JPMorgan being investigated over alleged power market manipulationReported by Proactive Investors on Tuesday, 3 July 2012 (on July 3, 2012)
Shares of JPMorgan Chase & Co. (NYSE:JPM) edged down about 10 cents Tuesday, a day after the U.S. Federal Energy Regulatory Commission (FERC) filed a petition in U.S. federal court as part of a formal probe into whether the bank manipulated power markets in California and the Midwest.
As at the early US market close of 1 pm EDT, the company’s shares were down 0.28 per cent, trading at $35.88.
FERC began its investigation Monday by asking JPMorgan to produce e-mails from 2010 and 2011, as well as looking at whether JPMorgan made truthful and non-misleading communications to the commission and regional energy market operators.
In documents filed yesterday, the agency said “three of the bidding techniques had together resulted in at least $73 million in improper payments,” citing estimates by the two system operators.
The news comes less than a week after the New York Times reported that a credit derivative trading at loss a JPMorgan initially estimated at $2 billion, could be as much as $9 billion.
The paper quoted an unnamed source as saying a report generated in April showed that in a worst-case scenario the losses from the trade could reach $8-9 billion, but said some regulators expect something closer to $6-7 billion.
Last week, CNBC had also said the final losses would not exceed $6-7 billion, given that the company had moved quickly to unwind the position.
JPMorgan chief executive Jamie Dimon had said the eventual losses could be higher than the $2 billion announced in May.
In mid-June, JPMorgan’s chief executive Jamie Dimon testified for the second time that week before lawmakers about his company's risk strategies.
Dimon said his bank was upfront with investors about its multibillion-dollar trading loss, even as regulators investigate whether JPMorgan disguised a dramatic rise in risk-taking.
He acknowledged that JPMorgan in January changed a "value-at-risk" model for the trading portfolio in question.
The bank did not disclose the change until May 10, when Dimon also revealed that the trading portfolio had produced at least $2 billion US in losses.
"We disclosed what we knew when we knew it," Dimon told the House Financial Services Committee.
Dimon's comments came after the committee heard from a panel of regulators, including Securities and Exchange
Commission Chairman Mary Schapiro, who gave more details about her agency's investigation into the trading loss.
Schapiro said the SEC is looking at whether JPMorgan misled investors in its April earnings statements by failing to disclose the value-at-risk change. At that time, Dimon also called press reports about a "London whale" trader with an outsized position a "tempest in a teapot".
The SEC is investigating the trading loss, along with the Commodity Futures Trading Commission. The FBI has also said it is looking into the losses.
Links: Full news story
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