Why Goldman Sachs has no business owning a coal mine in Colombia

By Lina Khan

In 1913, Congress determined that a cabal of Wall Street bankers had captured control over the US economy. Having bought up large shares of railroads, utilities, and manufacturers, these titans of finance had acquired the power to pick whether a business thrived or failed, and could effectively direct the nation’s commerce. “t is fraught with peril to the welfare of the country,” wrote the Pujo Committee, the investigating body.

In the century since, banks have mostly been prohibited from direct involvement in non-banking activities—transporting and storing goods, for example, or running commercial businesses. But today, a handful of banks are back in the game of real stuff and services. Goldman Sachs, for example, owns a coal mine in Colombia and a giant metals warehouse in Detroit. Morgan Stanley owns and operates electric power plants outside Reno and delivers cargoes of liquefied natural gas to Argentina.

This fall, the Federal Reserve will decide whether to allow these two banks to continue owning and operating these businesses. Experts say that if Goldman Sachs and Morgan Stanley get their way, the result could vastly expand the reach and influence of the entire banking industry—even as lawmakers hustle for ways to rein in these same giants.

The banks stand to gain the most rights in markets for essential commodities, like oil, gas, metals, and electricity. Over the last decade, the Fed has allowed a handful of commercial banks to directly enter these industries, largely through circuitous back road legal processes. Its decision in this instance could open a highway for everyone.

“This would concentrate even more power among a few,” said Saule Omarova, a professor at the University of North Carolina at Chapel Hill School of Law and author of “The Merchants of Wall Street,” a seminal paper on the legal and policy implications of banks’ physical operations. “What we have here is essentially the same story as J.P. Morgan controlling railroads and infrastructure in the early 20th century—it’s just a different level of sophistication.”

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