JPMorgan Chase & Co. (JPM), Morgan Stanley (MS) and Goldman Sachs Group Inc. (GS) are among lenders whose commodity-trading is in jeopardy as the Federal Reserve reconsiders letting banks ship oil and store metal.
“When Wall Street banks control the supply of both commodities and financial products, there’s a potential for anti-competitive behavior and manipulation,” U.S. Senator Sherrod Brown said in an e-mailed statement. Photographer: Scott Eells/Bloomberg
The central bank, ahead of a Senate subcommittee hearing on the issue tomorrow, says it’s reviewing a decade-old ruling to let deposit-taking banks trade physical commodities. A reversal would be the Fed’s biggest exclusion of banks from a market since Congress lifted the Depression-era law against them joining with securities firms in 1999.
“Like any regulator, the Fed doesn’t like reversing a long line of decisions,” said Saule T. Omarova, a law professor with the University of North Carolina at Chapel Hill, who’s scheduled to testify at tomorrow’s hearing. “If they get enough pressure from the outside they might be forced to do so.”
Article Source: : SC Finance