U.S. banks including Goldman Sachs should be banned from owning commodities businesses because they could threaten the institutions and global supply chains, Senators Sherrod Brown and Elizabeth Warren told the Federal Reserve.
Bloomberg reports that financial holding companies “should be prohibited from owning physical assets like warehouses, pipelines and tankers,” Democrats Brown of Ohio and Warren of Massachusetts said in a letter to the Fed Wednesday: 'These activities pose significant safety and soundness, legal and reputational risks to the institutions'.
The Fed concluded a comment period on risks posed by bank ownership and trading of commodities such as oil, gas and aluminum, and the possible benefits of imposing additional capital standards on such activities. The Fed announced on January 14 that it was seeking comment on curtailing banks’ involvement in the physical commodities business and other non banking activity.
The lawmakers have warned that a catastrophe involving a bank-owned supertanker or power plant could jeopardize a firm’s health and leave taxpayers on the hook for a bailout. Bankers say liability from an oil spill or similar accident wouldn’t fall onto them or their depositors.
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