After seeing how much Goldman profited from selling MBS that they knew were junk, it's hard to feel sorry for Goldman receiving so much grief for its commodity storage and trading activities. The worry seems to be that because Goldman has become increasingly involved in commodities markets that they must be manipulating prices for profit, and in the process pushing prices away from their fundamental values---ie., supply and demand.
Do we actually know whether there is a problem here? It's possible that Wall Street is trying to manipulate the market. But this is a hard thing to do, even for a really big company, especially one that doesn't produce the stuff it's trying to monopolize. Also bear in mind that anyone can buy and store commodities, so it's not like there are huge barriers to entry. Those who have tried to corner commodity markets in the past haven't fared well.
My sense is that cornering a commodity market via hoarding is basically impossible once the market realizes what the major player(s) is doing. And if they're having senate hearings about Goldman's storage and trading activities, I think it's fair to say the cat's out of the bag.
So, what is Goldman doing? If it's not a market power story I'd guess they're trying to buy low and sell high, just like everybody else. They probably believe they have a better handle on market fundamentals than other commodity speculators. Perhaps they do. But if this is all they are doing, then they are effectively reducing price volatility and helping to make the market work more efficiently.
On public radio this morning a reporter (sorry, I forget who), asked Omarova whether Goldman's profits just meant that consumers were paying higher prices. Omarova said "that's absolutely right." But it's absolutely wrong if Goldman's just speculating. Goldman's profits are coming out of the pockets of speculators who bet prices would fall when they rose, and vice versa. In fact, that's probably the case if it's a market power issue too.
Anyway, if this is about Goldman trying to corner the storage market, that's a problem and Goldman deserves the grief they're receiving. But that strikes me as unlikely as it would be foolhardy. My guess is that this is just speculation, which means Goldman's profits translate directly to better allocation of commodities over time, less commodity price volatility, and basically zero influence on average prices.
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