Banco Popular de Puerto Rico

Receiving Wide Coverage ...Nasdaq's Knock Out: Regulators and exchange officials continued digging up more information as to what caused Nasdaq's three-hour shutdown on Thursday. The Journal reports it was a two-minute window where rival electronic market NYSE Arca could not connect with the Nasdaq after numerous attempts, according to unnamed sources. But Robert Greifeld, the chief executive of the Nasdaq-OMX Group, says it was because the U.S. equity market is a "fragmented landscape," the FT reports. The papers took divergent stances, as the Journal says the glitch "exposed a weakness in the plumbing of the market" and the Times says Nasdaq looks "more like a vulnerable also-ran."

Breaking News This Morning ...Arrest in 'London Whale' Case: Javier Martin-Artajo, former JPMorgan Chase employee and "London Whale" supervisor, was arrested Tuesday in Madrid after turning himself in to Spanish police. Martin-Artajo is one of two former JPM traders facing criminal charges filed by U.S. prosecutors over the bank's $6 billion trading debacle. Julien Grout, the other trader charged, has yet to be arrested. Wall Street Journal, Reuters

Receiving Wide Coverage ...Jamie's Cryin': If you are most CEOs, you know it's going to be a tough day when you wake up to read lots of stories about your company that quote people "familiar with the matter." For Jamie Dimon, it is just another day in August. ... The Federal Housing Finance Agency wants $6 billion in connection with its lawsuit alleging that JPMorgan sold Fannie Mae and Freddie Mac $33 billion of tainted mortgage-backed securities ahead of the financial meltdown, several of the major dailies reported. JPM is fighting the offer but could still end up paying billions of dollars, the Financial Times says.

Receiving Wide Coverage ...Sweet Partial Victory: Bankers were mostly happy with a revision that softens the criteria for qualified residential mortgages. A provision of the Dodd-Frank Act requires banks and other lenders to retain 5% credit risk of loans they sell on the secondary market that don't fit QRM requirements. However, regulators revised the definition of the QRM exemption and it is so broad that 98% of loans last year would have been covered, the Wall Street Journal said.

Receiving Wide Coverage ...Fed Staff Violates Rules: It's not just the banks, folks, it's also the regulators. The Federal Reserve's inspector general says the Fed violated its own rules when a staff member inadvertently emailed minutes from a March policy meeting a day early. Oops. The email went to 150 people including some of the biggest banks and investment firms on Wall Street plus congressional staffers. The IG says the Fed failed to provide sufficient training to employees handling confidential information. Wall Street Journal, New York Times

Receiving Wide Coverage ...Downsizing: Bank of America is selling its stake in China Construction Bank for up to $1.5 billion, reports the Journal, which obtained a term sheet on the deal. The bank has yet to comment on the reason for the sale, but the article notes "market experts remain wary about Chinese banks' asset quality after a huge credit boom in China aimed at stimulating the country's economy in the last few years." Bank of America isn't the only big bank scaling back. The Journal also reports that last week Citigroup sold Citi Venture Capital International, a $4.3 billion private-equity fund, for an undisclosed price to private-equity fund Rohatyn Group. The paper estimates Citi has shed more than $6 billion in alternative investments over the last month and anonymice say the big bank is also looking to sell its remaining hedge fund to those that manage it. "The moves reflect a decision by Citigroup to shed its private-equity and hedge funds in the wake of new regulations that restrict banks' holdings of alternative investments," the paper reports before name-dropping the yet-to-be-finalized Volcker Rule, which, among other things, prohibits banks from investing in funds they don't manage.

Receiving Wide Coverage ...S&P vs. DOJ, Retaliation Edition: Well, this is an interesting tactic. Standard & Poor's is arguing that the federal government is suing the firm in retaliation for stripping the U.S. of its AAA credit rating back in 2011. Per S&P's latest court filing, "the government's 'impermissibly selective, punitive and meritless' lawsuit was brought 'in retaliation for defendants' exercise of their free-speech rights with respect to the creditworthiness of the United States of America,'" the Times reports. Scan readers will recall that the U.S. Department of Justice filed civil charges against the credit rating agency back in February 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. A spokeswoman for the DOJ told the Journal the retaliation allegation was preposterous. Lawyers tell the paper making the claim stick will be "an uphill battle" as S&P would need "to prove that there was direct communication between different government agencies and to indicate any such goal, as of the alleged retaliation by the government." The FT reports that S&P's lawyers "have demanded, and been granted, permission to collect documents and emails from government departments and agencies relating to the DOJ's decision to launch the lawsuit." Tuesday's court filing cites a total of 19 defenses to the government's allegations. Among them, S&P argued that even Federal Reserve Chairman Ben Bernanke (who has previously been attached to civil crisis-related cases) and then-Treasury Secretary Hank Paulson didn't anticipate how serious the crisis was, prior to it actually happening. S&P has argued in previous court filings that certain assurances it made about the objectivity of its ratings process constitute "classic puffery" — the vague and overblown language that businesses often use to describe the virtues of their products and services — which is also an interesting tactic, given the firm's business model.

Receiving Wide Coverage ...A Probe Within a Probe: Just when you thought we would go a week without learning new details about JPMorgan Chase's regulatory troubles, reports surface that the nation's largest bank is currently being probed about possibly obstructing a probe. As it turns out, the Justice Department's criminal investigation into whether JPM manipulated U.S. energy markets (remember that one?) is really focused on whether the bank withheld information from regulators during the Federal Energy Regulatory Commission's investigation into the matter. JPM agreed to pay $410 million to settle FERC's allegations back in July. The bank didn't admit or deny wrongdoing as part of the settlement. Reuters, which broke the story, reports the DOJ decided to look into whether JPM had impeded that investigation, in part, due to a letter Sens. Elizabeth Warren, D-Mass, and Edward Markey, D-Mass, sent to FERC at the end of July. "The letter asked FERC about why it had allowed JPMorgan to settle the case without admitting wrongdoing and why no individual executives faced regulatory action," the article notes. "[It] also asked FERC why no action was taken against people who 'impeded the Commission's investigations.'" JPM has previously denied that employees lied during the FERC probe. Bloomberg columnist Jonathan Weil argues that little will come from the DOJ's new investigation. "It's unlikely that the government would ever prosecute JPMorgan, for obstruction or anything else, because it's too big to fail," he writes. "If the energy regulator couldn't see fit to file claims against any individuals, it's difficult to imagine the Justice Department would press criminal charges against them later." Meanwhile, the Journal reminds readers: "The Justice Department has at least seven other investigations of [JPM] in the works."

Receiving Wide Coverage ...JPM Ditches School: JPMorgan Chase is dropping out of the student loan business. The Journal calls the exit "the latest development in a larger push by JPMorgan to exit businesses it no longer dominates." The government, of course, is the dominant lender in this space, accounting for over 85% of the market. Wells Fargo now stands as the only big bank still making student loans, though Discover Financial Services has widened its student lending business over the last few years. JPM's decision gave the bank the opportunity to tell Reuters, which broke the news, that not making more loans "puts us in a position to redeploy those resources, as well as focus on our No. 1 priority, which is getting the regulatory control environment strengthened." As the Washington Post reminds readers, "in the past few months, the nation's largest bank has found itself entangled in litigation and investigations into a wide range of its businesses." JPM now joins Bank of America and Citi to be the subject of downsizing news this week. As previously scanned, B of A is selling its stake in China Construction Bank, while Citi has been steadily shedding its private-equity and hedge fund investments over the last month.

Receiving Wide Coverage ...Time Really Flies: Five-year retrospectives of the 2008 meltdown were popular over the weekend and fed into Monday's papers. Journal economics editor David Wessel wove together a complete summary of the meltdown — from the fallout over the sharp decline in housing values to policymakers' decision-making over which firms to bail out and which to let fail. In the five years of recovery since the near collapse, "Americans could justifiably celebrate victory." But it is only a partial victory. "The fundamental unresolved policy question is this: Were the fiscal and monetary stimulus the wrong medicine, or were they just too small to do the job?"