Fed Said to Widen Commodities Review to Goldman, Morgan Stanley
By Cheyenne Hopkins and Michael J. Moore
The Federal Reserve has expanded its scrutiny of banks’ physical commodities operations to encompass businesses run by Goldman Sachs Group Inc. and Morgan Stanley that Congress had previously authorized. The Fed is examining all legal and regulatory exemptions that allow banks to participate in the commodities markets, said a person briefed on the process who asked not to be named because the review is confidential. The appraisal, aimed at minimizing potential risks to the financial system, has widened since the Fed said in July that it’s reconsidering its landmark 2003 decision to grant some lenders, such as Citigroup Inc. and JPMorgan Chase & Co., permission to expand into raw materials.  The Fed is “trying to clear up grandfathering and how it fits merchant banking and the broader context,” said Karen Shaw Petrou, managing partner of Washington-based Federal Financial Analytics, which advises companies on how policies may affect their businesses. Leeway allowed to banks is vague, she said.