WASHINGTON —
A two-year U.S. Senate investigation of commodity-market activities at big Wall Street banks such as Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. found the firms compromised market integrity and put the broader financial system at risk. The firms did so by influencing prices, gaining trading advantages with non-public information and entering risky businesses like uranium trading and coal production, according to the investigation.
The findings from the U.S. Senate Permanent Subcommittee on Investigations shed new light on how banks built voluminous inventories of aluminum, copper and other commodities, often exceeding regulatory limits. It portrays banks straying far beyond their traditional business lines to dabble in lucrative but risky activities that posed legal and financial threats to the firms.
The Senate report also depicts the Federal Reserve as failing to stop the bank buildup of commodities, allowing firms like J.P. Morgan to hold assets well in excess of allowable limits. At times, the report said, the Fed was simply unaware of how much oil, aluminum and copper banks were stockpiling.
The findings are likely to put additional pressure on the Fed as it considers whether to restrict or reduce Wall Street banks’ role in physical commodity markets.
