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Receiving Wide Coverage ...Rates Tied to Unemployment: Holy mackerel. The Delphic confusion of Fedspeak past vanished from headlines on the central bank's policy statement Wednesday. Both the Journal and the Times went with "Fed Ties Rates to Joblessness," and FT wasn't far off (different font, different space to fill, presumably).

Receiving Wide Coverage ...UBS Settlement: The Swiss bank is negotiating a deal with international regulators in which it will pay $1 billion in fines for manipulating Libor, the papers report. UBS' Japanese unit will enter a guilty plea to a criminal charge, the first such capitulation by a bank in over a decade, according to the New York Times. "Federal prosecutors are trying to strike a balance," the paper says. "By levying a charge against the subsidiary, authorities send a powerful message, but stop far short of putting the company out of business" — a known hazard of indicting corporations for the actions of individual employees (see: Arthur Andersen). Wall Street Journal, Financial Times, New York Times

Receiving Wide Coverage ...AIG Is Having (Another) Share Sale: The newly private (or perhaps newly re-private) AIG is set to sell its shares in Asian life insurer AIA. Prices have yet to be set, but the sale is expected to net the company anywhere from $6.4 billion to $6.7 billion, depending on what paper you ask. AIG told Dealbook it will "sell the shares to institutional investors" and "use the proceeds from the deal for general corporate purposes," but other news outlets point out the firm has been "shedding noncore assets" steadily — just last week, the insurer announced plans to sell its 90% stake in an airplane leasing business — as it continues to pay off government loans. News outlets also point out AIG isn't getting out of Asia entirely, however. Last month, the firm said it plans to launch a joint venture with the People's Insurance Company (Group) of China. Wall Street Journal, Financial Times

Receiving Wide Coverage ...Facebook IPO Settlement: Morgan Stanley's paying $5 million to settle a Massachusetts probe of how it handled the Facebook IPO. According to a Journal story crosschecked between the state's attorney general's office and people "familiar with the matter," star tech analyst Michael Grimes wrote a script with detailed, non-public information for Facebook's CFO to share with investors. Then, in what might seem a cynical approach to dealing with Morgan Stanley's supposed Chinese walls, Grimes walked down the hall so that he was out of earshot when the CFO read it. "I took extra precaution to do that, and sat on the floor," Grimes later said, according to the Massachusetts order. The two takeaways from this one are: that Morgan Stanley's actions do appear to run against post-Spitzer prohibitions of selective disclosures and analysts in bed with bankers, and that nobody seems to care enough to do anything serious about it. Financial Times, New York Times

Receiving Wide Coverage ...UBS Fined in Libor Probe: An irony of the Libor probe is that it's looking nearly as choreographed and negotiated as the long-running rate manipulation that preceded it. Early this morning UBS and Swiss regulators announced the bank had agreed to a $1.5 billion settlement, and arrests of people connected with the Swiss bank are expected today, according to anonymous sources. RBS is next in line to settle, these same sources say. As for that $1.5 billion UBS fine: despite rolling over early in the international probe, the bank played a central role in the manipulation, anonymous investigators believe. A Japanese subsidiary stepped up to take a single fraud conviction, though that doesn't seem to risk bringing UBS down Arthur Andersen style.

Holiday Notice: The Morning Scan will publish next on Thursday, Jan. 3, 2013. Happy holidays from all of us at American Banker.

Receiving Wide Coverage ...The Fiscal, Uh, Valley: The budget deal reached at the beginning of this year extends an obscure but important tax break for U.S. banks that do business overseas, according to the FT. Under the "subpart F exception for active financing income" (rolls off the tongue, don't it?), income earned on certain transactions outside U.S. borders is taxed only when brought back into the country. The exception was introduced in the late 1990s as a "temporary" measure, but it's been extended every few years since. The latest extension is forecast to cost the Treasury some $9 billion this year. Megabank lobbyists argued, as lobbyists often do, that continuing the relief was necessary for U.S. companies to remain competitive with foreign firms taxed at lower rates. We suspect this news may rub salt in the wounds of some community bankers, in light of Congress' failure to similarly renew the also-originally-temporary TAG program, which expired at yearend. The big banks are in good company, though: "Hollywood, the railroad industry and rum producers" also retained tax breaks as part of the budget deal according to the Times. And the drama isn't even over yet: "Fresh Budget Fights Brewing," says the Journal); "Lawmakers Gird for Next Fiscal Clash, on the Debt Ceiling," per the Times. The Journal's "Heard on the Street" column warns investors that Wednesday's relief rally may be premature. The same point, more or less, is made in the Post: "Business leaders say the agreement won't ease economic uncertainty and warn that the market gains could evaporate once lawmakers move on to the next battle over raising the federal borrowing limit." On the Journal editorial page, economist Martin Feldstein faults the Fed's bond-buying program for (among other things) keeping long-term rates low and thus taking the pressure off Congress and the president to deal with deficits.

Receiving Wide Coverage ...Unease with Easing: How low can interest rates go? Maybe no lower than where they are now.

Breaking News This Morning ...B of A Settles with Fannie: B of A has agreed to pay $10.3 billion to settle claims that it sold bad loans to Fannie Mae. Under the terms of the settlement, the bank will pay Fannie $3.6 billion, and will also spend $6.75 billion buying back mortgages from the housing giant at a discount to their original value. The settlement is likely to wipe out B of A's earnings for the quarter, the FT reports. New York Times, Wall Street Journal

Receiving Wide Coverage ...B of A Settlement: "An albatross that the bank has fought hard to loosen," that's what a Washington Post article on B of A's $11.6 billion settlement with mortgage giant Fannie Mae calls the bank's acquisition of Countrywide, which has now collectively cost B of A more than $40 billion in losses. It remains unlikely that the bank's most recent related payoff will help them shake that bird entirely. According to this American Banker article, several analysts think, moving forward, B of A's mortgage woes will linger with one writing in a research note that the bank's "financial penance for legacy issues will continue." And, even if the litigation is over, the apparently accursed acquisition's already had a lasting effect on the megabank's business model. Both the Post and the Times point out that the settlement represents B of A's continued efforts to pull out of the mortgage market, since the bank was required to sell off about 20% of its already scaled back loan servicing business to pay off Fannie Mae. This retreat, of course, isn't exactly a good thing. "This is part of a broader consolidation of banks and that is something that we should all be very, very concerned about," one analyst told Dealbook. "Anything that leads to less competition can only be bad for consumers." "You have less competition, and as a result the pricing has gotten worse," another told the Post. "Mortgage rates should probably be closer to 3.25 rather than 3.5. One of the reasons they aren't is because banks aren't that competitive and don't have to be to get business."