Prior to 1999 banking law reforms, bank holding companies were permitted to engage as principals on cash-settled derivative contracts as well as derivatives that allowed for physical settlement, provided the holding company made good faith effort to avoid delivery of the commodity.The Senate Permanent Subcommittee on Investigations held a two-day hearing at the end of last week, "Wall Street Bank Involvement with Physical Commodities." This followed a two-year study of banks and their holding companies that own physical commodities or control warehouses, pipelines or power plants. The over 800-page analysis and supporting documents were released on Wednesday, but there was little discussion of that material as the hearing started Thursday w...

TAGS – Energy