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of issues troubling him—from concerns about a bank taking over a commercial business; to that bank’s exercising control over a key raw material important to U.S. defense, the auto industry, and American consumers; to Goldman’s disrupting commodity markets and driving up commodity prices through questionable practices; to concerns about whether Goldman was using inside information from its warehouse activities to line its own pockets in financial markets. It rang all his outrage bells at once. Senator Levin opened the hearings by observing: “If you like what Wall Street did for the housing market, you will love what Wall Street is doing for commodities.” After generally describing the nine case studies at Goldman, JPMorgan, and Morgan Stanley, he launched into detail about Goldman’s physical aluminum activities. The first two hearing witnesses were the president of the Detroit warehousing company purchased by Goldman and the head of Goldman’s commodities group. Both denied wrongdoing and defended the warehouse’s actions, but were hard pressed to explain the merry-go-round transactions in which clients were paid millions of dollars to move their aluminum from one Goldman warehouse to another. Both admitted Goldman itself had engaged in a massive aluminum transaction that contributed to the warehouse’s already lengthy exit queue. Yet both denied that any of those transactions contributed to the steadily climbing U.S. aluminum prices. In addition, under questioning, both acknowledged that at least 50 Goldman employees got regular reports on confidential warehousing activities, while denying Goldman ever used any of that inside information for its own trading purposes. The next panel heard from two more witnesses, one a leading aluminum market analyst and the other the largest purchaser of aluminum in the world, Novelis, which supplies aluminum used to make beer and soda cans, auto parts, and consumer electronics. Both blasted Goldman’s warehouse activities for artificially restricting aluminum supplies, driving up prices, and costing consumers billions of dollars. They expressed outrage about the nearly twoyear delay to get aluminum out of the Goldman warehouse, and strenuously disputed the claim that the warehouse’s actions had no effect on overall aluminum prices. Novelis’ representative testified point blank: “[B]anks and trading companies should not be allowed to own warehouses.” The second day of hearings took testimony from experts and federal regulators who, rather than comment on the Goldman case study, testified more broadly about the negative impacts of bank involvement with physical commodities. One key moment came when Law Professor Saule Omarova and industrial risk analyst Chiara Trabucchi were shown a chart depicting 31 U.S. power plants and related facilities located across the country that, in 2011, were all controlled by JPMorgan Chase (Image 13.2).20
