The issue raised in the California JPMorgan Chase case, which led to the Federal Electricity Reliability Council investigation, is not that it is illegal to "game" the electricity markets, but that JPMC's "bidding strategies" led to "inflated" or "excessive" payments in the wholesale power markets.
The gaming of markets is a product of "financialization," which took off with the deregulation of futures markets by Wendy Gramm, when she was Chairman of the Commodity Futures Trading Commission (CFTC) in the late 1980s, appointed by President GHW Bush, and then exploded after the repeal of Glass-Steagall, with the Gramm-Leach-Bliley Act, and the passage of Phil Gramm's Commodity Futures Modernization Act of 2000, which deregulated so-called over-the-counter derivatives trading. When Wendy Gramm left the CFTC, she became a member of the Board of Enron.
The pioneer in this form of derivatives trades using commodities was Enron, the former pipeline company, which was morphed into a derivatives dealer, then crashed spectacularly in December 2001. A number of officials of Enron were convicted and sent to prison. One of the "innovators" in its derivatives trading, Jeffrey Skilling, is still in prison, though a judgment is pending on reducing his sentence.
(Enron's role in the bankruptcy of California was crucial in its subsequent prosecution, as its lobbyists wrote the California electricity deregulation bill, which Enron and others then used to gouge tens of billions in profits from the state. Lyndon LaRouche's intervention into the California debacle was one of the keys in spurring the development of the LaRouche Youth Movement.)
However, despite these arrests, the model Enron applied was not only NOT shut down, but has continued to generate speculative profits for today's universal banks and hedge funds, as the JPMC case shows.
In analyzing the fall of Enron in an EIR article, "Enron: A Mere Symptom of the Post-Industrial Culture of Corruption," in the February 17, 2006 issue, Harley Schlanger warned that this would lead to even bigger collapses in the future. Here are the final two paragraphs from that article:
"In October 2002, less than a year after Enron filed for bankruptcy, the CFTC rewrote its rules to exempt hedge funds dealing primarily in commodities, from regulatory oversight. While some Congressmen warned of the potential for manipulation in over-the-counter derivative markets, their efforts to expand regulatory control were defeated. Greenspan defended the expanded freedom for hedge funds, saying it would 'add liquidity' to the markets.
"A year later, the Federal Reserve relaxed rules regulating commercial banks, so they could take possession of physical commodities — such as oil — allowing banks to deal in commercial derivatives [as in the present case of JPMC]. Randall Dodd, director of the Financial Policy Forum, which studies regulation of financial markets, said of this move, 'It is an effort by banks to move into the terrain that Enron abandoned in their bankruptcy. This is moving that risk into our core financial infrastructure, so the consequence of a failure becomes even larger.'"
Among the conclusions which can be drawn from this, is that Phil Gramm, whom LaRouche once described as a "man with a gram-sized brain," and his wife Wendy, were among the most criminal of those who functioned as operatives of the British Empire, in attacking the American System. After leaving the Senate, Phil Gramm was rewarded with a high-paying job at Union Bank of Switzerland (UBS), one of the banks which originated the "bail-in" theft policy
