U.S. Sen. Sherrod Brown (D-OH) on Wednesday outlined efforts to crack down on bank holding companies (BHCs) physical commodities operations, and shed light on the effect these activities have on consumers and manufacturers. Brown’s office released a list of more than 60 breweries in Ohio that are affected by bank-owned aluminum warehouses.
By hoarding physical commodities, Brown said, BHCs effectively drive up the cost of everyday commodities and products, including gasoline, canned soft drinks and beer, and electricity for Ohioans. Today, the six largest U.S. BHCs have 14,420 subsidiaries, he said — only 19 of which are traditional banks.
“Ohio manufacturers and consumers should not have the price of their gas, beer, soft drinks, or electricity driven up by Wall Street speculators,” Brown said. “When Wall Street banks control the supply of both commodities and financial products, there’s a potential for anti-competitive behavior and manipulation. It also exposes these megabanks - and the entire financial system - to undue risk from mine collapses, oil spills, and refinery explosions.”
In Ohio, 62 beer breweries across the state directly employ 1,780 Ohioans. Brown’s office released a county-by-county inventory of the breweries in Ohio that depend on aluminum for production. Although not every brewery listed in the report has packaging operations at its facility, each brewery listed depends on aluminum for production.
On the list of Ohio breweries was the Portsmouth Brewing Company, on Second Street in Portsmouth — but Emily Eldridge, of the Portsmouth Brewing Company, said they only package their beer in bottles, not aluminum cans. She said she was unaware that banks control aluminum markets, and aside from their steel brewing barrels costing more than they used to, she hasn’t noticed an increase in the price of aluminum.
Brown was joined Wednesday by Mary Jane Saunders, General Counsel for the Beer Institute, the trade association representing American brewers, beer importers and suppliers, who discussed the issue and its impact on the industry.
“We are encouraged that Sen. Brown is looking at the issue from his perspective as a Subcommittee Chairman on the U.S. Senate Banking Committee,” Saunders said. “Brewers and beer importers have been paying tens of millions of dollars in higher prices and higher fees for aluminum that is used for cans. The warehouse rules set by the London Metal Exchange are preventing companies like MillerCoors and any of the other 61 brewers in Ohio from investing that money into capital investments that could create jobs.”
In order to address this trend, Brown called for three steps of immediate action.
• The Federal Reserve must issue clear guidance on permissible non-bank activities, and consider placing limitations on those that expose banks and taxpayers to undue risk.
• The Commodity Futures Trading Commission (CFTC) should crack down on anticompetitive practices and stop the bottleneck that allows the banks – which own the aluminum warehouses – to charge higher prices to end users like beer and soft drink companies.
• Congress must pass Brown and U.S. Sen. David Vitter’s (R-LA) recently introduced legislation, The Terminating Bailouts for Taxpayer Fairness Act (TBTF Act), which would limit taxpayer and government support to these non-banking activities.