Fed: Congress Should Make Goldman Sachs, Morgan Stanley Curtail Commodities Businesses
September 08 2016 - 2:46PM
Dow Jones News
By Ryan Tracy
The Federal Reserve asked Congress to repeal banks' authority to
make a range of investments in nonfinancial businesses, saying the
businesses put the firms' safety and soundness at risk.
The Fed said lawmakers should ban banks from making "merchant
banking" investments, which involves investing in and potentially
owning nonfinancial companies. Congress should also repeal a
provision of a 1999 law that allows Goldman Sachs Group Inc. and
Morgan Stanley to store, extract, and transport commodities even
though other banks are barred from doing so, the Fed said.
The recommendations came in a report required by the 2010
Dodd-Frank regulatory-overhaul law and were approved unanimously by
the Fed's five-member governing board in Washington.
Fed officials had previously questioned the risks of merchant
banking, but hadn't endorsed banning it. They had talked publicly
about repealing the "grandfather" provision governing Goldman Sachs
and Morgan Stanley, but the Fed's board hadn't formally endorsed
doing so -- until now.
The report gives the recommendations momentum, though Congress
likely won't act on them this year.
Write to Ryan Tracy at ryan.tracy@wsj.com
(END) Dow Jones Newswires
September 08, 2016 14:31 ET (18:31 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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