Goldman spars with lawmakers over aluminum conflicts
Goldman Sachs Group Inc. executives sparred with lawmakers over accusations that its aluminum business improperly influenced prices and that the firm’s traders had unfair access to market-moving data.
Under fire at a hearing Thursday on whether Wall Street’s ownership of commodities spurs conflicts, Goldman Sachs’s Jacques Gabillon disputed senators’ charges that long wait times for aluminum stockpiles had a direct effect on what companies and consumers pay for the metal. Only a handful of Goldman Sachs employees get information on the aluminum unit and reports are limited to financial performance, he said.
“When everything is said and done, you can say there is no correlation” between wait times and price, said Gabillon, head of the New York-based bank’s global commodities principal investments group.
His statements were met with skepticism from a Senate panel that released a 400-page report Wednesday alleging that commodities businesses give banks undue influence over markets, spur trading advantages and could endanger the financial system through an industrial catastrophe.
Sen. Carl Levin, who chairs the Permanent Subcommittee on Investigations, called the Goldman Sachs transactions “merry-go-round deals” that had little purpose other than moving aluminum around from warehouse to warehouse to influence how much customers paid for storage and financial products tied to the metal.
“If you can say there’s no correlation between premium and the length of the queue then you are in a very different mathematical world than most of the mathematicians that look at this,” said Levin, raising his voice.
The Senate investigation adds to months of scrutiny from lawmakers and companies that use commodities over banks’ involvement in the business. Levin’s findings put renewed pressure on the Federal Reserve to restrict Wall Street’s ownership of assets such as power plants and oil tankers.