With baseball season in full swing, Ohio families hosting friends for an Indians or Reds game may have to pay more for beer and soft drinks – all because Wall Street megabanks have found another way to game the system.
At one time, banks were just banks. They made loans and they held checking and savings accounts. But nearly 20 years ago, banks also got into the business of selling insurance and holding securities. We have long moved beyond the days of the local trusts, savings and loans, and community banks.
Today, Wall Street megabanks also control commodities that manufacturers depend on to deliver affordable prices to consumers. Banks are not just making small business loans. They own everything from electric power plants, to oil pipelines and tankers. And they even own the warehouses that store aluminum and copper. Simply put, these megabanks by owning too many of the resources our nation needs to operate are putting our markets and financial system at risk.
Whether or not you believe that a bank holding your savings account should also be in the business of refining and shipping oil, there is no place for banks to engage in anti-competitive practices. But that’s what is happening today. Wall Street banks are driving up costs on American manufacturers and consumers by hoarding commodities.
Recently, Mary Jane Saunders, general counsel at the Beer Institute, the trade association representing American brewers, beer importers and suppliers, explained how the supply – and, less directly, the price – of aluminum affect the cost of beer. Because the warehouses that store aluminum are owned and controlled by Wall Street, brewers and beer importers across the country have been paying higher prices and higher fees for aluminum that is used for production.
There are more than 60 breweries and about 1,780 direct brewery jobs throughout Ohio. These breweries are dependent on aluminum for their kegs and cans.
Recently, Tim Weiner of MillerCoors, which operates a brewery in Trenton, Ohio testified at a Senate hearing that, “Aluminum users, like MillerCoors, are being forced to wait in some cases over 18 months to take physical delivery due to […] warehouse practices or pay the high physical premium to get aluminum today.” Mr. Weiner estimated that this is costing businesses and consumers $3 billion per year.
When banks control both the supply and price, manufacturers and consumers pay the price. It’s not right, and we need to end this Wall Street tax on Main Street beer drinkers. We need to take action, and there are some simple steps to do so.
First, the Federal Reserve should issue clear guidance on permissible non-bank activities. It should also consider placing limitations on those that expose banks and taxpayers to undue risk.
Next, the Commodity Futures Trading Commission (CFTC) – which investigates speculative practices – needs to crack down on anticompetitive practices. The CFTC needs to stop the bottleneck that allows the banks – which own the aluminum – to charge higher prices to end users like beer and soft drink makers.
Third, Congress needs to pass the Terminating Bailouts for Taxpayer Fairness Act (TBTF), legislation that Senator David Vitter (R-LA) and I introduced to stop these behemoths from taking advantage of manufacturers and consumers. Our bill sets forth a plan that would prevent any one financial institution from becoming so risky and overleveraged that it could put our economy on the brink of collapse or trigger the need for a federal bailout.
Ohio manufacturers and consumers should not have the price of their gas, beer, soft drinks, or electricity driven up by Wall Street speculators. That’s why I will fight to ensure that Wall Street megabanks will never again monopolize our nation’s wealth or gamble away the American dream.