Seduced and Abandoned in a Commodity Corner


A quick follow up on my post about the Senate Banking Committee hearings on Financial Holding Companies:

Today JPMorgan announced it will exit the physical commodities business. After considering “many different factors, including the impact of potential new rules and regulations,” the bank has decided to pursue “strategic alternatives” to its commodities business. Presumably this decision extends to JPMorgan’s Copper ETF (JPM XF Physical Copper Trust), which requires the bank to hold or warehouse copper, though the news reports are so far silent on this point.

FT has the story here; Reuters here. FT saw it coming in a July 14th story about JPM looking to sell the Henry Bath Warehouses.

A proposed rule change to reduce bottlenecks at LME warehouses like Henry Bath along with what the FT calls “intensifying scrutiny” (Reuters: “unprecedented scrutiny”) may help account for the bank’s about-face, but this was clearly not a decision taken in haste.

After its acquisition of Bear Stearns (or what was left of it) in 2008 and its $1.7 billion investment to acquire RBS Sempra in 2010, JPM seemed to have a strong hand in commodities. The bank had fought hard for SEC approval of its copper ETF against copper producers and consumers; now that looks like a Pyrrhic victory.

It’s hard to say exactly how the theatrics at this week’s Senate Banking Committee hearing figure into this move. Sherrod Brown isn’t that scary.

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