June 24, 2014 / 12:21 AM / in 4 years

UPDATE 1-U.S. House bill calls for CFTC to review metals warehouse oversight

(Adding details on wait times in paragraphs 9 and 10)

WASHINGTON, June 23 (Reuters) - The U.S. commodities regulator will have to carry out a review of metals warehousing if a bill before the U.S. House of Representatives is passed, the latest sign of intense U.S. political pressure over the controversy at the London Metal Exchange.

Representative Bob Goodlatte, who chairs the House Judiciary Committee, urged the CFTC to take a tougher stance on the LME when the House Committee on Agriculture in April approved a bill reauthorizing the agency’s mandate.

The LME is struggling to resolve a years-long controversy after complaints from brewers, which use aluminum for beer cans, and other companies that excessive stockpiling by warehouses owned by Wall Street banks was inflating prices.

The text of the bill has now been amended to include Goodlatte’s request for a study by the CFTC on how it oversees metals markets, specifically to compare the rules for foreign and domestic exchanges.

The fact that the legislation addresses the issue shows the ongoing scrutiny of the warehousing business by politicians, even if the bill stands little chance of making it through Congress against opposition from President Barack Obama. The House is scheduled to discuss the bill late on Monday, and to vote on it a day later.

The LME is regulated in Britain by the UK’s Financial Conduct Authority, while the CFTC holds sway over its U.S. business.

The LME has largely been exempt from the CFTC’s rules since 2001 but is now seeking to register with the agency as a so-called foreign board of trade.

The CFTC and Department of Justice have been looking into allegations of manipulation of metal storage since last summer.

Complaints about inflated prices and long wait times to take delivery of metal, particularly in Detroit where Goldman Sachs Group Inc operates a warehouse company, have plagued the LME, the world’s No.1 base metals exchange for years.

The issue captured public and political attention last year, with much of the charge led by Senator Sherrod Brown, an Ohio Democrat critical of large banks. (Reporting by Douwe Miedema in Washington; Additional reporting by Josephine Mason in New York; Editing by Ken Wills)

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