Breaking News This Morning ...

JPMorgan Restates 1Q Profits Lower: The bank "cut its previously reported first-quarter earnings by $459 million, or 8.5%, after revising valuations of some positions in the Chief Investment Office's synthetic credit portfolio." Wall Street Journal

…And Reports Second-Quarter Results: JPMorgan made $5 billion, down from $5.4 billion a year ago. Press release here. Expect lots of questions on this morning's conference call about risk management lapses and VaR model flip-flops, says the Journal. Meanwhile, Bruno "the Whale" Iksil, his "brutal" boss Achilles Macris and one other London employee involved in the problematic CDS trades have left the firm, the paper says.

Receiving Wide Coverage ...

Wells Settles DOJ Fair Lending Case: "Bank Will Pay $175 Million for Mortgage Practices Tied to Minorities; Pact Alleges Higher Fees and Interest Rates Charged." Wall Street Journal, Financial Times, Washington Post

More on Wells: The Journal's editorial page calls the DOJ's case against the bank a "shakedown," and reiterates the writers' skepticism of bias claims that rely on statistics without evidence of discriminatory intent. Meanwhile, the paper's "Ahead of the Tape" column previewed Wells Fargo's second-quarter results, which just came out, and predicted (correctly, it seems) "continued strength in mortgage banking," given the rate- and government-driven refinancing wave. For another perspective, see Clifford Rossi's latest "Risk Doctor" column in BankThink, in which he considers the flipside of Wells' mortgage dominance — it has a gigantic servicing portfolio, with attendant risks to manage. Another question that might come up on the conference call: how much will mortgage production be affected by the bank’s decision, announced yesterday, to quit the wholesale channel?

Liborama: The Libor scandal could cost the banking industry a total of $22 billion in regulatory fines and private litigation damages, according to a Morgan Stanley analysis. The FT’s Alphaville has a detailed breakdown of the estimate. U.S. senators are now calling for the government to investigate banking regulators to see if they allowed their charges to rig Libor, and to pursue criminal charges against the bankers who did the rigging. But don’t look at Treasury Secretary Tim Geithner; as president of the New York Fed in 2008, he tried to curb the manipulations, according to documents cited in the Times and the Post.

Wall Street Journal

In a rare criminal case against bankers, a grand jury indicted four former executives of the failed Bank of the Commonwealth in Virginia for fraud.

Financial Times

Today San Bernardino County in California (not to be confused with San Bernardino City, which just went bankrupt) will hold its first meeting to consider a proposal to use eminent domain to acquire and rework underwater mortgages. Investors in mortgage-backed securities hate the plan, though North Carolina Rep. Brad Miller argues that it won’t hurt and might help them. If the proposal passes, and/or other municipalities try this strategy, industry lawyers are already formulating constitutional challenges.

New York Times

The paper follows the FT in previewing next week’s hearing of Sen. Carl Levin’s investigations subcommittee, where HSBC executives will apologize profusely for anti-money laundering compliance lapses.

Correction

San Bernardino City filed for bankruptcy protection last week, not the county, as erroneously stated in the email version of Friday's Scan. The usual Scan writer is in the doghouse today, and our muni-maven colleagues at The Bond Buyer will be mercilessly teasing him all week.

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