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JPMorgan Chase & Co. will pay $2.6 billion to resolve criminal and civil allegations it failed to stop Bernard Madoff’s Ponzi scheme, bringing its legal settlements from the past two years to more than $29 billion, Bloomberg News reported today. JPMorgan avoided prosecution by acknowledging in an accord with the U.S. that it ignored red flags for about 15 years that Madoff used his account to run a fraud, Manhattan U.S. Attorney Preet Bharara said. The bank will pay $1.7 billion to settle the government’s charges, $350 million in a related case by the Office of the Comptroller of the Currency and $543 million to cover private claims, the firm said in a filing.

JPMorgan Chase & Co. lost a bid to throw out a lawsuit by the California attorney general alleging that the largest U.S. bank by assets illegally tried to collect debt from about 100,000 credit-card borrowers, Bloomberg News reported yesterday. California Superior Court Judge Jane L. Johnson in Los Angeles on Monday rejected the bank’s argument that the attorney general’s unfair competition claims were precluded by California legal authority. California Attorney General Kamala Harris sued New York-based JPMorgan in May, alleging that the bank’s Chase unit engaged in “wide-spread and illegal robo-signing” and other unlawful practices against credit-card borrowers. Chase used the judicial system as a mill to obtain default judgments, according to the attorney general.

Janet Yellen will join the ranks of the most powerful economic policy makers in the world next month, taking the helm of the Federal Reserve at a time when the central bank is assessing its unprecedented steps to buoy the U.S. economy, the Wall Street Journal reported today. Yellen, currently the vice chairwoman of the Fed's board of governors, will become the first woman to lead the central bank in its 100-year history after the Senate voted to confirm her yesterday in a 56-26 vote. Eleven Republicans joined 45 Democrats to support her; no Democrats opposed her. Ben Bernanke will preside at the Fed's policy meeting Jan. 28-29. His last day as chairman is Jan. 31. Ms. Yellen is expected to be sworn into office Feb. 1 and lead the Fed's policy meeting in March.

JPMorgan Chase & Co. officials won't be penalized as part of a deal the largest U.S. bank is negotiating with the Justice Department over alleged failures to warn about Bernard Madoff's massive fraud, said people close to the talks, the Wall Street Journal reported today. U.S. Attorney Preet Bharara and U.S. banking regulators intend to announce a total of more than $2 billion in fines this week, but all fines will be paid by the company as opposed to individuals. New York-based J.P. Morgan is expected to sign a so-called deferred prosecution agreement with the Justice Department where it will acknowledge that it didn't have the proper systems in place to catch Madoff, and that various procedures designed to root out and report such suspicious behavior were flawed, said people close to the talks.

The Securities and Exchange Commission announced yesterday that Michael J. Osnato, Jr. has been named chief of the Enforcement Division unit that conducts investigations into complex financial instruments, according to a SEC press release. Osnato previously helped spearhead the SEC’s case against JPMorgan Chase & Co. and two former traders for fraudulently overvaluing a complex trading portfolio in order to hide massive losses, and the subsequent action in which the bank admitted that it violated federal securities laws. Osnato will now lead a Complex Financial Instruments Unit that is comprised of attorneys and industry experts working in SEC offices across the country to investigate potential misconduct related to asset-backed securities, derivatives, and other complex financial products.

Detroit Emergency Manager Kevyn Orr testified that the city asked a U.S. regulator to consider bringing charges against two banks for costly interest-rate swaps that factored in the city's record-setting municipal bankruptcy case, Reuters reported on Friday. Orr said that Detroit asked the U.S. Securities and Exchange Commission to investigate its deals with UBS AG and Merrill Lynch Capital Services, a unit of Bank of America , for interest rate swaps to hedge risk on some of the $1.4 billion of pension debt Detroit sold in 2005 and 2006. The city thought there were "serious questions" about whether it owed the banks anything at all, Orr testified, and Detroit weighed trying to invalidate the swaps. But officials decided chances of prevailing in court were only "more or less 50/50," so it decided to bargain with the banks instead. Orr testified before Bankruptcy Judge Steven Rhodes at a hearing about a Christmas Eve deal to end the swap agreements for $165 million plus fees. That represents a 43 percent discount for Detroit, steeper than one initially proposed. Judge Rhodes, who is overseeing Detroit's bankruptcy case, sent the city and the banks back to the bargaining table after postponing a hearing about the earlier deal to terminate the swaps for $230 million, or 75 cents on the dollar.

Regulators are hoping to release an interim final rule this week designed to satisfy banker demands to change a provision of the Volcker Rule that threatens to force smaller institutions to take millions of dollars in write-offs, American Banker reported on Friday. While the situation is fluid and the exact form of relief could change, regulators are considering exempting all existing collateralized debt obligations backed by trust-preferred securities from compliance with the Volcker Rule. Such a move would likely stem the banker anger that erupted after regulators said such CDOs were covered by the controversial regulation, and may spur the American Bankers Association to drop its lawsuit over the issue.

Capitol Bancorp Ltd. has reached a settlement with unsecured creditors that will allow the bank holding company to close on its sale to Wilbur Ross's Talmer Bancorp Inc. after months of fighting, Dow Jones Daily Bankruptcy Review reported today. With this deal, creditors have agreed to support Capitol's bankruptcy-exit plan after 99 percent of general unsecured debt and 61 percent of trust-preferred securities debt voted in mid-December to reject it. These groups are owed $20.8 million and $2.35 million, respectively.

Wells Fargo & Co., the largest U.S. home lender, agreed to pay Fannie Mae $591 million to resolve repurchase demands on loans that originated before 2009 and were sold to the government-backed firm, Bloomberg News reported yesterday. Wells Fargo paid $541 million in cash to Fannie Mae after adjusting for prior repurchases, the San Francisco-based lender said yesterday. The firm had set aside funds to cover the full cost as of Sept. 30, according to the statement.

Tucked away in a river bend behind a curtain of redwood trees, Scotia is an old-fashioned company town with a contemporary twist: The company that owns the town is a New York hedge fund, Dow Jones Daily Bankruptcy Review reported today. Marathon Asset Management, with roughly $11 billion under management, was not looking to be the owner, but in 2008, a bankruptcy court awarded ownership of Scotia, including its 272 homes, two churches, a hotel and several commercial buildings, to Marathon, which was a big creditor of the timber company that previously owned the town. Now, Marathon faces the prospect of spending another five years or more unloading this most illiquid of investments.