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Almost a dozen large law firms have landed lead advisory roles on the proposed $11 billion merger of American Airlines parent AMR and US Airways Group, according to Am Law Daily on Friday. Thursday's announcement that the two companies have agreed to merge follows months of negotiations that began when US Airways started circling its insolvent rival last year. The AMR bankruptcy, which began when the carrier filed for chapter 11 in November 2011, has already generated millions in legal fees for a variety of firms. AMR alone is paying at least 20 law firms—including the now-defunct Dewey & LeBoeuf—and navigating the looming regulatory approval process is likely to fatten at least some of those firms' coffers even more. Weil, Gotshal & Manges is serving as lead bankruptcy and deal counsel to longtime client AMR through corporate and M&A partners Thomas Roberts and Glenn West—the managing partner of the firm's Dallas office—and business finance and restructuring partners Stephen Karotkin and Alfredo Perez.

U.S. banks and securities firms would have to step up their compensation disclosures under rules being considered by the Federal Reserve, the Wall Street Journal reported today. The rules are in the formative stages and would not take effect for some time. The Fed's push ultimately could give investors large amounts of new data on how and when companies pay their employees—including scarce numbers on how much compensation has been promised but not yet paid out. The consideration comes as Wall Street, under pressure to curb risk-taking and reduce costs, embraces so-called deferred pay as never before. Morgan Stanley last month deferred the entire annual bonuses of thousands of high-paid employees, meaning they will not finish collecting their 2012 pay until 2016.

Rep. John Campbell (R-Calif.) yesterday introduced legislation aimed at reducing the size of "too-big-to-fail" banks by requiring them to hold more capital including long-term debt, Bloomberg News reported yesterday. Campbell's bill comes as a number of lawmakers and regulators from both parties—including Federal Reserve Governor Daniel Tarullo—argue that the 2010 Dodd-Frank Act failed to curb the growth of large banks and express support for renewed efforts to limit the kind of systemic risk that fueled the 2008 financial crisis. Campbell’s bill would require banks with at least $50 billion in assets to hold an additional layer of capital in the form of subordinated long-term bonds totaling at least 15 percent of consolidated assets. If an institution were to fail, the long-term bondholders would be guaranteed reimbursement at no more than 80 percent of the face value of the debt.

A unit of New York Life Insurance Co. issued a $1.5 billion collateralized debt obligation (CDO) named after a Northern sky constellation in April 2007, but the deal burst when it defaulted less than a year later, Bloomberg News reported yesterday. The Corona Borealis CDO, underwritten by Lehman Brothers Holdings Inc., is one of dozens of deals named in the Justice Department’s Feb. 4 lawsuit accusing the world’s largest credit-rating company of deliberately misstating the risks of mortgage bonds as it sought to keep its share of the booming business of repackaging home loans for sale as securities. Eastern Financial Florida Credit Union lost its investment after purchasing a portion of the Corona Borealis CDO, relying in part on Standard & Poor’s assessment of the securities, according to the Justice Department’s complaint filed in federal court in Los Angeles. The U.S. is seeking penalties against S&P and its New York-based parent, McGraw-Hill Cos., that may amount to more than $5 billion, based on losses suffered by federally insured financial institutions.

Citigroup Inc. asked a U.S. appeals court to overrule a trial judge and let its $285 million mortgage-securities settlement with the Securities and Exchange Commission go forward, Bloomberg News reported on Friday. The bank is challenging U.S. District Judge Jed S. Rakoff’s 2011 refusal to approve the agreement, which would resolve claims that New York-based Citigroup misled investors in a $1 billion financial product linked to risky mortgages. The SEC claimed Citigroup cost investors more than $600 million. Judge Rakoff criticized the SEC practice of agreeing to settlements that do not require defendants to admit wrongdoing. He said that the parties did not give him "any proven or admitted facts" he could use to determine whether the settlement was fair.

Moody's Investors Service, Standard & Poor’s and Fitch Ratings are being investigated by the New York Attorney General over whether they breached a 2008 settlement with the state, Bloomberg News reported yesterday. The companies reached an agreement with then Attorney General Andrew Cuomo that required them to adopt changes to their operations. Eric Schneiderman, the current attorney general, is probing whether they complied with the agreement. The U.S. Justice Department and state attorneys general this week sued S&P, accusing the company of inflating ratings on mortgage-backed securities during the housing bubble. New York was not one of the states that sued.

Standard & Poor's Ratings Services could face a much higher legal bill than the $5 billion sought by the federal government as more and more states join the battle against the credit-ratings firm, the Wall Street Journal reported today. A raft of lawsuits this week from attorneys general from several states, including California and Iowa, is compounding S&P's legal woes over its role during the financial crisis of 2008-2009. The Justice Department on Tuesday sued S&P for allegedly causing some banks and credit unions to lose $5 billion after relying on the company's ratings of mortgage-linked securities. Thirteen states and the District of Columbia have followed in the Justice Department's footsteps, filing separate lawsuits against S&P on Tuesday. The California attorney general alone is suing S&P for about $4 billion to recover funds for two of the country's largest public pension funds, according to its lawsuit.

A multistate probe of alleged manipulation of interest rates threatens to leave banks liable for billions of dollars in estimated state and local losses from the scandal, even as they settle with national regulators, Bloomberg News reported yesterday. New York Attorney General Eric Schneiderman is helping lead a probe into claims that banks rigged global benchmarks for borrowing, adding to investigations by other authorities, including the U.S. Justice Department. Royal Bank of Scotland Group Plc agreed yesterday to pay about $612 million to U.S. and U.K. regulators to resolve their claims. States have joined forces as banks reach settlements to resolve liability tied to Libor, or the London interbank offered rate. Barclays Plc in June agreed to pay 290 million pounds ($454 million), and in December, UBS AG agreed to pay 1.4 billion Swiss francs ($1.5 billion).

The Justice Department accused Standard & Poor's of issuing faulty credit ratings on securities tied to mortgages, but whether the company's practices equate to fraud will be difficult to prove, according to an analysis yesterday in the New York Times DealBook blog. The government is bringing charges under a provision of the Financial Institutions Reform, Recovery and Enforcement Act, a statute adopted in 1989 during the savings and loan crisis to make it easier to pursue fraud cases in the banking business. The law allows for a penalty of up to $1 million for each violation of the mail, wire and bank fraud statutes for conduct "affecting" a federally insured financial institution. The statute is designed to help the government recoup money it expended bailing out any failed bank. In this case, the government is suing over the failure of Western Federal Corporate Credit Union and other unnamed financial institutions. The statute was rarely used until recently, when the Justice Department apparently found it useful for cases arising out of the financial crisis. According to experts, the first problem the Justice Department will face is demonstrating that S&P acted inappropriately. The government will have to prove that the company’s ratings were in fact faulty, and published with the intent to deceive investors in the securities.

A big tax break that benefits U.S. private equity and venture capital executives is under threat again, and this time the chances of preserving it may have dimmed, according to a Reuters analysis yesterday. President Barack Obama said at a news conference yesterday that he will pursue a short list of tax loophole closures to try and avert looming budget cuts. Obama on Sunday had mentioned carried interest in a CBS television interview in which he called for reducing the budget deficit by closing tax breaks to raise more tax revenue. Past attempts by some senior Democrats to roll back the provision have failed amid heavy lobbying by the private equity industry and other investment managers. The tax break has been defended by lawmakers from both parties, but this time advocates of repeal say they may have the upper hand. Carried interest is an industry term that describes a large portion of the investment gains realized by private equity managers, as well as executives at some venture capital, real estate and hedge funds. The tax break allows these financiers—many of whom are among the wealthiest people in the country—to treat such income as capital gains, making it subject to a tax rate of only 20 percent, instead of the nearly 40 percent top rate on ordinary income paid by the highest earners.