Who needs Enron when you have taxpayer-backed “banks.”
Whereas 20 years ago, it was Enron that made billions from the California electricity crisis (which it caused), a scandal which culminated with Enron’s scandalous and convoluted bankruptcy, this time it is pristine banks such as Goldman and Bank of America that made hundreds of millions of dollars in revenue as tens of millions of Texans were stuck in the dark.
According to the Financial Times, in the days when the Texas electric grid failed during last month’s polar vortex blast and which sent electricity prices to staggering levels, Bank of America made hundreds of millions of dollars in trading revenue “highlighting the upside for Wall Street from mayhem that knocked out power and heat across the state, industry executives and traders said.”
The bank’s Houston-based energy trading group – which is part of BofA’s FICC division that made revenues of $1.7bn in the fourth quarter – had electricity contracts that soared in value when wholesale Texas power prices rose 10,000 per cent to a cap of $9,000 a megawatt-hour the third week of February, the FT reports.
The story is familiar to our readers: while the record prices were ordered by the Texas utility regulator in an attempt to bring more generation into service, this plan imploded when almost half the state’s capacity fell offline as wind farms froze over starting a catastrophic chain reaction which lead to widespread blackouts amid blocked supplies of natural gas and frozen coal piles. The Blackouts lasted days, leaving millions in the dark.
Like numerous other power merchants, BofA takes part in the Texas energy market by trading power and gas and selling products that enable generators and other asset owners to hedge against fluctuating prices. That activity left BofA with an inventory of power contracts that surged in value during the blackouts. “The volatility of the energy market has heightened the value of risk management,” the bank’s website says, perhaps in anticipation of the outrage that will follow the realization that a handful of banks made huge windfalls as the population froze, in some cases to death. – READ MORE
Listen to the insightful Thomas Paine Podcast Below --