* JPMorgan did not belong in energy space, official says
* Regulator: some firms will "self select" out of market
* Wall Street firms will get same scrutiny, can help market
By Patrick Rucker
WASHINGTON, Aug 2 Wall Street firms that cannot
legitimately profit in the power sector will leave the market in
time, the top regulator for the U.S. electricity market said on
JPMorgan Chase & Co this week agreed to pay more
than $400 million to settle charges of market manipulation
brought by the nation's power regulator and the bank says it
will wind down its entire commodity trading business.
JPMorgan was not cut out for the power market, the regulator
said, and other Wall Street giants who have strayed from their
core lending business into the power sector could make a similar
"I don't think I have to go crusading to Congress or other
places and say we need to cordon off an entire sector of
participants in the market," said Jon Wellinghoff, chairman of
the Federal Energy Regulatory Commission (FERC), who is set to
step down from the post in coming months.
"I think they are going to self-select, as JPMorgan did, to
understand that they are just not experienced enough to make
money in this market legitimately."
The JPMorgan settlement is just one in a series of recent
FERC actions against major banks accused of manipulating
Barclays is fighting a record $453 million FERC fine for
allegedly gaming markets while Deutsche Bank earlier this year
settled a manipulation case for $1.5 million.
Wall Street is welcome in power markets, Wellinghoff said,
but companies that are more interested in trades than delivering
electricity might find it hard to thrive.
"(If) they have to engage in activities that are
manipulative, inappropriate or outside the rules then we are
going to come after them and stop them," said Wellinghoff.
Lawmakers have begun to question whether big banks should
have large stakes in commercial ventures that are remote from
their lending business. Two weeks ago the Federal Reserve said
it was "reviewing" a 2003 decision that allowed commercial banks
to trade in physical commodity markets.
Wellinghoff said on Friday that FERC does not need to set
tougher standards for financial firms that play in the power
sector than enterprises that principally generate or transmit
electricity. Supervisors are equipped to give each enterprise
its due scrutiny,he said.