WASHINGTON, Sept 6 A $410 million settlement by
JPMorgan Chase & Co of alleged manipulation in the power
market served the public interest more than an uncertain legal
fight to punish individual bank executives, a U.S. regulator has
In a reply to lawmakers' questions late last month, the
chairman of the Federal Energy Regulatory Commission wrote that
it had to weigh a certain settlement with JPMorgan against the
costs and risks of taking the company to court.
And while FERC has sharpened its enforcement tools to curb
manipulation in the market, both the regulator and lawmakers
have said loopholes remain.
FERC and its sister agency, the Commodity Futures Trading
Commission, have not yet agreed how to share information,
something that is required by the 2010 Dodd Frank law, it said
in a separate letter to lawmakers.
FERC blamed the CFTC - the derivatives markets supervisor -
for being unwilling to share certain data that is "critical" to
fight market manipulation, FERC said in the letter in response
to a request from three senators.
The senators had asked the two agencies for an update on how
they had improved their cooperation, after the FERC lost a court
battle against the CFTC in March over who had jurisdiction to
fine a futures trader.
The CFTC said it was still reviewing the letter and would
withhold comment for now.
Defending its decision on JPMorgan, FERC Chairman Jon
Wellinghoff said the immediate cash penalty and costs to the
bank's reputation were a valuable message to the market that the
regulator will not tolerate abuses.
"The Commission concluded that, on balance, acceptance of
the settlement containing these substantial, immediate benefits
for ratepayers and the public was preferable to jeopardizing
those benefits through the considerable delay and uncertainty
posed by pursuing actions against individual JP Morgan
employees," he said in a letter dated Aug. 26.
FERC alleged that JPMorgan used its position to exploit
loopholes in the California and Michigan power markets.
Specifically, according to the settlement, JPMorgan would
quickly move in and out of the market to make sure that it got
payed high rates for operating its power plants at low levels.
In late July, a day after FERC announced its settlement, two
Democratic Senators asked whether the regulator could not have
gotten more concessions from the Wall Street giant.
"We are concerned about whether the settlement includes
adequate refunds to defrauded ratepayers and also concerned that
the individual executives who sought to impede the Commission's
investigation will not be punished," Massachusetts senators
Elizabeth Warren and Ed Markey wrote.
In the settlement paperwork, FERC and the bank acknowledge
that JPMorgan's commodities chief Blythe Masters and other
executives were briefed on aspects of the power plants that were
losing money in operations but earning millions of dollars in
profits as parts of energy trades.
U.S. authorities are conducting a criminal investigation
into whether JPMorgan employees tried to impede the FERC
investigation, according to multiple sources familiar with the