Have the grifters on Wall Street found yet another mark?

The Los Angeles Times has a damning piece explaining how our good pals at JPMorgan & Chase have allegedly manipulated the electricity market in California and perhaps in the Midwest as well, stealing hundreds of millions of dollars from consumers and businesses and depositing it in the accounts of JPMorgan, pretty much risk free.

The focus of the alleged scam is the California Independent System Operator, which fulfills the state’s energy needs by taking bids from private power marketers to provide electricity to the state.

Here’s how the Times explains it (and don’t worry, it’s not as complicated as it may seem):

“The alleged scheme involves two related wholesale electricity markets maintained by the ISO. There’s the day-ahead market, in which power plant owners place bids to provide power for the California electricity grid in the future; and the real-time market, an auction market through which ISO buys electricity for immediate distribution to homes and businesses.

To give plant owners an incentive to participate in these auctions, ISO guarantees to cover their costs for starting up or running their plants at a minimal level, even if their bids aren’t accepted. This is known as “bid cost recovery.” ISO rules allow bidders to claim payments of up to twice their real costs.

In simplest terms, JPMorgan submitted bids in the day-ahead market that were so low the firm was certain to be accepted onto ISO’s roster of potential electricity suppliers — in fact, they were negative bids, essentially offering to pay ISO to take their electricity…. ISO believes that JPMorgan never intended to make that sale, but the beauty of its low bids was that they made it eligible to collect bid cost recovery payments.

The next step was for JPMorgan to make sure that ISO didn’t actually buy its electricity, presumably because the profit margin from the bid cost recovery claim was greater than from actually selling energy. So in the real-time market, it priced its electricity so high that ISO wouldn’t buy it.

The bottom line, the ISO says, is that JPMorgan’s traders never intended to sell it electricity via these bids. The scheme, it says, seems to have been designed purely to capture a bid cost recovery payment the bank didn’t deserve, at a rate that was inflated anyway.”

In other words, pretend that you’re ready to sell electricity at a low rate; collect a handsome fee for pretending to sell electricity at a low rate; then bid high to ensure that you never have to actually provide that electricity.

Repeat, day after day, collecting some $57 million in improper payments in just six months between 2010 and 2011, with more such payments perhaps yet to be discovered. Free money!!!

But of course, it’s impolite to even notice that Wall Street continues to rip us off in a seemingly endless series of scams. To do so is to be anti-capitalist, even socialist. So forget I said anything, will ya?

– Jay Bookman

835 comments Add your comment

han1

July 19th, 2012
11:57 pm

Fred, stop.

Quit being the dbag.

Fred ™

July 19th, 2012
11:59 pm

Oh gee, alt-boy has another alt to post under lol. I post that I miss and like Moonbat Betty (my green egg buddy) and I’m a douche bag? Really? LOl You are too much alt-boy.

Oscar

July 20th, 2012
12:06 am

The way I read Jay’s column, I don’t see they did anything illegal. Sounds like they followed the regs in what they did.

But they can also be indicted and tried for intent to defraud and let the jury decide.

The last time the feds tried something along those lines it was against John Edwards and all we got for our (taxpayer’s) money was a hung jury.

I don’t think there is a case for fraud, as long as the bank had the contracts signed to provide the power – that they knew they would probably never have to provide.

They could have gotten stuck with one of their high bids if they for some quirk turned out to be the only bidder. A one in a million chance but it could have happened. Don’t laugh – people buy lottery tickets where the chances are one out of 90 million,

G Mare

July 20th, 2012
12:20 am

Hi, Oscar. Just wanted to say that before I check out for tonight. :)

marko

July 20th, 2012
5:53 am

If the election were held tomorrow, it’s a coin flip as to who would win. I can’t for the life of me figure out why so many people buy into the arguments that the Mitts of the world are over burdened with taxes and regulations. Reagan deregulated the S&L’s, and didn’t even leave office before the poo poo hit the rapidly rotating blades. How many times do we have to watch this pathetic rerun before we wake up and smell the coffee. Mitt at least has an excuse. God commanded him not to smell the coffee.

In an interview, Ann Romney said, “we’ve given all you people need to know” about her family’s financial records”. Dear Ann, it reads WE the People, not You the People Do as your told. Did you think you were talking to your maids?

Jack

July 20th, 2012
5:58 am

If Bookman was the CEO of JPMorgan and took his grifter idea to the board, he wouldn’t be CEO for very long.

JamVet

July 20th, 2012
7:12 am

When anyone, not least a member of Congress, launches specious and degrading attacks against fellow Americans on the basis of nothing more than fear of who they are and ignorance of what they stand for, it defames the spirit of our nation, and we all grow poorer because of it. ~John McCain regarding the comments of M. Bachmann and others

TiredOfIt

July 20th, 2012
7:23 am

When Ann Romney stated “you people” she wasn’t talking about the 1%. After all it’s “Our turn”.

stands for decibels (SfBA)

July 20th, 2012
7:31 am

Mornin’.

So, “more guns, less crime” — do I still have that right?

Aquagirl

July 20th, 2012
7:39 am

So, “more guns, less crime” — do I still have that right?

The problem was not enough guns.Because everyone is proficient enough to fire through a panicking crowd in a dark, smoke-filled theater and take out a guy in a bulletproof vest.

stands for decibels (SfBA)

July 20th, 2012
7:39 am

If the election were held tomorrow, it’s a coin flip as to who would win.

I think it’s pretty clear that it wouldn’t be a coin flip, that Obama would beat Romney like a yard dog.

But it’s not being held tomorrow; tons of crappy economic news + scores of millions of dollars’ worth of superPAC attack ads could tip the scale between now and Nov., of course.

But let’s get this clear–it’s Obama’s to lose right now.

Granny Godzilla - Union Thugette

July 20th, 2012
7:40 am

Where were you when you heard these words this day in 1969?

“that’s one small step for a man, one giant leap for mankind.”

stands for decibels (SfBA)

July 20th, 2012
7:42 am

Because everyone is proficient enough to fire through a panicking crowd in a dark, smoke-filled theater and take out a guy in a bulletproof vest.

yeah, I’d thought about that argument and even the die-hardest gun nut really can’t make that one. You aren’t going to get enough of the general gun-carrying public trained (and continually re-trained) in law enforcement scenarios to make that a reasonable probability in any given group of, say, 100-150 people.

so I would humbly suggest that we do what most of the rest of the civilized world does and regulate these armaments more carefully than we do now.

USinUK - pro-gay-marriage thug and former Girl Scout

July 20th, 2012
7:42 am

HAPPY FRIDAY EVERYBODY!!!

To start the Friday right, here’s a kick-a$$ song that will definitely get Jay in the mood for his vacay

http://www.youtube.com/watch?v=oABEGc8Dus0

Have a safe trip Jay! We’ll try to mind the place while you’re gone :-)

stands for decibels (SfBA)

July 20th, 2012
7:45 am

Where were you when you heard these words this day in 1969?

Watching with my family on a black and white telly. A very special night.

I had to look it up, and I do remember correctly, it was fairly late–10:39pm EDT, Sunday. But it was summer, and we didn’t have school the next day, so no worries.

USinUK - pro-gay-marriage thug and former Girl Scout

July 20th, 2012
7:45 am

“The youngest victim reported was a 6-year-old being treated at Children’s Hospital Colorado, where a total of six victims were taken. Their condition wasn’t known. ”

okay, momentarily setting aside the tragedy of the incident … WTF is wrong with people taking a 6-year-old to a midnight screening of a RATED PG-13 MOVIE!!!

JamVet

July 20th, 2012
7:45 am

But let’s get this clear–it’s Obama’s to lose right now.

No doubt.

Especially given this:

Mr. Romney’s chances of winning the Electoral College rose to 33.3 percent, from 32.1 percent on Tuesday.

The cons need to prepare themselves. A second McCaining is at hand…

USinUK - pro-gay-marriage thug and former Girl Scout

July 20th, 2012
7:46 am

Granny G – I was 3, so probably playing with my PlaySkool Little People

stands for decibels (SfBA)

July 20th, 2012
7:48 am

Did you think you were talking to your maids?

Now, let’s not get carried away. I think she was talking to the college kid, the baby sitters, the nails ladies, who just don’t understand what’s going on.

USinUK - pro-gay-marriage thug and former Girl Scout

July 20th, 2012
7:48 am

“The cons need to prepare themselves. A second McCaining is at hand…”

and, kinda like when you make a copy of a copy, you lose resolution … Mitt is McCain 2.0 – which is really just Dole 3.0 … and getting weaker with each version …

JamVet

July 20th, 2012
7:49 am

Watching with my family on a black and white telly. A very special night.

I had to look it up, and I do remember correctly, it was fairly late–10:39pm EDT, Sunday. But it was summer, and we didn’t have school the next day, so no worries.

Ditto, stands!

From the living room floor. Mom, dad and four brothers, meant that I spent more than a little time watching from that vantage point!

What a fabulous memory of a fabulous time…

stands for decibels (SfBA)

July 20th, 2012
7:49 am

so probably playing with my PlaySkool Little People

After 10pm? Were you a night owl even then?

stands for decibels (SfBA)

July 20th, 2012
7:51 am

…or maybe Mom/Pop UnU wanted their kid to be awake so she could SAY she saw it?

(My folks applied a similar principle to a JFK appearance. Sure wish I could say I remember seeing/hearing him speak, but… nope.)

USinUK - pro-gay-marriage thug and former Girl Scout

July 20th, 2012
7:51 am

oooo … 10:pm??? nope – my parents were firmly in the “early to bed” school for little ones – I would have been out like a trout for 3 hours by then …

USinUK - pro-gay-marriage thug and former Girl Scout

July 20th, 2012
7:52 am

(hell, I’m barely a night owl now … at 10:00, the Wondermutt and I start making our way upstairs…)

Aquagirl

July 20th, 2012
7:53 am

yeah, I’d thought about that argument and even the die-hardest gun nut really can’t make that one.

Oh, watch them.

stands for decibels (SfBA)

July 20th, 2012
7:56 am

Oh, watch them.

I will, and I will shake my head because I will know they are completely full of it on this issue. I know too much about actual law enforcement training and what is required to be able to make a real difference in a situation last night and it is just not within the ability of Joe Average Self-Deputized Gun-Range Guy to contribute positively.

josef

July 20th, 2012
7:59 am

Where was I? Memphis. Over at my sister’s house, Had been out lying on the slope in the front yard with my friends Johnny and his girlfriend Susan, Benji and his sister Mary, and my boyfriend Joe Boy, enjoying the smoke and the magic night…when it came time, all our parents/adults came out on the street to call us to our individual homes, for the historic moment. Cabinet tv in the den, four generations, in silent awe…in one lifetime, Granny’s, we had come from horse and buggy, to Kitty Hawk and now to the moon…her three year old great-grandchild was watching it from her arms…

stands for decibels (SfBA)

July 20th, 2012
8:02 am

One last thing about Apollo 11. It left such an impression of utter competence and professionalism that, just nine months later when Apollo 13 was under way and later news emerged that they “had a problem”?

I never for a moment doubted that NASA was going to fix it and get all the men back home safely.

(That is about all I really remember of Apollo 13, and frankly I was shocked when I saw the movie many years later, and it sunk in just how precarious the whole mission really was.)

stands for decibels (SfBA)

July 20th, 2012
8:02 am

TSPLOSTy SHEETZ.

TaxPayer

July 20th, 2012
8:29 am

“I pwomise to be good while you is away, Jay.” – Gropefor Moregrits

Joe Hussein Mama

July 20th, 2012
9:16 am

Doom — “Stinky people sport. I discriminate against stinky people.”

Good. What other kinds?

“Rejected. Pure conjecture and fallacious reasoning.”

Denied. You clearly didn’t take any logic courses in college, because a question is neither conjecture nor reasoning. Doomfail #1.

“God that’s some sorry logic.”

Said the novice to the master of the art. (laughing) :D

“I’m embarrassed for you Joe. Is that all ya got?”

Too bad you can’t answer the question, Doom. I suspect it’s because it woudl reveal some things about you that you’d rather others not know. :D

“And speaking of a thick skull I find it difficult to believe that you take a tongue in cheek comment about me not wanting to eat with liberals to heart.”

Speaking of a thick skull, I’m sure you’re aware that tongue-in-cheek comments don’t necessarily come across as such on the web. Of course, if you had said something like ‘oh, that was just a tongue-in-cheek comment’ instead of arguing about it for the last three pages, then you might have some credibility. Sorry! (laughing) :D

“Been eating with them, dating them, and drinking and carousing with them my whole life.”

Except that you don’t LIKE to. That’s what you said.

“Get a grip dude.”

It’s not my fault if you can’t say what you mean and if you don’t mean what you say. That’s why I said it might be better for you to keep your mouth shut about those sorts of things — if you don’t want people coming to those sorts of conclusions, of course. :D

” I guess I’m going to have to go back to putting in my keep up tongue in cheek disclaimer statement regarding facetious statements, sarcastic statements, and tongue in cheek statements, Geez.”

Always good advice on the web. I suggest you write it on a sticky note and put that sticky note on your wall, right in front of your face as you’re seated at your computer.

“Sure buddy. Stretching like Gumby again I see and making a leap longer than Carl Lewis’s long jump. Trying to establish racism over a jesting comment about not wanting to eat with you liberals. You cannot possibly be that stupid. You just can’t.”

You can’t possibly be so stupid as to think that after arguing over it for three pages — that your sudden change of heart in re ‘oh, it was just a flippant comment’ is in any way believable or credible. If you do believe that, then you’re clueless and tone-deaf into the bargain.

Joe Hussein Mama

July 20th, 2012
9:20 am

JKL — “Strike 6. Two down and more dodging.”

Sweet pea, I’ve already crossed home plate three times and am headed back for another trip. The longer you refuse to clarify your question, the longer you shall wait.

“Like obama, you got nothing.”

When you actually have a question you’re willing to clarify, let me know, Punkin.

“Are you a Cub fan too? Humor me and say that unlike our president, you could name at least one player (past or present) on your favorite team?”

Why would I humor you? You won’t clarify your question and you want me to “humor” you?

IMO, someone needs to do a urinalysis on you. I think you might be high.

Joe Hussein Mama

July 23rd, 2012
9:42 am

Doom — “Sorry sport but I didn’t get pinned down on anything. Joe mama suggested a racist comment and couldn’t back it up.”

Ah, Doomie, you’re ever the dishonest one, aren’t you? :roll:

Nowhere did I accuse you of racism or of making a racist comment. If you think that’s what I said or meant, then perhaps it’s just your guilty conscience working on you (laughing) :D

“Then he uses some kinda roundabout logic that because I said I don’t eat with liberals that I must have racist tendencies against other groups as well.”

Nope! Didn’t say it, didn’t think it. Must be that guilty conscience of yours again! (giggling) :D

“Sorry sport but its just plain moronic first of all to have taken that statement seriously.”

That’s funny. I thought it was moronic of you to say that I was calling you a racist when I’ve said nothing of the sort. Maybe you’re just making things up again, Doom. :D

“And then to compound it and try and use that to say one must be racist against other groups because they refuse to eat with liberals is beyond stupid. Even you aren’t that damn dense.”

Well, of course I’m not. Because I didn’t say that. (laughing) :D

dbm

July 24th, 2012
11:10 am

To the extent that the point of this thread is that Wall Streeters can do dishonest things, that seems to be true in this case.

To the extent that this is used as an argument for more regulation, that’s illogical. The answer here is to redesign the system so that it can’t be gamed this way, and to be more careful in the future to avoid designing systems that can be gamed. Piling on more regulations is irrelevant and destructive.

This also raises the question of whether we are opening ourselves up to this sort of thing by having government involved in so much.