Explaining Southern California's economy

JP Morgan's manipulation of power markets? CAISO can't say much

Mark Lennihan/AP

JPMorgan, the largest bank in the United States is reeling from a multi-billion trading loss. But it's also being investigated for 'gaming' the energy markets in California.

JPMorgan, the country's biggest bank, is under investigation for manipulating electricity markets in California and the Midwest. But because this is a federal investigation, no one is really saying much.

A JP Morgan spokesman told the media that the company believes it has "complied in all respects with the law."

And Steven Greenlee, a spokesperson for the California Independent System Operator, which oversees the state's power grid, told me that "because of the ongoing investigation of potential manipulations and communications violations related to the California ISO market, we are not allowed to provide details at this time."

I hadn't seen any reporting on "communications violations," outside FERC demands for emails that came from JPMorgan's commodities group, so I followed up the Greenlee to get some insight. No reponse yet, but it is Friday, and it's a holiday week. I'll update when I get more information.

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JPMorgan under investigation for manipulating California energy markets

Mark Lennihan/AP

JPMorgan, the largest bank in the United States, in under investigation by the federal government for manipulating energy markets in California and the Midwest.

JPMorgan Chase was the darling of the U.S. financial system after everything fell apart in 2008. The bank, now the country's largest, picked up a lot of respect for avoiding the high-risk game that took down Bear Stearns and Lehman Brothers and threatened many of the country's biggest banks, including Bank of America and Citigroup (in fact, it stepped up to buy Bear Stearns in an early effort by the government to stem the crisis).

Californians have gotten used to seeing the "Chase" logo because atfer JPMorgan took over bankrupty Washington Mutual in 2008, it changed hundreds of West Coast WaMu branches to Chase branches.

But things haven't been so rosy for JPMorgan of late. It's been dealing with a trading scandal that could wind up costing it $9 billion, in a worst case scenario. It's CEO, Jamie Dimon, has had to testify before Congress. And just last week, we learned that JPMorgan is being investigated by the Federal Energy Regulatory Commission (FERC), for "[manipulating] power markets in California and the Midwest, according to the New York Times.

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This just in: Variety for sale, Corzine in trouble

Former MF Global CEO Jon Corzine Testifies To House Hearing On Company's Bankruptcy

Alex Wong/Getty Images

Former chairman and CEO of MF Global and former New Jersey Governor Jon Corzine testifies during a hearing before the Oversight and Investigations Subcommittee of the House Financial Services Committee.

A couple of pieces of breaking business news, one from Hollywood and one from Wall Street. Reed Business Information just announced that it's going to sell Variety; and Jon Corzine — former head of Goldman Sachs, U.S. Senator, and Governor of New Jersey — may have broken securities laws as CEO of MF Global and perjured himself before Congress.

Not a lot to say about Variety, just get ready for all the inside jokes about Reed "ankling" the century-old trade. The Wrap wastes no time in, um... Celebrating?

[Variety] has been challenged by digital upstarts like TheWrap and the Deadline blog. It has also faced greater competition from long-time rival The Hollywood Reporter, which relaunched its website and folded its daily print editions, launching a glossy weekly in its stead.

The larger point is worth noting, of course: ad dollars are moving away from print to digital. However, the profits from digital aren't enough to make up the losses, so it's tougher for companies to maintain both print and digital editions — or hang onto the brands at all.

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Do venture capitalists care about more than money?

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I don't really want to do this $10 billion IPO. Really, I don't.

I'm officially arguing with Felix Salmon about venture capitalists. You can read the previous installments here and here. We've got even more fodder for debate now, based on Felix's excellent piece in the latest issue of Wired.

First off, I think he's talking about two things at the same time: 

1. Why IPOs suck for tech companies (Duh, it's the title of the piece!) — and why the IPO model, once so useful, is now broken

2. Why venture capitalists are doing all kinds of things that are borderline despicable when it comes to funding companies and maximizing their greed

I don't entirely disagree with point number one. It's taking companies longer to get to the IPO stage, and it's debatable whether companies that are already quite successful really need to go public. Also, as William Cohan has argued, investment banking has become a Wall Street cartel, with the same big firms — Goldman Sachs, Morgan Stanley, JPMorgan et al. — getting to run all the IPOs. The model that Bill Hambrecht developed — the so-called "OpenIPO" model — and used to take Google public in 2004 has fallen by the wayside.

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