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By Reuters

The Federal Reserve Board and two other regulators on Thursday issued a report that recommends Congress pare back Wall Street's access to commodity and merchant banking investments.

Leading financial institutions like Goldman Sachs and Morgan Stanley can gain an unfair advantage because of rules that allow them to invest in the commodities sector, said the report from the Fed, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, all bank regulators.

Existing rules that allow commodity investments "raises safety and soundness concerns as well as competitive issues," the Fed said in a report to Congress required under the Dodd Frank reform legislation.

The report also recommends that Congress "repeal the authority of (Financial Holding Companies) to engage in merchant banking activities."