FTSE 100
Dow Jones

Tuesday, 30 July 2013

Masters of the universe (part 2)

Remember Blythe Masters? Perhaps not, but then who has a long memory these days?

If you can cast your mind back 4 years you may remember one female Labour politician saying the 2008 crash wouldn't have happened if Lehman had been called Lehman Sisters. Silly claim because as we all knew the systemic disaster that is the credit default swap sprang from the loins of the derivatives team run by the ever so definitely female Blythe Masters at J.P. Morgan.

Quite an achievement, but where does a career go after that?  Well in Ms. Blythe's case, back to NY to build up the physical commodities business at JPM, and by all accounts it seemed to be goin fairly well with the business becoming one of the largest on Wall Street, active in electricity and gas trading. But then it all went horribly wrong .... again.

JPMorgan Chase has just agreed to pay $410 million to the nation’s energy regulator, a move that will allow the bank to settle allegations that traders in its Houston offices manipulated electricity markets in California and Michigan. The pact announced on Tuesday is a record settlement for the regulator, the Federal Energy Regulatory Commission, which has ramped up its policing of Wall Street trading in recent months.

While the regulator fined the bank, it stopped short of penalizing individual JPMorgan executives. That decision is a reversal from earlier this year, when the regulator warned JPMorgan that it might seek to sanction Blythe Masters, the influential leader of the bank’s commodities business. Initially, investigators also planned to recommend that the agency hold three of her employees “individually liable.”

The accusations of market manipulation initially surfaced this spring in a confidential commission document, reviewed by The New York Times. The document, a warning that investigators would recommend that the agency pursue civil charges, had originally concluded that Ms. Masters gave “false and misleading statements” under oath.

From the outset, JPMorgan argued that Ms. Masters never made false statements.

The accusations against JPMorgan originated from its rights to sell electricity from power plants that it acquired after the bank took over Bear Stearns in an emergency rescue in 2008.

The plants that the bank inherited were outdated and inefficient. Still, the regulator said, traders in Houston found a work around. To transform the power plants into profit generators, the agency said, JPMorgan’s traders adopted eight different “schemes” from September 2010 to June 2011.

The trading strategies offered electricity at prices that appeared falsely attractive to state energy authorities. The effort prompted authorities in California and Michigan to make excessive payments that helped drive up energy prices, the regulator said.

As part of the settlement on Tuesday, JPMorgan will pay a civil penalty of $285 million to the Treasury Department. JPMorgan will also pay $125 million in “unjust profits,” the energy regulator said on Tuesday. That money will go to ratepayers in both California and the Midwest, where JPMorgan’s trading practices, the agency said, drove up prices for electricity.

Honestly, these women.

No comments: