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U.S. megabank JPMorgan Chase is being investigated for, of all things, manipulating the California energy market.
From Michael Hiltzik at the L.A. Times:
The next time your electricity bill prompts you to curse your local utility, here's another target where you should direct your anger: JPMorgan Chase and Co., which has manipulated the California energy market for its own profit and at a cost to residents and businesses in the state that could be $100 million, $200 million or much more.
That's the accusation leveled by the California Independent System Operator, which has jurisdiction over 80 percent of the state's electrical transmission. The ISO, a nonprofit corporation controlled by the state government, estimates that JPMorgan may have gamed the state's power market for $57 million in improper payments over six months in 2010 and 2011.
According to Hiltzik's article, Chase's alleged scam was fairly simple: bidding to produce a certain amount of electricity in the California market with no intent to actually make the sale, in order to collect compensation for nonexistent power plant operating costs.
If these charges prove true, you've got to wonder just what an FDIC-insured depository institution is doing playing around in the California energy market in the first place. And if this incident, like the now infamous "London Whale" loss, proves to have happened without the approval of top management, it will be more evidence that massive banks like JPMorgan may be too large to manage effectively.
What do you think? Should large banks be split up so that one hand knows what the other is doing, or are these just isolated incidents?
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