The U.S. government permitted Wall Street firms to expand in the energy industry a decade ago but the results aren't pretty.
Bloomberg News reports that J.P Morgan settled Federal Energy Regulatory Commission (FERC) claims this week that employees engaged in 12 bidding schemes to wrest tens of millions of dollars from power-grid operators.
A Barclays trader stands accused of bragging he 'totally f***ed' with a Southwest energy market. Deutsche Bank AG workers, faced with losses on a contract, allegedly altered electricity flows to make it profitable instead.
The FERC’s investigations are fueling a debate among lawmakers and the Federal Reserve over whether to reverse more than a decade of policy decisions that let Wall Street banks keep or build units handling commodities and energy. Senators examining the firms’ roles have said they may call bankers and watchdogs to a September hearing amid concern traders are abusing their ability to buy and sell physical products while betting on related financial instruments.
Banks have been seen as 'sources of capital investment and market liquidity,' said Marc Spitzer, a partner at law firm Steptoe & Johnson LLP in Washington and a former FERC commissioner. 'But the tradition and culture of large banks is different than the conservative and risk-averse culture of regulated utilities.'
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