Tell The Fed How You Really Feel About Banks Trading Physical Commodities

Tyler Durden's picture

Delighted by the Goldman Sachs et al commodity cartel hoarding aluminum inventory in one of their warehouses and pushing prices artificially higher? Happy that JPM is reprising the role of Enron (without admitting or denying it) and creating "schemes" with which to boost prices for end consumers (and have FERC furiously slap its wrist in response)? Ecstatic by that whole "precious metals" manipulation 'thing' by assorted unnamed banks (aside from the London fix of course - that has now been confirmed)? Then take this opportunity to tell the Fed how happy you really feel.

Click on the link below for the full comment form.

Joking aside, here is why the Fed is issuing this proposal for public comment "Complementary Activities, Merchant Banking Activities, and Other Activities of Financial Holding Companies related to Physical Commodities"

The Board of Governors of the Federal Reserve System (Board) is issuing this advance notice of proposed rulemaking (ANPR) inviting public comment on various issues related to physical commodity activities conducted by financial holding companies and the restrictions imposed on these activities to ensure they are conducted in a safe and sound manner and consistent with applicable law. The Board is inviting public comment as part of a review of these activities for the reasons explained in the ANPR, including the unique and significant risks that physical commodities activities may pose to financial holding companies, their insured depository institution affiliates, and U.S. financial stability.

 

This advance notice of proposed rulemaking (ANPR) is designed to elicit views from the public on the risks and benefits of allowing FHCs to conduct physical commodity activities under the various provisions of the BHC Act, whether risks to the safety and soundness of a FHC and its affiliated insured depository institutions (IDIs) and to the financial system warrant Board action to impose limitations on the scope of authorized activities and/or the manner in which those activities are conducted, and if so, what those limits should be.

FT has more on why the Fed is conducting this request for comments:

The Federal Reserve cited recent disasters, including the BP oil spill in the Gulf of Mexico in 2010, as it sought comment on whether it should further limit banks in their physical commodities businesses. The regulator said on Tuesday it was examining whether to impose capital charges and increase insurance requirements on banks to restrict further their trading of physical commodities. In total, the Fed posed 24 questions in consideration of possible tougher restrictions.

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The Fed asked questions about conflicts of interest, additional reporting requirements and further liquidity measures, among other issues. The deadline to comment is March 15. Banks can engage in the warehousing of physical commodities under rules governing complementary activities to bank operations, merchant banking regulations and a grandfather clause for bank holding companies. The grandfathering exemption applies to Goldman and Morgan Stanley to own assets such as oil tankers and power plants.

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The Fed said it was studying the costs and other burdens to banks and to the public if it made such a move. It could go as far as eliminating the ability to engage in complementary commodities activities.

But it won't. Here is your chance to ask why, as well as have all other questions (un)answered.