Banco Popular de Puerto Rico

Receiving Wide Coverage ...Downsizing After Volcker: In what the Journal pegs as an "unforeseen consequence" of the recently released Volcker Rule, more than a dozen small and regional banks will likely need to sell collateralized debt obligations. Case in point: Zions Bancorp, which said it would take a $387 million charge to get rid of a large CDO portfolio, as a result of the Volcker Rule's treatment of CDOs comprised of trust preferred securities. "The unexpected announcement by Zions … is an indication that the impact of the Volcker Rule will not just be felt at traditional Wall Street firms but at other kinds of banks as well," echoes Dealbook. JPMorgan Chase, meanwhile, is selling an Asia-based principal investment business, valued at more than $1 billion. Potential buyers include Blackstone, Carlyle and KKR. According to the FT, "while the operation … does not directly fall foul of the new Volcker rule restricting proprietary investments, bankers at JPMorgan say it is only a matter of time before regulators may decide it is a risk-taking business." The FT also reports that Citigroup and Santander have sold $1 billion of trade finance assets in a securitization, though that sale is attributed primarily to new Basel capital rules, which "hurt the profitability of assets that banks would have typically held."

Receiving Wide Coverage ...JPM Lawsuits, Etc.: JPMorgan Chase sued the Federal Deposit Insurance Corp. on Tuesday for over $1 billion, alleging that the regulator did not honor its obligation to cover legal claims against Washington Mutual. JPM, of course, acquired WaMu in a hastily drawn-up deal at the height of the financial crisis. (We're saying "hastily drawn-up" here, since the agreement apparently lacks specifics over who exactly is liable for what.) JPM is not seeking restitution for the landmark $13 billion mortgage settlement it reached with the Justice Department in November, because, you know, as part of that settlement, it agreed not to. The bank is, however, looking for the FDIC receivership to cover damages from "24 suits brought by a variety of investors, for which it said it should not have to take responsibility," reports the FT. The bank includes settlements paid out to Fannie Mae and Freddie Mac over bad loans they purchased from WaMu. Spokespersons from both sides are declining to comment. The Journal notes that JPM's "confrontation with one regulator comes as the bank faces a host of other legal headaches and investigations into everything from its overseas hiring practices to its trading operations." In fact, just yesterday, the bank was sued by Mississippi's attorney general over its credit card debt collection practices. And, in case you haven't had your fill of JPM news this morning, a new report, per the Journal, has found JPM "is the least likely among 15 big U.S. commercial banks to return large amounts of excess capital to shareholders over the next three years."

Receiving Wide Coverage ...The Taper: The Federal Reserve announced it will begin cutting back on bond purchases next month, sooner than many economists expected. While this is generally viewed as a vote of confidence in the economy by departing Chairman Ben Bernanke, the central bank cautioned it would keep short-term rates near zero until "well past" when unemployment falls below 6.5% (it was 7% last month). The decision to "taper" asset purchases is one less thing for Janet Yellen to worry about when she succeeds Bernanke next month, but she'll still have a full plate, according to a sidebar in the Journal (which focuses exclusively on monetary policy issues and doesn't mention bank regulation, which presents a whole other set of challenges). In an op-ed in the FT, economics professor Barry Eichengreen calls the taper announcement a "non-event": "These changes are inconsequential by the standards of the dramatic and unprecedented developments in monetary policy that we have seen since 2008; $10bn of [reductions in] monthly securities purchases are a drop in the bucket for a central bank with a $4tn balance sheet. … It is a way for the Fed to signal to its detractors that it hears their criticisms of its unconventional monetary policies, and that it shares their desire to return to business as usual. … But, at the same time, the central bank has also signalled that it is not prepared to return to normal monetary policy until a normal economy has returned."

Holiday Notice: The Morning Scan will publish next on Monday, Jan. 6. Happy new year and best wishes.

Receiving Wide Coverage ...JPM Madoff Settlement: New year; same story for JPMorgan Chase. Anonymice are telling their favorite news outlets the big bank is close to nearing another settlement with federal regulators. This one involves allegations that JPM ignored signs about Bernie Madoff's massive Ponzi scheme. The settlement is expected to include just over $2 billion in fines, paid out to victims of the Madoff fraud, the Office of the Comptroller of the Currency and the Financial Crimes Enforcement Network. It will also include a deferred prosecution agreement with Manhattan U.S. Attorney Preet Bharara. "The agreement, nearly unheard-of for a giant American bank and typically employed only when misconduct is extreme, underscores the magnitude of the case against JPMorgan," notes Dealbook. The Journal says JPM is trying to get the settlement finalized before it reports earnings on January 14.

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