Breaking News This Morning ...

Barclays Settles Libor Probe: The British bank is the first to cut a deal with regulators in the international investigation of manipulation of the London Interbank Offered Rate, the papers report, citing anonymous sources. The Times puts the penalty in the "hundreds of millions." A formal announcement is expected today. New York Times, Financial Times, ZeroHedge

Wall Street Journal

There's less than a month left before the Volcker rule takes effect (well, kinda), so why not engage in borderline proprietary trading while you're still unambiguously allowed to do so? The Journal's Craig Karmin reports that JPMorgan put up all of the equity — about $100 million, give or take — for a real estate fund after it encountered difficulty raising money from outside investors. The Junius fund (named after J. Pierpont Morgan's pop) has leveraged that capital to make about $465 million of property investments. The bank expects to be taken out by institutional and individual investors so that its ends up with just 3% of the equity in each property. It's unclear whether this practice would violate the letter of Volcker, Karmin writes, but "it resembles the sort of speculative activity the rule was supposed to curb."

We regret missing this story yesterday: The "Heard on the Street" column urges regulators to stick to their guns on a plan to phase out the counting of trust-preferred securities toward capital for all banks, regardless of asset size. Community banks, which fought hard and won an exemption to the Collins Amendment's restriction on Trups-as-capital during the deliberations over Dodd-Frank, are likely to protest the Fed's proposal. But the Journal column argues that "as banks discovered during the financial crisis, something is either equity or it isn't. And Trups, which have a maturity and coupons that must be paid even though they can be deferred for a time, aren't equity." We're surprised there aren't more comments on this one, given the tenacity and passion we're used to seeing from community banking advocates.

Financial Times

An article notes the "steady inroads" that private equity firms have been making in the megabank-dominated mortgage servicing business. For example, Nationstar, majority-owned by Fortress Investment Group, has expanded its portfolio fivefold over four years, in no small part by buying fat chunks of servicing from Bank of America. Nationstar, along with Warren Buffett's Berkshire Hathaway and subprime stalwart Ocwen, will be bidding for the servicing portfolio of the bankrupt ResCap. "With no banks believed to be in the running, whoever wins the ResCap portfolio will become the largest non-bank servicer overnight and the only non-bank in the top five," the FT says. Regulatory arbitrage concerns come into play here — "Non-bank servicers have traditionally been regulated at the state level and some suggest that has allowed them to collect payments more aggressively, prompting concern about their expansion" — though the CFPB may bring more consistency to supervision of this activity.

New York Times

By fighting proposed reforms tooth-and-nail, the money market fund industry is doing a disservice to itself and to American businesses broadly, "Deal Professor" columnist Steven M. Davidoff argues. "Corporate America is less likely to rely on money market financing these days because of its inherent instability," he writes. "Leaving things as they are may only keep people skittish about money market funds, hurting the funds and the companies that rely on them for financing."

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