Banks: Big Appetites
The Consequences When Banks Swallow Commodities
April 10, 2014 -
As the Federal Reserve Board revisits a critical
policy concerning whether Wall Street mega-banks may own commodities, a new
Public Citizen report concludes that for the sake of consumers and the
financial system, regulators and lawmakers should establish a strong wall
between banks and commerce.
Not only does bank control of metals, oil, food
and other commodities enable Wall Street to monopolize markets and drive up
prices, but it puts the financial system – and taxpayers – at risk. Banks buy
commodities with borrowed, federally insured deposits so a natural disaster or
catastrophic event can create billions in liabilities. When a bank lacks its
own capital to cover these liabilities, taxpayers may be stuck with the bill.