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UBS AG, Switzerland’s largest bank, agreed to pay $885 million to Fannie Mae and Freddie Mac to settle claims that it improperly sold them mortgage-backed securities during the housing bubble, Bloomberg News reported yesterday. The Federal Housing Finance Agency claimed Zurich-based UBS misrepresented the quality of loans underlying billions of dollars in residential mortgage-backed securities purchased by Fannie Mae and Freddie Mac. The firms have operated under U.S. conservatorship since 2008, when they were seized amid subprime mortgage losses that pushed them toward insolvency. UBS disclosed earlier this week that it had reached an agreement in principle to settle the suit. The FHFA sued UBS in 2011 over $4.5 billion in residential mortgage-backed securities that UBS sponsored and $1.8 billion of third-party RMBS sold to Fannie Mae and Freddie Mac. The suits alleged losses of at least $1.2 billion plus interest. Fifteen other banks still need to resolve such lawsuits.

MF Global Holdings Ltd. has struck a deal with JPMorgan Chase & Co. that calls for the bank to pay MF Global a portion of what the bank recovers in the case, a settlement that MF Global’s administrator says avoids “years of costly and complex litigation,” Dow Jones Daily Bankruptcy Review reported today. In a Wednesday court filing, MF Global laid out settlement terms that call for J.P. Morgan to pay MF Global based on how much it recovers on its claim against the trustee unwinding the company’s brokerage. In return, J.P. Morgan would be off the hook for any claims against it in MF Global’s bankruptcy case.

Wall Street banks are debating whether to suspend doing business with SAC Capital Advisors LP if the hedge fund is charged by U.S. prosecutors, Bloomberg News reported today. Deutsche Bank AG and Goldman Sachs Group Inc. are among firms weighing the reputational and financial consequences of continuing to provide trading, lending and prime brokerage services to SAC, one of Wall Street’s largest trading clients. Prosecutors plan to charge SAC, the hedge fund founded by Steven A. Cohen, as soon as today as part of a probe of insider trading.

Sen. Carl Levin (D-Mich.), who leads the Permanent Subcommittee on Investigations, said that lawmakers may use subpoena power to examine banks’ trading and ownership of physical commodities, Bloomberg News reported yesterday. “We have been into this issue for a long time and it’s a very, very significant issue,” Levin said after a Senate Banking subcommittee hearing yesterday led by Senator Sherrod Brown on whether power plants and oil refineries should be owned by financial holding companies such as JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley. The potential for conflicts of interest and manipulating prices to benefit their proprietary holdings “is huge,” said Levin, whose subcommittee held hearings over Goldman Sachs’s packaging and sale of toxic mortgage-backed securities and JPMorgan’s “London Whale” trading losses.

Jon Corzine and two of his top executives at defunct commodities brokerage MF Global sought Monday to have dismissed a lawsuit accusing them of hastening the firm’s 2011 collapse, Reuters reported yesterday. In court papers filed on Monday, lawyers for Corzine, former Chief Operating Officer Bradley Abelow and former Chief Financial Officer Henri Steenkamp lambasted allegations that they acted with gross negligence as the company teetered on the brink. Louis Freeh, the trustee that wound down MF Global’s bankrupt parent, filed the lawsuit in April, accusing Corzine of pursuing a high-risk business strategy that culminated in the brokerage’s destruction.

Bank of America Corp., Barclays Plc and Citigroup Inc. are among a group of banks sued by the city of Houston for financial damages caused by the alleged manipulation of the London Interbank Offered Rate (Libor), Bloomberg News reported yesterday. Houston, the fourth-largest U.S. city, is one of the biggest to sue on rate-fixing allegations. The Texas city seeks unspecified damages for both receiving artificially low interest and paying artificially high rates on municipal investments dating back six years, according to a complaint filed yesterday in federal court. Besides Houston, other U.S. municipalities that have sued include Baltimore and San Diego County.

Concerned that tougher mortgage rules could hamper the housing recovery, regulators are preparing to relax a key plank of the rules proposed after the financial crisis, the Wall Street Journal reported today. The watchdogs, which include the Federal Reserve and Federal Deposit Insurance Corp., want to loosen a proposed requirement that banks retain a portion of the mortgage securities they sell to investors. The plan, which has yet to be finalized and could still change, would be a major U-turn for the regulators charged with fleshing out the Dodd-Frank financial-overhaul law passed three years ago.

U.S. and U.K. regulators accused a New Jersey high-speed trader of manipulating commodities markets in 2011, the latest sign of heightened global scrutiny of computerized trading across financial markets, the Wall Street Journal reported today. The Commodity Futures Trading Commission accused Panther Energy Trading LLC and its owner, Michael J. Coscia, of disrupting markets by improperly placing trades allegedly designed to lure other investors into buying and selling futures contracts tied to corn, oil and other commodities at bogus price levels. In a related action, the U.K. Financial Conduct Authority fined Coscia for alleged deliberate manipulation of commodities markets.

The Federal Reserve’s review of its decision to let banks store, transport and trade raw materials signals a potential rebuilding of the wall between banking and commerce that legislation and rulemaking have eroded, Bloomberg News reported today. The central bank said on July 19 that it’s reviewing a decade-old decision that physical commodities are “complementary” to banking, allowing lenders such as Citigroup Inc. and JPMorgan Chase & Co. to operate in both industries. Goldman Sachs Group Inc. and Morgan Stanley may be less at risk from the review as some businesses owned before the firms became bank holding companies in 2008 are grandfathered. The move into physical commodities exposed the biggest banks to additional risks and allegations of price manipulation, creating potential legal liabilities and threatening to damage their reputations. The shift also weakened the barrier between government-insured banks and other commerce established by the 1956 Bank Holding Company Act.

The U.S. Securities and Exchange Commission accused the city of Miami and Michael Boudreaux, a former budget director, with securities fraud related to several municipal bond offerings about four years ago, Bloomberg News reported yesterday. Florida’s second-largest city and Boudreaux shifted money from a projects account to the general fund to mask budget gaps and win higher grades from ratings companies on three 2009 debt sales totaling $153.5 million, the SEC said yesterday. Boudreaux’s lawyer said he’s being made into a scapegoat. In 2010, the SEC began cracking down on state and local governments for not giving investors accurate information about their financial condition prior to bond sales, focusing on pension deficits. Since then, Illinois and New Jersey have both settled with the agency over such issues. The agency has since broadened its focus beyond retiree obligations, as in Miami.