Breaking News This Morning ...

JPM, Wells Report 4Q Results: JPMorgan Chase and Wells Fargo kicked off earnings season Tuesday morning, giving investors and others a glimpse of what to expect from the industry. Revenue from mortgage refinancing and fixed-income capital markets are expected to be sluggish, but cost-cutting and stock underwriting results should be strong. Billions of dollars of legal costs from several settlements took a bite out of JPMorgan's results. The company reported net profit of roughly $5.3 billion, or $1.30 per share, which was below analysts' expectations of $1.35 per share. So far the company has paid approximately $20 billion in the last year to resolve various government investigations. Wells Fargo fared much better, posting a 10% rise in net income. A decline in the company's mortgage business was offset by controlling expenses. American Banker, New York Times

Receiving Wide Coverage ...

Libor Probe Widens: The Justice Department charged three former Rabobank Group traders with wire fraud and conspiracy to commit wire fraud and bank fraud for allegedly manipulating an important interest rate. Tetsuya Motomura of Japan, Paul Robson of the United Kingdom and Paul Thompson of Australia allegedly submitted misleading interest rates to the group that sets the yen London interbank offered rate, for the purpose of helping their own trading position. Rabobank agreed in October to pay more than $1 billion in an agreement with U.S., British and Dutch authorities to settle charges that employees manipulated Libor. The Justice Department has now charged eight individuals at various companies for allegedly manipulating Libor. Wall Street Journal, Financial Times, New York Times

More Employee-Friendly Policies: Credit Suisse is the latest investment bank to try to improve working conditions for junior employees. Analysts and associates in the Americas should only come into the office on Saturdays if they are working on a live deal, according to an internal memo obtained by media outlets. Other banks, including Bank of America, have also issued similar orders in an attempt to lure young talent from other more enticing careers. Financial Times, New York Times

Free Credit Scores: Target has hired Experian to provide a year of free credit-monitoring to its patrons in the wake of the recent security breach, which affected up to 110 million customers. Customers can sign up for a free copy of their credit report and daily credit monitoring. The retailer has also hired security firms to help with an internal investigation into the breach. New York Times, Washington Post

Getting Back into the Game: John Havens, a former high-level Citigroup executive, will come out of retirement to serve as chairman of Napier Park Global Capital, a hedge fund he oversaw when it was part of the bank. Havens had resigned as chief operating officer in 2012 when Vikram Pandit was ousted as CEO. Wall Street Journal, New York Times

Wall Street Journal

The Journal takes a look at the winners and losers from the Fed's quantitative easing program. The short answer is pretty obvious. Borrowers basked in the policy while savers suffered. However, it is more complicated than that. Corporations and individuals are likely to be both borrowers and savers. Companies earned an additional $310 billion from 2007 to 2012 because of lower rates. Households, which are generally net savers, felt the sting of losing roughly $360 billion during that time period. Banks suffered from lower interest rates on the lending side but also benefited as rates paid out on deposits fell during the period.

Regulators are almost ready to issue a rule meant to provide relief to banks that want to own collateralized debt obligations without running into problems with the Volcker rule. The interim final rule would allow banks to hold some CDOs assuming the CDOs meet certain criteria, such as containing specific types of loans.

The Consumer Financial Protection Bureau and state attorneys general are intensifying an investigation into for-profit colleges and their lending practices for student loans, the Journalreports. The probe is focusing partly on the loans provided by outside investors through the schools.

There should be some bright spots for banks as earnings season begins. The KBW Bank index rose 35% last year — better than the S&P 500 — but is still roughly 40% below its level at the end of 2006. Net interest margins should stabilize or maybe even expand in the fourth quarter as the Fed tapers its bond purchasing and long-term bond yields rise. Additionally, this year could also see strong lending if the economy keeps improving.

Financial Times

The Fed is expected to request public comment about restricting the trading of physical commodities by banks prior to a Senate Banking Committee hearing on the subject, scheduled for Wednesday. Critics argue that the trading of these commodities, including oil and metals distorts the price. Regulators are more concerned about "the potential effects of, for example, a bank-owned oil tanker spilling its cargo in the Gulf of Mexico," according to FT. Some banks, including JPMorgan Chase and Morgan Stanley, are looking to exit this business prior to new rules.

Lending to nonfinancial companies increased last year, according to data from law firm Allen & Overy. New loans were up globally by an average of 30% while bond issuance rose 4%. However, businesses are increasingly turning to alternative lenders, such as asset managers, insurers, private equity and hedge funds, for financing, the FT reports.

New York Times

European Union officials are expected to meet Tuesday to work on new rules to rein in the trading of derivatives and other complex instruments. This will be the first meeting since discussions fell apart in December. The new rules will cover regulations of a wide range of financial activities, including restrictions on high-frequency trading and greater transparency on trading activity that isn't currently public. U.S. and European authorities have disagreed on how strict to make new regulations. The Commodity Futures Trading Commission plans to regulate European branches and affiliates of U.S. banks if the EU's rules are not comprehensive enough.

Washington Post

Washington Post columnist Michelle Singletary praises the new qualified mortgage rule, especially the ability to repay rule. QM may make it harder to get a mortgage but that may not be a bad thing, Singletary argues. Instead, it will limit the availability of loans, such as interest-only loans or loans with negative amortization, and ensure financial institutions check out a borrower's income before making a mortgage. Singletary spoke with Richard Cordray, head of the CFPB, who noted the changes were really "a back-to-basics approach."

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