| WASHINGTON, Sept 13
WASHINGTON, Sept 13 Regulators should have
better insight into the commodity businesses owned by large Wall
Street banks to help them prevent market manipulation, a senior
official at the U.S. derivatives watchdog said.
The Federal Reserve is reviewing an exception that has
allowed banks to trade physical commodities and even own metals
warehouses and oil tankers despite a law that prohibits the
mingling of finance and commerce.
But Bart Chilton, a member of the Commodity Futures Trading
Commission which regulates swaps and futures, said his agency
did not even know exactly what the banks owned.
"It is still nearly impossible to figure out exactly what
banks own," Chilton said in notes prepared for speaking in
Michigan at an event on Saturday.
"Unless we can see that, we can't reasonably and responsibly
protect against market manipulations," he said.
Banks such as Goldman Sachs, Morgan Stanley
and JPMorgan Chase - which generated an estimated $4
billion in commodity revenues last year - face growing pressure
from a number of investigations in their operations.
The CFTC has subpoenaed a number of major metals warehousing
firms, including Switzerland-based Glencore, seeking
documents from the last three years in an inquiry into
complaints about inflated metals prices.
Chilton, a Democrat and an often outspoken critic of large
banking, earlier urged the Fed to reverse its policy of allowing
investment banks' widespread activities in commodities, saying
it created a conflict of interest.
Brewing companies have complained before Congress that banks
were pushing up the price of aluminium, which they need for beer
cans, by delaying delivery times and creating long queues for
the metals warehouses they own.
The Fed, which oversees large banks, has said it is
"reviewing" its 2003 decision that permitted Citigroup Inc's
Phibro unit to trade oil cargoes, setting a precedent for
a dozen more banks that followed suit.
Since then, JPMorgan Chase announced its exit from
commodities trading, while Goldman Sachs, which has been looking
to sell its warehouses, offered customers immediate access to
aluminium it stores.