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Fed Seeks Aggressive Limit on Wall Street Commodity Holdings

  • Regulator’s proposal calls for extreme capital for commodities
  • Rule adds to Fed request that Congress ban merchant banking
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Inside the Fed Proposal on Wall Street Commodity Holdings

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Goldman Sachs Group Inc.’s and Morgan Stanley’s sometimes lucrative romance with metals, coal and oil could become prohibitively expensive under a proposed rule released Friday by the Federal Reserve.

The long-awaited regulation would require banks to put up much more capital to support investments in physical commodities, restrict involvement with power plants and limit the amount of trading banks can do. While the Fed doesn’t have the power to sever banks’ ties to physical commodities, it is seeking massive capital increases for the activities -- especially at Goldman Sachs and Morgan Stanley, which have special legal exemptions to stay in those businesses.