DAVID SHEPPARD AND JOSEPHINE MASON, REUTERS JUL. 20, 2013, 5:04 PM 1,831 14
NEW YORK (Reuters) - The*Federal Reserve*is "reviewing" a landmark 2003 decision that first allowed regulated banks to trade in physical commodity markets, it said on Friday, a move that may send new shockwaves through Wall Street.
The one-sentence statement suggests the*Fed*is taking a much deeper, wide-ranging look at how banks operate in commodity markets than previously believed, amid intensifying scrutiny of everything from electricity trading to metals warehouses.
While the*Fed*has been debating for years whether to allow banks including Morgan Stanley <MS.N> and JPMorgan <JPM.N> to continue owning assets like oil storage tanks or power plants, Friday's surprise statement suggests it is also reconsidering whether all bank holding firms should be able to trade raw materials such as gasoline tankers and coffee beans.
By referencing its initial decision a decade ago permitting Citigroup's Phibro unit to trade oil cargoes - setting a precedent for a dozen more banks that followed suit - the*Federal Reserve*has put in question a key profit center for Wall Street's top players, which have already seen multibillion-dollar commodity revenues shrink in the face of new regulations.