Banco Popular de Puerto Rico

Receiving Wide Coverage ...Libor Probe Widens: You can add nine more big banks to the already too-long list of financial institutions being investigated for alleged attempts to rig the London interbank offered rate. New York Attorney General Eric Schneiderman (we're sure that name sounds familiar) and Connecticut Attorney General George Jepsen have issued subpoenas to Societe Generale, Royal Bank of Canada, Bank of America, Credit Suisse, Bank of Tokyo Mitsubishi UFJ Ltd., Norinchukin Bank, Rabobank, Lloyd's Banking Group and West LB AG in recent months in order to determine whether the firms played a part in any Libor-manipulation schemes. It was already widely known that seven banks, including Barclays and JPMorgan Chase, have received subpoenas related to the attorneys general investigations, thanks, in part, to an unnamed source "familiar with the matter" and several disclosures in financial filings. The investigation is part of a larger, global probe into the Libor scandal. Wall Street Journal, Financial Times, Washington Post

Receiving Wide Coverage ...A Hard Rain's Gonna Fall: U.S. stock markets are closed today as Hurricane Sandy approaches the Northeast. The financial district in lower Manhattan (including American Banker's office) has been evacuated, the transit system has been shut down and flights are being canceled. Federal offices and the Metro in D.C. are also closed. So if you're in California and someone in New York or Washington doesn't return your call today, don't take it personally. Our colleagues at American Banker report that banks are bracing for the storm's arrival with the goal of avoiding interruptions in operations. For general stories read the Wall Street Journal, Financial Times, New York Times, Washington Post, and of course weather.com.

Receiving Wide Coverage ...'Water, Fire, Darkness': Hurricane Sandy is wreaking havoc on the East Coast. Streets are flooded, millions are without power, dozens of homes have been destroyed by a fire and a nuclear plant in New Jersey is on, well, low-to-medium alert. The New York Stock Exchange will be closed for a second straight day Tuesday, a decision that the Journal says is raising questions about the market's disaster preparedness. NYSE and other exchange operators will test a new contingency plan, which involves keeping the Big Board closed but using its all-electronic Arca platform to handle trading of NYSE-listed securities and opening and closing auctions. (The previous contingency plan called for operating the NYSE itself using Arca's systems.) Insurance companies could pay an estimated $5 billion to $10 billion in claims related to the storm, making Sandy one of the 10 most expensive hurricanes in history. According to the Post, it's getting harder and harder for actuaries to predict losses from weather-related damage. The Journal has a thorough run-down of the disaster's impact on various businesses, including JPMorgan Chase, whose "facilities will be open during the storm except for major office centers in lower Manhattan, and only key personnel would work out of the affected buildings while business activity was being relocated to other sites." Despite the interruption to business and destruction of property, economists tell the Times that the event "could actually pump up growth temporarily in a few sectors, like construction and retail sales, when cleanup begins in earnest in a few days." "Temporarily" being the operative word: "Eventually, most spending or other activity is simply pushed forward, a phenomenon known in economics as intertemporal substitution." Or, perhaps, pushed from one sector to another: Suggestions that the hurricane would stimulate the economy were quickly countered by citations of the nineteenth-century economist Frederic Bastiat’s "Broken Window Fallacy." (If you never heard it before, the parable goes roughly like this: Baker's son throws rock in bakery shop window. Baker yells at son. Fellow Parisians tell baker to cut the kid some slack, that it's all just as well, since the money he now has to spend fixing his window will fatten the carpenter’s wallet, allowing said carpenter to buy himself a nice bottle of wine with his usual baguette. Baker says, "yeah, but I was going to spend that money to buy myself some new shoes." You get the idea.) While we're getting deep and philosophical about Sandy, Reuters Breakingviews columnist Rob Cox sees a lesson for banking from the storm: "It is better to stand ready for the worst-case scenario than to skimp," whether that means sandbags and preventative evacuations before a hurricane or building up large capital buffers to absorb future financial hits. His Reuters colleague, the blogger Felix Salmon, sees a different analogy for finance in this disaster. Building skyscrapers in flood zones, but according to sophisticated probability models, is no substitute for the common sense practice of just building them on high ground; hence Goldman Sachs is now reduced to placing sandbags outside its Manhattan headquarters near the waterfront. Likewise, Salmon argues, "dumb regulations like Glass-Steagal[l] and Basel I, which weren’t very sophisticated" nevertheless work better than fancy risk models to mitigate financial calamities.

Receiving Wide Coverage ...Sandy, Day Three: "Power Outages May Last More Than a Week" along the East Coast, says the Journal. "New York City’s subways could take between 21 days and several months to be restored," reports the website Quartz. But the stock market is reopening today, as critics continue to fault the exchanges for insufficient disaster preparedness. (By the way, if you heard rumors yesterday about the New York Stock Exchange trading floor being flooded or Con Edison shutting down all power in Manhattan, they apparently emanated from the same source and they weren't true. Caveat Twitter.) CNBC's John Carney reports that the New York Fed has stayed open this whole time, and while most staff members have telecommuted, a few key employees slept over at headquarters. (In the vault with all that gold? That would be pretty sweet.) The Times offers a broad survey of how businesses of various kinds have coped with the disaster; the banking industry is represented by JPMorgan Chase, whose headquarters and main trading floors in midtown Manhattan are set to reopen Wednesday, along with "at least 100 hub bank branches in New York, New Jersey and Connecticut that were stocked with extra cash before the storm. … About 25,000 employees worked remotely on Monday, but that figure dropped to 15,000 to 20,000 on Tuesday as lights went out across the region. On a typical day, about 2,000 to 3,000 employees work through the bank’s remote computer system." Another Times story warns that many homeowners in the areas hit by Sandy "are likely to find that their flood insurance policies have lapsed or that they wrongly assumed their homeowners' policy would cover the damage." Although federal flood insurance is a prerequisite for mortgaging a home in a flood zone, "relatively few [lenders] monitor compliance with the requirement when the coverage expires, meaning that some homeowners inevitably allow their policies to lapse." (Just to be clear: They're talking about flood insurance here, not homeowners insurance, which, as American Banker readers know, is quite often subject to forced placement.) The Post has a thumbsucker of a story about how despite all the talk of the "Internet economy," this disaster reminds us how dependent we still are on physical infrastructure like subways, planes, etc. (That’s the Washington Post, by the way; the New York Post does not publish thumbsuckers.)

Receiving Wide Coverage ...Back to Business: The East Coast continues along its long road to recovery post-Sandy with some subways and airports set to resume (albeit limited) service today in the tri-state area. Also back in business is the New York Stock Exchange, which reopened its doors yesterday amid much criticism that a two-day shutdown signaled insufficient disaster preparedness. Both the Journal and the Times have pretty detailed play-by-plays of how the exchange's first day back went and the news is good. Despite a few "visible glitches" (including some blank monitors related to unreliable data connections) and relatively low staffing levels, "things went very, very smoothly." So smoothly, in fact, that Dealbook deems the exchange as "a small sign of reassurance and resilience" in the storm's aftermath. Activity was "average" with the Dow "closing down 10.75 points at 13096.46," but traders are now readying themselves for several big influential events including Friday's October jobs report and Tuesday's presidential election.

Receiving Wide Coverage ...Intergalactically Systemic: The list of really, really, waywayway too-big-to-fail banks is out, and Citigroup and JPMorgan Chase are on it. The Financial Stability Board, which is coordinating the international regulatory reform effort for the G20 economies, said Thursday that it had put the two New York banks in an echelon that would subject them to a 2.5% capital surcharge. That means that they would have to maintain common equity equal to 9.5% of risk-weighted assets, compared with a universal 7% baseline. Deutsche Bank and HSBC are also in the 2.5% bucket, while other American firms like Bank of America and Goldman Sachs are in the 1.5% bucket and Wells Fargo is at 1%. The list is subject to change and the requirements for the additional loss cushions will be phased in beginning in 2016.

Receiving Wide Coverage ...Banks Take Back Seat: Wide coverage? That'd be the election and the hurricane, of course. The only banking story covered by more than one major paper is HSBC's $800 million additional reserve for its U.S. money laundering case. That brings the tab to $1.5 billion, and it could rise "significantly higher." CEO Stuart Gulliver acknowledged the rising tab and correlated reputational damage. The bank lost money in its European and North American businesses, relying on emerging markets for the good news. The brightest spot in was HSBC's performance in Hong Kong, which brought the bank a profit of $1.8 billion.

Receiving Wide Coverage ...Election Day Has Arrived: It seems remiss not to at least mention the story set to dominate today's news cycle. That is, of course, the presidential election, which appears virtually deadlocked as polls open today throughout the U.S. Some notable (and arguably left-leaning) pundits are predicting President Barack Obama will maintain the electoral edge exhibited in key swing state poll results and keep the presidency, while other (arguably right-leaning) pundits are arguing Mitt Romney's national momentum will peak at just the right time and ensure victory. (The Washington Post actually has a pretty good round-up of notable pundit predictions, in case you're interested in that type of thing.) Either way, we should know the results by this time tomorrow. Unless, of course, Ohio — or possibly another battleground state — needs to hold a recount. (We're a little inclined to echo New York Times blogger Ross Douthat's sentiments here: "But for the love all that's holy don't give us a recount in Ohio.") In either or, perhaps, any event, while you're waiting for the polls to close, you can catch up on how the election is likely to affect the economy (according to Dealbook, don't expect either outcome to solve all puzzles), how it may impact the markets (via the FT) or how it's likely to impact the jobs of top U.S. banking regulators (via American Banker).

Receiving Wide Coverage ...Well, that's that. Despite a few seats changing hands, both the executive and legislative branches are going to look the same as they did before the election, plus one Elizabeth Warren. How we got there involves a feisty Republican primary, plenty of vitriol over basic facts and statistics, and a broad win for the president that was shallower than the one four years ago.

Breaking News This MorningSettlement: As speculated, JPMorgan Chase has reached a settlement with the Securities and Exchange Commission related to Bear Stearns' mortgage backed securities sales practices, Bloomberg reports. Details on the terms of the settlement are scarce, but JPMorgan did say in the filing "the agreement in principle is subject to approval by the SEC, as well as court approval."