brendan Coffey argues that "the real power to control the world" lies not with the likes of Wal-Mart and Bank of America, but with the select few companies that control the indexes that rank these corporations. CME Group, owner of the Dow Jones Indexes, is one of these four companies, which is why it is important for all of us to get to know this company, how it makes its billions, and how it impacts us all.

The "CME" in "CME Group" stands for the Chicago Mercantile Exchange, which has special significance for those of us who live in Chicago. We're familiar with "The Merc" and the Chicago Board of Trade, the two iconic commodities futures exchanges comprising Chicago's Wall Street. (And if you're not from Chicago, you've likely seen the trading floor of Board of Trade -- featured in the classic Ferris Bueller's Day Off). CME Group formed relatively recently, when the Mercantile Exchange bought the Board of Trade in 2007. But a five-year growth and acquisition spree has secured its status as one of the four masters of the corporate universe.

So what does CME Group do, exactly? Maybe the word "derivative" rings a bell. Derivatives are the risky financial products (think credit default swaps) that brought the economy crashing down. The exchanges CME Group operates do handle a few respectable transactions -- farmers protecting their commodities against price fluctuations for example. But mostly, these exchanges operate as giant casinos where thousands of ultra-wealthy traders and speculators go to place bets on the rise and fall of the price of commodities, including oil, gold, currencies, interest rates, and other exotic financial products.

cme blocking bride The November 17, 2011, sit down on Chicago's LaSalle Street bridge. Photo Labor Beat. Story - Holding the LaSalle Street Bridge... Labor and Occupy mark November 17 day of actions

So what does CME Group do, exactly? Maybe the word "derivative" rings a bell. Derivatives are the risky financial products (think credit default swaps) that brought the economy crashing down. The exchanges CME Group operates do handle a few respectable transactions -- farmers protecting their commodities against price fluctuations for example. But mostly, these exchanges operate as giant casinos where thousands of ultra-wealthy traders and speculators go to place bets on the rise and fall of the price of commodities, including oil, gold, currencies, interest rates, and other exotic financial products.

Mayor announces he will declare a partial TIF 'surplus'...
How much will go to the Board of Education and what the Board will do with it is unclear, although Rahm wants it to go for pensions for non-teacher CPS workers

Buried in more than 30 pages of various documents sent out by Chicago Mayor Rahm Emanuel's press office is a short note indicating that the mayor will declare a partial TIF surplus in response to pressure from various groups. One of the oddest things about the announcement (in addition to the fact that it is truly buried in a larger document) is that Emanuel claims that the declaration of the partial TIF surplus is in response to urgings by groups including the Civic Federation and aldermen, while ignoring the fact that the largest number of groups urging the TIF surplus (for more time than Rahm's been mayor) have been the city's unions, specifically the Chicago Teachers Union and the Service Employees International Union.

story continued @ .........................
http://www.substancenews.net/...

For the past six months, union members have protested, among other things urging the TIF surplus. Union members have also testified at every meeting of the Chicago Board of Education since Rahm Emanuel appointed his Board in June 2011, urging the Board members to sign the pledge to ask for TIF funds for the schools. (All refused, at the September 28 Board meeting, Board President David Vitale refused several times...).

Like more traditional casinos, CME Group makes its money by taking a cut of each and every bet. For a concise explanation of how derivative exchanges work, check out this clip from Trading Places, evidence that the whole set up is comically absurd. Unfortunately, in real life, it's not an audience but the CME that's laughing -- all the way to the bank.

And the CME Group has a LOT to laugh about. A lot of money that is. Its profit margin is consistently above 30 percent, making it the most profitable company in Chicago and one of the most profitable companies in the world. It took home nearly $2 billion last year -- a remarkable figure for a company with just 2,500 employees.

If you think that earning billions in profits year after year would be enough for CME Group, you'd be wrong. Tragically wrong. Because CME Group has a penchant for padding its already expansive bottom line with public dollars.

'Occupy Chicago' protestors after stand off at Congress and Michigan

PA220060

The crowd had marched earlier from the Federal Reserve Bank at LaSalle and Jackson to Grant Park, chanting “We are the 99 percent,” and, “How do we fix the deficit? Tax, tax, tax the rich!” A rally earlier in the evening had included members of the Teamsters Union and the Chicago Teachers Union. At least one Chicago teacher was known to have been arrested.

story continued @ .........................
http://www.substancenews.net/...

Chicagoans are familiar with the company's $15 million TIF grab a few years back -- and were justified in claiming victory when, after months of protest by community and labor groups, CME Group took the unprecedented step of giving the money back. And families across the state are now reeling from the Illinois General Assembly's recent decision to reward CME Group's empty threats to relocate with a tax loophole that will take $1 billion out of the state budget over the next ten years, resulting in layoffs and cuts to vital services.

CME Group has a funny way of "earning" money -- and the joke is on the 99%. In addition to siphoning off taxpayer dollars that are desperately needed elsewhere, CME Group is also setting a very troubling example. By taking advantage of people's fears about jobs and the economy to get its hands on public funds, it's sending a message to all other corporations that they, too, can pad their profits, pay their executives multi-million dollar salaries, and hire corporate lobbyists to ensure that the laws continue to favor their company, all with our money.

Although keeping a low profile has helped CME Group become so powerful, over the last few months the company's irresponsible behavior has earned it some unwanted attention. The collapse of its client MF Global, former New Jersey governor John Corzine's derivatives brokerage where $1.6 billion in client funds went missing last October, put CME Group in the spotlight. The CFTC, the federal agency that oversees futures exchanges, is now investigating CME Group to determine whether the company fulfilled its regulatory obligation to safeguard customer money. And just a few days ago, CME Group announced that CEO Craig Donohue would be stepping down much sooner than anticipated, amidst growing trader dissatisfaction with his handling of the MF Global crisis.

Given both its immense power and its history of predatory behavior, we would be wise to keep an eye on CME Group. In the coming weeks and months, Illinois will be grappling with the giant hole that the company's tax breaks have left in the state budget, and families will suffer as a result. There has never been a better time to stand up to this powerful company and demand that it give our money back.

by Elizabeth ParisianPolicy Analyst, Stand Up! Chicago

Originally posted to Hyde Park Johnny on Sun May 06, 2012 at 07:42 PM PDT.

Also republished by Occupy Wall Street, Your Government at Work, ClassWarfare Newsletter: WallStreet VS Working Class Global Occupy movement, and Progressive Hippie.

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Comment Preferences

  •  Excellent diary. (8+ / 0-)
    So what does CME Group do, exactly? Maybe the word "derivative" rings a bell. Derivatives are the risky financial products (think credit default swaps) that brought the economy crashing down.
    It seems these derivatives are behind a lot of what is destroying our economy - here and around the world. Our Banking Meltdown in 2007 and now in Europe.
    •  It was the Chicago Board of Trade which... (7+ / 0-)

      ...originally initiated London-style futures and options trading in the United States in 1865, only months after Abraham Lincoln’s assassination. This speculative activity flourished until Franklin Roosevelt banned most of these practices in 1936.

         In 1973 the Chicago Board of Trade opened its “Options Exchange,” which initiated trades in European-style financial options for the first time since such trading was made illegal by Franklin Roosevelt in 1936. That same year the the Black-Scholes Formula was published in the Journal of Political Economy. Using mathematical formulas to “predict” market behavior, use of the Black-Scholes and related methods quickly spread throughout the financial community, as the preferred technique to engage in financial gambling .

          In 1974, Franklin Roosevelt’s Commodity Exchange Administration was abolished and replaced by the pro-speculation Commodity Futures Trading Commission (CFTC ). Between 1974 and 1982, the CFTC legalized (or acquiesced in the creation of) a variety of speculative financial instruments, including currency futures, interest rate futures, and stock index futures. In 1982 Congress passed the Futures Trading Act, which officially legalized options trading, and expanded the role of the CFTC at the expense of the Roosevelt-created Securities and Exchange Commission, giving the pro-speculation CFTC sole oversight over all commodity futures and options trading.

          In 1988, Wendy Gramm, the wife of Sen. Phil Gramm (R-Tex.), was appointed chairman of the CFTC. Under her leadership, the floodgates were opened for a massive growth of the derivatives market.

          In 1992, Enron was allowed by the Gramm-led CFTC to remove energy derivatives and interest-rate swaps from CFTC oversight. This opened the door to a new era of profiteering in the energy markets.

          In 1994, Long Term Capital Management (LTCM) hedge fund is started up by Robert C. Merton and Myron S. Scholes. Using the Black-Scholes “method,” the collapse of LTCM in 1998 almost brought down the entire banking system.

          In 1999, Congress repealed the Roosevelt-era Glass-Steagall Act, opening the door for the federally-chartered commercial banks to engage in the same speculative practices as the investment banks.

          In 2000, Congress passed the Commodities Futures Modernization Act, which expanded the power of the CFTC, repealed the laws against stock futures, and – most importantly – liberalized the regulations against the insane Over-the-Counter (OTC) derivatives.

          As a result of these actions, following the stock market crash of 1987, and under the “guidance” of Alan “wall of money” Greenspan and Ben “bubbles” Bernanke, America embarked on a speculative binge unprecedented in human history, resulting in the dot-com crash of 2000-2001, the mortgage crash of 2007, and the looming banking crash we face today.

      source

      Resistance Is Fertile - Occupy

      by Sean X on Sun May 06, 2012 at 10:19:01 PM PDT

      [ Parent ]

  •  This is really well done! (1+ / 0-)
    Recommended by:
    Youffraita


    Anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "my ignorance is just as good as your knowledge." ― Isaac Asimov

    by Pluto on Sun May 06, 2012 at 11:17:21 PM PDT

  •  We need a Financial Transaction Tax (5+ / 0-)

    on every single trade of every single type of derivative, stock, commodity, all of it.  A good size percentage of the value traded plus a BIG tax on earnings by the traders.  

    CME harvests money.  Our money.

  •  Fascist Rahm Emmanuel gearing up for NATO (0+ / 0-)

    protesters and is very busy I guess.

    "The word bipartisan means some larger-than-usual deception is being carried out”. - George Carlin

    by Funkygal on Mon May 07, 2012 at 01:59:06 AM PDT

  •  "So what does CME Group do, exactly?" (0+ / 0-)

    Blowing up the world through financial terrorism using weapons of mass destruction - derivatives that is.

    "The word bipartisan means some larger-than-usual deception is being carried out”. - George Carlin

    by Funkygal on Mon May 07, 2012 at 02:00:51 AM PDT

  •  Family Farmer and Rancher Protection Fund (0+ / 0-)
    In April 2012, CME Group established a $100 million Family Farmer and Rancher Protection Fund to provide further protection of customer segregated funds for U.S. family farmers and ranchers who use CME Group markets to hedge their crops and livestock that feed the world. For registration information, please consult the resources below.

    Under the terms of the Family Farmer and Rancher Protection Fund, farmers and ranchers using CME Group products will be eligible for up to $25,000 per participant in the case of losses resulting from the future insolvency of a clearing member or other market participant. Farming and ranching cooperatives also will be eligible for up to $100,000 per cooperative. If losses in a future failure total more than $100 million, participants will be eligible for a pro-rata share of the fund, up to $100 million.

    Clearing members and eligible family farmers, ranchers and agricultural cooperatives must register in advance with CME Group and provide certain documentation in order to substantiate their eligibility.

    For more information, please consult the resources below.

        Fact Sheet (PDF)
        Q&A (PDF)
        Terms & Conditions (PDF)
        Customer Registration Form (PDF)
        Clearing Member Registration Form (PDF)
        Eligible Products for CME Group Family Farmer and Rancher Protection Fund (PDF)
        Registered Clearing Members

    http://www.cmegroup.com/...

    .

    Resistance Is Fertile - Occupy

    by Sean X on Mon May 07, 2012 at 02:51:32 AM PDT

    •  So what? I mean, that's nice... (3+ / 0-)
      Recommended by:
      semiot, a2nite, native

      No it's not nice, according to this commodities broker:

      Pathetic Kabuki Theatrics: CME Family Farmer Fund

      The Chicago Mercantile Exchange (died November 1, AD 2011), has announced with great fanfare their new "Family Farmer & Rancher Protection Fund." Hurl. Puke. Vomit. Where to start with this pathetic crap? Let's start with the CME's (Dead Man. Got a Dead Man walkin' here. Dead Man . . . ) press release itself:

         

      To Our Valued Customers,

          We are pleased to announce that registration resources are now available for the CME Group Family Farmer and Rancher Protection Fund. This $100 million program has been established to provide further protection of customer segregated funds for U.S. family farmers and ranchers who hedge their business in CME Group futures markets. For registration forms and further information, please consult www.cmegroup.com/familyfarmerfund.

          Under the terms of the Family Farmer and Rancher Protection Fund, farmers and ranchers using CME Group products will be eligible for up to $25,000 per participant in the case of losses resulting from the future insolvency of a clearing member or other market participant. Farming and ranching cooperatives also will be eligible for up to $100,000 per cooperative.

          Since the failure of MF Global, in which a clearing firm violated CFTC regulations and misused customer funds that should have been kept segregated, CME Group has taken aggressive action to get our customers back to business and to speed the return of customer property. Going forward, we are working with the National Futures Association, the Futures Industry Association, and the entire industry to focus on holistic solutions to further strengthen protection of customer funds at the firm level. The Family Farmer and Rancher Protection Fund therefore is a first step - an extra security measure to protect the country's food producers - in what we expect to be a series of enhancements.

          We continue to actively work with the industry to further strengthen customer fund protections, and we will continue to keep you updated on these efforts through our website, www.cmegroup.com/mfglobal.

          Sincerely,
          Bryan

      Let's start at the beginning. If their customers were "valued", the CME wouldn't have participated in their repeated GANG RAPE and thus destroyed the U.S. financial markets and custodial system.

      Next, the entire "Farmers and Ranchers" thing. Wait just a minute. Why is this protection limited to "Farmers & Ranchers"?? What is that crap? What about the service station owner hedging his gas and diesel buy? What about the small regional airline hedging their fuel needs? What about the fabric mill hedging their cotton needs? What about the small, rural bank hedging their interest rate exposure? What about the small business in upstate New York hedging their Canadian Dollar risk exposure? Heck, what about the metals speculator? What about anyone? Why are Farmers & Ranchers ONLY provided "protection"?

      Oh, I know why. Because this is all pure theatrical, politicking bee-ess. Throw out some bee-ess "program" that makes for good publicity so you can bee-ess the public and the gullible customer base into thinking that you all aren't a bunch of godless psychopaths. But we all know that you are. Jackals.

      Remember guys, "Farmers & Ranchers" are my peeps. That's my bread and butter customer base, and I'm the first one to tell you that to afford any special "protection" to one group of people or industrial sector is just plain WRONG, and at the end of the day is proof that this is all bee-ess. The CME will never pay out on any claims, because if they do THEY WILL INSTANTLY BE SUED FOR DISCRIMINATION BY ALL OF THE NON-AG CUSTOMERS, AS THEY SHOULD BE.

      Next, $100 million? Really? You know, that's funny, because the CME has had all along an EIGHT BILLION DOLLAR emergency fund sitting idle. Yep. They could have not just made the MF Global customers whole (assuming we're talking about $1.6 billion), oh they could have easily covered the ENTIRE COMPANY, which was just under $7 billion on October 31, 2011.

      So . . . is this trifling, paltry $100 million just money already in the CME's untouched emergency fund, or is this new money in addition to the EIGHT BILLION already sitting in reserve?? Eyeroll.

      Why exactly, again, was the EIGHT BILLION DOLLAR CME emergency reserve fund NOT tapped in the MF Global collapse? Why are the MF customers STILL not whole, and never will be? Why did this entire situation happen in the first place??? What EXACTLY would need to happen from here forward for the CME to actually fulfill its fiduciary duty and actually tap the EIGHT BILLION DOLLAR emergency fund?

      Wow. $25,000 max payout, huh? You all do realize that a $25,000 account balance would constitute a VERY SMALL ag hedge account, right? VERY SMALL. So "XYZ Brothers Family Feedlot" with an easy $500k account balance between their cattle, feeder cattle and corn positions would have a maximum payout of . . . $25k? WOW. That makes it ALL WORTHWHILE, knowing that FIVE PERCENT COVERAGE is there. Or ABC Family grain elevator with its $2.5 MILLION account balance will have a whopping ONE PERCENT coverage! Or EFG Small Family Farms with their hedge on this year's corn, wheat and soybean crops and their $75,000 account balance. I'm sure that losing TWO-THIRDS of their equity won't be a problem at all!

      I'm a HUGE fan of math. Slaughter-ready cattle are trading for roughly $1.24 per pound today. The average slaughter weight is 1300 pounds. That means that ONE - JUST ONE fat steer is worth right at $1600. $25,000 divided by $1600 is . . . FIFTEEN HEAD. That's right cattle feeders! The CME in all of its benevolence will guarantee that if they participate in prison raping you again, that they will cut you a check, after you fill out several hundred pages of claim forms and wait three years - for FIFTEEN HEAD. In today's dollars.

      [...]

      Finally the letter wraps up by saying that the CME has taken aggressive action. What aggressive action? The only aggressive action was to push through a totally fraudulent Chapter 11 BK filing on the MF estate to guarantee that the customers were displaced from the front of the line to the rear - all in favor of Jamie Dimon and JP Morgan. The only "aggressive" advocacy on the part of the CME was for JP Morgan. Give me a break.

      And I love the first name-only signature - like Bryan (Durkin) is your buddy who's "got your back." Well, yeah, in the "Cellblock D gang showers" sense of "got your back."

      Bottom line: Anyone who falls for this, or any broker who peddles or cites this "Protection Fund" as evidence of "market integrity" deserves what they get. At some point, people just have to wise up and take intellectual responsibility for the stewardship of their wealth.

      Oh, and anyone who uses the word "holistic" needs to be taken out back behind the woodshed and soundly beaten just on general principle. Cut the metrosexual Berkeley crap, "Bryan." Good grief, next he'll be wanting to "cleanse auras" with crystals or some crap like that.

      Here's the citation if you want to see it on CME's website.

      http://barnhardt.biz/
      (not possible to link to individual posts at this website)
      I admire her straightforwardness, and her explaining what's happening in a business most people don't understand at all. And she does know well the commodity futures trading business. I was looking to see if this was the particular group that caused her to announce to her customers last November that she was closing down her business because she could no longer guarantee the safety of her customers funds in these markets. No matter what one may think of her other views, she cannot be accused of a lack of integrity.

      Resistance Is Fertile - Occupy

      by Sean X on Mon May 07, 2012 at 03:17:40 AM PDT

      [ Parent ]

  •  I remember the IL General Assembly giving CME... (1+ / 0-)
    Recommended by:
    semiot

    ...a big tax break because they threw a fit and threatened to move out of Illinois if they didn't get what they wanted.

    CME Group doesn't believe in capitalism, they believe in greed!

  •  they're not powerful. (1+ / 0-)
    Recommended by:
    VClib

    they just operate the exchange, they don't control the activity that occurs on it.

    interesting sidenote: in 2011 they paid 42% of their income in income tax.

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