Federal Reserve Governor Daniel Tarullo questioned whether Goldman Sachs Group Inc. and Morgan Stanley should be allowed to own physical commodities such as oil and coal.

“Those two firms are by statute allowed to engage in the extraction, transportation of potentially highly combustible materials with substantial risks associated with them,” Tarullo told the Senate Banking Committee on Thursday.

“So I think it would be very much worth considering treating those two firms the way we treat all other bank-holding companies.”

The Fed is working on a rule to discourage banks from holding physical commodities amid lawmaker criticism that the firms could manipulate markets and expose themselves and taxpayers to the risk of a catastrophic environmental accident.

Tarullo’s comments indicate he wants to crack down on the activities.

The 1999 Gramm-Leach-Bliley law, which ended the separation of investment and deposit-taking firms, “grandfathered” commodities operations that Goldman Sachs and Morgan Stanley had before 1997.

The two were securities firms until they became bank-holding companies during the 2008 financial crisis.