Breaking News This Morning ...

eBay and PayPal to Split: The online marketplace said this morning it would spin off its payments unit, a move activist investor Carl Icahn had been pushing. Wall Street Journal, New York Times

Receiving Wide Coverage ...

AIG and the Meaning of 'Many': A lawsuit that accuses the U.S. government of unfairly penalizing AIG shareholders in the terms of its 2008 bailout of the insurer got underway Monday. David Boies, a lawyer for plaintiff and former AIG chief executive Maurice Greenberg, argued the government had charged an "extortion interest rate" of 14% for the bailout, compared to interest rates of 3% or 4% that big banks received. He also contended the government did not have the legal authority to "grab" an 80% stake in AIG. Government lawyer Kenneth Dintzer dismissed the motivation behind the lawsuit: "The goal was not to save AIG," he said. "The goal was to save the world from AIG." Moreover, he says, AIG shareholders ought to be grateful that the government stepped in at all. While many observers are eagerly anticipating the testimony of Wall Street and Washington players like Ben Bernanke and Tim Geithner over the course of the six-week trial, it appears they should be prepared for the trial to veer into tedious territory. "Some audible groans, and at times laughter, could be heard in the courtroom as [Federal Reserve general counsel Scott] Alvarez sparred with Mr. Boies over the meaning of 'many' for nearly five minutes," the Times reports. Wall Street Journal, Financial Times, New York Times

Grading Holder on Prosecutions: Two articles in the Times assess the legacy of Attorney General Eric Holder, whose resignation was announced last week, and draw the same conclusion: under his reign, the Department of Justice neglected to hold individuals responsible for corporate malfeasance. While a Dealbook article credits Holder for pushing for steeper monetary penalties in settlements with bank holding companies, it concludes his "record of individual prosecutions is more likely to be seen as a failure, at least if one believes that criminal conduct was rampant in the executive suite" in the run-up to the financial crisis. Columnist Joe Nocera takes an even more critical view: "Holder's Justice Department has been notoriously laggard in prosecuting crimes that stemmed from the financial crisis," he writes, "and much of what it has done amounts to an exercise in public relations." A Times commenter rises to Holder's defense, arguing the attorney general's hands were tied. "After the repeal of the Glass-Steagall Act, many of the actions taken by those who brought the economic system to the brink of collapse were no longer criminal actions," writes reader B. Rothman. "Unethical, oh yes, but illegal — no. And you cannot prosecute an action that doesn't break the law."

Wall Street Journal

"Banks based outside the U.S. have been unlikely beneficiaries of the Federal Reserve's interest-rate policies, and they are likely to keep profiting as the Fed changes the way it controls borrowing costs," the paper reports. Foreign banks have collected roughly half of the Fed's $9.8 billion in interest payments on reserves since the beginning of 2013, according to the paper's analysis of Fed data. The reason? Equity and capital requirements in the U.S. make it less beneficial for domestic banks to park extra cash at the Fed.

Securities and Exchange Commission chair Mary Jo White has fulfilled her promise to up the agency's enforcement activity during her first fiscal year in office, but critics say she should be going after bigger game. "When the chairman testifies before Congress…she will have nice numbers to cite," Thomas Gorman, a partner at law firm Dorsey & Whitney LLP, tells the paper. "But she's not going to have the really good cases that the SEC made its reputation on."

Financial Times

"PNC Financial Services has bought independent equity advisory firm Solebury Capital, in an unusual move that gives the U.S. regional lender a foothold in the niche but growing market for IPO advisory," the paper reports. The Pittsburgh-based PNC paid $50 billion for Solebury, which is based in New York.

Lloyds Banking Group has fired eight employees who allegedly participated in an effort to rig benchmark interest rates. The bank also forced the group to give up £3 million in bonuses. Anonymice tell the paper the dismissed staffers "were all relatively junior traders or mid-level managers."

New York Times

The fate of Lehman Brothers might have been changed by a little more communication within the government, according to the paper. Interviews with a half-dozen anonymous current and former Fed officials have revealed that two teams of financial experts inside the New York Fed concluded "Lehman was narrowly solvent and therefore might qualify for a bailout." But "that preliminary analysis never reached senior officials before they decided to let Lehman fail."

Flagstar Bank in Troy, Mich., has reached a $37.5 million settlement with the Consumer Financial Protection Bureau over charges that its servicing practices prevented thousands of troubled homeowners from avoiding foreclosure. The CFPB "outlined how Flagstar strung along borrowers for months only to wrongfully deny them loan modifications," the paper reports. "Further thwarting the efforts of homeowners, Flagstar also failed to tell borrowers that their applications for loan modifications were missing critical documents."

Bank of America will pay a $7.65 million penalty for the accounting error that led the bank to overstate its capital level by $4 billion. The Securities and Exchange Commission noted Bank of America received a relatively light penalty because it voluntarily disclosed the error and cooperated with the agency's investigation.

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