WASHINGTON, D.C. – Public Citizen today called on the U.S. Federal Reserve Board of Governors to open an investigation into JP Morgan Chase & Co. for possible violations of the Bank Holding Company Act in light of a ruling by the Federal Energy Regulatory Commission (FERC) last week placing the bank at the center of a control over a sprawling fossil fuel empire.
In a letter to Michael Barr, vice chair for supervision on the Board of Governors of the Federal Reserve System, details the research performed by Public Citizen since 2019 which culminated with an order from FERC, concluding JP Morgan’s legal and personnel arraignments with IIF “undermines any potential for independence between the two entities.”
One of the primary objectives of the Bank Holding Company Act is to restrict banks like JP Morgan Chase from controlling non-banks like utilities and offshore oil platforms. The Volker Rule generally prohibits banks from operating a private equity entity like IIF. The fact that FERC’s order appears to confirm that JP Morgan is doing both requires the Fed to act.
“JP Morgan Chase has been playing a shell game with regulators, hiding its control over a fossil fuel empire that threatens consumers and financial system risk,” said Tyson Slocum, director of Public Citizen’s Energy Program. “JP Morgan appears to have deliberately designed IIF to conceal from regulators that the bank actually controls every aspect of the private equity fund. The investment management agreement and IIF’s LLC agreement reveal that it is impossible for IIF to operate independently from JP Morgan.”
According to Public Citizen’s letter to the Federal Reserve, in 2005 JP Morgan stated “it will not acquire or operate facilities in the United States for the extraction, transportation, storage or distribution of commodities.” But, the next year, JP Morgan created IIF, obscuring the fund’s true ownership with proxy “owners” who delegated their roles on the board to JP Morgan Investment Management.
Last week, FERC ruled that JP Morgan has such a close relationship with IIF, including the rights to use the name IIF, and decision making authority being delegated to JP Morgan Chase, that the two companies are “affiliates.”
Public Citizen’s letter suggests JP Morgan may be in violation of the Bank Holding Company Act and the Volcker Rule’s prohibitions of banks sponsoring private equity funds. According to the letter, JP Morgan is now affiliated with and has some level of control over a nuclear power plant in Arizona; four different electricity, natural gas and water utilities across the United States with over 3 million captive customers; an extensive network of petroleum storage facilities in 11 U.S. states and Canada; six natural gas storage facilities in the U.S.; two deepwater offshore oil/gas production platforms and 1,900 miles of subsea and onshore pipelines connecting offshore Gulf of Mexico oil/gas production to several U.S. states; and 13 natural gas power plants with nearly 5,000 MW of capacity across the United States
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