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It sounds like there might finally be a true reckoning for the financial crisis. JP Morgan has recently been hammered by regulators for various offenses. Now regulators are turning their attention to the rest of the culprits of the near-collapse:

Wall Street could pay nearly $50 billion to buy peace from federal authorities who are taking aim at the banks over their role in the mortgage crisis, according to interviews and a confidential analysis of the industry’s potential legal exposure. Bracing for a potential reckoning, the banks and their outside lawyers are quietly using JPMorgan Chase’s record $13 billion mortgage settlement in November to do the math and determine just how much each bank might have to pay to move beyond the torrent of government mortgage litigation that has dogged them since the financial crisis.

Regulators may even be looking past these efforts to designing a remedy for too-big-to-fail. Yesterday Simon Johnson wrote in the New York Times:

It is entirely possible that under Ms. Yellen’s direction, the Fed will move further in a sensible direction — meaning that it will seek to limit the damage that very large, complex financial institutions can inflict on the rest of the economy.

Today Bloomberg reveals that Elizabeth Warren has been given reason to believe the same:

U.S. Senator Elizabeth Warren said she anticipates Janet Yellen will be a more aggressive financial regulator than Ben S. Bernanke when she succeeds him as chairman of the Federal Reserve Board. “Yellen is making commitments in the direction of saying she understands the problem, she sees the problem, she knows what the tools are. I’m hopeful that means she’s going to act,” Warren, a Massachusetts Democrat, said of the Fed’s regulatory duties in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend.

It’s clearly way too early to tell but this may make for more fundamental underpinnings for “The Bear Case For The Banks.”

DISCLOSURE: Long FAZ for myself and for clients. In no way is this advice.