Goldman Sachs took the lead today in rejecting allegations by a powerful US Senate subcommittee that Wall Street banks were exploiting physical commodity markets to manipulate prices and gain unfair trading advantages.
In an often heated hearing before the senate's permanent subcommittee on investigations, senator Carl Levin pressed bankers and executives on whether the company had inflated physical prices and curbed supplies of aluminium, adding billions of dollars to costs for consumers, such as the US Navy and beverage can makers.
Chris Wibbelman, president and chief executive officer of Metro International Trade Services, the metals warehousing firm Goldman bought in 2010, defended his company's actions, saying it plays by the rules and contributes jobs to the Detroit area.
Mr Wibbelman received the brunt of Mr Levin’s questions and the senator, who chairs the subcommittee, appeared frustrated at his testimony.
The hearing, which continues tomorrow with officials from the Federal Reserve and US power market regulator, follows the release yesterday of a detailed 403-page report that criticised how banks purchased and exploited huge commodity stockpiles. The public airing of concerns about banks' ownership of physical commodities and assets from pipelines to warehouses renewed scrutiny on Wall Street.
Retrenching
But experts said it may have little impact on an industry that is retrenching and with the Federal Reserve already signalling its intent to move forward in some way with changes in regulation.
Mr Levin, one of several lawmakers who have led the criticism of the blending of commerce and finance on Wall Street, is retiring from the Senate in early January.
"There will be a lot of sound and fury, but it won't amount to much in the long term," said Craig Pirrong, a finance professor at the University of Houston.
Goldman is under particular scrutiny because it has maintained that commodity trading is core to its business.
The company is in the process of selling Metro, though details of bidders and timing remain unclear.
JPMorgan Chase & Co and Morgan Stanley have both made major moves to get out of the physical commodity space.Meanwhile Goldman Sachs said it fired two employees over the leaking of confidential informationfrom the Federal Reserve Bank of New York, raising again questions about the bank's alleged cozy relationship with its regulator.
The bank said a junior employee was sacked for passing on to a colleague information from the New York Fed, his former employer, while a supervisor was fired for knowing about the matter but not acting on it.
- (Reuters)
