Fed Is Reserved on Commodity Regulation Ahead of Senate Hearing
Another day brings another piece of information on what is not expected to happen at the Federal Reserve. In addition to not tapering, the Fed is unlikely to reveal its plans for regulating the commodity trading business on Wall Street this year. Speaking to Reuters on the condition of anonymity, a person with insight on the matter said: ”I was told … they would not make any determination by the end of the year, but maybe soon after that.” Some had expected the regulations to be outlined ahead of next month’s Senate hearing, the second on the matter.
The first hearing was held in July by the Senate Banking Committee and was called “Examining Financial Holding Companies: Should Banks Control Power Plants, Warehouses, and Oil Refineries?” As the title suggests, the hearing is an investigation into whether banks should be allowed to trade and hold commodities, particularly the rigging of the aluminum market.
Partnership for Progress, a government website, explains the various filings and how the process works. A bank holding company under The Bank Holding Company Act of 1956, in conjunction with the 1999 Gramm-Leach-Bliley Act, is allowed to engage in non-banking activities that are closely related to banking, like mortgages. A bank holding company can also invest in companies not closely related to banking, provided they do not comprise more than 5 percent of the company’s voting stock. If approval is granted, the bank holding company can become a financial holding company and engage in more financial investments.