Wall Street is finding itself in a bitter fight against a relatively new organisation that is intent to see some of the largest banks charged for market manipulation.
The Federal Energy Regulatory Commission (FERC) is a government watchdog which oversees the oil, natural gas, and electricity markets in the US. In 2005, and as a result of the Enron scandal, the agency was given additional resources and powers to not only pursue energy companies, but also Wall Street banks, and hold them accountable for any illegal activities that they may have been involved in.
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Just lately it has set its sights on JP Morgan Chase, Deutsche Bank, and Barclays, accusing them of manipulating energy prices.
Tyson Slocum, the director of the energy program for Public Citizen, claimed that the FERC is “the most powerful agency that no one knows about.”
Barclays and JP Morgan are aggressively contesting the attacks against them, stating that the accusations are overreaching.
Normally banks like to avoid confrontations with regulators, and try to settle issues fairly quickly and quietly. For example, the New York Times reported in June that Barclays had struck a deal with regulators to pay $450 million to settle accusations that it had manipulated interest rates during the 2008 financial crisis.
It is possible that the unusually aggressive response to the accusations is as a result of a far larger regulatory battle, which the financial institutions do not want to lose. The FERC, unlike other regulators has been granted the power to fine firms up to $1 million a day for every violation that it commits, which could potentially tie banks into years of costly law suits.
By. James Burgess of Oilprice.com