Fed urges lawmakers to toughen rules on Wall St. and commodities

(Reuters) by By Michael Flaherty and Josephine Mason – U.S. lawmakers should consider overturning a decades-old rule that allows Morgan Stanley and Goldman Sachs to extract, transport and trade physical commodities, a top Federal Reserve official said on Thursday. Asked at a Senate Banking Committee hearing on bank regulation what rules could be strengthened, Fed Governor Daniel Tarullo said one target was the commodities exemption the two banks enjoy, which allows them to handle everything from crude oil cargoes and copper pallets to electricity lines and aluminum stockpiles. Without naming the banks Tarullo said “it would be very much worth considering treating those two firms like the other banking companies.” Tarullo, the Fed’s point person for bank regulation was joined by two other bank regulators on the panel, which was called by Senate Banking Committee Chairman Richard Shelby to examine the regulatory regime for regional banks. Regional banks, such as Comerica Inc, fall in the middle of the supervisory spectrum, between the small community banks and the large Wall Street firms. Shelby is trying to combine regulatory relief for banks, together with reforms to the Fed and other regulatory bodies, into a financial reform bill to be crafted by April. The … continue reading

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