PROFILE-Oregon lawmaker will not let Fed forget to tackle commodities

NEW YORK, Aug 17 – Just over a year ago, Oregon Senator Jeff Merkley was looking for a place to make a bold statement about his latest crusade: taking Wall Street’s traders to task for gaming commodity markets.

His office telephoned Bruce Kehe, marketing director at Portland’s Hopworks Urban Brewery, to see if the microbrewer would host an event at which Merkley would blast banks such as Goldman Sachs Group Inc for driving up the price of aluminum and other commodities.

Allegations that banks were hoarding aluminum in warehouses they own had captured regulatory, legal and political attention in July 2013, when Merkley participated in the first hearing on the issue.

In the past year, the Senate Banking Committee has held a second hearing on the issue; the Federal Reserve said it would consider ways to curb banks’ commodities activities and solicited public comment on the matter; and banks including JPMorgan Chase & Co and Morgan Stanley have sold portions of their business.

But even as the Fed has gone quiet on the issue, Merkley is growing louder.

In June, two months after the Fed’s comment period closed, he submitted a seven-page letter in which he urged the regulator to severely limit banks’ commodities activities, citing several provisions of the Volcker Rule under which it could act.

Now, as he awaits a response from the Fed on the commodities issue, he is pondering his next steps.

“I feel that the Fed has not come to grips with this issue,” he said in a recent interview with Reuters.

“There doesn’t seem to be a conversation in the regulatory world saying ‘Isn’t there a fundamental conflict between owning oil pipelines and trading on the price of oil?'”

Kehe himself was less convinced of the link between banks and the cost of the aluminum cans he uses for his organic hops, but he called the August 2013 press conference, which also included two Oregon Democratic members of the House of Representatives, Suzanne Bonamici and Earl Blumenauer, “a solid event.”


While Senators Sherrod Brown and Elizabeth Warren often capture headlines with their attacks on Wall Street, Merkley has operated a quieter behind-the-scenes campaign that people say reflects his deliberative, persistent political style.

“He’s more like a professor than a senator. If you were on a bus with him and someone offered you a thousand dollars to pick out the senator, you couldn’t do it,” said Dennis Kelleher, president of Better Markets, a financial reform advocacy group in Washington, D.C.

The freshman lawmaker, a Democrat, is already well known in some financial circles as a force behind the Volcker rule, which clamped down on banks’ speculative bets. Merkley recalls phoning at least 80 other senators personally to convince them of its merits.

He could put forward legislation on commodities in the next session, but, as he notes, “legislation is hard to come by in this institution.”


With connections to beer cans and power prices, commodity trading is a prime example of the kind of wonky issue Merkley, who is up for re-election in November, loves to tackle, even if it may not top voters’ agendas.

The first person in his family to attend college, he lives in the same working-class East Portland neighborhood where he grew up, and he relishes defending “the little guy” from Wall Street machinations, according to interviews with a dozen people who know him.

Merkley traces his interest in commodities to the late 1990s, when Enron ran a trading desk in Portland’s World Trade Center while he was serving in Oregon’s state legislature.

From downtown Portland, Enron’s traders manipulated electricity markets up and down California, causing price spikes and major blackouts throughout 2000 and 2001.

“It was certainly an education about what can go wrong if the same entity is both making bets on the price of something, and able to influence its supply and demand,” Merkley said.

He called similar allegations against JPMorgan Chase & Co , which were settled with the Federal Energy Regulatory Commission for $410 million, “a scary echo, or a deja vu,” of the Enron scandal.

Art Robinson, chair of the Oregon Republican Party, said Merkley has jumped on the commodities bandwagon for political gain.

“Wall Street can run itself just fine. It probably doesn’t need Jeff Merkley’s help,” he said.


Merkley acknowledges that pushing the Fed to regulate banks’ commodities activities will not happen overnight.

He called the June letter “the culmination of more than two years of advocacy” on the issue, and said he brings it up with regulators at every chance he gets.

“We’re reviewing a number of possibilities, and we continue to work with regulators themselves,” he said, declining to offer specifics.

Those who know him say he is in it for the long haul.

“He’s not flashy; he’s dogged,” said Representative Blumenauer, who worked with him in the 1990s to transform an Oregon neighborhood known as “crack alley,” when Merkley ran the state chapter of Habitat for Humanity.

“He finishes.”