Big 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.