Banco Popular de Puerto Rico

Breaking News This Morning ...Earnings: Comerica, Fifth Third, First Horizon, Suntrust, GE

Receiving Wide Coverage ...Executive Pay: The Journal and the Times have somewhat different takes on the compensation disclosures from JPMorgan, Morgan Stanley and Citi that came out late last week. "Bonuses Pinched for Bank CEOs," the Journal's headline declared, though the first paragraph elaborated that some bonuses were pinched more than others. The stock bonus for JPMorgan's Jamie Dimon was flat, Morgan Stanley chief James Gorman's stock award was cut in half, and Citi's Vikram Pandit got his first stock award since the financial crisis. The Times' headline telegraphed a more critical take: "Bad Year for Wall St. Not Reflected in Chiefs' Pay." The article suggests that lower-level employees took bigger pay cuts than the top brass at the banking and securities conglomerates, and that any hit being taken by these CEOs to their compensation packages is modest compared to the suffering of shareholders as the companies' stocks tanked in 2011. Meanwhile, "Heard on the Street" in the Journal notes that there's a hitch to the much-celebrated trend of deferring bankers' bonus pay: "firms may be locking in compensation expense that isn't matched by future performance." If revenues fail to rebound, "firms could actually be handcuffed on pay. In the face of further revenue declines, a firm could find itself saddled with large accruals for deferred compensation."

Receiving Wide Coverage ...Deal or No Deal? There was brief speculation Monday that President Obama would announce a settlement of government probes into foreclosure abuses in his State of the Union address tonight. Those hopes (or fears, for some consumer advocates) were dashed when Iowa Attorney General Tom Miller, the leader of the multistate task force negotiating with the top five mortgage servicers, went out of his way to say there would be no deal reached this week. For the skeptical consumer advocates, that’s just as well; they “fear the pending settlement would allow banks to pay only a fraction of what is warranted and escape legal culpability for a wide range of abuses that have yet to be fully investigated,” according to the Post. An additional objection is that the banks reportedly would be allowed to earn “credits” toward the $25 billion settlement amount by writing down first mortgages they service for investors, but would not have to swallow losses on the second mortgages the banks themselves own. “This reverses the contractual hierarchy that junior lienholders take losses before senior lenders. So this deal amounts to a transfer from pension funds and other fixed income investors to the banks, at the Administration’s instigation,” writes “Naked Capitalism” blogger Yves Smith, who rarely makes a point she doesn’t feel the need to italicize. And yes, those “credits” mean the industry isn’t necessarily going to pay the whole $25 billion out of pocket; the cash portion might be as small as a fifth of the total. On Monday administration officials pitched the tentative terms reached with the servicers to all the states’ attorneys general. A handful of AGs, including California’s Kamala Harris, remain wary of potentially giving away the store. Anonymice tell the Journal that the timetable for a deal is now early February. Wall Street Journal, Washington Post, Naked Capitalism, Financial Times

Receiving Wide Coverage ...State of the Union: During the (surprisingly brief) discussion of the housing mess in his speech last night, President Obama announced yet another mortgage refinancing program. “Responsible homeowners” could take advantage of low rates and save $3,000 a year without having to jump through bureaucratic hoops or deal with “runaround from banks,” he said. And if you coughed or sneezed at the precise moment, you might have missed this: “a small fee on the largest financial institutions” would pay for this program. Subsidizing these refis “will give banks that were rescued by taxpayers a chance to repay a deficit of trust,” Obama said. Zing! The president gave no other details on the refi plan, but the Times got the goods, or some of them, from an anonymous “senior administration official”: The program would cost no more than $10 billion. (How many of “the largest” banks would share that cost? The top four? The Big 19 TARP recipients? Unclear.) FHA is to guarantee the new loans. Unlike the revamped HARP program, which is available only to homeowners whose existing mortgages are held by Fannie and Freddie, the new plan (should it be called HARP 3.0 or HARP 2.5?) could benefit two to three million people whose loans are owned by private investors, the Times reports. Legislation would be required to allow FHA to refi the underwater mortgages and to authorize the bank fee. Notably, the president did not utter the word “foreclosure” once in his speech. New York Times, Businessweek, Associated Press, Washington Post (op-ed by economist Mark Zandi), Wall Street Journal.

Receiving Wide Coverage ...Great Rates to Continue: "Great" if you're living on debt, like the U.S. government, that is. If you're a saver or retiree on a fixed income, or a bank trying to earn an interest rate spread, things don't look quite so peachy.

Receiving Wide Coverage ...Davos Dispatches: Lots of interesting news is coming out of that World Economic Forum junket in Switzerland. Jamie Dimon says JPMorgan Chase considered pulling out of Europe’s troubled peripheral countries, the so-called PIIGS (Portugal, Ireland, Italy, Greece and Spain), though he diplomatically referred to them as “the euro five.” The decision to stay was “largely social and partially economic,” the CEO said, according to the FT. … Too-big-to-fail behemoths of the world, unite! The Global Financial Markets Association, an umbrella group for trade associations in the U.S., Europe and Asia that’s kept a low profile to date, is reinventing itself as a lobbyist on international regulatory issues for the world’s biggest banks. The group is chaired by Blythe Masters, the head of commodities at JPMorgan and a pioneer of the credit default swap. … The European Union plans to raise objections to the Volcker rule with U.S. Treasury Secretary Tim Geithner, the Journal reports. European officials worry the regulation will restrict U.S. banks’ ability to trade European sovereign debt on behalf of clients, hurting liquidity for these countries at a time when they really need it. Of course, the rule is supposed to ban only proprietary trading by banks, not old-school market-making, but banks have protested that there are gray areas between the two. … The Times profiles Treasury undersecretary for international affairs Lael Brainard, who’s in Davos “trying to coax European leaders to contribute to a financial firewall.” … BreakingViews reports that the plight of the 99% has cast a pall over the annual convocation. … But Reuters’ blogger Felix Salmon says that the Davos attendees really don’t care what the Occupy Wall Street crowd has to say. ... And if you care, wine tastings are once again being held at Davos, the Times reports. Fine, but please don't tell us what kind of shoes the female attendees we wearing. It can't be important.

Receiving Wide Coverage ...Ratings Rumble: This coming Friday is the deadline for public comments on a regulatory proposal that would forbid the use of credit ratings in determining capital requirements. The FT has a pair of stories in which bankers and other industry representatives complain that this plan would have adverse effects because risk weights on securitized assets, and therefore the amount of capital that must be held against them, would increase. One story emphasizes the potential to delay the housing market recovery; “punitive” capital charges would prevent the private mortgage securitization market from coming back, a bank lobbyist tells the FT. The other story focuses on the perception that the proposal is “anti-American” since banks here would have to hold more capital against mortgage- and asset-backed securities than their overseas counterparts are required to under the international Basel rules. Chimes in one FT reader in the comment thread: “[I] don't disagree with the point about the cost this will impose on US banks but struggle to see how it's anti-Americanism: these are US rules proposed by US regulators.”

Receiving Wide Coverage ...Collections Crackdown: The Federal Trade Commission announced its second-biggest settlement with a debt collection agency. Asset Acceptance agreed to pay $2.5 million to settle allegations that it strong-armed consumers into paying debts that had expired under statutes of limitation. That’s a widespread industry practice, according to the government, and a Justice Department official tells the Journal that “more cases are on the way." Wall Street Journal, New York Times

Receiving Wide Coverage ...Volcker Haters: Woe is Paul Volcker, the former Fed boss who came up with the eminently sensible and elegant idea of banning taxpayer-backed banks from acting like Las Vegas card sharks. Enter Washington pols and the Dodd-Frank Act's Volcker Rule has been turned into a multi-hundred page monstrosity that its recently silent namesake almost assuredly hates. So too do most of the world's leading financial policymakers. Their gripe is that as the Volcker Rule's rules take shape, it's beginning to look like it will have a chilling effect on liquidity and market activity. So chilling, in fact, that the U.S. government has been left with only one logical option—exempt its own debt from the Volcker restrictions. That ploy has left foreign government officials hopping mad, as the New York Times reported out of Davos late Monday. This morning the Wall Street Journal reports that the U.K. Chancellor of the Exchequer, George Osborne, has added his voice to the chorus rising up against Volcker. The regulation, "would appear to make it more difficult and costlier" for banks to buy and sell non-U.S. sovereign bonds on behalf of clients, Osborne, said in a recent letter to Federal Reserve Chairman Ben Bernanke. Osborne's critique follows similar objections from the European Commission, Japan and Canada. Under Dodd-Frank, five regulators, including the Fed, the Securities and Exchange Commission and the Commodity Futures Trading Commission, are charged with crafting the rules. With its initial implementation set for July, and with banks having several years to comply, this kerfuffle is likely to be around for a long, long time. New York Times, Wall Street Journal

Receiving Wide Coverage ...Refis, for Real? President Obama unveiled the details of the new refinancing plan for underwater borrowers he mentioned in the State of the Union address last month. (Or rather, the new new refi plan, since it’s only been three months since HARP 2.0 came out.) Close to 15 million homeowners would be eligible for the latest initiative. To qualify, one would need a credit score of at least 580 and have missed no more than one mortgage payment over the last six months. The new loans would be insured by the FHA, whose loan limits (which range from $271,050 to $729,750, depending on the region) would apply. Interestingly — and barely mentioned in the coverage we’ve read — the plan would encourage people to refinance into mortgages with a 20-year term instead of the customary 30 years, so they can rebuild equity faster. As an incentive, the government would cover closing costs for those who choose the 20-year option “with monthly payments roughly equal to those they make under their current loan.” Of course, this means the borrower’s cash flow wouldn’t improve off the bat, which doesn’t sound like much of a Keynesian spending stimulus to us, but it’s a nice contrast to the heady days when people were seriously talking about 50-year amortization schedules to make mortgages more “affordable.” The administration reiterated that the cost of the new refi program (estimated at $5 billion to $10 billion) would be paid for by a “financial crisis responsibility fee,” assessed on “the largest financial institutions.” It’s still unclear how many of “the largest” ones would have to pay the tab, but the fee would be based on a company’s size and “the riskiness of their activities.” (By what measure? VaR?) Back to reality: We’ve been careful to use the conditional “would,” because all this requires legislation, and Congressional Republicans are having none of it. Here’s House Speaker John Boehner, talking to reporters: “One more time? One more time? How many times have we done this?” (Hey, that could make a catchy song!) This reaction probably explains why a lot of the news coverage is focused on Machiavellian political analysis — the Journal suggests the President is “setting up a contrast with Republicans over government's role in helping Americans who, in Mr. Obama's words, ‘play by the rules.’” You know, it’s an election year and all that. But isn’t it a lot more interesting to think about the socioeconomic implications of 20-year mortgages than listen to another Washington horse-race narrative? No? Anyone? Wall Street Journal, New York Times, Washington Post