In 1998, President Bill Clinton signed the Gramm-Leach-Billey Act. Heralded as the masterpiece of the New Economy, the law stripped away New Deal provisions enumerated in the Glass-Steagall Act and allowed commercial banks to invade the investment sector. Alas, we had the newly created Citigroup, Goldman Sachs and the rest of Wall Street in the American household; years later, this would come to shotgun-spray Lady Liberty back in the face.
However, neither the Gramm-Leach-Bailey nor the Glass-Steagall Acts said anything about banks entering the energy sector; hence why we have gas prices fumbling on the back of a bunch of speculating stock traders. But now, a new chapter has been written in the history of financial energy prop-ups: in their recent cover story on Afghanistan’s trillion-dollar raw material market, the New York Times briefly mentioned that ”an investment consortium arranged by JP Morgan Chase is mining gold.” Think the 1849 Gold Rush in Tora Bora’s backyard, led by the same guys that brought you derivatives.
Like the Iraqi invasion in 2003—in which the U.S. government encouraged war profiteers like Halliburton to basically rebuild Mesopotamia—the bloody Afghanistan mining fields are being chopped and screwed by the Department of Defense and sold to the highest bidder. And that’s the case for the Wall Street titan: in 2010, the DOD’s Task Force for Business and Stability Operations (TFBSO, for brevity issues) bragged it landed its “first Western investment” with a $50 million certificate for JP Morgan Chase to start “drilling and production in northern Afghanistan’s Baghlan Province.”
With that money, Ian Hannam, a former solider and Chairman of J.P. Morgan Capital Markets at the time, led his team of Indiana-Jones-meets-the-Brooks-Brothers into a literal gold mine. By doing so, the Pentagon had its fingers crossed that the bank could prove that the “country is safe for foreign investors.” FYI: this was 2010 – the climax of President Obama’s surge that witnessed hundreds of deaths on both American and Afghanistan sides. The war effort needed a little bit of good PR at this point.
However, much has changed in the past two years. To start, Hannam no longer works at J.P. Morgan Chase because the whole energy sector dabbling thing came to back to bite him in the ass. This past April, he resigned from his top post after being charged with giving away financial secrets to Heritage Oil, a British exploratory energy company at which he was a lead advisor. For his keen inability at keeping his mouth shut in disclosed e-mails, he was slapped on the wrist with a $721,000 fine.
But as we all know, gold is addictive as Afghan heroin. So the resignation didn’t stop Hannam from his thirsty mission: later on that month, Bloomberg Businessweek reported that Afghan Gold, the private company he started to suck up the pricey yellow blood of the Baghlan Province, was given VIP access to mining licenses by the Afghan government. Mine, baby, mine.
Now, the second problem here is the enormous risk factor that comes in a country with a War-in-Progress. Deadly encounters on the fields have already popped up and, if the Times headline was any indication (“Potential for a Mining Boom Splits Factions in Afghanistan”), the bankers are skating on thin ice. Instead of the reasonably xenophobic Native Americans in the late 1840s, the modern-day gold diggers will have to deal with a nativist group of a slightly higher degree: the Taliban. Stand back for a second and realize the sheer irony of this all. The Taliban are hunting American bankers. It’s like if Steven Spielberg and Michael Moore made an action movie together.
Alas, money tends to speak louder then common sense. And obsessing over something as valuable as gold without using any of the latter is what Americans do best. Especially Wall Street.