WASHINGTON — Significant risks to the nation’s financial system and to taxpayers are the potential consequences of continuing to allow the country’s largest financial institutions to own commodities units that store and ship vast quantities of metals, oil and the other basic building blocks of the economy, several witnesses warned a Senate panel on Tuesday.
The ability of those bank subsidiaries to gather nonpublic information on commodities stores and shipping also could give the banks an unfair advantage in the markets and cost consumers billions of dollars, the witnesses said.
The Senate Financial Institutions and Consumer Protection subcommittee convened the hearing to explore whether financial companies should control power plants, warehouses and oil refineries.
Although Congress removed post-Depression era barriers that separated commercial banking and traditional commerce in the late 1990s, a group of bipartisan senators has lately been advocating the reinstatement of those walls in part to impose tighter regulation on such actions.
Because the giant banks receive the benefit of low-rate borrowing from the Federal Reserve, taxpayers could be left on the hook for losses caused by a collapse in commodities prices or in the event of an environmental disaster.