Goldman Sachs nearly invested heavily into now-tanking company Glencore, but they didn’t because of potential regulatory limits. The investment firm was ready to put millions of dollars into the commodity trading and mining company, but they stopped at the last minute because they believed that the Federal Reserve would put a restriction on commodity trading by banks.

Now that Glencore has experienced a 78% decline over the past five months, Goldman Sachs has to be feeling pretty lucky.

When Goldman Sachs transitioned into a bank holding company in 2008, the Federal Reserve began monitoring their activities more closely. In 2013, politicians urged regulators to review the commodity-trading activities of the banks, as well as the exemptions that were put in place that enabled investment firms to own shares of commodity businesses.

Last year, subcommittee of the United States Senate recommended that investment firms shouldn’t be allowed to own physical commodities because doing so would provide unfair trading advantages and possibly threaten the financial system of the country if the investment firm faced financial trouble.

The Federal Reserve never acted on this recommendation, but it was enough to scare banks away. Investment firms began dumping commodity companies left and right. And purchases that were set to occur, like Goldman Sachs investing in Glencore, never took place.

Other investment firms also experienced fortuitous situations as a result of the Senate hearing. In July of last year, investment firm Morgan Stanley sold its stake in TransMontaigne Inc., an oil transportation company. In addition, it also sold some physical inventory. The total deal was worth around $750 million. Morgan Stanley made a gain of about $101 million on the sale. Since this deal took place, TransMontaigne shares have fallen by a third, while oil has declined by $60 per barrel.

Meanwhile, JPMorgan sold the majority of its physical commodities trading unit to Mercuria Energy Group Ltd. last October. With the decline in commodity prices, JPMorgan has to be feeling pretty good about that deal.

Banks recognize their lack of a need for physical commodities.

Morgan Stanley CFO Jonathan Pruzan said in June, “We don’t think we need to be in the physical oil assets or merchanting business to be effective. Ten years or 15 years ago it was important, and we thought it was a competitive advantage, but we don’t think that’s the case today.”

So while Goldman Sachs may have been heavily tempted to pursue the lucrative Glencore at one point in time, it has to be extremely thankful that it did not.

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