Regions

The US Federal Reserve was currently reconsidering whether financial firms should be allowed to continue trading physical commodities in addition to financial products. The review came after the regulator received complaints.

In a letter to the Fed chairman, four Democrats asked the following questions: How would Fed account for possible bank runs of oil spills caused by bank-owned tankers? How would the Fed resolve the collapse of commodities activities of a systematically important financial institution?

By initiating the review, the Fed showed that it was not deaf to criticism, said Joshua Rosner, managing director at Graham Fisher & Co., a research firm based in New York. Rosner will also stand as a witness on a hearing of the Senate Banking, Housing and Urban Affairs Committee.

"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," stated Fed spokesman Barbara Hagenbaugh.