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JP Morgan may be going back to banking basics. Instead of losing billions in arcane, illiquid credit instruments, the bank’s latest scandal is a classic: overcharging unwitting customers.
Jessica Silver-Greenberg and Ben Protess report that JP Morgan is in some very hot water with the Federal Energy Regulatory Commission (FERC). According to an agency memo, the bank turned “money-losing power plants into powerful profit centers”.
Under other circumstances, that’d be just another win for JP Morgan’s booming commodities division. The problem is that JP Morgan’s success came through allegedly duping California and Michigan state officials into overpaying for energy by $83 million. These same allegations were included in Joshua Rosner’s comprehensive review of the bank’s regulatory lapses published in March.
When confronted by regulators, Blythe Masters, the bank’s head of commodities, made “false and misleading statements”, FERC says. The traders working for Masters “planned and executed a systematic cover-up” of the trades,” and an email from Masters instructed an internal document to be rewritten. Importantly, the agency plans to hold both JP Morgan and individuals at the bank liable for any infractions.