Courtesy of Pam Martens.
U.S. Senator Sherrod Brown
U.S. Senator Sherrod Brown, Chair of the Subcommittee on Financial Institutions and Consumer Protection, part of the Senate Banking Committee, will hold a hearing today at 2:00 p.m. on “Regulating Financial Holding Companies and Physical Commodities.” This will be the second time in six months that the U.S. Senate has investigated the alleged rigging of these markets by Wall Street firms as the Federal Reserve, the sole regulator to grant Wall Street the power to push into these markets, fails to take action to repeal its orders and asks for public comment through March 15, after which time it will study the problem some more.
In his written testimony submitted to the Committee, on which he will take questions today, Norman Bay, Director of the Office of Enforcement at the Federal Energy Regulatory Commission (FERC), cited examples of fraudulent activity by Deutsche Bank, Barclays, and JPMorgan. In the JPMorgan case, FERC forced the bank to pay a combined $410 million in civil penalties and disgorgements to ratepayers in July of last year. At the time, FERC said JPMorgan engaged in 12 manipulative bidding strategies designed to make profits from power plants that were wildly excessive and resulted in the overpayment of tens of millions of dollars to JPMorgan.
Bay said FERC’s efforts in the past have been hampered by the Commodity Futures Trading Commission (CFTC) failing to turn over data on trades except on a case by case basis. According to Bay, “this prevents Commission staff from seeing the complete picture of what is occurring in its jurisdictional markets and from fully integrating the financial information into its automated screens.” (A nice loophole for Wall Street.)
Bay added that he is hopeful this situation will now improve because “earlier this month, FERC and the CFTC signed a Memorandum of Understanding that is intended to result in broader information sharing than currently occurs and is, therefore, a first step toward sharing appropriate data in a timely manner.”
According to Bay’s written testimony, FERC is also being hamstrung in policing its markets by a decision handed down by the U.S. Court of Appeals for the District of Columbia last year in Hunter v. FERC. In that case, the court said the CFTC has exclusive jurisdiction over futures contracts. Bay said that “deprives FERC of authority to bring an action based on manipulation in the futures market, even if the activity affected prices in the physical markets for which FERC has exclusive jurisdiction.”
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