Courtesy of Pam Martens.
Barbara Hagenbaugh, a former economics reporter for USA Today, now spokesperson for the Federal Reserve, sent an Arctic chill through the sweltering heat of Wall Street on Friday with this one liner: “The Federal Reserve regularly monitors the commodity activities of supervised firms and is reviewing the 2003 determination that certain commodity activities are complementary to financial activities and thus permissible for bank holding companies.”
The unexpected statement from the Fed came just two business days before Senator Sherrod Brown will drop a few more bombshells in the direction of Broad and Wall. Brown chairs the Senate Banking Subcommittee on Financial Institutions and Consumer Protection, which will hold a hearing tomorrow titled: “Examining Financial Holding Companies: Should Banks Control Power Plants, Warehouses, and Oil Refineries?” Does that question even have to be asked given the 2008 to 2010 taxpayer bailout of these banks?
Don’t feel badly if you thought banks weren’t allowed to own commercial businesses; much of the investing public and Congress will be flabbergasted to learn what’s been going on behind their backs for the past nine years – all courtesy of the Federal Reserve’s inability to say “no” to Wall Street.
Saule T. Omarova, Associate Professor of Law at the University of North Carolina at Chapel Hill School of Law
One of the most fascinating aspects of this hearing will be the presence of the big Wall Street law firm, Davis Polk & Wardwell LLP, both in the form of the current head of their Financial Institutions Group, Randall D. Guynn, and in the form of a former member of their Financial Institutions Group, Saule T. Omarova, currently an Associate Professor of Law at the University of North Carolina at Chapel Hill School of Law. The former colleagues are expected to take opposing sides of the argument.
Last year, Omarova published a 77-page paper, “The Merchants of Wall Street: Banking, Commerce, and Commodities,” which provided an in-depth look at the enormous conflicts that the Federal Reserve had signed off on by allowing the largest Wall Street banks to not only hold insured deposits while trading trillions in unregulated derivatives but to also own physical commodities like oil, natural gas, and base metals with the ability to hoard these economically essential products in storage facilities.
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