SIFMA Study: "The Role of Banks in Physical Commodities" (with Lofchie Comment)

SIFMA released a study conducted by IHS Global (which was founded by Daniel Yergin, author of The Prize: The Epic Quest for Oil, Money and Power), which is intended to describe and support the role of banks in the physical commodities market. SIFMA stated that the study aims to explain and illustrate the important business role that banks play in the commodity sectors of the U.S. economy. Additionally, according to SIFMA, the study demonstrates how the role of banks and other financial intermediaries in physical commodities is beneficial in providing business access to capital and related risk management services.

Lofchie Comment: Several days ago, following Congressional questions concerning the role of banks in the commodities markets, CFTC Commissioner Chilton delivered remarks in which he criticized (implicitly, at least) the role of banks and asserted that the CFTC should have more authority over banks trading commodities. For a criticism of Commissioner Chilton's remarks, see the blog of Professor Pirrong on the topic of bank involvement in physicals, "Attack of the Commodity Market Critic Zombies." This SIMFA Study is essentially a further response to, and criticism of, Commissioner Chilton's remarks, albeit delivered in gentler tones than those of Professor Pirrong.

See: SIFMA Study: "The Role of Banks in Physical Commodities".