Exclusive: Goldman's Cohn takes on Washington to defend commodities

Fri May 23, 2014 7:39am EDT
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By Anna Louie Sussman and Lauren Tara LaCapra

NEW YORK (Reuters) - Sen. Sherrod Brown, a Democrat from Ohio, and Goldman Sachs Group Inc. President Gary Cohn, who's from Cleveland, are friendly enough that Brown has been known to rib Cohn for abandoning the Cleveland Indians baseball team in favor of the New York Yankees. The two men first met years ago, and Cohn and his family, who are also Democrats, have contributed to Brown's campaigns.

They may like each other, but the two men are antagonists in a battle over whether Goldman can maintain its lucrative role in physically trading stuff ranging from aluminum to coal to natural gas to zinc.

Brown, 61, has been a critic of the role that banks, particularly Goldman, play in commodities markets, accusing Wall Street of driving up prices for businesses and consumers. Cohn, Goldman's No. 2 executive, met this month with lawmakers including Brown as well as U.S. Federal Reserve officials to explain why a Wall Street bank's presence in the commodities market is actually good for Main Street.

The meetings with lawmakers and the Fed, which haven't been previously reported, show how hard Goldman is fighting to hang on to its commodities business.

"For more than 30 years, we have been helping our clients manage commodity and other risks and we believe that experience has given us an important perspective on the policy debate under way today," Goldman said in a statement.

Goldman reported $902 million in commodities revenues for 2013, up from $492 million the prior year. The bank says those figures, reported in accordance with U.S. Securities and Exchange Commission rules, do not accurately reflect the way it runs its commodities business.

Cohn's meetings come after consumers, including beer-can and steel-railings manufacturers, prompted Brown to hold hearings on the subject of banks and physical commodities through a congressional subcommittee he oversees. Brown has also been considering whether to bring bankers in front of the committee to publicly question their role in the raw materials supply chain, sources said.

This week, Goldman said it began a process to sell one part of its physical trading operations, a metals warehousing business called Metro International Trade Services, that has been the center of controversy over its influence on consumer prices.   Continued...

Gary Cohn, president and COO of Goldman Sachs, speaks during a news conference, after a meeting with Brazil's President Dilma Rousseff in Brasilia April 9, 2014. REUTERS/Ueslei Marcelino