Federal Reserve Governor Daniel Tarullo questioned whether Goldman Sachs and Morgan Stanley should be allowed to own physical commodities because the practice exposes them to risks outside traditional banking.
Bloomberg News reports that the companies are allowed 'to engage in the extraction, transportation of potentially highly combustible materials with substantial risks associated with them,” Tarullo told the Senate Banking Committee on Thursday. Such activity appears to “breach the wall between banking and commerce'.
The Fed is working on a rule to rein in Wall Street ownership of raw materials such as Goldman Sachs’s coal mines in Colombia and oil stored by Morgan Stanley. Tarullo, who spearheads the Fed’s regulatory efforts, is concerned about the catastrophic and liability risks posed by banks holding commodities.
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