By Pam Martens: July 18, 2013
Jamie Dimon, Chairman and CEO of JPMorgan Chase, Explaining Losses to the House Financial Services Committee, June 19, 2012
The Wall Street Journal and the New York Times are reporting this morning that JPMorgan Chase, the mega Wall Street bank that has shelled out over $16 billion in the last three years for legal expenses connected to investigations and lawsuits, may shortly be inking a deal with the Federal Energy Regulatory Commission (FERC) that would settle claims it manipulated energy prices. The price tag for making another regulatory mess go away, says the New York Times, may reach $500 million.
The specifics of just what charges JPMorgan will be settling are not yet available, but the path to this outlay of a cool half billion is, without question, related to a regulator incensed with what it believes to be stonewalling on the part of JPMorgan’s lawyers.
On November 14, 2012, FERC suspended JPMorgan Ventures Energy Corp.’s electric market-based rate authority for submitting false information to FERC. The suspension prohibited JPMorgan Ventures from selling power at market-based rates for six months. The background of that suspension showed a trail of legal hubris.
FERC wrote at the time regarding the suspension:
“The nature of JP Morgan’s violations is of critical importance in this case. The ability to charge market-based rates is a privilege, not a right, and in granting that privilege the Commission relies on the truth and veracity of the demonstrations made by companies when they apply for market-based rate authority. Furthermore, the Commission’s grant of market-based rate authority is founded upon the presumption that a company’s behavior will not involve fraud, deception or misrepresentation. Consequently, the Commission relies on the submission of complete and accurate information from those that seek authorization to charge market-based rates. Indeed, the provision of false, misleading or inaccurate information undermines the very integrity of the Commission’s decision-making process, the Commission’s market-based rate regime, as well as the Commission’s ability to carry out its statutory obligation to ensure just and reasonable rates. For these reasons, the Commission has continuously warned market participants of the consequences associated with failing to abide by the Commission’s rules and regulations.”
According to its SEC filings, JPMorgan has paid the following sums for litigation expense: $3.8 billion for the nine months of 2012 ending September 30; $4.9 billion in 2011; $7.4 billion in 2010 for the whopping total of $16.1 billion in 33 months.
JPMorgan has other potentially costly headwinds facing it from regulators, stemming from a host of serious investigations; among them, the London Whale episode where the firm lost over $6 billion gambling with depositor funds in London and the ongoing Libor investigation where large banks colluded to rig a key interest rate benchmark.
