Banco Popular de Puerto Rico

Receiving Wide Coverage ...Charges Filed: The Justice Department is suing credit rating agency Standard & Poor's for allegedly ignoring their own standards and rating mortgage investments much higher than they should have been in years leading up to the financial crisis. Per the suit, filed by U.S. Attorney General Eric Holder: S&P "falsely represented that its credit ratings of RMBS and CDO tranches were objective, independent, uninfluenced by any conflicts of interest that might compromise S&P's analytical judgment, and represented S&P's true current opinion regarding the credit risks." According to Dealbook, prosecutors "have uncovered troves of e-mails written by S.& P. employees" that indicate concern over how mortgage investments were being rated. The complaint reproduces an internal instant message written by an S&P employee in April 2007 that reads "We rate every deal. It could be structured by cows and we would rate it."

Receiving Wide Coverage ...And RBS Makes Three: Royal Bank of Scotland has reached a settlement with U.S. and U.K. regulators over its involvement in the Libor rate-rigging scandal. The settlement includes a combined $612 million fine. As previously speculated, RBS' Japanese unit pled guilty to criminal wrongdoing. Per Dealbook, this involves "a single count of felony wire fraud to settle the case." John Hourican, the head of RBS's investment bank, resigned as part of the settlement and his and other investment bankers' bonuses will be clawed back. Tangentially, an FT article, written prior to the formal settlement announcement, reports that U.K. Business secretary Vince Cable plans to "revive a radical plan to return Royal Bank of Scotland to the private sector by distributing free shares to the public," though it's unclear how likely this plan is to be implemented. The settlement makes RBS the third "giant global bank" to settle with regulators over the rate-rigging scandal.

Receiving Wide Coverage ...RBS, Part II: Bankers behaving badly are all too happy to document said behavior in any type of internal correspondence they can. That seems to be a big takeaway this week as the Royal Bank of Scotland's $612 million Libor settlement has yielded incriminating emails and instant messages similar to those the Justice Department revealed in its civil case against Standard & Poor's. The most notable RBS correspondence making the rounds is an instant message a senior yen trader wrote in mid-2007: "The jpy libor is a cartel now. It's just amazing how libor fixing can make you that much money." Some other things we're learning from the RBS settlement the morning after: British taxpayers may wind up paying some portion of the fine, as "the government still owns an 82% stake in the bank." Emails aside, RBS could emerge from the scandal "about as well as shareholders can have dared hope." And, banks, in general, "are keen" to reach Libor settlements, (for which, Dealbook offers this handy tutorial.)

Receiving Wide Coverage ...A Hard Rain's Gonna Fall: JPMorgan Chase (JPM) on Thursday became the latest megabank implicated in the global scandal involving the rigging of Libor, the London Interbank Offered Rate. The U.S. banking giant coordinated its Swiss franc Libor submissions with those of Royal Bank of Scotland, which, Scan noted yesterday, has itself reached a $612 million rate-rigging settlement. The JPM connection surfaces through documents filed in connection with RBS's deal earlier in the week with U.S. and U.K. authorities, the Financial Times reports. Specifically, two of its yen swaps traders were implicated in dealings with Tom Hayes, a star trader who began his career at RBS before moving on to UBS and Citibank (NYSE:C). Goldman Sachs (GS) also reportedly wooed Hayes. The trader is rapidly emerging as having played as prominent a role in the in the Libor-rigging scandal as Bruno Iksil, aka the London Whale, did in JPM's Chief Investment Office brouhaha. Hayes, a brainy and socially awkward Brit nicknamed "Rain Man," was the "connective tissue in pervasive efforts by several banks to boost trading profits by manipulating the London interbank offered rate," according to a long profile in the Wall Street Journal. His "strong connections with Libor setters in London [are] invaluable," his boss at UBS wrote in an email to executives, including one who now co-heads the firm's investment bank, according to a Journal report citing documents released as part of the RBS settlement. "Hayes often acted with the knowledge of bosses mindful of his ability to rack up big trading profits," it writes. Citi eventually won the tussle for his services. Hayes was arrested by the U.K.'s Serious Fraud Office (No, there is not a Non-Serious Fraud Office) in December. He has not been charged but reportedly remains under investigation. He faces separate wire fraud, price-fixing and conspiracy charges by the U.S. Department of Justice (which Hayes referred to, perhaps prophetically, as "the dudes who…put people in jail" in a phone call that the DOJ tapped). There are no indications that Hayes has cut a deal with the feds, the FT reports. That, in turn, raises the likelihood that the Rain Man will face pressure to roll on associates, colleagues and, most notably, higher-ups. In fact, Hayes has already invoked the "I'm innocent. It was my bosses!" defense, is cooperating with British authorities and pointing the finger at former superiors, the Journal writes, citing Jennifer Arcuri, a close friend of the trader. (As cooperating witnesses are fond of saying: "Call me a snitch. Call me a rat. But call me at home 'cause that's where I'm at.") The FT describes the Libor riggers as part of "a clubby world where fortunes were made on friendships and connections" and where one trader, whose name was redacted, continued to co-ordinate submissions with RBS even after moving to JPMorgan. One way or another, the Libor scandal appears destined to rise up the ranks of U.S. and non-U.S. banks alike. While working for UBS's Tokyo unit (which pled guilty to a U.S. fraud charge as part of the bank's $1.5 billion Libor settlement), Hayes told colleagues during morning meetings which way he planned to push Libor and even posted status updates on his Facebook page, the Journal reports. Wall Street Journal, Financial Times

Receiving Wide Coverage ...Barclays Restructuring: After six months on the job, CEO Antony Jenkins will announce a restructuring on Tuesday that "is expected to leave the bank's strategy largely intact," according to the Journal. The British giant's investment bank will slash 2,000 jobs, or 10% of the unit's workforce, and activities that aren't "socially useful" may get the ax, such as "transactions that have no business purpose other than reducing taxes." (Nevertheless, Barclays "will continue to offer tax-minimizing advice. People familiar with the matter say the business has been hiring employees recently.") Best tidbit of all: "Late last year, 125 top managers were taken to a venue in West London to discuss the bank's culture. They looked at case studies of other troubled organizations. The Roman Empire was used to highlight the risk of hubris, says one person who attended. Executives examined a presentation detailing how public zoos evolved from entertainment with animals into centers of learning." Wall Street Journal, Financial Times, The Telegraph (op-ed by Jenkins in U.K. newspaper)

Receiving Wide Coverage ...More on Mary Jo White: The papers scrutinize the financial disclosures of Obama's nominee to lead the SEC. Among other things, they reveal how much she and her husband have made at their respective white-shoe law firms (at least $16 million combined) and the couple's plan to avoid conflicts of interest if she's confirmed (he'd convert his partnership in Cravath, Swaine & Moore to a nonequity one and recuse himself from dealing with the SEC while she's in office). Mary Jo White would get a lump sum retirement payment of $2 million from her employer, Debevoise & Plimpton, within two months of taking the SEC job. According to the Post, her clients have included "JPMorgan Chase, Deloitte & Touche, General Electric and Verizon Communications. Also listed were individuals such as Rajat Gupta, the former Goldman Sachs board member convicted of insider trading, and former Bank of America chief executive Kenneth Lewis." Meanwhile, a watchdog group called POGO is, er, jumping all over the SEC's longstanding revolving door problem. New York Times, Washington Post

Receiving Wide Coverage ...State of the Union Address: Obama urged passage of a mortgage refinancing bill, but otherwise made no mention of banking or financial services, to the relief of some industry executives. In the Republican rebuttal, Marco Rubio alluded to the role of "reckless government policies" in the housing crisis and called for improved disclosures to student loan borrowers. Incidentally, why all the fuss about taking a swig of water? He was giving a speech, not acting in a play. A more interesting digression: if you're wondering what this 3-D printing thing Obama mentioned is all about, here's a good primer. General SOTU coverage in Wall Street Journal, Financial Times, New York Times, Washington Post

Receiving Wide Coverage ...Jack Lew's Confirmation Hearing: According to the Post, "The questions from the Senate Finance Committee, which is vetting Lew, reflected the widening responsibilities of the Treasury secretary, a role that shapes policy on trade, taxes, economic growth — and now banking regulation." Despite pointed questions about his lucrative work at Citigroup, his Cayman Islands hedge fund investment, etc., "Lew handled the confirmation so smoothly that toward the end of the hearing, Republicans on the committee were conceding that he was all but greenlighted for the job." The headline of the latest Journal editorial subtly hints at the writers' assessment of Lew: "The Rookie." The paper also has a straight news story on the hearing that mostly talks about the fiscal policy stuff.

Editor's note: Morning Scan will not publish on Monday, Feb. 18 in observance of the Presidents Day holiday. We'll be back on Tuesday, Feb. 19.

Wall Street JournalFourth time's a charm? The paper reports "deficit hawks" Alan Simpson and Erskine Bowles plan to offer up a deficit fix to Washington sometime later today. According to the duo, this new plan "would reduce the federal budget deficit by $2.4 trillion over 10 years" primarily through reductions to Medicare and Medicaid, curbing or axing certain tax breaks, lowering caps on discretionary spending and adjusting how cost-of-living increases are calculated for Social Security checks. Of course, Simpson and Bowles' prior attempts to solve the nation's fiscal woes, including as co-chairs of a White House panel in 2010 "fell flat." The article attributes this to their pitches being "more popular with rank-and-file members looking to support a bipartisan plan than with congressional leaders ... locked in negotiations."