Receiving Wide Coverage ...
JPM Madoff Settlement: It's official. JPMorgan Chase will pay roughly $2.6 billion to resolve allegations that it ignored signs about Bernie Madoff's massive Ponzi scheme. As anticipated, the bank's latest settlement includes a deferred prosecution agreement that saw JPM skirt criminal prosecution "in exchange for the payment and a promise to reform its practices." (Anony-mice provided Dealbook with a bit of a play-by-play regarding the settlement negotiations that involves a face-to-face meeting with JPM chief Jamie Dimon and U.S. Attorney for the Southern District of New York Preet Bharara.) Per usual, the settlement agreement itself cites several incriminating banker emails, including one in which a JPM senior executive joked "that they should visit Madoff's accountant's office to make sure it wasn't a car wash." But talk has now largely turned to whether JPM's punishment was too lenient. And Bharara's explanation for why the bank and/or its execs were escaping prison specifically that the government must consider "potential collateral consequences" when bringing charges against a company as big as JPM is certainly fodder for the argument over "too big to jail." (Dealbook columnist Peter J. Henning, however, does give prosecutors credit for finding a creative way to get money back to the Ponzi scheme's victims.) Also back on the "topics for debate" docket? Forcing Dimon to vacate his dual role as JPM CEO and chairman at least according to the Journal's Heard of the Street columnist David Reilly, who writes "Mr. Dimon prides himself on readily admitting to shortcomings and fixing them. This time, he and shareholders should again consider if he himself isn't the remedy." As for JPM itself, the bank (and its stock) seems to be taking things in stride. "Shareholders and clients show every sign of remaining loyal," reports Dealbook. "JPMorgan's financial success highlights a deep quandary that regulators have to grapple with as they press the largest banks to clean up their acts. The government's penalties may seem large on paper but the largest banks seem capable of earning their way out of serious legal trouble."
Volcker Rule Update: Rep. Jeb Hensarling may have a workaround to bankers' biggest Volcker Rule contention. The House financial services chairman (and onetime BankThink contributor) is expected to propose a bill that would broadly exempt collateralized debt obligations backed by trust-preferred securities from Volcker compliance. We say broadly because "the wording appears to indicate that new collateralized debt obligations could be created that banks could hold and trade, as long as they contained at least one TruPS security issued before Dec. 10," Dealbook, which reviewed a copy of the bill, reports somewhat ominously. "Most of the assets in the collateralized debt obligation could be other securities." Amid backlash in late December, regulators agreed to consider an exemption to the provision for existing CDOs backed by Trups, but their final decision on the issue isn't expected until January 15. Per American Banker reporter Victoria Finkle, Congress' efforts could possibly force "the regulators to act faster and in a more sweeping manner to resolve the issue" and also provide "recourse for banks if they are unsatisfied with how the agencies handle the situation." Meanwhile, Citigroup is mulling a sale of its remaining stake in an emerging-markets fund it sold back in August in order to comply with the Volcker rule. Anony-mice tell the Journal a formal offer for the stake could come from private equity fund the Rohatyn Group in the first half of 2014.
Goldman Tech Team Shuffle: Goldman Sachs is reorganizing its technology, media and telecommunications investment banking team. As part of the shakeup, current co-head George Lee will become the group's chairman and take on the newly created role of chief information officer. Senior banker Dan Dees will succeed Lee. Anthony Noto, the group's other co-head, will remain in his position. The Journal bills the move as a bid by Goldman "to raise its profile among startups," but the FT cites possible tension in the unit. Per some (but not all) of the paper's anony-mice "there was internal competition for credit for landing high-profile assignments, such as the Facebook and Twitter IPOs, and M&A deals" and "some bankers considered leaving the TMT group because of the difficult atmosphere." Dealbook has obtained Goldman's memos, outlining the changes.
Wall Street Journal
Anony-mice tell the paper federal investigators have launched a probe into whether some big banks "cheated clients in the years following the financial crisis by deliberately mispricing a type of mortgage bond that was central to the economic turmoil." Banks under scrutiny include Barclays, Citigroup, Deutsche Bank, Goldman Sachs, JPM, Morgan Stanley, Royal Bank of Scotland and UBS.
U.S. Bancorp is buying 94 Chicago branches from RBS Citizens.
Bank of America is closing its European power and gas sales and trading desk. The decision "mirrors similar moves at other banks, as they face regulatory constraints on commodities trading and flat or declining prices in many markets."
Nonbanks are stepping in to help small businesses with less-than-perfect credit get loans for a price. "Interest rates on such loans can run in excess of 50%, on an annualized basis, much higher than on conventional bank loans," reports the paper. "Usury laws limiting interest rates generally don't apply to the short-term lenders. Some of the loans are originated in states that don't cap interest rates on commercial loans."