Wall Street Journal

Prosecutors are pursuing criminal cases against JPMorgan Chase and Royal Bank of Scotland executives for allegedly selling flawed mortgage securities, unnamed sources said. Authorities are looking at a $2.2 billion deal that RBS handled, in which home mortgages were securitized. RBS has already reached a civil settlement with the SEC on the case. JPMorgan is being probed on a different deal, earlier investigated by the Justice Department's Sacramento, Calif., office, related to a 2007 memo written by a bank employee warning her bosses that they were putting bad loans into securities.

Tim Sloan, who was made a likely heir-apparent to Wells Fargo CEO John Stumpf on Tuesday, was the first Wells Fargo executive to get a call from Blackstone Group about making a joint bid for $50 billion of asset from GE Capital, unnamed sources said. Although Wells Fargo told American Banker Tuesday it has not set a specific date for making a decision about Stumpf's successor, the Journal points out the decision will need to be made fairly soon. Wells Fargo requires its executives to retire at age 65 and Stumpf is 62; Sloan is 55.

New York Fed president William Dudley said more work needs to be done on ending the perception that some banks are "too big to fail." "We should acknowledge and take stock of the significant advances achieved over the past few years, while at the same time remain focused on our responsibility to address the challenges that remain," Dudley said in prepared remarks at a Tuesday conference hosted by the Clearing House.

Square's IPO is scheduled for today. Its performance may have a lot to say about the prospects of other fintech companies. If Square stumbles, it may mean that other fintech startups will have a hard time getting rich from the public markets. The IPO market is far from a sure thing. LendingClub's shares have been pummeled as investors worry about the ability of online alternative lenders to make money.

"It's proving harder and harder to make money in IPOs," said Loomis Sayles portfolio manager Tony Ursillo. Square has proffered an IPO share price of between $11 and $13, down from the initial $15.46 price of its private placement last year. The $11 to $13 range would still place a higher value on Square than established payments concerns like Global Payments and Vantiv.

Simple and BBVA have a strange relationship. On one hand Spain's BBVA Compass owns Simple lock, stock and barrel. It bought the online bank in February 2014. On the other hand, Simple wants to maintain a separate identity from BBVA. It stems, in part, from the fact that Simple's co-founder Joshua Reich mocked big banks like BBVA Compass back when it really was independent from its now-parent company.

"By not sucking, we will win," Reich wrote after starting the firm.

But it's not easy to have your cake and eat it, too. BBVA Compass provides Simple with all sorts of benefits that it probably couldn't have gotten on its own. Simply has more than doubled the number of customer accounts since BBVA Compass bought it, and it's increasing users by 10% each month. This is, in part, because BBVA Compass has thousands of depositors, expertise in dealing with regulators and loads of capital — all things that Simple didn't have pre-acquisition.

For many fintech startups, then, maybe they need banks as much as banks need them. "The classic narrative is the Silicon Valley firebrand who's taking on the system," Bain Capital Ventures' Matt Harris said. But in financial services, "that's just not going to be a winning narrative."

The online lender Kabbage, which makes both small business loans and personal loans, is eagerly wooing banks to license its technology; the Atlanta company's founders say banks would benefit from using its online lending platform. Still, Simple claims that BBVA Compass has given it "near-complete autonomy," including branded company T-shirts.

Financial Times

Cash (and plastic cards) are still the kings. A study by the Canadian data analytics shop Aimia found that fewer than one in 10 customers in the U.K. were "very likely" to use a digital wallet. That's even after the introduction of Apple Pay. The reasons? Consumers prefer cash and cards, and they have increasing worries about data security and lost or stolen phones. The paper then goes on to list many of the various alternative payment methods.

New York Times

Bank of America Merrill Lynch and Morgan Stanley have postponed plans to sell billions of dollars of debt to support Carlyle Group's acquisition of Symantec's data storage subsidiary, which is slated to be the biggest leveraged buyout this year. The banks were scheduled to provide about $5 billion of debt as bridge financing for the deal; some of the debt has already been sold. But as they've tried to sell more of the junk-rated debt, they've found a market demanding better terms; the banks have decided to mothball the debt sale for the time being.

Washington Post

The Federal Housing Administration has made it easier to qualify for a mortgage on a condo, but the new rules still may not be lenient enough to help many first-time homebuyers. The FHA's tight rules had squeezed many out of the condo market, because so few condo buildings were FHA-certified. As a result, only 2.8% of FHA's loan volume has been tied to condos.

One of the problems is the agency didn't allow single units within a building to get an FHA loan unless the entire building was FHA qualified. The FHA's Ed Golding said at a recent San Diego conference the agency is going to ease restrictions on condo certification procedures.

But outside experts say the new changes won't help much. "I'm shocked that they bothered to come out with this at all," said Natalie Stewart, president of FHA Review in Orange County, Calif. The new rules don't address the problem of the FHA not making loans on single FHA units; restrictions remain on transfer fees, which shut out large groups of condo-homeowners associations from FHA loans; and there are restrictive rules on budgets, reserves, lease approvals and more.

Elsewhere ...

Fort Worth Star-Telegram: "There Will Be Blood" is a movie starring Daniel Day-Lewis about the early days of wildcatting. The film's title was recently appropriated and modified by an attorney for a Texas law firm to describe what he projects for the energy industry and energy lenders in the coming months. "There will be more bloodletting," said Brian Barnard, administrative partner at law firm Haynes & Boone.

In other words, if you think the energy business is in trouble now, just wait. Energy companies have reported a net reduction of 4.2% of their aggregate credit lines through the end of October, the law firm reported. That's represents about $1.23 billion of credit. That decline will exacerbate next year, based on a survey of energy executives.

In another bad sign, drillers and oilfield-services companies like Conoco Phillips, Chevron, Baker Hughes and FTS International have been firing workers, which does not portend well for the likes of Comerica and Texas Capital Bancshares in Dallas; Prosperity Bancshares in Houston; Cullen/Frost Bankers in San Antonio; Zions Bancorp. in Salt Lake City; LegacyTexas Financial Group in Plano, Texas; BOK Financial in Tulsa, Okla.; Hancock Holding in Gulfport, Miss.; and Wells Fargo.

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