Senate to Hold Hearing on Bank Storage for Commodities

Politics Reuters

A U.S. Senate committee will hold a hearing next week on whether banks should control physical storage for commodities, signaling lawmakers may be toughening their stance on the controversial but lucrative business for giant Wall Street firms.

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Goldman Sachs Group Inc, JP Morgan Chase & Co and Morgan Stanley all have business units involved in the storage of physical commodities such as metals and oil, as well as being involved in commodities trading.

The hearing comes as a five-year grace period from the U.S. Federal Reserve that allows banks to hold physical commodities assets is set to expire before the end of the year.

The panel will hear on July 23 from beer and can maker MillerCoors and two experts who are critical of the banks' involvement in physical commodities and infrastructure, including businesses such as storage and transportation.

"When Wall Street banks control the supply of both commodities and financial products, there's a potential for anti-competitive behavior and manipulation," Sen. Sherrod Brown (D-Ohio), a member of the banking committee, was reported as saying in the HuffingtonPost.

"It also exposes these megabanks -- and the entire financial system -- to undue risk," he said in comments published on Tuesday.

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The Huffington Post said representatives for Goldman and JPMorgan may also be asked to testify before the banking committee.