Congress probes bank commodities, warehouse investments
The Senate Banking Committee is holding a hearing today on bank investments in things like warehouses and oil refineries, and commodities such as metals and oil.
Banks have jumped head first into the commodities markets. The New York Times is reporting Goldman Sachs was able to raise the price of aluminum through its investments. The Times says Goldman owns 27 warehouses in the Detroit area, where tons of aluminum is stored. Goldman charges rent. According to the Times, Goldman shuffled aluminum among its warehouses so rent was paid longer.
As a result, consumers paid more for the aluminum in cans of beer, and soft drinks. Turns out, aluminum is in lots of other products as well.
“Aluminum is in your frozen food packaging, it’s in canned food packaging. Your soup cans, your corn and peas. All of that has aluminum in it," says Barbara Shook with the Energy Intelligence Group in Houston.
Shook says we also pay more at the pump when banks speculate on oil. The Times says oil speculation added about $10 per tank of gas for the average American driver, in 2011.
Congress and federal regulators are worried that, if banks get involved in risky commodity investments, and then need a government bailout, the whole economy could be affected. There’s also concern about whether banks are using their own money for these investments, or their customers' money.