Banco Popular de Puerto Rico

Receiving Wide Coverage ...Volcker Day: Initial coverage of the public comments filed on the Volcker Rule proposal only scratched the surface of a rich debate. “Heard on the Street” in the Journal suggests that foreign governments objecting to the rule may have a point, since the ban on proprietary trading by banks would include most sovereign debt but would exempt U.S. Treasury bonds – a point that Paul Volcker didn’t quite address in his FT op-ed. The rule’s namesake scoffed at concerns that it would hurt liquidity for foreign government debt, but the carve-out for Treasurys is “an implicit acknowledgment that Washington believes this risk is real,” the Journal column says. A reader follows this train of thought into the realm of geopolitical intrigue, writing in the comment thread that the “unfair” treatment of foreign sovereign debt “could be correctly or incorrectly [interpreted] as hostile,” inviting a “retaliatory response, which will only make the markets less liquid and more expensive and uncertain.” Meanwhile, despite CFO David Viniar’s recent favorable remarks about the Volcker rule, Goldman Sachs wants some changes. A less obvious group of critics are the regional banks — PNC, U.S. Bancorp, Capital One, SunTrust, BB&T, Fifth Third, Regions and KeyCorp — that jointly filed a comment letter. Their main beef is that they’d have to very quickly put in place all sorts of compliance chazerai “simply to ‘prove a negative’ that we are not engaged in impermissible proprietary trading or funds activities.” (We found that one at Politico’s Morning Money, which is worth a look on those days when you have time after your requisite dose of Morning Scan). The FT reports that the big banks, including Bank of America, are lobbying for regulators to revise the Volcker Rule to explicitly allow market making in exchange-traded funds. Or rather, activities that the banks consider market making but don’t fit the proposal’s definition of it. Some market watchers have called the “opaque” ETFs a source of systemic risk, the article notes. Elsewhere, Times columnist Peter Eavis laments that the comment letters on the Volcker rule, both pro and con, are long on abstract arguments but short on hard numbers and real-world examples. And John S. Reed, perhaps seeking to atone for his role in creating FrankenCiti, is urging regulators to make the Volcker rule tougher. For example, a bank’s CEO and top trading, risk management and accounting executives should be required to sign a SarbOx-like statement each quarter “stating that, to the best of their individual knowledge, the operations of the trading unit were conducted within the letter and spirit of the Volcker Rule,” Reed writes. Traders should be paid “based on the results of their market making and hedging activities after those positions are fully unwound,” rather than collecting bonuses for short-term appreciation of assets held in inventory. And penalties for violating Volcker ought to be “severe,” Reed says. You can download a pdf of his letter here.

Receiving Wide Coverage ...Ratings Review: Moody’s has put Bank of America, Citigroup, JPMorgan and other big financials on review for possible downgrade, citing the headwinds facing the investment banking business. Wall Street Journal, New York Times

Editor's Note: The Morning Scan is off Monday, Presidents' Day. We'll be back on Tuesday, Feb. 21.

Receiving Wide Coverage ...Greek Bailout, Act II: This may finally be it. A bailout pact to end the Greek financial drama that has threatened to end in a global economic tragedy.

Receiving Wide Coverage ...Like A Marine: Let's begin today with a treatise on morals involving two of the business media's favorite topics: Greece and the U.S. housing market. As the New York Times notes, contract issues are at the forefront of both.

Receiving Wide Coverage ...Hold it, They've Got Ideas: A funny thing happened on the way to the Republican presidential debate last night - a candidate actually made a policy proposal. Before all the name-calling, piling on the front-runner du jour and renewed etymological analysis of the word "conservative," Mitt Romney offered a plan to cut personal income taxes on the same day President Obama proposed to cut the corporate tax rate (more on that in a moment). But the Romney tax plan hardly came up in the debate, the Journal reports. In fact, the economy took a backseat to social issues and the latest round of posturing among the candidates vying for the GOP nomination, the Times says.

Receiving Wide Coverage ...Woeful Results in Europe: Considerable attention was paid to Europe's biggest banking companies, which reported sizable quarterly and full-year losses in recent days as they continue to struggle with their exposures to sovereign debt and grapple with the potential fall out from another Greek bail out. Weighed down by exposures to Greek government debt and other impaired assets, Royal Bank of Scotland, Crédit Agricole and Dexia reported quarterly losses. The Financial Times made a video to cover the results. RBS however touted its progress in purging bad assets.

Receiving Wide Coverage ...Wells Fargo: The FT has a pair of admiring stories on the bank. One depicts Wells as a stalwart that shunned the exotic-mortgage boom of the previous decade and is now being rewarded for its conservatism with an unprecedented 30.1% share of mortgage originations (a position that fallen archrival Countrywide’s Angelo Mozilo once dreamt of). It might be a bit of an overstatement to say Wells “stayed out of the game” of pushing the underwriting envelope (remember those first-lien home equity lines the bank was flogging in 2006?), but clearly it’s suffered less from that period’s excesses than its peers. In the other FT story, chief executive John Stumpf lays out Wells Fargo’s expansion plans, which include growth via acquisitions in wealth management and insurance and purchasing assets from European institutions that are downsizing.

Receiving Wide Coverage ...M&A, or Lack Thereof: It is now harder for U.S. banks to make acquisitions “than at any point in at least the last 20 years,” thanks largely to regulation, the FT reports. Aside from longstanding antitrust and accounting rules, a new impediment is the Fed’s consideration of “financial stability” in approving merger applications, as required by Dodd-Frank. Although the regulator approved PNC’s deal for Royal Bank of Canada’s U.S. retail business and Capital One’s takeover of ING Direct, the Fed “put both banks through the wringer and showed a much more conservative approach to new ‘financial stability’ responsibilities than anyone in the sector thought.” Meanwhile, JPMorgan Chase is worth less than the sum of its many parts, in the estimation of veteran banking analyst Mike Mayo. He released a note making the case for breaking up the company ahead of JPM’s investor conference scheduled for today. Quips a Times reader in the comment thread: “Great idea. Once it's broken up, there will be an immediate opportunity to improve the value of the business through consolidation.”

Receiving Wide Coverage ...The Loan Arrangers: Happy days are here again. Sort of. After a string of quarters pulling back from risk, banks are finally signaling the time is right to grow again.