Banco Popular de Puerto Rico

Receiving Wide Coverage ...Where in the World are the London Whale Traders? The latest developments in the London Whale investigation may not make for a catchy a cappella tune, but the timing of a grand jury indictment and possible charges against the JPMorgan [JPM] traders at the focus of federal authorities' criminal investigation may hinge on the whereabouts of Javier Martin-Artajo and Julien Grout.

Receiving Wide Coverage ...Probe of Banks' Commodities Role: It is apparently not enough that banks are winding down some of their commodities operations to evade scrutiny over alleged price manipulation. It was widely reported Monday that the Commodity Futures Trading Commission issued subpoenas to institutions with subsidiaries that store and deliver aluminum, seeking documents as part of an investigation. "The subpoenas come," according to the Wall Street Journal, "amid heightened scrutiny of Wall Street's involvement in commodity and energy markets." The paper also reported another move by a big firm, this time Morgan Stanley, to reorganize its commodities business. The Times, citing two sources, said the CFTC requests "seek all internal documents, e-mails, correspondence, voice recordings and other records concerning the warehouse operations dating back to January 2010." The FT reported that the CFTC inquiry corresponds with a potential ruling by the Federal Reserve on whether firms "should be allowed to continue owning physical commodity assets."

Receiving Wide Coverage ...Yellen v. Summers: The growing controversy over who will succeed Fed Chairman Ben Bernanke garnered more attention in the major papers. The Journal focused on behind-the-scenes efforts by the White House to "quash the campaign" by Senate Democrats, who have been pressuring President Obama to nominate Fed Vice Chairman Janet Yellen. Apparently, the "message" has been received. "In recent days, top Democratic senators have vowed to support whomever he picks." Not getting the message, though, was Times columnist Maureen Dowd, who listed her reasons why nominating Larry Summers — the other leading candidate, who is said to have support in the White House — would be a bad idea. "The idea that it is somehow historically inevitable that the chairmanship of the Federal Reserve should go to Summers, that it belongs to him, that he would be an enthusiastic enforcer of bank regulation to protect the little guy? I have my doubts." A story on the front of the Times business section said it is difficult to predict exactly how either candidate would chart the Fed's regulatory course. "For supporters of stronger regulation, it comes down to a choice between someone they do not know and someone they do not trust."

Receiving Wide Coverage ...It's Official: In a widely expected announcement, prosecutors formally charged Javier Martin-Artajo and Julien Grout for their actions to allegedly try to hide JPMorgan Chase losses stemming from the disastrous "London Whale" trades last year. But in addition to the straight news reporting by the Journal, Times, FT and Washington Post, three of the papers also dug into the details around how Bruno Iksil — the London Whale himself — avoided prosecution by cooperating with authorities building a case against his colleagues. The Journal pointed out that Iksil's name was left out of the criminal complaints, but he is identified under the handle "CW-1." "Prosecutors chose to give Mr. Iksil a relatively rare 'nonprosecution agreement,' partly because he pushed back against his colleagues' alleged efforts to conceal losses." The Times said the decision to make Iksil a potential "top witness" in any future trial "is a step the Justice Department rarely takes, more commonly having an individual plead guilty in exchange for an agreement to cooperate." The FT also observed how Iksil allegedly tried to convince his colleagues that the bank "should take a one-time hit to get the values in line with market prices but was rebuffed." The Times included analysis on how the case reflects the risks banks face trying to value derivatives. "On Wall Street, bets worth hundreds of billions of dollars are valued using a considerable amount of guesswork. The dangers of that approach were revealed on Wednesday in the government's criminal complaints against two former JPMorgan Chase traders."

Receiving Wide Coverage ...China's Banking Woes: Multiple stories this morning touch on concerns about China's banks, and not just about credit quality. Finishing up a two-part series about China's banking sector, the Journal reported the growing risk from banks selling bonds to raise cash. China had tried to limit its currency supply in June to constrain funding for "shadow banks", but that created the "unintended consequence" of banks "scrambling for cash. The bond market was drawn into the turmoil when some lenders rushed to sell bond holdings, especially short-term bonds, which tend to be more liquid." The Times explored the fears about China's shadow banking more broadly, as several cities face a "painful credit crisis" and an overall hit to their business sectors. The FT had two stories about the county's flood of non-performing loans. One looked at the more prominent role played by asset-management companies — funded by the state and established over a decade ago to assume the bad debts of the nation's largest banks. "This role in buying a broader set of non-performing loans and receivables from across the financial sector is what many bankers and analysts see as the market-based future of how China will deal with bad debts." The paper also reported talks that Goldman Sachs, Morgan Stanley and Deutsche Bank have held with Huarong, one of China's largest troubled banks, about making a big capital infusion in the institution. "The move is one sign that the Chinese government will not entirely bail out the next round of problem loans emerging from China's credit boom, but will instead rely more on market driven remedies."

Receiving Wide Coverage ...JPM's Woes Grow … Again: The hits just keep on coming over at JPMorgan Chase. The nation's biggest bank disclosed in a regulatory filing that the Securities and Exchange Commission is investigating its hiring practices in China. "Authorities suspect that JPMorgan routinely hired young associates who hailed from well-connected Chinese families that ultimately offered the bank business," explains the Times, which first reported on the filing. The bank told several news outlets it is fully cooperating with regulators regarding the investigation. The SEC is declining to comment. The FT notes that the investigation could "cause consternation" for more than just JPM. "In their rush to capitalize on China's economic growth, virtually all the big Wall Street and European financial institutions with operations in the country have habitually hired … the children of senior Chinese officials," the paper notes. Meanwhile, the Journal estimates that JPM's growing regulatory problems could cause the bank to "absorb $6.8 billion in future legal losses above its existing reserves" then drops this factoid: "The numbers put JPMorgan on pace to supplant Bank of America as the big lender with the most legal problems."

Receiving Wide Coverage ...JPM Déjà vu: JPMorgan Chase is having a hard time getting through the day without news of a probe surfacing. Following reports that the Securities and Exchange Commission was investigating whether the bank routinely hired the children of well-connected families in China, anony-mice told the Journal and, later, the FT that the Justice Department is now looking into whether JPM manipulated U.S. energy markets. Scan readers will recall that the bank agreed to pay $410 million to the Federal Energy Regulatory Commission as part of a civil settlement over energy market manipulations just last month. JPM "didn't admit to wrongdoing as part of the settlement," the Journal makes a point of noting. "It did name Blythe Masters, the bank's head of commodities, three times in the filing," the FT adds. JPM, Masters and the DOJ have yet to formally comment on the new probe. Several pundits, however, are weighing in on the recently unveiled China investigation. Both a Journal article and a Dealbook op-ed from Andrew Ross Sorkin suggest, to varying degrees, that nepotism isn't always a crime. "Given that many of the children of the elite have some of the best educations and thriving networks of contacts, it is hard to see how businesses are supposed to not seek them out, let alone turn them away," Sorkin argues. Meanwhile, the FT's Patrick Jenkins writes that while it remains unclear whether JPM committed any wrongdoing, cultural traditions cannot be used as an excuse for rule-breaking. "Regulators in China and Qatar should be rooting out wrongdoing as eagerly as western authorities — in the interest of both the banks and the future appeal of the markets themselves," he writes.

Receiving Wide Coverage ...Enforcement-Palooza: JPMorgan Chase may not be the only bank facing impending enforcement action. In an interview with the Wall Street Journal, U.S. Attorney General Eric Holder promised more cases — or "a series of significant matters" — related to the economic meltdown are on the way. Holder also dropped this sound bite during the interview (when asked, incidentally, about JPM): "No individual, no company is above the law. We don't investigate companies based on who a CEO is, but we don't avoid investigating companies based on who the CEO is, either." How much of a continuing about-face this represents for Holder, who essentially told lawmakers back in March that some banks were, in fact, too big to jail, is unclear. The AG offered few specifics about what "significant matters" the Justice Department had in the pipeline, including whether any prospective crisis-related cases would be criminal or civil. Meanwhile, the Securities and Exchange Commission continues to flex its enforcement muscles. Just yesterday, news broke that the regulator required hedge fund manager Philip Falcone to admit guilt as part of a settlement over market manipulation allegations. (Legal specialists tell the Journal this settlement "could become a model for future deals.") Now, the regulator has charged a former portfolio manager at Oppenheimer & Company with misleading investors, which Dealbook calls "a rare enforcement action involving the private equity industry."

Receiving Wide Coverage ...More Mortgage Job Cuts: Wells Fargo says it plans to cut 2,300 mortgage-related jobs nationwide. The FT calls the cuts, which are the third and largest wave of mortgage-related layoffs Wells has announced this year, "part of a renewed push by John Stumpf, chief executive, to cut Wells' overall costs to help offset lower mortgage lending and falling profit margins." The Journal suggests the news is ominous. "The job cuts highlight the bank's belief that the mortgage market is headed for a dive," the paper notes. "Other banks could soon follow." Both Bank of America and Citigroup are among lenders who have already announced cutbacks at their mortgage units this year.

Receiving Wide Coverage ...Nasdaq Outage: The Nasdaq stock exchange went down for three hours on Thursday, after a technical glitch caused connectivity issues and interrupted its ability to quote prices. The failure "delivered another black eye to Nasdaq, which was bruised by last year's botched initial public offering of Facebook," reports the Journal. This incident, coupled with Goldman's rogue computer problems from earlier this week, has also raised new questions about the high-speed, computerized structure of our financial markets. "While regulators and market participants have taken several steps to strengthen their systems, the problems this week suggest that the flaws in the markets have not been repaired, and may actually be getting worse," Dealbook notes. Perhaps not-so-surprisingly, the Journal is reporting that the Commodity Futures Trading Commission is moving to rein in high-speed trading by developing a road map it can use to develop rules for the practice. "The road map, which must be approved by the commission before it is officially released, could pave the way for more direct scrutiny of such activities," one agency commissioner tells the paper. Back in March, the Securities and Exchange Commission proposed rules intended to prevent these types of technical snafus, but the exchanges have fought against them. In a statement following the Nasdaq meltdown, SEC chairman Mary Jo White said she would move to have the proposal approved. Washington Post, Financial Times