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    Nomination of Antony Blinken to Be Deputy Secretary of State

    by Former Senator Carl Levin

    Posted on 2014-12-16

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    LEVIN. Madam President, I ask unanimous consent that the order for the quorum call be rescinded.

    The PRESIDING OFFICER. Without objection, it is so ordered.

    Mr. LEVIN. Madam President, I ask unanimous consent that I be permitted to proceed as though in morning business for 5 minutes.

    The PRESIDING OFFICER. Without objection, it is so ordered.

    Ending Insider Trading in Commodities Act Mr. LEVIN. Madam President, last month the Senate's Permanent Subcommittee on Investigations concluded a 2-year bipartisan investigation into Wall Street bank involvement with physical commodities. Our investigation, which focused on Goldman Sachs, Morgan Stanley, and JPMorgan Chase, culminated in a 400-page report and 2 days of hearings. The subcommittee's investigation found these banks involved in a breathtaking array of physical commodities activities. They owned coal mines and oil pipelines, oil tankers and refineries, electric powerplants, massive amounts of copper and aluminum and even uranium.

    We examined multiple aspects of financial holding company involvement with physical commodities, including the nature and extent of those activities with the attendant risk, such as the threat to a bank's safety and soundness from a catastrophe along the lines of the BP oilspill in the Gulf of Mexico. We also examined the impact of those activities on consumers, manufacturers, and markets. One key area of concern relates to possible price manipulation and unfair trading.

    What we found is that involvement in physical commodities gave these banks access to important nonpublic information that they could use to profit in their trading of financial products tied to those same commodities. In the stock market, the use of such nonpublic information is prohibited, but no such clear prohibition exists in commodities markets. That gives the biggest Wall Street banks an enormous incentive to pursue physical commodities activities--often to the detriment of consumers and manufacturers--in order to profit in financial trades by the use of the nonpublic information they gain from their physical commodities activity and to provide the opportunity in some cases to engage in market manipulation.

    I have introduced, with Senator McCain, a bill intended to prevent such abuses. The Ending Insider Trading in Commodities Act, S. 3013, which we just introduced, would prevent a large financial institution from trading in physical commodities and commodity-related financial instruments while at the same time in possession of material nonpublic information arising from its ownership or interests in a business or facility used to store, ship, or use the same commodity. A large financial institution should not be able to control, for instance, a huge number of warehouses and then use the nonpublic information that it gains and sometimes creates from the operation of those warehouses to trade on the same kinds of commodities stored in those warehouses.

    As we learned from our investigation, a financial institution that owns warehouses may manipulate warehouse operations in ways that move the prices of the very financial instruments and commodities the financial institution is trading.

    In the case of aluminum, we saw that Goldman Sachs owned dozens of warehouses in the Detroit area, which it used to build a near monopoly on the storage of aluminum in the United States that is used to settle trades on the London Metal Exchange, which sets the benchmark price for aluminum around the world. Using that dominant position, Goldman approved warehouse deals and practices that lengthened the lines, the queues for metal owners to get their metal out of the warehouses to nearly 2 years. By lengthening the queues, Goldman raised the premium that includes such costs as storage and transportation and which, along with the London Metal Exchange's benchmark price, makes up the total price consumers pay for aluminum. Goldman manipulated these warehouse practices in ways that made metal owners wait to get their metal and influenced prices paid to buy aluminum and hedge aluminum costs. All the while, Goldman was trading in aluminum and aluminum-related financial instruments.

    It is a rigged game. It needs to be stopped, and that is what this bill is intended to do. I thank Senator McCain for joining me in this important effort. We hope our colleagues will take up this bill and carry on this effort in the next Congress.

    (The remarks of Mr. LEVIN pertaining to the introduction of S. 3019 are printed in today's Record under ``Statements on Introduced Bills and Joint Resolutions.'') Mr. LEVIN. I yield the floor and suggest the absence of a quorum.

    The PRESIDING OFFICER. The clerk will call the roll.

    The bill clerk proceeded to call the roll.

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