Banco Popular de Puerto Rico

Receiving Wide Coverage ...Substandard Charter: Well, this is a bit of a doozy. New York regulators have accused Standard Chartered of leaving "the U.S. financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes" after discovering the British bank allegedly used its New York unit to launder at least $250 billion for the Iranian government. Among other things, the bank is being accused of "wire-stripping," or removing codes from money so Iranian transfers could not be identified. The FT says regulators are also alleging Standard Chartered engaged in "similar schemes" with Libya, Myanmar and Sudan.

Receiving Wide Coverage ...StanChart Revisted: Remember how New York regulators were accusing Standard Chartered of helping Iranians launder $250 billion, but the British bank was only acknowledging $14 million in improper transactions? According to the FT, the discrepancy stems from StanChart's belief it used an exemption to U.S. sanction law, known as a U-turn. This exemption allowed banks operating in the U.S. to process transactions from rogue nations such as Iran so long as they were initiated offshore and properly vetted by the overseas financial institution. The U-turn exemption was revoked back in 2008, but, in its formal statement, StanChart asserts it ceased doing new business with the Iranians five years ago. The bank also says it is absolutely sure it wasn't doing business with terrorists.

Receiving Wide Coverage ...Squarebucks: One small step for Square may turn out to be a giant step for mobile payments. The start-up has struck a mega-partnership with popular coffee chain Starbucks that could very easily revolutionize the payment space. Starting this fall, Starbucks will begin processing all of its debit and credit card transactions in the U.S. using Square technology. The deal also comes with a $25 million investment that places Starbucks CEO Howard Shultz on Square's board.

Receiving Wide Coverage ...Goldman Off the Hook: The Justice Department has decided it will not charge Goldman Sachs (or any of its employees) with financial crimes related to the mortgage crisis. Neither, apparently, will the Securities and Exchange Commission, as Goldman Sachs announced separately the SEC had informed it an investigation into a $1.3 billion subprime mortgage deal had come to an action-less end. The Justice Department said there was not enough evidence to file charges. According to the Journal, the department also said "protecting the integrity of our banking system" remains a "top priority."

Receiving Wide Coverage ...StanChart Update: Standard Chartered is trying to settle New York state regulators' allegations it laundered money for Iran, ahead of a hearing scheduled Wednesday on whether the U.K. bank should keep its local license, the FT reports. However, there is a sizable bid-ask spread in the negotiations, as it were: Benjamin Lawsky's Department of Financial Services wanted $500 million, and StanChart came back with an offer of $5 million, which the regulator rejected. Although the U.S. Department of Justice was unsure whether to even bother pursuing a case against StanChart ("the conduct was less egregious than what investigators found at other banks," an anonymous source tells the British paper), Lawsky's agency "could intervene because it need only decide whether the bank meets safety and soundness standards to have a banking licence and does not have to prove the merits of the allegations." In an op-ed in the FT, Kishore Mahbubani, a Singaporean academic, writes that Benjamin Lawsky has become "a Lawsky unto himself." His unilateral decision to go after the U.K. bank "appears to have been driven by domestic political considerations, not by the merits of the case," Mahbubani writes. "In the strange political climate of the US, anyone who stands up to Iran is a hero." Lawsky could go public with his charges without the cooperation of nominally more powerful federal agencies because "it would be political suicide to take on a brave crusader battling against Iran. ... The big question that US regulators face now is whether their overall system will work to deliver a fair and balanced judgment on StanChart." For U.S. bankers, Lawsky's actions could have long-term consequences, Mahbubani warns: "Would another regulatory authority someday similarly retaliate against an American bank?" However, in the Journal's opinion pages (which are usually skeptical of regulatory and prosecutorial zeal), columnist L. Gordon Crovitz compares StanChart's alleged actions to the Bank of England's "appeasing Hitler" by transferring gold reserves to Germany's central bank in 1939. "Any bank that helps Iran's nuclear ambitions by undermining sanctions deserves all the harm done to its reputation," Crovitz writes. And for those who are just getting back from vacation and want to get up to speed on the developing StanChart story, this feature from the weekend FT is a good place to start.

Receiving Wide Coverage ...Still More StanChart: The money-laundering allegations against Standard Chartered have further strained relations between U.S. and U.K. financial regulators, which were already testy from recriminations after the Libor scandal, according to the Journal. In the FT, columnist Tom Braithwaite says U.K. officials come off "thin-skinned" in their rush to defend StanChart against the accusations by New York state regulator Benjamin Lawsky. "Implicit — and sometimes explicit — in the wave of London ire at Mr. Lawsky is that he is a publicity-seeking, showboating, impertinent arriviste. … Mr. Lawsky is all of those things. That doesn't make him wrong." One virtue of the surfeit of regulatory bodies in the U.S., Braithwaite argues, is that "if one agency is slow, ineffective or incompetent there are dozens of other men and women — especially the publicity-seeking, showboating types — who have some power to step in and tackle an issue."

Receiving Wide Coverage ...StanChart Settles: Standard Chartered agreed to pay $340 million to settle Benjamin Lawsky's money-laundering charges, but it's unclear how far the U.K. bank actually budged from its initial position that most of the allegedly illegal transactions were kosher. "The parties have agreed that the conduct at issue involved transactions of at least $250 billion," according to the official statement from Lawsky's New York State Department of Financial Services. This sounds to us like a prosecutor saying “the defendant admits that I have accused him of pouring tar into those 250 mailboxes” — a far cry from brandishing a confession to all 250 acts of vandalism. Remember, Standard Chartered had insisted last week that only $14 million of the transactions were improper. Well, press releases are seldom lucid, so let's go to the actual settlement document to find out whether StanChart really admitted any wrongdoing. … Oh wait, there isn't one. According to the Journal, "The settlement took the form of a term sheet signed by [StanChart's CEO] that spelled out the key points in the agreement, including the monetary penalty, said people familiar with the matter. Because the deal was struck so quickly, the final settlement agreement is yet to be drafted in its full legal format." So just like the national mortgage settlement, the full contents of this deal won't be available for a while. In the meantime the public must rely on whatever information the anonymice choose to leak to the media. Wall Street Journal, Financial Times, New York Times, Washington Post

Receiving Wide Coverage ...StanChart Redux: This morning's editions of the Journal and the FT offer behind-the-scenes accounts of the Standard Chartered saga from different perspectives. The Journal describes how New York regulator Benjamin Lawsky blindsided his counterparts in Washington and London by forging ahead with money-laundering charges against the U.K. bank while the other agencies were still investigating. The FT's story focuses on StanChart's response — the bank considered suing Lawsky for reputational damage, the British paper says. But Lawsky's threat to revoke StanChart's license to clear dollar transactions spooked shareholders. Both papers quote analysts who found the settlement amount of $340 million paltry in light of Lawsky's initial bluster and the bank's earnings power (StanChart made about $4 billion in the first half of this year). As often, we find the reader comments on these stories nearly as interesting as the news itself. "This episode simply illustrates the cost of doing business in [the] US now for banks who trade where [the] US wants complete hegemony," comments an FT reader. "Banks should identify it as a business risk similar to that which oil companies operating in Russia view the vagaries of the Russian legal system." And it seems the now-infamous foulmouthed StanChart banker who complained about "you [expletive] Americans" is in good company. Another Journal article says European companies are complaining that "banks acting for them are refusing to handle legitimate trades with Iran for fear of falling afoul of U.S. regulatory authorities. They claim the situation has put them at a disadvantage to U.S. businesses whose trade with Tehran is soaring."

Breaking News This Morning ...The Long and Winding Road: Four years after the government bailout of Fannie and Freddie, the Treasury is restructuring the terms of its investment in the beleaguered behemoths of housing. Instead of a mandatory 10% quarterly dividend, an arrangement which at times has forced the GSEs to borrow more from the government to pay the government, the Treasury will now capture any and all profits they generate. When Fannie and Freddie aren't making money, they won't have to pay. The new terms also accelerate the shrinkage of the GSEs' portfolios to 15% annually beginning next year, from the current required pace of 10%. The government is reworking the terms because the open-ended financial commitment to the GSEs that the administration announced on Christmas Eve 2009 (remember that fast one?) is set to expire this year. The capital available for Fannie and Freddie to draw down will once again be capped, and the government wants "to avoid the prospect that Fannie and Freddie could one day exhaust their Treasury support simply because they might not generate enough profits to pay back those dividends," according to the Journal. The catch is that forking over all their earnings will make it harder for Fannie and Freddie to build capital. Wall Street Journal, FHFA Press Release

Receiving Wide Coverage ...Barclays Branded a Big Disgrace: Newly-minted Barclays Chairman David Walker has got a pretty tough job on his hands when it comes to revamping his bank's image. A new report from British lawmakers calls Barclays' steps towards rigging the London Interbank offered rate "disgraceful," says CNN. It also suggests the Libor scandal stemmed from a "deeply flawed culture" at the bank and was not simply the actions of a "small group of rogue traders."