I saw this as a story on the front page of the WSJ finance page. When you go online, it is not one of the featured headlines. Someone must have complained.
Carolyn Cui and Dan Fitzpatrick, Wall Street Journal, 2 June 2011
A group of 10 large banks—including Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Citigroup Inc., Bank of America Corp. and Barclays PLC—saw their commodities revenues increase by 55% in the first quarter, according to Coalition, a firm that analyzes the performance of investment banks. After a disappointing 2010, commodities was the fastest-growing segment in banks' fixed-income businesses in the first three months of this year, even though it still accounts for just 7% of banks' total fixed-income revenues, Coalition said.
Commodities trading is a bright spot for institutions that face new regulatory clampdowns on practices that previously fattened bank profit margins, such as trading with their own capital and slapping customers with hefty "overdraft" fees. Oil is up about 10% so far this year, settling at $100.29 a barrel Wednesday, and commodities such as gold and copper are close to all-time highs.
So we rescued the Big Banks so that they could become commodity speculators? Obviously the “clampdowns” noted at the top of the second paragraph are having a rather limited effect.
These banks make both proprietary trades (betting their own money) and various services in commodity trading to their clients. So they are making both speculative profits and fees. But it does make you wonder how they use their client’s information when they are making their own trades.