In October 2011, things were looking bleak at Goldman Sachs Group Inc.'s commodities business. Revenue was down, competition was up, employee attrition was at an all-time high and new regulations were on the horizon.

Beyond the usual rivalries with Morgan Stanley and JPMorgan Chase & Co., Goldman Sachs executives saw an upstart doing deals they couldn't do and throwing lots of cash at traders: Glencore Plc. The commodities company wasn't tied down by rules that applied to banks and had become even more of a presence since a $10 billion initial public offering earlier that year. It boasted strong growth and higher stock multiples than Goldman Sachs was receiving for its commodities unit.

"Glencore competes with GS Commodities but has a broader business mix, including significant production, refining, storing and transport activities," Goldman Sachs executives said in a presentation that month to the bank's board later made public by the Senate Permanent Subcommittee on Investigations. "May be model for evolution of commodities trading."

Four years later, that envious assessment is looking wrong, and Goldman Sachs executives are probably breathing a sigh of relief. Glencore shares plunged 29 percent Monday, extending their decline to 78 percent in the past five months. The Baar, Switzerland-based company is seeking to sell assets and cut debt to avert a credit-rating downgrade. It has sold new stock and scrapped its dividend as part of a $10 billion debt-reduction program amid a broad commodity rout spurred by China's economic slowdown. Last week, Goldman Sachs analysts said the company's efforts were inadequate, sending the stock lower.

Fed Scrutiny

Goldman Sachs and other banks have the U.S. Congress and the Federal Reserve to thank. While you won't hear many bankers praising regulation that limits their activities, the Fed's scrutiny of banks' physical commodities units came at a fortuitous time for the largest Wall Street firms.

The Fed was already overseeing the commodities units of Goldman Sachs and Morgan Stanley as a result of their 2008 conversion to bank holding companies when Senator Sherrod Brown, an Ohio Democrat, held hearings in 2013 on the risks those businesses posed to lenders and markets. He pushed regulators to review banks' commodities activities and the exemptions that allowed firms to own such businesses.