Following our initial uncovering of the manipulation and monopolization of the metals warehousing business two years ago, the last few days have seen the public's attention grabbed by the reality of what the banks are actually doing. Following this week's hearing, as the Fed reconsiders banks roles in non-banking businesses (and the 'societal benefit'), it seems the CFTC has woken up. As the WSJ reports, the Department of Justice has opened an initial probe into the metals warehousing industry and the Commodity Futures Trading Commission has also sent letters to some firms telling them to preserve documents, in what is likely the beginning stages of an investigation.
Via WSJ,
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The probe comes amid growing concern in Washington over banks' ownership of metals warehouses and other commodity assets.
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Banks that trade physical commodities have come under attack by government officials, companies and consumer groups, who worry about the ability of the financial sector to exert influence over markets for raw materials.
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Mr. Brown held a hearing on the subject this week at which some company officials alleged banks are deliberately creating shortages of aluminum and other raw materials for financial gain.
The Federal Reserve has said it is reconsidering the permission it granted to banks over the past decade to participate in physical commodity markets. The permission expires later this year.