Chase May Get Nailed with $500 Million Settlement for Dodgy Energy Trading
Some records were made to be broken. Whether it's the most home runs in a season, building the world's tallest skyscraper or serving the world's best cup of coffee -- these are all records people are aiming to bust right through.
However, it's unlikely the Houston energy traders working for JP Morgan Chase had anything like a yen to break the record for Federal Energy Regulatory Commission fines.
Chase, the largest bank in the nation, took on electricity assets when Bear Stearns died back in 2008, and now the bank is in settlement talks that may result in a record fine from the F for how those electricity assets were handled.
Chase picked up Bear Stearns for about $2 a share back in March 2008, which was basically like finding an investment bank and securities trading and brokerage firm in the bargain bin because it had subprime mortgages smeared all over it. As part of the deal, Chase got the right to sell electricity to power plants. The thing is, the power plants were old, with outdated technology, and weren't turning a profit as expected.
From September 2010 to June 2011, electricity traders in Houston, responding to pressure to bring in better profits, allegedly dressed things up so the prices for electricity looked like better deals than they actually were.
Power plants in California and Michigan ended up paying more than $80 million over what they should have been paying for the electricity. Eventually, the folks over at FERC figured it out and started investigating, according to The New York Times.