Levin's committee plans showdown on banks in commodities

WASHINGTON (Reuters) - U.S. Senator Carl Levin's powerful committee will hold a two-day hearing later this month on Wall Street banks' ownership of physical commodities and assets from pipelines to warehouses, touching off a two-year probe into potential market abuses.

The much-anticipated session by the Permanent Subcommittee on Investigations that he leads will take place on Nov. 20-21 and follows a bipartisan investigation into a decade-long expansion by Wall Street banks into the commodities supply chain.

The probe into banks and commodities is seen as Levin's final target before retiring at the end of this year after serving on the investigations panel for about 15 years.

"The objective of the hearing is to provide facts that have been missing from the public debate about the nature and extent of bank involvement with physical commodities and the impact and consequences of that involvement," Levin said in a statement.

The witness list will be announced on Nov. 17.

The third such hearing by lawmakers on the hot issue will likely renew scrutiny of banks, including JPMorgan Chase & Co (JPM.N), Goldman Sachs Group Inc (GS.N) and Morgan Stanley (MS.N), that have faced pressure from the Federal Reserve over whether it is appropriate for them to maintain vast holdings in metals warehouses and other physical commodities businesses.

Democrats Sherrod Brown and Elizabeth Warren have grilled regulators and banking experts on the issue twice after companies including MillerCoors LLC accused warehouses and their owners of distorting supplies, inflating the prices of aluminium, and costing consumers billions of extra dollars annually.

The latest public airing of concerns will also step up pressure on U.S. regulators to clamp down on some of the country's largest banks.

The Federal Reserve has said it is reconsidering a previous policy that allowed banks to build up substantial activities in physical commodity markets.

Facing legal, regulatory and political pressure, the banks have already retreated from these once-lucrative markets. Goldman has put its metals warehouse up for sale and JPMorgan has sold its physical business to Mercuria.

Representatives for Goldman, Morgan Stanley and the Fed declined to comment on whether they would be invited to speak. JPMorgan did not return requests for comment.

(Reporting by Emily Stephenson in Washington DC and Josephine Mason in New York; Editing by Doina Chiacu and Ken Wills)