(Adds background on issue, paragraphs 2, 7-8; on Goodlatte,
paragraph 6; on Brown, paragraph 9)
By Douwe Miedema
WASHINGTON, April 9 A U.S. congressman has urged
the U.S. commodity regulator to take a tougher stance on the
London Metal Exchange as it struggles to resolve a years-long
controversy over inflated prices and distorted supplies of
The comments - his first in public - show that the issue
that has drawn political, legal and regulatory scrutiny for the
past year has a growing support base, with end-users finding new
allies on Capitol Hill to press their case.
Bob Goodlatte, who chairs the House Judiciary Committee, was
speaking as a member of the House Committee on Agriculture,
which adopted a bill to rewrite the rules governing the
Commodity Futures Trading Commission.
"The CFTC acknowledges that they have the authority to
regulate and investigate concerns about the aluminum supply,"
said Goodlatte, a Virginia Republican.
"End-users are concerned that the CFTC has been slow in
taking action and looking into their concerns."
As head of the Judiciary Committee, Goodlatte has the
ability to delve into issues ranging from mergers to competition
Aluminum users, including MillerCoors which uses the metal
for its beer cans, have accused warehouses and their owners
including Wall Street banks Goldman Sachs Group and JPMorgan
Chase & Co and major merchants of distorting aluminum
supplies and inflating prices through excessive stockpiling.
The issue has plagued the industry for years, but captured
public and political attention last year. The Department of
Justice and CFTC are looking into the issue.
Senator Sherrod Brown, an Ohio Democrat who has led the
charge in Congress against banks' involvement in the physical
commodity business, called on the CFTC to take an aggressive
stance on the issue earlier this year.
Goodlatte chairs the House Judiciary Committee, which has
also looked into the matter, according to a Committee aide, and
has met with representatives of the aluminum industry. The
lawmakers' panel, which oversees the Justice Department, did not
however at this moment plan to hold a hearing.
Facing intense regulatory scrutiny, the LME has announced
sweeping measures to help ease the backlogs, but some market
participants are still pushing for U.S. regulators and
politicians to take up the fight for even tougher oversight of
the world's oldest and biggest metals market and its warehousing
Goodlatte's remarks came at a meeting at which the House
Committee on Agriculture adopted a bill to adjust the CFTC's
mandate and several of its rules, a process known as
reauthorization that roughly takes place every five years.
However, he withdrew an amendment to the bill that would
have required the CFTC to report in a year's time to account for
its oversight of aluminum markets. In return, the panel vouched
to keep a close eye on the issue.
The bill now needs to go to the House floor, but few policy
watchers expect it to become law because President Barack
Obama's administration opposes the changes. That means the
Democrat-led Senate is unlikely to pass it.
The LME, owned by Hong Kong Exchanges and Clearing Ltd
, is regulated by the UK's Financial Conduct Authority
(FCA), but the CFTC holds sway over its U.S. business.
(Additional reporting by Aruna Viswanatha in Washington and
Josephine Mason in New York; Editing by Diane Craft and Eric