Wall Street Commodity Trading in Jeopardy Amid Fed Review
By Bob Ivry
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. 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. The 2003 ruling marked “a radical departure” from bank holding companies’ past practices, Karen Shaw Petrou, managing partner of Washington-based Federal Financial Analytics, said in an interview. The Fed is “certainly going out of its way to send a signal,” she said. While it’s hard to predict whether officials will reverse the ruling, “it sounds like it is a real dialing back.”