U.S. Senate to grill watchdogs on Wall Street commodity bets
* Sen. Banking Committee schedules meeting Nov. 20 -source
* Fed, CFTC, FERC to testify
* Banks under pressure over their physical commodity business
WASHINGTON, Nov 8 (Reuters) - U.S. senators will question financial regulators over Wall Street's role in commodity markets, a person familiar with the matter said, in a hearing that will draw close attention from the largest investment banks.
The Nov. 20 meeting of the powerful Senate Banking Committee will be the second called by Senator Sherrod Brown, an Ohio Democrat, and follows a session in which brewers complained that beer cans were too expensive because banks kept the price of aluminum artificially high.
The Committee did not immediately return a request for comment.
Brown and other lawmakers have been questioning whether banks should be allowed to own metals warehouses, oil tankers and other physical assets next to their vast commodity and commodity derivatives trading desks.
One of their concerns is that banks hold too much sway over the market if they can control supply of the same commodities that they trade in large volumes.
At the same time, the Federal Reserve has been reconsidering a policy that has allowed banks including Citigroup Inc and JP Morgan Chase & Co to build up extensive physical commodity operations since the early 2000s.
The hearing, which was originally scheduled for Oct. 8, will call up representatives from the Fed, the Commodity Futures Trading Commission - the derivatives regulator - and the Federal Energy Regulatory Commission.
Sources earlier told Reuters that Michael Gibson, a director of the Fed's Division of Banking Supervision and Regulation who represents the Fed abroad, would be speaking on the central bank's behalf.
CFTC Commissioner Bart Chilton - a Democrat who has made no secret of his mistrust of large banks involved in commodity markets, was also expected to testify.
The Fed may not unveil its plans for regulating investment banks' commodity business until early next year, Reuters reported last month, confounding any expectations it would come out with a new policy before the second meeting.
Goldman Sachs Group Inc and Morgan Stanley are two banks that will be paying particularly close attention to the hearing because they are allowed far greater leeway in trading raw materials than rival banks.
That is because of a quirk in the law that enabled them to retain enterprises they owned before 1997, even after they became Fed-supervised banks at the height of the financial crisis.