By Douwe Miedema
WASHINGTON (Reuters) - A U.S. congressman on Wednesday urged the U.S. commodity regulator to take a tougher stance on the London Metal Exchange as it struggles to resolve a year-long controversy over inflated prices and distorted supplies of aluminum.
Bob Goodlatte, who chairs the House Judiciary Committee, was speaking as a member of the House Committee on Agriculture, which adopted a bill to rewrite the rules governing the Commodity Futures Trading Commission.
"The CFTC acknowledges that they have the authority to regulate and investigate concerns about the aluminum supply," said Goodlatte, a Virginia Republican.
"End-users are concerned that the CFTC has been slow in taking action and looking into their concerns."
Complaints about high prices from brewers and other aluminum users last year sparked frenzied scrutiny from politicians and regulators in the United States and elsewhere on the role of big banks in commodity markets.
Much of their wrath focused on vexing logjams within the network of LME warehouses - many owned by big banks and traders - something critics say is a deliberate tactic by the operators to charge storage fees over many months.
The LME - owned by Hong Kong Exchanges and Clearing Ltd - had started a consultation to reform the process, but the London High court last month put an end to that, condemning the process as "unfair and unlawful".
The Department of Justice and CFTC are looking into the issue which has been under political, regulatory and legal scrutiny since the middle of last year.
Senator Sherrod Brown, an Ohio Democrat who has lead the charge in Congress against banks' involvement in the physical commodity business, urged the CFTC to take an aggressive stance on the issue earlier this year.
Goodlatte chairs the House Judiciary Committee, which has also looked into the matter, according to a Committee aide, and has met with representatives of the aluminum industry. The lawmakers' panel, which oversees the Justice Department, did not however at this moment plan to hold a hearing.
Goodlatte's remarks came at a meeting at which the House Committee on Agriculture adopted a bill to adjust the CFTC's mandate and several of its rules, a process known as reauthorization that roughly takes place every five years.
However, he withdrew an amendment to the bill that would have required the CFTC to report in a year's time to account for its oversight of aluminum markets. In return, the panel vouched to keep a close eye on the issue.
The bill now needs to go to the House floor, but few policy watchers expect it to become law because President Barack Obama's administration opposes the changes. That means the Democrat-led Senate is unlikely to pass it.
The LME is regulated by the UK's Financial Conduct Authority (FCA), but the CFTC holds sway over its U.S. business.
(Reporting by Douwe Miedema, Additional reporting by Aruna Viswanatha in Washington and Josephine Mason in New York; Editing by Diane Craft)