Stock Exchange

Futures flat, credit downgrade for Ireland

2010-12-17T06:23:00.000-08:00

NEW YORK (Reuters) – Stock index futures were little changed on Friday as wary investors kept their eyes on the euro zone debt crisis after Ireland's credit rating was slashed.

European Union leaders agreed to create a permanent financial safety net starting in 2013, and the European Central Bank will nearly double its capital to cope with bigger credit risk.

European bank stocks were hit hard after Moody's slashed Ireland's credit rating by five notches.

U.S.-listed shares of Allied Irish Bank (AIB.N) fell 4.6 percent to $1.24 in premarket trade, while Barclays (BCS.N) also fell 2.1 percent to $16.25.

"We are headed for a sluggish open because of European woes ... but since this isn't something we weren't expecting, I don't see the market selling off much," said Peter Cardillo, chief market economist at Avalon Partners in New York.

S&P 500 futures were down 0.2 point and below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures fell 11 points, while Nasdaq 100 futures lost 0.75 point.

U.S. stocks, bucking a trend of late-day selloffs, ended higher Thursday as economic bellwether FedEx Corp (FDX.N) offered a bullish profit outlook that augured well for broad growth.

Market volume and volatility could increase later in the day as traders adjust or exercise derivative positions on four different types of expiring equity futures and options contracts, also know as "quadruple witching."

The U.S. House of Representatives approved a compromise deal between President Barack Obama and Republicans late Thursday to extend expiring tax cuts -- a high-stakes gamble to create jobs at a cost of deepening the U.S. debt. Congress was racing to enact the legislation as it faced an end-of-year deadline when the Bush-era tax cuts were set to expire.

The Conference Board releases its report on November leading economic indicators at 10:00 a.m. EST (1500 GMT). Economists in a Reuters survey forecast a 1.1 percent rise, compared with a 0.5 percent increase in the prior month.

Ford Motor Co (F.N) intends to raise its 30 percent stake in Jiangling Motors Corp (000550.SZ), a major Chinese light commercial vehicle maker, a source said.

Blackstone Group LP (BX.N) agreed to restructure about $7 billion of the remaining debt tied to its 2007 purchase of Equity Office Properties Trust, the largest leveraged buyout ever, the Wall Street Journal reported.

Oracle Corp (ORCL.O) forecast current-quarter profit will beat estimates as it reported that new software sales surged. Oracle rose 4.4 percent to $31.60 premarket.

(Reporting by Angela Moon; editing by Jeffrey Benkoe)

Futures flat ahead of housing data

2010-07-26T05:08:00.000-07:00

NEW YORK (Reuters) – Stock index futures were little changed on Monday ahead of data on new home sales, following the best three-week period on the S&P 500 Index in almost a year.

S&P futures hovered around 1,100, a key level broken by the benchmark on Friday for the first time in a month. Some technical measures of both the S&P 500 (.SPX) and S&P futures are sending bullish signals, but charts also show further resistance roughly 1 percent above current levels. Recent economic data has also cut into the positive sentiment.

S&P 500 futures fell 1.7 2 points and were about even with fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures lost 9 points and Nasdaq 100 futures shed 4.25 points.

BP Plc (BP.L)(BP.N) was up 2.6 percent in premarket trading as the British oil giant is expected to install an American troubleshooter as chief executive in the next 24 hours, replacing Tony Hayward, who has come under fire for his handling of the worst oil spill in U.S. history.

Pharmaceutical stocks will be in the spotlight The Wall Street Journal said Britain's GlaxoSmithKline Plc (GSK.L)(GSK.N) had recently made "a very casual approach," to Genzyme Corp (GENZ.O) but industry insiders and analysts said Glaxo's chief executive was unlikely to pursue a deal. U.S.-traded Glaxo shares dipped 1.4 percent to $35.99 premarket.

Sources familiar with the matter said on Friday that Sanofi-Aventis (SASY.PA)(SNY.N) was sounding out Genzyme, prompting a 15 percent jump in the U.S. biotech company's market value to $16.7 billion.

Investors will eye the U.S. Commerce Department's new home sales data for June, at 10 a.m. (1400 GMT). Economists in a Reuters survey forecast a total of 320,000 annualized units in June compared with 300,000 in May.

Legg Mason Inc (LM.N), Fluor Corp. (FLR.N), Lorillard Inc (LO.N), Masco Co (MAS.N), Plum Creek Timber Co Inc (PCL.N) and Range Resources Corp (RRC.N) are due to report results on Monday.

U.S. stocks rose on Friday as GE's (GE.N) dividend hike boosted investor sentiment, the Dow Jones industrial average gained 102.32 points, or 0.99 percent, to 10,424.62, and The Nasdaq Composite Index (.IXIC) added 23.58 points, or 1.05 percent, to 2,269.47.

The S&P 500 rose 8.99 points, or 0.82 percent, to 1,102.66, closing above the key 1,100 level for the first time in a month after coming close but failing four times in July.

EU companies: debt crisis is hurting recoverya

2010-06-14T23:16:00.000-07:00

BRUSSELS: European companies warned Monday that the region's debt crisis risks damaging a fragile economic recovery by hiking costs for businesses to borrow and invest.

The euro has shed some 20 percent of its value over the past six months as financial markets lost confidence in European governments' ability to rein in massive debt levels while growth remains low.

Philippe de Buck, who heads the BusinessEurope group representing some 20 million companies, told reporters that "business is more than concerned about the credibility of the euro" after its sharp drop in value.

The group says that businesses are seeing the real impact of recent months' volatile markets in higher costs for borrowing and more difficulty in getting credit. It says this holds companies back from investing more in the economy.

It is calling on European Union leaders to bolster confidence in the euro currency and their own finances by making the public spending cuts they need to balance their books — and also make longer-term reforms to boost growth by opening up the labor market and shedding business barriers across the 27-nation bloc.

EU leaders meet for talks on June 17 on a new 10-year growth strategy for the region to build on a weak recovery.

Manufacturing is among the few sector picking up in Europe, fueled by exports that BusinessEurope says will grow 5 percent in 2010 and 2011 — and helped by the lower value of the euro which makes eurozone products cheaper for U.S. customers and Asian buyers using the dollar.

Eurozone industrial output grew 0.8 percent in April from the previous month, according to the EU statistics agency, and increased 0.5 percent in the entire EU.

But BusinessEurope says economic growth is stabilizing "at a too low level" — and companies are still very cautious about the recovery. The region's jobless rate will likely stay at record highs until employers start hiring again in late 2011, it forecasts.

The Spanish government was trying Monday to win back market confidence by pushing on with efforts to curb public spending, this time by selling crucial labor reforms to skeptical opposition parties that would loosen up rigid hiring and firing rules.

The ruling Socialist Party says this could encourage companies to hire more workers — reducing a jobless rate that is the highest in the eurozone — and help to kick start economic growth.

The measures also aim to appease markets and EU nations worried that Spain could be the next eurozone country to require a bailout. Spain must refinance €40 billion ($49 billion) in debt in June and July, according to Deutsche Bank.

Greece has already sought a bailout from other European Union nations and the International Monetary Fund and some economists believe other indebted nations — such as Spain and Portugal — may also need financial rescue if they can't borrow what they need from wary investors.

EU and German officials on Monday denied German media reports that Spain was likely to seek help soon.

European Commission Amadeu Altafaj Tardio told reporters in Brussels that there was "no such request and no plan whatsoever to provide financial assistance." German finance ministry spokesman Michael Offer also said "we see no need for action at this point."

Separately, French Prime Minister Francois Fillon expressed concern that Europe's drive toward austerity could go too far and trigger a new economic downturn.

"It is difficult for the European states to balance debt reduction ... while simultaneously tightening and not triggering a new recession," he told reporters in Oslo.

BusinessEurope's de Buck said government spending cuts had to be accompanied by moves to stoke growth.

"Discipline and growth can go hand in hand even it can be difficult," he said, calling for governments to shun "indulgence" and become more efficient with their spending.

Merkel, Sarkozy discussing the economy

2010-06-14T23:15:00.000-07:00

BERLIN: The German chancellor and the French president met Monday to prepare for a European Union summit later this week, amid speculation of a rift in German-French views on economic policy.

Angela Merkel welcomed Nicolas Sarkozy to discuss a joint strategy on how to curb the debt crisis that has dragged down the common European currency and rattled economies across the continent.

The leaders of the eurozone's most important economies were to have held talks last week, but the meeting was canceled with only a few hours notice, fueling rumors the two are split on how Europe should best handle the financial crisis.

Germany is calling for sanctions on countries with high deficits and advocates the path of austerity as a model for Europe after presenting its own package of budget cuts on June 7, worth €80 billion ($97 billion) by 2014.

But the French government minister in charge of stimulus efforts, Patrick Devedjian, last week explicitly warned that German-style austerity measures "would be dangerous because it risks killing growth" in France.

The next test for the 16 countries sharing the euro currency — who passed a €110 billion rescue package for Greece and then set up a wider bailout found for countries in financial trouble worth €750 billion — could be ahead as pressure mounts on Spain to curb its deficit.

EU leaders meet for talks on June 17 on a new 10-year growth strategy for the region to build on a weak recovery.

While Sarkozy supporter creating an independent economic government for the eurozone, Merkel insists such decisions should be made by all EU leaders, such as the European Council.

Despite recent tension over the bailout packages for Greece and the eurozone, Sarkozy and Merkel last week showed that France and Germany were still working together closely, and wrote a joint letter urging the European Commission to speed up efforts to regulate financial markets.

The combined economic output of Germany and France, with their respective GDP in 2009 standing at €2,400 billion and €1,950 billion according to EU statistics, represents almost half of the eurozone's GDP of some €9,000 billion.

Asian stocks post tepid gains amid Europe anxiety

2010-06-14T23:13:00.000-07:00

TOKYO: Asian shares rose Tuesday but gains were tepid after Wall Street succumbed to anxiety about Europe's economy.

Japan's Nikkei 225 stock average fell 0.2 percent to 9,861.87, with investors taking profits after Monday's jump of almost 2 percent. Australia's S&P/ASX 200 gained less than 0.1 percent to 4,507.70 while Hong Kong's Hang Seng added 0.1 percent to 20,075.11.

Elsewhere, South Korea's Kospi was fractionally higher at 1,691.47 and Singapore's market rose 0.1 percent. Taiwan's benchmark was 0.3 percent higher. Financial markets in mainland China were closed for a holiday.

In New York on Monday, the Dow Jones industrial average erased early gains to end down 0.2 percent at 10,190.89. The S&P 500 index fell 0.2 percent to 1,089.63, while the Nasdaq composite index rose less than 0.1 percent 2,243.96.

Stocks began higher following encouraging industrial production data from Europe. But that wasn't enough to overcome ongoing fears about the continent's problems, especially after Moody's lowered its rating on Greece's debt to "junk" status.

The fallout in Asia was mild, however, with most benchmarks showing little definitive direction ahead of U.S. industrial production numbers due Wednesday.

In Tokyo, insurance names were among the day's losers, with Tokio Marine Holdings Inc. down 1.8 percent. Tech shares were also having a lackluster day. Canon Inc. fell 1.1 percent, and Sony Corp. lost 0.6 percent.

In currencies, the dollar slipped to 91.43 yen from 91.58 yen late Monday in New York. The euro rose to $1.2217 from $1.2210.

Benchmark crude for July delivery was up 10 cents at $76.38 in electronic trading on the New York Mercantile Exchange.

NC congressman apologizes for behavior on video

2010-06-14T23:09:00.000-07:00

RALEIGH, N.C. – A Democratic congressman apologized Monday after video posted online showed him swatting at the camera, demanding that two men taping him identify themselves and grabbing one of them by the wrist and neck.

"I deeply and profoundly regret my reaction and I apologize to all involved," Rep. Bob Etheridge of North Carolina said in a statement. "No matter how intrusive and partisan our politics can become, this does not justify a poor response."

The video was posted on websites owned by Andrew Breitbart, the conservative Web entrepreneur who also released video of workers for the community organizing group ACORN counseling actors posing as a pimp and prostitute.

It shows two men approaching Etheridge with a camera on a Washington street. He swats at the camera and repeatedly asks the men who they are. When they say they are students, he grabs one by the wrist and quickly by the back of the neck before pulling him against his side.

Etheridge, a congressman in the state since 1997, reiterated his apology at a hastily called news conference Monday afternoon.

"The truth is I had a long day," he said. "I've had bad days many times. It's not a good crutch to lean on and I won't use that."

The video is interspersed with several screens of text, including: "What happens when a US congressman meets a college kid on a street in Washington?" and a few frames later, "He goes BERSERK!"

In a telephone interview from London, Breitbart declined to name the students who recorded the video, saying he wanted to protect them. The two do not work for Breitbart and were not paid, he said.

A Breitbart employee found the video online, edited it and posted it, he said. A story accompanying the video on a Breitbart website says the video was recorded last week. Etheridge declined to say when the encounter occurred.

Asian stocks up despite Wall Street anxiety

2010-06-14T23:07:00.000-07:00

BANGKOK – Asian shares rose slightly Tuesday as skittish investors came back to the market despite a drop on Wall Street triggered by anxieties over Europe's economy.

Oil rose past $75 per barrel, while key indexes in Japan, South Korea, Hong Kong and Australia rose tepidly. The dollar weakened against the yen and the euro slipped slightly against the greenback.

The Nikkei 225 stock average was up 0.3 percent, or 28.97 points, to 9,908.85. Australia's S&P/ASX 200 gained 0.2 percent to 4,512.3 while Hong Kong's Hang Seng added 0.4 percent to 20,129.24.

Elsewhere, Singapore's market rose 0.3 percent. Taiwan's benchmark was 1.4 percent higher. Stock indexes in India and Thailand were down by just a fraction of a percent.

Financial markets in mainland China were closed for a holiday.

In New York on Monday, the Dow Jones industrial average erased early gains to end down 0.2 percent at 10,190.89. The S&P 500 index fell 0.2 percent to 1,089.63, while the Nasdaq composite index rose less than 0.1 percent 2,243.96. Stocks began higher following encouraging industrial production data from Europe. But that wasn't enough to overcome ongoing fears about the continent's problems, especially after Moody's lowered its rating on Greece's debt to "junk" status.

The fallout in Asia was mild, however, with most benchmarks showing a small amount of buoyancy ahead of U.S. industrial production numbers due Wednesday.

"Overseas markets have regained some of their nerve," said Howard Gorges, vice chairman of South China Brokerage in Hong Kong. "People will still be wary because of what goes on in Greece or Spain, but there's been so much adverse news that markets are ignoring quite a lot of it."

While the euro has risen since hitting a four-year low earlier in June, it has dropped more than 15 percent this year and a strong rebound isn't expected in the near-term. Analysts also said traders remained a bit on edge, and markets could stay choppy.

"It is a seesaw situation," said Castor Pang, director of research at Cinda International in Hong Kong. "Most investors are still cautious."

In currencies, the dollar slipped to 91.50 yen from 91.58 yen late Monday in New York. The euro dipped to $1.2206 from $1.2210.

Benchmark crude for July delivery was up 9 cents to $75.21 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.34 to settle at $75.12 on Monday.

Documents: BP cut corners in days before blowout

2010-06-14T23:06:00.000-07:00

NEW ORLEANS – BP made a series of money-saving shortcuts and blunders that dramatically increased the danger of a destructive oil spill in a well that an engineer ominously described as a "nightmare" just six days before the blowout, according to documents released Monday that provide new insight into the causes of the disaster.

The House Energy and Commerce Committee released dozens of internal documents that outline several problems on the deepsea rig in the days and weeks before the April 20 explosion that set in motion the largest environmental disaster in U.S. history. Investigators found that BP was badly behind schedule on the project and losing hundreds of thousands of dollars with each passing day, and responded by cutting corners in the well design, cementing and drilling mud efforts and the installation of key safety devices.

"Time after time, it appears that BP made decisions that increased the risk of a blowout to save the company time or expense. If this is what happened, BP's carelessness and complacency have inflicted a heavy toll on the Gulf, its inhabitants, and the workers on the rig," said Democratic Reps. Henry A. Waxman and Bart Stupak.

The missteps emerged on the same day that President Barack Obama made his fourth visit to the Gulf, where he sought to assure beleaguered residents that the government will "leave the Gulf Coast in better shape than it was before."

Obama's two-day trip to Mississippi, Alabama and Florida represents his latest attempt to persevere through a crisis that has served as an important early test of his presidency. The visit coincides with a national address from the Oval Office on Tuesday night in which he will announce new steps to restore the Gulf Coast ecosystem, according to a senior administration official who spoke on condition of anonymity so as not to upstage the president's announcements.

"I can't promise folks ... that the oil will be cleaned up overnight. It will not be," Obama said after encouraging workers in hard hats as they hosed off and repaired oil-blocking boom. "It's going to be painful for a lot of folks."

But, he said, "things are going to return to normal."

The breached well has dumped as much as 114 million gallons of oil into the Gulf under the worst-case scenario described by scientists — a rate of more than 2 million a day. BP has collected 5.6 million gallons of oil through its latest containment cap on top of the well, or about 630,000 gallons per day.

But BP believes it will see considerable improvements in the next two weeks. The company said Monday that it could trap a maximum of roughly 2.2 million gallons of oil each day by the end of June as it deploys additional containment efforts, including a system that could start burning off vast quantities as early as Tuesday. That would more than triple the amount of oil it is currently capturing — and be a huge relief for those trying to keep it from hitting the shore.

"It would be a game changer," said Coast Guard Chief Petty Officer Mark Boivin, deputy director for near-shore operations at a command center in Mobile. He works with a team that coordinates the efforts of roughly 80 skimming boats gathering oil off the coast.

Still, BP warned its containment efforts could face problems if hoses or pipes clog and engineers struggle to run the complicated collection system. Early efforts at the bottom of the Gulf failed to capture oil.

Meanwhile, congressional investigators have identified several mistakes by BP in the weeks leading up to the disaster as it fell way behind on drilling the well.

BP started drilling in October, only to have the rig damaged by Hurricane Ida in early November. The company switched to a new rig, the Deepwater Horizon, and resumed drilling on Feb. 6. The rig was 43 days late for its next drilling location by the time it exploded April 20, costing BP at least $500,000 each day it was overdue, congressional documents show.

As BP found itself in a frantic race against time to get the job done, engineers took several time-saving measures, according to congressional investigators.

In the design of the well, the company apparently chose a riskier option among two possibilities to provide a barrier to the flow of gas in space surrounding steel tubes in the well, documents and internal e-mails show. The decision saved BP $7 million to $10 million; the original cost estimate for the well was about $96 million.

In an e-mail, BP engineer Brian Morel told a fellow employee that the company is likely to make last-minute changes in the well.

"We could be running it in 2-3 days, so need a relative quick response. Sorry for the late notice, this has been nightmare well which has everyone all over the place," Morel wrote.

The e-mail chain culminated with the following message by another worker: "This has been a crazy well for sure."

BP also apparently rejected advice of a subcontractor, Halliburton Inc., in preparing for a cementing job to close up the well. BP rejected Halliburton's recommendation to use 21 "centralizers" to make sure the casing ran down the center of the well bore. Instead, BP used six centralizers.

In an e-mail on April 16, a BP official involved in the decision explained: "It will take 10 hours to install them. I do not like this." Later that day, another official recognized the risks of proceeding with insufficient centralizers but commented: "Who cares, it's done, end of story, will probably be fine."

The lawmakers also said BP also decided against a nine- to 12-hour procedure known as a "cement bond log" that would have tested the integrity of the cement. A team from Schlumberger, an oil services firm, was on board the rig, but BP sent the team home on a regularly scheduled helicopter flight the morning of April 20.

Less than 12 hours later, the rig exploded.

BP also failed to fully circulate drilling mud, a 12-hour procedure that could have helped detect gas pockets that later shot up the well and exploded on the drilling rig.

Asked about the details disclosed from the investigation, BP spokesman Mark Proegler said the company's main focus right now is on the response and stopping the flow of oil. "It would be inappropriate for us to comment while an investigation is ongoing," Proegler told AP. BP executives including CEO Tony Hayward will be questioned by Congress on Thursday.

The letter from Waxman and Stupak noted at least five questionable decisions BP made before the explosion, and was supplemented by 61 footnotes and dozens of documents.

"The common feature of these five decisions is that they posed a trade-off between cost and well safety," said Waxman and Stupak. Waxman, D-Calif., chairs the energy panel while Stupak, D-Mich., heads a subcommittee on oversight and investigations.

___

Associated Press Writers Erica Werner in Gulfport, Miss., and Harry R. Weber in Houston contributed to this report. Daly contributed from Washington, D.C.

Govt to hit airlines harder for bumping passengers

2010-05-31T21:13:00.000-07:00

DALLAS – Giving up your airline seat may become a little less painful.

Federal officials are expected to announce this week a plan to raise the maximum amount that airlines must pay passengers who get bumped off an oversold flight, currently at $400 or $800 depending on how long a trip is delayed.

Bumpings rose in three of the past four years and jumped 10 percent to 762,422 in 2009, the highest total since 2002. They soared 17 percent in this year's first quarter.

The potential inconvenience is greater now too. Airlines have cut back on flights and planes are more crowded, so bumped passengers could wait hours or even days to find alternate arrangements.

Passenger-rights groups have pushed the Transportation Department to raise the payout limits to $800 and $1,200 per traveler if the airline bumps you involuntarily. The agency has signaled that it plans some type of inflation adjustment in the limits, which were last raised in 2008. Officials declined to provide details.

The issue is overbooked flights. Airlines are allowed to sell more tickets than they have seats on the assumption that some passengers — usually those with refundable tickets — won't show up. What travelers' groups such as FlyersRights want is a limit on how many extra seats airlines can sell per flight. But industry insiders say that may be impractical because no-show rates vary by route, day and even hour.

When a flight is overbooked, airlines must first ask for volunteers before involuntarily bumping ticket holders. While volunteers can get travel vouchers, people forced off flights must be paid in cash or check. Critics say airlines often flout that rule. The Transportation Department recently fined Southwest Airlines $200,000 for that and other shortcomings in its bumping practices.

In the first three months of this year, American Eagle, the regional affiliate of American Airlines, was most likely to bump passengers involuntarily. US Airways, Continental, ExpressJet and Southwest were next. For several years, JetBlue has been the least likely to bump — it says it gives customers $1,000 if they're booted off a flight.

The government has been moving to give airline customers more protections. One new rule prohibits the airlines from keeping passengers on a plane on the tarmac more than three hours. This week, the agency will also unveil proposed requirements for more information about advertised fares and checked-bag fees, and for contingency plans when aircraft are stuck on the tarmac for long delays.

Last year one in every 763 passengers got bumped from a flight, according to government figures. That includes volunteers and those forced to give up their seat. The numbers show that more passengers are volunteering to give up their seats, a reversal of the trend a few years ago.

Passenger-rights advocates say bigger payments to people forced to give up their seats could in turn force airlines to give volunteers more generous offers. But that remains to be seen.

Kate Hanni, who organized FlyersRights, says without limits on how many extra seats airlines can sell, "they'll find more deceptive ways to grab people's money and not give it back."

Relief for Gulf is 2 months away with another well

2010-05-31T21:10:00.000-07:00

NEW ORLEANS – The best hope for stopping the flow of oil from the blown-out well at the bottom of the Gulf of Mexico has been compared to hitting a target the size of a dinner plate with a drill more than two miles into the earth, and is anything but a sure bet on the first attempt.

Bid after bid has failed to stanch what has already become the nation's worst-ever spill, and BP PLC is readying another patchwork attempt as early as Wednesday, this one a cut-and-cap process to put a lid on the leaking wellhead so oil can be siphoned to the surface.

But the best-case scenario of sealing the leak is two relief wells being drilled diagonally into the gushing well — tricky business that won't be ready until August.

"The probability of them hitting it on the very first shot is virtually nil," said David Rensink, incoming president of the American Association of Petroleum Geologists, who spent most of his 39 years in the oil industry in offshore exploration. "If they get it on the first three or four shots they'd be very lucky."

The relief well drilling and temporary fixes were being watched closely by President Barack Obama, who planned to meet for the first time Tuesday with the co-chairmen of an independent commission investigating the spill. A senior administration official said the meeting will take place at the White House. The official spoke on condition of anonymity because the meeting had not been formally announced.

For the relief well to succeed, the bore hole must precisely intersect the damaged well. If it misses, BP will have to back up its drill, plug the hole it just created, and try again.

The trial-and-error process could take weeks, but it will eventually work, scientists and BP said. Then engineers will then pump mud and cement through pipes to ultimately seal the well.

As the drilling reaches deeper into the earth, the process is slowed by building pressure and the increasing distance that well casings must travel before they can be set in place.

Still, the three months it could take to finish the relief wells — the first of which started May 2 — is quicker than a typical deep well, which can take four months or longer, said Tad Patzek, chair of the Petroleum and Geosystems Engineering Department at the University of Texas-Austin. BP already has a good picture of the different layers of sand and rock its drill bits will meet because of the work it did on the blown-out well.

On the slim chance the relief well doesn't work, scientists weren't sure exactly how much — or how long — the oil would flow. The gusher would continue until the well bore hole collapsed or pressure in the reservoir dropped to a point where oil was no longer pushed to the surface, Patzek said.

"I don't admit the possibility of it not working," he said.

A third well could be drilled if the first two fail.

"We don't know how much oil is down there, and hopefully we'll never know when the relief wells work," BP spokesman John Curry said.

The company was starting to collect and analyze data on how much oil might be in the reservoir when the rig exploded April 20, he said.

BP's uncertainty statement is reasonable, given they only had drilled one well, according to Doug Rader, an ocean scientist with the Environmental Defense Fund.

Two relief wells stopped the world's worst peacetime spill, from a Mexican rig called Ixtoc 1 that dumped 140 million gallons off the Yucatan Peninsula. That plug took nearly 10 months beginning in the summer of 1979. Drilling technology has vastly improved since then, however.

So far, the Gulf oil spill has leaked between 19.7 million and 43 million gallons, according to government estimates.

In the meantime, BP is turning to another risky procedure federal officials acknowledge will likely, at least temporarily, cause 20 percent more oil — at least 100,000 gallons a day — to add to the gusher.

Using robot submarines, BP plans to cut away the riser pipe this week and place a cap-like containment valve over the blowout preventer. On Monday, live video feeds showed robot submarines moving equipment around and using a circular saw-like device to cut small pipes at the bottom of the Gulf.

The crews will eventually cut the leaking riser and place the cap on top of it, the company hopes it will capture the majority of the oil, sending it to the surface.

"If you've got to cut that riser, that's risky. You could take a bad situation and make it worse," said Ed Overton, a Louisiana State University professor of environmental sciences.

BP failed to plug the leak Saturday with its top kill, which shot mud and pieces of rubber into the well but couldn't beat back the pressure of the oil.

Meanwhile, the location of the spill couldn't be worse.

To the south lies an essential spawning ground for imperiled Atlantic bluefin tuna and sperm whales. To the east and west, coral reefs and the coastal fisheries of Florida, Alabama, Mississippi and Texas. And to the north, Louisiana's coastal marshes.

More than 125 miles of Louisiana coastline already have been hit with oil. "It's just killing us by degrees," said Tulane University ecologist Tom Sherry.

It's an area that historically has been something of a superhighway for hurricanes, too.

If a major storm rolls in, the relief well operations would have to be suspended and then re-started, adding more time to the process. Plugging the Ixtoc was also hampered by hurricane season, which begins Tuesday and is predicted to be very active.

Three of the worst storms ever to hit the Gulf coast — Betsy in 1965, Camille in 1969 and Katrina in 2005 — all passed over the leak site.

On the Gulf coast beaches, tropical weather was far from some tourists' minds.

On Biloxi beach, Paul Dawa and his friend Ezekial Momgeri sipped Coronas after a night gambling at the Hard Rock Casino. Both men, originally from Kenya, drove from Memphis, Tenn., and were chased off the beach by a storm, not oil.

"We talked about it and we decided to come down and see for ourselves" whether there was oil, Momgeri said. "There's no oil here."

Though some tar balls have been found on Mississippi and Alabama barrier islands, oil from the spill has not significantly fouled the shores.

Still, the perception that it has soiled white sands and fishing areas threatens to cripple the tourist economy, said Linda Hornsby, executive director of the Mississippi Hotel and Lodging Association

"It's not here. It may never be here. It's costing a lot of money to counter that perception," Hornsby said. "First it was cancelations, but that evolved to a decrease in calls and there's no way to measure that."

Yet there was fear the oil would eventually hit the other Gulf coast states. Hentzel Yucles, of Gulfport, Miss., hung out on the beach with his wife and sons.

"Katrina was bad. I know this is a different type of situation, but it's going to affect everybody," he said.

Attorney General Eric Holder plans to visit the Gulf Coast on Tuesday and meet with state attorneys general. Several senators have asked the Justice Department to determine whether any laws were broken in the spill.

Aide: Abbas says no need to quit peace talks

2010-05-31T21:07:00.000-07:00

RAMALLAH, West Bank – An adviser to Mahmoud Abbas says the Palestinian president sees no need to quit indirect Mideast peace talks over Israel's interception of a Gaza-bound ship.

The killing of nine pro-Palestinian activists in Monday's Israeli raid has raised concern that U.S.-led efforts to broker an Israeli-Palestinian peace deal could be disrupted.

Abbas met late Monday with senior PLO officials to assess the situation. Abbas adviser Mohammed Ishtayeh says Abbas told the group there is no need to quit the negotiations since the Palestinians are talking to the U.S. and not to Israel.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

JERUSALEM (AP) — Israeli commandos rappelled down to an aid flotilla sailing to thwart a Gaza blockade on Monday, clashing with pro-Palestinian activists on the lead ship in a botched raid that left at least nine passengers dead.

Bloodied passengers sprawled on the deck and troops dived into the sea to save themselves during several hours of hand-to-hand fighting that injured dozens of activists and six soldiers. Hundreds of activists — many of whom were apparently Turkish — were towed from the international waters to Israeli detention centers and hospitals.

International condemnation was swift and harsh as Israel scrambled to explain how what was meant to be a simple takeover of a civilian vessel went so badly awry.

Israeli Prime Minister Benjamin Netanyahu abruptly canceled a planned meeting with President Barack Obama in Washington to rush home. The global reaction appeared likely to increase pressure to end the embargo that has plunged Gaza's 1.5 million residents deeper into poverty.

Most of the information about what happened on the single ship where violence broke out came from Israel, which cut off all communication to and from the activists and provided testimony and video evidence that its soldiers came under attack by activists armed with metal rods, knives, slingshots and two pistols snatched from the troops.

Passengers reached at an Israeli hospital and journalists aboard the ship accused the soldiers of using excessive force. One passenger, who identified himself as American, spoke briefly with reporters.

"I'm not violent. What I can tell you is that there are bruises all over my body. They won't let me show them to you," he said before he was pushed away by a security escort.

A soldier identified only as a sergeant told reporters at a military briefing that the activists on board "were armed with knives, scissors, pepper spray and guns." He said he was armed only with a paintball rifle. "It was a civilian paintball gun that any 12-year-old can play with," he said. "I saw my friends on the deck spitting blood."

The high-seas confrontation was a nightmare scenario for Israel, which insisted its soldiers were simply unprepared for what awaited them on the Mavi Marmara, the ship carrying 600 of the 700 activists headed for Gaza. Instead of carrying their regular automatic rifles, the Israelis said they went in with non-lethal paintball guns and pistols they never expected to use.

Israel intercepted the six ships carrying some 10,000 tons of aid for the isolated seaside territory, which has been blockaded by Israel for three years, with Egypt's cooperation. The Israeli government had urged the flotilla not to try to breach the blockade before the ships set sail from waters off Cyprus on Sunday and offered to take some aid in for them.

Israel has allowed ships through five times, but has blocked them from entering Gaza waters since a three-week military offensive against Gaza's Hamas rulers in January 2009.

Key regional ally Turkey withdrew its ambassador on Monday, the U.N. Security Council held an emergency session, the British foreign secretary demanded an end to the blockade of Gaza, and Jordan called Israel's raid a "heinous crime."

An al-Jazeera journalist delivering a report before Israel cut communications said Israel fired at the vessel before boarding it. In one web posting, a Turkish television reporter on the boat cried out, "These savages are killing people here, please help" — a broadcast that ended with a voice shouting in Hebrew, "Everybody shut up!"

Al-Jazeera said that eight staff members were detained while covering the story, and asked for the Israeli government to release them immediately.

The military said naval commandos descending from a helicopter onto the deck of a Turkish-flagged ship were assaulted by armed activists. Military footage showed activists swarming around the commandos as they rappelled from a helicopter one by one, hitting them with sticks until they fell to the deck, throwing one off the ship and hurling what the military said was a firebomb.

Speaking alongside the Canadian prime minister, Netanyahu expressed "regret" for the loss of life but said the soldiers "had to defend themselves, defend their lives, or they would have been killed."

Activists said Israeli naval commandos stormed the ships after ordering them to stop in international waters, about 80 miles (130 kilometers) from Gaza's coast.

A spokeswoman for the Free Gaza movement, which organized the flotilla, said the group's goal — beyond just bringing supplies to the impoverished territory — was to shatter the blockade.

"What we're trying to do is open a sea lane between Gaza and the rest of the world," Greta Berlin said in Cyprus. "We're not trying to be a humanitarian mission. We're trying to say to the world, 'You have no right to imprison a million and a half Palestinians.'"

Israel's international image had already taken a beating from allegations that it committed war crimes during its 2008-2009 winter war in Gaza, and from widespread global opposition to the blockade. Hamas was also accused of rights violations in that conflict.

Relations with Turkey, a key supporter of the aid flotilla but also until recently Israel's staunchest ally in the Muslim world, were badly damaged by Monday's events, possibly irreparably. Ankara announced it would recall its ambassador and call off all military exercises with Israel. Around 10,000 Turks marched in protest.

At the U.N., Turkey's Foreign Minister Ahmet Davutoglu called the raid "murder conducted by a state" and demanded an immediate Israeli apology, international legal action and an end to the blockade.

The bloody showdown came at a sensitive time for Israeli-Palestinian peacemaking. Netanyahu had hoped to receive a high-profile expression of support from Obama after months of strained relations over Israeli settlement construction.

Obama voiced "deep regret," over the raids, and the White House said he and Netanyahu agreed by phone to reschedule White House talks. The U.S. recently began mediating indirect peace talks between Israel and the Palestinians following a 17-month breakdown in contacts.

Israel's immediate concern on Monday was what to do about the boats and their passengers. It ferried the wounded to hospitals by helicopter and towed the six ships to port, giving each of the activists a choice of deportation or detention.

By late Monday, about 150 of the activists — most from Turkey — had been taken off the boats, Israeli Interior Ministry spokeswoman Sabine Haddad said, adding the process would continue into Tuesday. She said about 30 had agreed to be deported, and the rest would be detained.

A commando who spoke to reporters on a naval vessel off the coast, identified only as "A," said he and his comrades were taken off guard by a group of Arabic-speaking men when they rappelled onto the deck. He said some of the soldiers were stripped of their helmets and their pistols and some had jumped overboard to escape the violence.

A high-ranking naval official displayed a box confiscated from the boat containing switchblades, slingshots, metal balls and metal bats.

Turkey's NTV network showed activists beating one commando with sticks as he landed on deck. Dr. Arnon Afek, deputy director of Chaim Sheba Medical Center outside Tel Aviv, said two commandos were brought in with gunshot wounds. Another had serious head wounds, Afek added.

At Barzilai hospital in the southern Israeli city of Ashkelon, a few activists trickled in under military escort, claiming they had been beaten during the assault.

Palestinian President Mahmoud Abbas condemned the Israeli "massacre" and declared three days of mourning across the West Bank.

Ismail Haniyeh, leader of the rival Hamas government in Gaza, condemned the "brutal" Israeli attack and called on U.N. Secretary-General Ban Ki-moon to intervene.

Ban condemned the violence.

"I am shocked by reports of killings," he said. "It is vital that there is a full investigation to determine exactly how this bloodshed took place."

After nightfall, Hamas-linked militants fired a rocket that exploded in Israel, the militants and the Israeli military said. Nobody was hurt. The militants said the rocket attack was in response to Israel's raid on the flotilla.

Iceland volcano 2010

2010-04-22T01:46:00.000-07:00

REYKJAVIK, Iceland, April 21 (UPI) -- An estimated 75 percent of the usual number of passenger flights over Europe were expected back in the air Wednesday as skies clear from volcanic ash.

Officials reopened airports across the continent a week after the eruption of a volcano under Iceland's Eyjafjallajokull glacier sent a huge plume of smoke, ash and grit into the air.

The fear that a buildup of volcanic debris could cause jet engines to fail led authorities to ground thousands of flights into and out of European airports. Millions of passengers were affected and the airline industry losses could approach $2 billion.

Airlines worked to fit the passengers who had been stranded for days onto flights. It was expected to be several days before the backlog was met and air traffic returned to normal levels.

The bulk of the flights canceled Wednesday were shorter trips.

It wasn't only travelers who were inconvenienced. Industry was also affected, the BBC said. Grounded flowers and food from Africa will likely have to be thrown out as spoiled, parts from Germany for automakers in Japan were delayed, idling plants, and goods waiting to be shipped from China, the world's largest exporter, remained in Asia.

Scientists said Wednesday the volcano at Eyjafjallajokull wasn't as active as it had been over the last week but warned such eruptions are unpredictable and could cause other nearby volcanoes to also erupt, which could spew another ash cloud dangerous to air travel.

Airspace in Norway and Sweden shuts again

2010-04-22T01:42:00.000-07:00

BRUSSELS – Aviation authorities say they have closed the airspace over parts of Norway and Sweden as shifting winds send a new cloud of volcanic ash over Scandinavia.

The Swedish aviation authority says airspace is still open over the capital Stockholm, but closed over the southern cities of Goteborg and Malmo, and large parts of western and northern Sweden.

Authority spokesman Bjorn Stenberg says changing winds meant the ash cloud over Sweden didn't disperse as forecast. Meanwhile, new ash clouds are blowing in over western Norway.

Norwegian authorities say Oslo remains open but airspace over western Norway has closed again, including Stavanger and Bergen.

Eurocontrol says it expects nearly 22,000 flights over Europe on Thursday.

Toyota to temporarily halt sales of Lexus GX 460

2010-04-13T23:39:00.000-07:00

WASHINGTON – Toyota Motor Corp. is temporarily halting sales of the 2010 Lexus GX 460 after Consumer Reports issued a rare "Don't Buy" warning amid concerns the large SUV has handling problems that could cause it to roll over during sharp turns.

The Japanese automaker said Tuesday it had asked dealers to temporarily suspend sales of the SUV while it conducts its own tests on the GX 460.

"We are taking the situation with the GX 460 very seriously and are determined to identify and correct the issue Consumer Reports identified," said Mark Templin, Lexus vice president and general manager.

The decision to stop selling the SUV is the latest blow to Toyota's tarnished safety reputation after the recall of millions of cars and trucks over gas pedals that are too slow to retract or that can become stuck under floor mats. The GX 460 is not covered by the pedal recalls.

But it reflects Toyota's attempt to respond more quickly to safety concerns after federal investigators accused the automaker of dragging its feet on recalls to address the faulty gas pedals. Toyota faces a $16.4 million fine from the Transportation Department and has until April 19 to decide whether to contest the penalty or accept it.

Toyota said about 6,000 GX 460s from the 2010 model year have been sold since the vehicle went on sale in late December and an estimated 1,600 of the SUVs are at dealerships.

Consumer Reports is closely read by many car buyers before choosing a new car or truck. In January, it pulled its "recommended" rating on eight vehicles recalled by the automaker due to faulty gas pedals.

The magazine said the Lexus problem occurred during tests on its track. In a standard test, the driver approached a turn unusually fast, then released the accelerator pedal to simulate the response of an alarmed driver. This caused the rear of the vehicle to slide outward.

In normal cases, the electronic stability control should quickly correct the loss of control and keep the SUV on its intended path. But with the GX 460, the stability control took too long to adjust, which could cause a rollover accident if one of the sliding wheels were to strike the curb or another obstacle, said Gabriel Shenhar, Consumer Reports' senior auto test engineer who was one of four testers who experienced the problem.

The magazine said it is not aware of any reports of the GX 460 rolling over. It tested two separate vehicles, both of which experienced the problem, but neither rolled over.

The warning label on the model will remain until Toyota addresses the handling issue with the seven-seat SUV.

Templin said in a statement he was "confident that the GX meets our high safety standards" and said Toyota's engineering teams were testing the GX using Consumer Reports' specific parameters. Lexus will provide a loaner car for any customer who bought a 2010 GX 460 and is concerned about driving the vehicle, Templin said.

Customers who have questions or concerns about the GX 460 can call Lexus at (800) 255-3987.

The "Don't Buy" label is unlikely to hurt Toyota's broader sales since the GX 460 accounts for a fraction of its total, said Erich Merkle, president of the consulting company Autoconomy.com in Grand Rapids, Mich. However, it comes at an unfortunate time as the automaker tries to move beyond the recalls.

"I think it will have a bigger impact from a negative-PR perspective than from an actual sales perspective," Merkle said.

The GX 460, which starts at about $52,000, is built on the same platform as the Toyota 4Runner. However, Consumer Reports said the problem did not occur during similar tests on the 4Runner. According to Toyota's Web site, both vehicles are about six feet tall but the GX 460 is about 3 inches taller.

Consumer Reports said the last vehicle to receive such a safety warning was the 2001 Mitsubishi Montero Limited, a large SUV. In that case, testers said the wheels lifted off the road during standard avoidance-maneuver tests, which also posed a rollover risk.

At the time, Mitsubishi disputed the magazine's findings and did not make any modifications to the vehicle, Mitsubishi spokesman Dan Irvin said. The designation appeared to have little effect on the Montero's sales, which increased overall during the second half of 2001.

The Montero remained on sale in the U.S. until 2007 and continues to be sold overseas as the Mitsubishi Pajero.

Toyota shares traded in the U.S. fell 52 cents to $79.03.

Greek debt woes weigh on European stocks

2010-04-08T03:56:00.001-07:00

LONDON: European stock markets fell Wednesday amid mounting concerns about Greece's debt crisis and a surprise downward revision to growth in the 16 countries that use the euro. Wall Street got off to a subdued start as the Dow Jones industrial average struggled to break above 11,000 for the first time in a year and a half.

In Europe, the FTSE 100 index of leading British shares was down 10.70 points, or 0.2 percent, at 5,769.65 while Germany's DAX fell 19.25 points, or 0.3 percent, at 6,232.96. The CAC-40 in France was 20.56 points, or 0.5 percent, lower at 4,033.38.

And on Wall Street, the Dow stock average faced resistance trying to break above 11,000, trading 21.38 points, or 0.2 percent, lower at 10,948.61 soon after the open. The broader Standard & Poor's 500 index fell 1.43 point, or 0.1 percent, to 1,188.01.

Once again, Greece took center stage as investors continued to fret about the country's ability to pay off its debts — the ten-year spread between Greek and Germany bond yields stood at 3.99 percentage points, just below Tuesday's all-time high but way up on the 3 percent level when the EU agreed on an aid program that would involve the International Monetary Fund.

Talk that Greece was looking to renegotiate the terms of the backstop agreement — denied by the finance ministry — as a technical team from the IMF arrived in Athens has fueled the spike in Greek borrowing costs.

"All of this puts a question mark over longer term debt sustainability as well as the threat of contagion elsewhere in the eurozone," said Neil Mackinnon, global macro strategist at VTB Capital.

With fiscal retrenchment due in Greece, as well as Portugal and Spain, there are also mounting concerns that the debt crisis will weigh on eurozone economic growth for a long time yet, particularly as lower demand for German goods could squeeze the eurozone's biggest economy.

"This does not look like a sensible strategy and will likely end up in economic slump for the eurozone generally alongside the risk of deflation," said Mackinnon.

Worries about the strength of the eurozone economy were stoked further on Wednesday with the news that economic growth ground to a halt in the last three months of 2009 as output stagnated in Germany and contracted once again in Italy.

In its latest estimate for the quarter, Eurostat, the EU's statistics office, said eurozone economic activity was flat, in contrast to its previous prediction of 0.1 percent quarterly growth.

The downward revision was unexpected and provides further evidence of how weak the recovery in the eurozone is — it was only in the third quarter of 2009 that the bloc emerged from recession with 0.4 percent growth.

"Today's data clearly highlight the fragile and unsustainable nature of the eurozone recovery," said Owen James, an economist at the Centre for Economic and Business Research.

The figures did little to entice any optimism regarding the euro. By mid afternoon London time the euro was trading 0.4 percent lower at $1.3342.

In contrast, data shows the U.S. economy is emerging more strongly from its recession. Figures last week showed that the U.S. created more jobs in March than at any time for over two years.

On Tuesday, stocks in the U.S. ended flat even though the U.S. Federal Reserve provided yet another indication that borrowing costs will not be rising any time soon — the benchmark Fed funds rate stands at a record low in a range between 0-0.25 percent.

The minutes to the last rate-setting meeting retained the phrase that interest rates should remain low "for an extended period," despite protestations from Thomas Hoenig that super-low borrowing costs would stoke trouble ahead.

"The one-line summary is that the Federal Reserve is not anywhere near raising rates," said Kit Juckes, chief economist at ECU Group.

Earlier in Asia, Hong Kong's Hang Seng stock index jumped 1.8 percent while Thailand rose 1.3 percent and Singapore gained 0.7 percent. China's Shanghai index fell 0.3 percent and Malaysia, Australia, India and South Korea were little changed.

Japan's Nikkei 225 stock average rose 0.1 percent to 11,292.83, as the country's central bank decided Wednesday to keep its key interest rate at 0.1 percent. The bank has not tweaked the overnight call rate target since December 2008.

Benchmark crude for May delivery fell 45 cents to $86.39 a barrel Wednesday.

United, US Airways in merger talks

2010-04-08T03:54:00.000-07:00

MINNEAPOLIS: The CEOs of United Airlines and US Airways have both been up front about their desire to merge with another airline. Now it appears they're talking to each other.

The two are in talks about a combination that would create the nation's second-biggest airline, a person with knowledge of the situation told The Associated Press on Wednesday. The person insisted on anonymity because of the sensitive nature of the talks, which the person said appear to be getting more serious.

This person said a deal would be modeled on the Delta-Northwest combination, which was a stock swap without a cash component.

United Chairman and CEO Glenn Tilton and US Airways Chairman and CEO Doug Parker were both involved when their companies talked about combining in 2008. They walked away then citing high fuel prices, but didn't rule out a future deal. That same year, Continental Airlines Inc. rejected United's attempt at a combination.

"We don't comment on rumors or speculation," United spokeswoman Jean Medina said Wednesday. "We've been consistent on our position on consolidation generally for several years, and that position is well known."

US Airways spokesman Jim Olson also said the airline doesn't comment on rumors.

Integrating their unionized work forces would be one of the most difficult tasks if United Airlines and US Airways got together. The person who spoke to AP said the companies have a plan for dealing with that issue.

US Airways, which is based in Tempe, Ariz., still runs separate pilot and flight attendant groups after it was bought in 2005 by America West. And its pilots formed their own union after leaving the Air Line Pilots Association, the union that represents United aviators.

Executives at Delta and Northwest put their deal on hold in early 2008 so their pilots could work out an agreement on combining their ranks.

Pilots at US Airways have not been involved in any talks with United, said James Ray, a spokesman for the US Airline Pilots Association.

"We'll support anything that would be good for our pilot group," he said.

A spokesman for the United branch of the Air Line Pilots Association did not immediately return a phone message seeking comment.

"Mergers in the airline business are notoriously difficult," said Doug Abbey, an independent airline consultant in Washington. He added, though, that Delta's purchase of Northwest has gone well.

"The discussions certainly wouldn't surprise me," he said. "This is a combination that has been embraced as plausible by a lot of people."

Based on 2009 traffic, a combined United-US Airways would be nearly as big as Delta Air Lines Inc., which became the world's largest airline after buying Northwest. It is unclear which name would survive, where the combined company would be based, or who would run it.

Like Northwest before it, one of United's main attractions is its Pacific routes, which it bought from Pan-Am in 1985.

Both airlines have been shrinking to cope with the recession. United cut capacity 7.4 percent last year, while US Airways shrank 4.6 percent. US Airways is cutting most flying that doesn't pass through either Washington or its hubs in Charlotte, N.C., Philadelphia, or Phoenix.

US Airways lost $205 million in 2009, and revenue fell almost 14 percent to $10.46 billion. UAL lost $651 million, while revenue fell 19.1 percent to $16.34 billion.

Shares US Airways rose $1.39, or 20.4 percent, to $8.21 in after-hours trading Wednesday. United parent UAL Corp. fell 18 cents to $18.77.

Uruguay's new leader strengthens ties with Chavez

2010-04-08T03:49:00.000-07:00

CARACAS, Venezuela – Venezuelan President Hugo Chavez offered Wednesday to help Uruguay expand a refinery and supply it with crude oil.

Chavez and visiting Uruguayan President Jose Mujica, popularly known as "Pepe," signed accords pledging to deepen trade and energy ties between the two South American nations.

Venezuela's president expressed admiration for the 74-year-old Mujica, a former leftist guerrilla leader who took office last month. Chavez embraced Mujica when he arrived at the presidential palace, affectionately calling him "a mentor."

Chavez presented Mujica with the Order of the Liberator — Venezuela's highest honor — and gave him a replica of a sword used by South American independence hero Simon Bolivar — the namesake of Chavez's socialist-inspired "Bolivarian Revolution."

Chavez said Venezuela will renew a deal to sell Uruguay up to 40,000 barrels of oil a day under preferential terms.

"The entire consumption of Uruguay doesn't surpass 40,000 barrels a day," Chavez said before he met with Mujica at the palace.

Chavez said he and Mujica also would discuss Venezuelan help in expanding Uruguay's La Teja refinery. He said it should be upgraded with equipment allowing it to refine heavy crude from Venezuela's eastern Orinoco River basin.

Under the accords, Uruguay will export 1,000 vehicles to Venezuela and help the oil-dependent country develop agriculture projects. The two nations also plan to cooperate in building glass and cement factories, producing software and establishing construction companies.

Since 2005, Venezuela has shipped 17,000 barrels a day of oil to Uruguay.

Under the 2005 agreement, Uruguay pays for 75 percent of the oil in cash. It can purchase the remaining 25 percent of the bill over a 15-year period at 2 percent interest. Since the shipments commenced five years ago, Uruguay has run up a $524 million debt, Uruguayan Economy Minister Fernando Lorenzo said.

The previous agreements were the product of Chavez's friendly relations with Mujica's predecessor, Tabare Vazquez.

While Mujica shares some of Chavez's leftist views, he has vowed to take a more moderate approach to politics.

Prior to his election in November, Mujica denied he would radically reform Uruguay's stable parliamentary democracy and push the country toward socialism — like Chavez. Mujica says he's more inspired by the performance of Brazilian President Luiz Inacio Lula da Silva.

Nearly half of US households escape fed income tax

2010-04-08T03:47:00.000-07:00

WASHINGTON – Tax Day is a dreaded deadline for millions, but for nearly half of U.S. households it's simply somebody else's problem.

About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That's according to projections by the Tax Policy Center, a Washington research organization.

Most people still are required to file returns by the April 15 deadline. The penalty for skipping it is limited to the amount of taxes owed, but it's still almost always better to file: That's the only way to get a refund of all the income taxes withheld by employers.

In recent years, credits for low- and middle-income families have grown so much that a family of four making as much as $50,000 will owe no federal income tax for 2009, as long as there are two children younger than 17, according to a separate analysis by the consulting firm Deloitte Tax.

Tax cuts enacted in the past decade have been generous to wealthy taxpayers, too, making them a target for President Barack Obama and Democrats in Congress. Less noticed were tax cuts for low- and middle-income families, which were expanded when Obama signed the massive economic recovery package last year.

The result is a tax system that exempts almost half the country from paying for programs that benefit everyone, including national defense, public safety, infrastructure and education. It is a system in which the top 10 percent of earners — households making an average of $366,400 in 2006 — paid about 73 percent of the income taxes collected by the federal government.

The bottom 40 percent, on average, make a profit from the federal income tax, meaning they get more money in tax credits than they would otherwise owe in taxes. For those people, the government sends them a payment.

"We have 50 percent of people who are getting something for nothing," said Curtis Dubay, senior tax policy analyst at the Heritage Foundation.

The vast majority of people who escape federal income taxes still pay other taxes, including federal payroll taxes that fund Social Security and Medicare, and excise taxes on gasoline, aviation, alcohol and cigarettes. Many also pay state or local taxes on sales, income and property.

That helps explain the country's aversion to taxes, said Clint Stretch, a tax policy expert Deloitte Tax. He said many people simply look at the difference between their gross pay and their take-home pay and blame the government for the disparity.

"It's not uncommon for people to think that their Social Security taxes, their 401(k) contributions, their share of employer health premiums, all of that stuff in their mind gets lumped into income taxes," Stretch said.

The federal income tax is the government's largest source of revenue, raising more than $900 billion — or a little less than half of all government receipts — in the budget year that ended last Sept. 30. But with deductions and credits, especially for families with children, there have long been people who don't pay it, mainly lower-income families.

The number of households that don't pay federal income taxes increased substantially in 2008, when the poor economy reduced incomes and Congress cut taxes in an attempt to help recovery.

In 2007, about 38 percent of households paid no federal income tax, a figure that jumped to 49 percent in 2008, according to estimates by the Tax Policy Center.

In 2008, President George W. Bush signed a law providing most families with rebate checks of $300 to $1,200. Last year, Obama signed the economic recovery law that expanded some tax credits and created others. Most targeted low- and middle-income families.

Obama's Making Work Pay credit provides as much as $800 to couples and $400 to individuals. The expanded child tax credit provides $1,000 for each child under 17. The Earned Income Tax Credit provides up to $5,657 to low-income families with at least three children.

There are also tax credits for college expenses, buying a new home and upgrading an existing home with energy-efficient doors, windows, furnaces and other appliances. Many of the credits are refundable, meaning if the credits exceed the amount of income taxes owed, the taxpayer gets a payment from the government for the difference.

"All these things are ways the government says, if you do this, we'll reduce your tax bill by some amount," said Roberton Williams, a senior fellow at the Tax Policy Center.

The government could provide the same benefits through spending programs, with the same effect on the federal budget, Williams said. But it sounds better for politicians to say they cut taxes rather than they started a new spending program, he added.

Obama has pushed tax cuts for low- and middle-income families and tax increases for the wealthy, arguing that wealthier taxpayers fared well in the past decade, so it's time to pay up. The nation's wealthiest taxpayers did get big tax breaks under Bush, with the top marginal tax rate reduced from 39.6 percent to 35 percent, and the second-highest rate reduced from 36 percent to 33 percent.

But income tax rates were lowered at every income level. The changes made it relatively easy for families of four making $50,000 to eliminate their income tax liability.

Here's how they did it, according to Deloitte Tax:

The family was entitled to a standard deduction of $11,400 and four personal exemptions of $3,650 apiece, leaving a taxable income of $24,000. The federal income tax on $24,000 is $2,769.

With two children younger than 17, the family qualified for two $1,000 child tax credits. Its Making Work Pay credit was $800 because the parents were married filing jointly.

The $2,800 in credits exceeds the $2,769 in taxes, so the family makes a $31 profit from the federal income tax. That ought to take the sting out of April 15.

Toyota exec urged automaker to 'come clean'b

2010-04-08T03:45:00.000-07:00

WASHINGTON – In the days leading up to its massive recall in January, Toyota executives debated when they should inform the public about safety problems with accelerator pedals, prompting one executive to urge the company to "come clean," according to documents obtained by The Associated Press.

Irv Miller, Toyota's then-group vice president for environment and public affairs, warned his colleagues in an e-mail on Jan. 16, 2010: "We are not protecting our customers by keeping this quiet. The time to hide on this one is over. We need to come clean."

Five days later, Toyota announced it would recall 2.3 million vehicles to address sticking pedals on popular vehicles such as the Camry and Corolla.

As Toyota deals with a spate of recalls, the e-mail reveals serious concerns within the Japanese company's public relations leadership that it wasn't dealing with the safety problems squarely and could be inflicting damage to its long-standing reputation for safety and quality. Months earlier, in September 2009, the automaker had announced a recall of more than 4 million vehicles to replace gas pedals that could get stuck in floor mats and cause sudden acceleration.

Toyota has recalled more than 6 million vehicles in the U.S. and a total of more than 8 million worldwide because of acceleration problems in multiple models and braking issues in the Prius hybrid.

"We better just hope that they can get NHTSA (National Highway Traffic Safety Administration) to work with us in coming (up) with a workable solution that does not put us out of business," Miller wrote in the Jan. 16 e-mail. He noted that Jim Lentz, president of Toyota Motor Sales USA, and Yoshi Inaba, president of Toyota Motor North America, were traveling to Washington to meet with federal regulators.

In a memo earlier that day, Katsuhiko Koganei, executive coordinator for corporate communications at Toyota Motor Sales USA, suggested the company should not discuss mechanical failures in accelerator pedals.

In an e-mail to Mike Michels, vice president of external communications, which was copied to other Toyota officials, Koganei wrote, "Now I talked with you on the phone, we should not mention about the mechanical failures of acc. pedal because we have not clarified the real cause of the sticking acc pedal formally, and the remedy for the matter has not been confirmed."

Koganei added that Toyota executives were concerned that news of the mechanical failures "might raise another uneasiness of customers."

Koganei's e-mail prompted a strongly worded response from Miller. "Kogi, I hate to break this to you but WE HAVE A tendency for MECHANICAL failure in accelerator pedals of a certain manufacturer on certain models," Miller wrote, adding his concerns about customer safety. The e-mail's subject line said it was about a draft statement to respond to an ABC News story.

The documents obtained by the AP were among 70,000 pages of papers turned over to government investigators.

Toyota, in a statement, said it "does not comment on internal company communications" and declined comment on Miller's e-mail. But the automaker said, "we have publicly acknowledged on several occasions that the company did a poor job of communicating during the period preceding our recent recalls."

"We have subsequently taken a number of important steps to improve our communications with regulators and customers on safety-related matters to ensure that this does not happen again," Toyota said, adding that it appointed a chief quality officer for North America.

"As part of our heightened commitment to quality assurance, we are fully committed to being more transparent," the company said.

Miller, reached by phone at his home in Los Angeles, said he had no comment. His retirement was announced by Toyota on Dec. 16 and his retirement was effective Feb. 1.

The Transportation Department has assessed a record $16.4 million fine on Toyota for failing to alert the U.S. government to the safety problems about the sticking accelerator pedals quickly enough. Transportation Secretary Ray LaHood said Tuesday that Toyota made a "huge mistake" by not disclosing the safety problems sooner.

Concerns about sticking gas pedals and complaints from Toyota owners in the U.S. were rising at the end of 2009, according to documents obtained by the AP. The documents show that on Sept. 29, Toyota's European division issued technical information "identifying a production improvement and repair procedure to address complaints by customers in those countries of sticking accelerator pedals, sudden rpm increase and/or sudden vehicle acceleration."

Distributors throughout Europe and in Russia, Georgia, Kazakhstan, Turkey and Israel received the technical information.

In mid-January, Toyota held internal meetings "to discuss status of production changes and to prepare for meetings with NHTSA" on Jan. 19, according to the timeline. Two days later, Toyota announced it would recall 2.3 million vehicles to address the sticking pedals.

The Japanese automaker was still weighing its options Wednesday about whether to accept or contest the fine. It has also been named in 138 potential class-action lawsuits over falling vehicle values and nearly 100 personal injury and wrongful death cases in federal courts.

Water bills go up in down economy as usage drops

2010-04-05T05:30:00.000-07:00

PORTLAND, Maine – The grim economy is hitting some consumers in the wallet in yet another way: their water bills.

Many water utilities are raising rates because water use is down, in part because manufacturers have closed or are cutting back, tourism has fallen and the real estate market is in the doldrums.

Water sales for the Kennebunk, Kennebunkport & Wells Water District in southern Maine fell 11 percent last year, to 1995 levels. The No. 1 reason is the sour economy, said superintendent Norm Labbe.

One of the utility's largest customers, a catalog printer, shut its doors last year, putting 374 people out of work. Tourism also has been down — meaning fewer tourists are taking showers and flushing toilets in the motels in the region's beachside communities.

"This is happening most everywhere. It's a regional thing, it's a national thing," Labbe said. "Many, many (water utilities) around the country are seeing decreases in revenues. Because if industry goes down, revenues go down."

A recent study by the Water Research Foundation, a Denver-based nonprofit, on the recession's impact on water utilities found that home foreclosures and business contractions have reduced water demand in many areas. Cities with high unemployment also have seen reduced water consumption as people move away in search of jobs, said Rob Renner, the foundation's executive director.

"It depends on where you are in the country. Regionally, the economy is better in some places than in others," he said.

Water companies for the most part get their money from customers. When water consumption goes up, revenues go up — but when consumption falls, so do revenues.

Water companies often raise rates to pay for high-priced capital expenditures, such as new water lines or treatment plant expansions. But they also have to hike rates when water use goes down to bring in enough money to pay their basic operating costs.

Water rates are based on a wide range of factors, such as infrastructure and water treatment costs as well as revenues from water use. When water use falls, that would be a reason to seek a rate increase, Renner said.

Water consumption can be influenced by the weather. In the Northeast, usage declined last summer in part because homeowners watered their lawns less with the rainy weather. The epic drought that gripped the Southeast in recent years also resulted in falling consumption as people were ordered to conserve water.

Nowadays, the bad economy is taking a toll.

Even after cutting costs 10 percent and laying off nine employees, the water utility in Mount Pleasant, S.C., recently raised rates 9 percent after its customer base and water sales tumbled. That amounts to about $50 a year for the average homeowner.

"We attribute our revenue decline to unoccupied homes due to foreclosures, and commercial businesses just going out of business," said Clay Duffie, Mount Pleasant Waterworks' general manager. "When you have fewer customers, you have less revenue."

At the same time, impact fees the utility collects from developers have dried up, from as much as $6 million a few years ago to $500,000 this fiscal year, Duffie said.

Mount Pleasant, outside of Charleston, has been one of the state's fastest-growing communities in the past 20 years, growing from about 30,000 to 65,000 residents. But development has come nearly to a halt with the down economy.

In New Jersey, the Sayreville water department recently raised rates 13 percent. One big reason was the department's biggest customer, a steel mill, suspended operations for several months because of lower demand for its products.

As a result, the water department's revenues fell $350,000 to $400,000, said Jeff Bertrand, the town's business administrator.

"That was because of the economy," Bertrand said. "Nobody was buying the rebar because nobody was doing construction."

And in California, water and sewer rates in tiny Davenport outside of Santa Cruz are going up because the economy has forced a shutdown of the local cement plant, built in 1906. Sewer rates will increase especially fast — up 74 percent to nearly $2,500 a year — because of the plant shutting down, said Rachel Lather of the Santa Cruz County Sanitation District.

When water rates go up, customers' bills might increase anywhere from a buck or two to $20 or more a month. That doesn't sound like it'll break the bank, but collectively the higher rates could amount to tens of millions of dollars.

And when jobs are scarce, every extra dollar hurts.

In the eastern Maine town of Baileyville along the Canadian border, residents faced the prospect of both lost jobs and higher water bills when the local pulp mill announced it was closing.

Baileyville's water utility proposed raising rates 80 percent after the Domtar Corp. mill, the utility's largest customer by far, said it would close because of the poor global economy. Domtar accounted for 52 percent of the utility's total sales, and residents would have seen their minimum quarterly bills go from $55 to nearly $97.

Domtar shut down last May, putting 300 employees out of work, but unexpectedly reopened two months later after business conditions improved. Even so, the Baileyville Utilities District had to raise rates 9 percent.

But the prospect of nearly doubled water rates when residents were losing their jobs was too much for Baileyville, a small town of about 1,500 people where employment largely revolves around the pulp mill.

"You've got to charge more when revenues go down," said water utility manager Gardner Ross. "But people don't have incomes coming in, so it's a double-whammy."

White House braces unemployed for slow job rebound

2010-04-05T05:21:00.000-07:00

WASHINGTON – Buoyed by good news on the jobs front, the White House claimed credit Sunday for reversing the downward economic spiral while bracing out-of-work Americans for a slow recovery.

The Obama administration also eased away from confrontation with China over its artificially low currency. The U.S. wants to encourage Beijing's help on nuclear proliferation and new penalties against Iran for its perceived attempts to build a bomb.

Given the depth and length of the recession, the White House wants to cool expectations of a rapid economic recovery before the November elections that will determine whether Democrats retain control of the House and Senate.

The administration's line is that there's steady, if slow, progress in repairing the economic ruin President Barack Obama repeatedly blames on his predecessor, Republican George W. Bush.

The economy added about 162,000 jobs in March, the most in nearly three years. A large percentage of the gains were temporary census workers hired by the federal government, and the unemployment rate held firm at 9.7 percent. The additional 123,000 private-sector jobs were the most since May 2007.

The economy is growing again, but at a pace unlikely to quickly replace the 8.4 million jobs erased in the recession that began in late 2007. More than 11 million people are drawing unemployment insurance benefits.

"We've got a long way to go," said Lawrence Summers, director of the National Economic Council. "We've inherited a terrible situation, the most pressing economic problems since the Great Depression in our country."

Christina Romer, head of the White House Council of Economic Advisers, said consumers still face "a lot of head winds" from the financial crisis. For example, debt and credit difficulties are hampering stronger job growth.

They were echoing the words of Treasury Secretary Timothy Geithner, who said last week the administration was "very worried" about returning to a more normal jobless rate of around 5 percent.

Summers said Obama was preoccupied with creating jobs. "The trend has turned, but to get back to the surface, we've got a long way to go," Summers said.

As Obama moves on with his legislative agenda after victory on health care, Summers said he believed Congress would pass new oversight rules for the financial industry. The Wall Street meltdown was largely blamed for the recession and the near collapse of the global financial system.

"I expect that reform is going to pass," Summers said. Obama wants it on his desk within two weeks.

Arizona Sen. John Kyl, the No. 2 Senate GOP leader, accused Democrats of pulling out of bipartisan negotiations on the bill. Nonetheless, he said he thought there was "a substantial opportunity" for a bipartisan solution.

On the issue of Chinese currency manipulation, Summers denied that a delayed report to Congress amounted to a trade-off for Beijing's support for new penalties against Iran.

The report was due April 15 — just as China's president comes to Washington for a nuclear security summit. Geithner said Saturday it would come out after several high-level international meetings in the months ahead, when Washington would have the opportunity to continue pushing its position.

China keeps the value of its currency at an artificially low level, making its goods less expensive in the U.S. market and causing American exports to be too expensive for Chinese consumers. They result is an exploding U.S. trade deficit

The White House is pressing China and Russia, which normally oppose Iranian sanctions, to join the effort to punish Tehran. Iran is enriching uranium in violation of international agreements against nuclear proliferation; the Iranian government says its nuclear ambitions are limited to developing nuclear power for peaceful purposes.

The West, led by the United States, contends Iran is trying to build a nuclear bomb, an outcome that Washington contends would launch an arms race in the Middle East.

As China began showing a readiness to join discussions on punishing Iran and President Hu Jintao committed to participating in Obama's nuclear proliferation conference this month, the administration eased back on the threat to label China as a currency manipulator and the imposition of trade restrictions.

Even as the report was delayed, Romer acknowledged the currency issue remained important.

"We think it (the value of the yuan) needs to be more influenced by market forces," she said. "I think there's no question of that. ... We're going to be working to, to get the kind of result that we want, which is something more in alignment."

Summers spoke on ABC's "This Week" and CNN's "State of the Union." Romer appeared on NBC's "Meet the Press," and Kyl was on "Fox News Sunday.

Oil rises above $85 as US jobs market improves

2010-04-05T05:19:00.001-07:00

Oil prices rose above $85 a barrel Monday, extending gains from last week as investors bet an improving U.S. job market will herald growing crude demand.

By early afternoon in Europe, benchmark crude for May delivery was up 56 cents to $85.43 a barrel in electronic trading on the New York Mercantile Exchange, but down from a peak of $85.89 earlier in the session. On Thursday, the contract climbed up $1.11 to settle at $84.87 following a gain of $1.39 on Wednesday.

Global oil trading was closed for the Good Friday holiday.

Crude has jumped from $69 a barrel in early February on expectations a growing U.S. economy will eventually spark higher oil consumption.

On Friday, the U.S. Labor Department said employers added 162,000 jobs in March, the largest job gain in three years. The unemployment rate stayed at 9.7 percent for the third straight month.

"The market was positive before but now it's been confirmed," said Clarence Chu, a trader with market maker Hudson Capital Energy in Singapore. "If the job growth can be sustained for several months, we'll definitely see crude demand pick up."

Analysts, however, warned that the rise in oil prices caused by speculative investments could harm the recuperation of the global economy.

"The last time we had oil prices at current levels, what followed was the worse recession ever and we will worry about what the combination of what is still high unemployment and higher fuel expenditure does to the economic recovery," said Olivier Jakob of Petromatrix in Switzerland. "On a fundamental basis we still do not see the indicators that would justify crude oil to trade at $90 a barrel."

"We still expect that this technical rally will start to work its way against the economic recovery," Jakob said.

Edward Meir, senior commodity analyst at MF Global in New York, said higher oil prices were part of an overall surge in the value of commodities, with investors betting that commodity prices will benefit as the global recovery picks up steam.

"The flip side to this argument is that the rally has already discounted a recovery, and that continued gains, particularly in energy, could potentially slow growth down, increase inflation and interest rates, and in a worst case, short-circuit the very recovery markets have been banking on," Meir said.

In the near term, nonetheless, oil prices will likely go higher.

"Technically, there is very little resistance showing on the charts given the upside breakout evident, which means that prices will likely have to define their own tops at this stage," Meir said.

In other Nymex trading in May contracts, heating oil rose 1.43 cents to $2.2310 a gallon, and gasoline gained 1.83 cents to $2.3420 a gallon. Natural gas fell 4.2 cents to $4.044 per 1,000 cubic feet.

In London, Brent crude was up 36 cents at $84.37 on the ICE futures exchange.

California rebound boosts 20-city home price index

2010-03-31T04:05:00.000-07:00

LOS ANGELES – A surprisingly strong rebound in California's real estate market helped lift a key home price index for the eighth month in a row.

That's good news for people who plan to sell their homes this spring. Prices are now up almost 4 percent from the bottom in May 2009, but still almost 30 percent below the May 2006 peak.

Prices rose 0.3 percent from December to January on a seasonally adjusted basis, according to the Standard & Poor's/Case-Shiller 20-city home price index released Tuesday. Prices increased in 12 cities in the index.

The biggest monthly gain was in Los Angeles, where prices rose 1.8 percent from December. And real estate agents say there's a distinct sense the worst of the downturn is over.

Buyers are "seeing that prices are creeping up," said Tony Middleton, a real estate agent with ZIP Realty who concentrates on the San Fernando Valley. "They're losing bids on homes and they have to bid again."

Prices in San Diego, meanwhile, rose by almost 0.9 percent. Phoenix had the third-largest gain at 0.8 percent.

Compared with the same month last year, the 20-city index was off just 0.7 percent from last year at a reading of 146.32. That was the smallest decline in almost three years and in line with analysts' expectations, according to Thomson Reuters.

Rising home prices also could boost consumer optimism. For most Americans, their home is their largest asset, so as values climb from the depths of the housing bust, homeowners feel wealthier and more comfortable spending. And, for homeowners who owe more on their mortgages than their properties are worth, rising prices rebuild equity.

Consumer confidence rebounded in March after a February plunge, according to a survey released Tuesday. The Conference Board's Consumer Confidence Index rose to 52.5 in March, recovering about half of the nearly 11 points it lost in February.

Still, shoppers remain cautious and there are signs that last year's housing rebound won't last. Home sales sank during the winter, and government incentives that have propped up the market are ending.

Another reason for the positive news is simply that the Case-Shiller index measures a three-month average of home prices. So January's report included November's strong home sales.

However, bargain-hunting homebuyers continue to pack open houses in California, often facing off with investors for foreclosed homes.

"We're seeing multiple offers in most of the markets here in the San Francisco Bay area," said David Kerr, an agent with ZipRealty in Oakland, Calif. "People are getting off the fence."

In February, bank-owned properties made up 44 percent of all resales in the state, according to MDA DataQuick. In Southern California, they accounted for more than half of resales.

With such high demand, supply is dwindling, driving prices higher.

Meanwhile, the state's unemployment rate has flat-lined of late, and that's made buyers more comfortable about purchasing a home than they were just six months ago, said Richard Green, director of the Lusk Center for Real Estate at the University of Southern California.

California home sales will likely get a boost in coming months thanks to a new serving of government stimulus.

Last week, state lawmakers enacted a tax credit of up to $10,000 for homebuyers that kicks in May 1. The state allotted $100 million for first-time buyers and another $100 million to anyone who buys a newly built home. California had a round of tax credits last year that proved to be popular; that program ended in July.

The latest incentive picks up where a federal first-time homebuyer tax credit of up to $8,000 is scheduled to leave off when it expires at the end of April. Should the Obama administration extend the federal tax break, that could give homebuyers in California even more reasons to buy.

Still, there remain pockets of weakness. Sales of homes priced above $500,000 are sluggish. And despite rising prices, more than one-third of all homeowners with a mortgage still owe more on their loans than their homes are worth, according to First American CoreLogic.

Among the cities showing monthly price declines in January, the biggest drop was in Portland, Ore., where prices fell 1.8 percent from December. Chicago and Seattle saw declines of 1.7 percent, while prices in Atlanta fell 1.5 percent.

Many analysts expect the Case-Shiller 20-city index will again turn downward in the coming months as more foreclosures in other states hit the market.

"It is only a matter of time before the index records a double-dip in prices," wrote Paul Dales, U.S. economist with Capital Economics, who forecasts a 5 percent drop. The market will be tested in the second half of the year, he wrote, when a tax credit that has boosted sales is gone.

The Case-Shiller index measures home price increases and decreases relative to prices in January 2000. The base reading is 100; so a reading of 150 would mean that home prices increased 50 percent since the beginning of the index.

European stocks up modestly ahead of US data

2010-03-31T04:02:00.000-07:00

LONDON – European stock markets rose modestly Wednesday following a late rebound on Wall Street in the previous session and ahead of a raft of U.S. economic data, though the long Easter break kept trading volumes light.

The FTSE 100 index of leading British shares was up 13.76 points, or 0.2 percent, at 5,686.08 while Germany's DAX rose 13.16 points, or 0.2 percent, to 6,155.61. The CAC-40 in France was 7.64 points, or 0.2 percent, higher at 3,995.05.

Wall Street was poised to dip slightly following a flat performance on Tuesday — Dow futures were down 10 points, or 0.1 percent, at 10,844 while the broader Standard & Poor's 500 futures fell 1.5 point, or 0.1 percent, to 1,167.90.

Tim Hughes, head of sales trading at IG Index, said a raft of U.S. economic data later, including the monthly private payrolls report from ADP, a manufacturing survey for the Chicago region and crude oil inventory figures "all have the potential to add a small amount of volatility to an otherwise bland trading landscape later in the day."

The big event this week is Friday's U.S. nonfarm payrolls data for March — traditionally this can set the market tone for a week or two but this month's figures will be released as many traders head off for the Easter break. All major stock indexes in Europe and the U.S. are closed for Good Friday.

The report is expected to show employers added 170,000 jobs in March. That would be only the second increase since the recession began in late 2007.

The euro, meanwhile, rallied 0.4 percent to $1.3464 after official figures showed inflation in the 16 countries that use the euro spiked to its highest level in 15 months during March. The dollar rose 0.6 percent to 93.36 yen.

In its preliminary estimate for the year to March, Eurostat, the EU's statistics office, said consumer prices in the eurozone rose by 1.5 percent, way above February's equivalent rate of 0.9 percent and market expectations for a more modest increase to 1.2 percent.

Eurostat did not provide any more details but a fuller analysis of why inflation jumped to its highest level since December will emerge on April 16, when a broader analysis is published.

Despite the euro's advance Wednesday, the currency continues to be dogged by worries surrounding Greece's debt crisis.

Even though the European Union finally agreed a backstop for the debt-laden country last week, investors remain concerned about the Greek government's ability to tap the financial markets for more cash — two bond issues this week met with muted success.

The most visible sign of unease in the markets is in the spread between Greek and German 10-year bond yields — the so-called spread between the two is indicative of investor unease, rising as it has to over 3.4 percentage points.

The current spread is more or less the same as before the rescue plan's announcement last Thursday and up from the 3.06 percentage points on Monday.

In Asia, trading was fairly lackluster. Japan's benchmark Nikkei 225 stock average ended down 7.20 points, or less than 0.1 percent, at 11,089.94 while Hong Kong's Hang Seng fell 135.44 points, or 0.6 percent, at 21,239.35. south Korea's index fell less than 0.5 percent to 1,692.85.

Australia's benchmark dropped 0.8 percent and China's Shanghai index was off 0.6 percent.

Benchmark crude for May delivery was up 49 cents at $82.86 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 20 cents to settle at $82.37 on Tuesday.

China gold demand to double in a decade

2010-03-30T03:22:00.000-07:00

BEIJING: China's gold demand is expected to double over the next decade from current levels due to jewellery consumption and investment needs, the World Gold Council (WGC) said in report released on Monday. Currently the world's second-largest gold consumer after India, China has seen its gold demand grow at an average rate of 13 percent per year over the past five years. Demand from China's two largest sectors -- jewellery and investment -- reached a combined total of 423 tonnes in 2009, with 314 tonnes supplied by domestic mines. "This shortfall creates a snowball effect as China's gold industry may not be able to keep pace with the annual leap in domestic consumption despite rising to be the world's largest gold producer since 2007," WGC said in the report. The Chinese per capita consumption of gold jewellery is one of the lowest, at 0.26 grams, compared with other major gold consuming countries. If gold were consumed at the same rate per capita as in India, Hong Kong or Saudi Arabia, annual Chinese demand could increase by at least 100 tonnes or as much as 4,000 tonnes in the sector alone, it said. If the central bank boosts gold holdings to 2.2 percent of forex reserves, a peak level seen in 2002, from the current 1.6 percent, China's total incremental demand would rise by 400 tonnes at the current gold price, the report added. China's share of global gold demand doubled from 5 percent in 2002 to 11 percent in 2009, and the council predicted that China's domestic gold mines could be exhausted within six years. "The Chinese gold industry is simply not responding fast enough to bring in new supply," it said.

Toyota global sales up 13% in February

2010-03-30T03:20:00.000-07:00

TOKYO: Crisis-hit Toyota said on Monday global sales rose 13 percent year-on-year in February, but analysts warned that the fall-out from recent mass safety recalls would continue to hang over the car giant.

The Toyota group, which includes brands Daihatsu and Hino trucks, sold 613,845 vehicles worldwide last month, up from 543,435 a year earlier, a spokesman said.

The group's global production in the same period jumped 69.2 percent to 734,631 units, of which 655,180 were for Toyota in an 82.7 percent jump for the brand.

Analysts said the figures were unsurprising given the auto industry's troubles a year earlier as the economic downturn eroded demand, and a low basis of comparison offset Toyota's reduced output in response to a global recall.

"The robust figures were largely due to a rebound from its sizeable slump a year earlier. There was no surprise. The figures were within expectations," said Mamoru Kato, auto analyst at Tokai Tokyo Research Centre.

"It is too early to be optimistic about the fate of Toyota."

One of Japan's most famed companies, Toyota has been battered by both the global economic downturn and by its massive safety woes over faulty accelerator and brake systems.

In recent months, the world's largest automaker has been forced to recall more than eight million vehicles worldwide mostly due to problems with sudden acceleration, which have been blamed for 58 deaths in the United States.

Domestic sales continue to rise however, surging 32.1 percent year-on-year to 210,767 units, with sales in the Toyota brand alone up 49.9 percent.

The figures were largely boosted by the success of the Prius hybrid model, the best selling car in Japan for the ninth consecutive month, according to statistics released earlier by a professional body.

Vehicle exports from Japan more than doubled to 161,533 units, Toyota said in a statement.

However, "the negative impact of its mass recall is being felt in developed countries except Japan," said Kato. "The prospect for Toyota's business activities is still uncertain."

The increases came even as the company suspended some production lines at five North American plants for five days in early February following the decision to halt sales of eight models due to accelerator pedal problems.

Toyota decided to suspend other production operations in the US and Europe in March and April, and in Japan from the spring of this year.

It said last week that it aims to finalise a plan to streamline output operations in Japan by summer.

In Tokyo trade, Toyota Motor shares closed 0.53 percent lower at 3,740 yen Monday.

"The impact of the recalls will emerge gradually," Mizuno Credit Authority analyst Tatsuya Mizuno told Dow Jones Newswires.

Earlier this month, the automaker said sales in the United States fell 8.7 percent year-on-year in February to 100,027 units.

The company last week faced its first US courtroom challenge as lawyers pressed for angry car owners to be allowed to bring a multi-billion-dollar suit against the Japanese firm.

It also announced a North American "quality task force" as it struggles to repair its reputation, that will answer to Toyota chief executive Akio Toyoda, the grandson of the company's founder.

Other Japanese auto giants also reported on Monday strong year-on-year increases in production and sales in February as demand continued to pick up.

Japan's second biggest automaker Honda said production worldwide increased 49.3 percent to 284,711 units while Mazda production surged 73.7 percent to 100,126.

Nissan saw worldwide sales gain 21.7 percent year-on-year.

Oil hovers above $82

2010-03-30T03:18:00.000-07:00

SINGAPORE: Oil prices were steady above $82 a barrel Tuesday in Asia, pausing after a leap the previous day fueled by a U.S. dollar drop and surging equity markets.

Benchmark crude for May delivery was up 6 cents to $82.23 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract jumped $2.17 to settle at $82.17 on Tuesday.

Crude prices have been buoyed by a yearlong rally of global stock markets. Oil traders often look to equity markets as a measure of overall investor sentiment.

The Dow Jones industrial average rose 0.5 percent Monday to its highest level since September 2008, and most Asian indexes rose Tuesday. The euro was steady against the dollar Tuesday.

"The oil complex has grabbed on to the stock indexes as a proxy for future oil demand," Ritterbusch and Associates said in a report. "As long as a low interest rate policy is nurtured by the Fed, oil values appear poised to go up easier than they go down."

In other Nymex trading in April contracts, heating oil fell 0.32 cent to $2.116 a gallon, and gasoline held at $2.26 a gallon. Natural gas was steady at $3.842 per 1,000 cubic feet.

In London, Brent crude was up 7 cents at $81.24 on the ICE futures exchange.

Sarkozy urges new world finance rules

2010-03-30T03:16:00.000-07:00

NEW YORK: French President Nicolas Sarkozy, in an upfront speech in New York, urged the United States to lead the way in imposing new global financial regulations — and to pay more attention to the rest of the world.

Sarkozy stood firm against terrorism, pledging to keep up the fight in Afghanistan and rallying behind Russia after deadly subway attacks.

But his main message was spurring the United States — and President Barack Obama, who will host the French leader at the White House on Tuesday — to prevent future economic crises.

"You should reflect on what it means to be the world's No. 1 power," he said, during his speech at Columbia University, repeatedly pointing his finger at the hundreds of students and faculty gathered for his speech.

His wife, Carla Bruni-Sarkozy, nodded supportively in the front row, after the two climbed the steps of the elite university's library hand-in-hand.

"The world does not stop at the East Coast, the world does not stop at the West Coast," Sarkozy said. "The world needs an open America, a generous America, an America that shows the way, an America that listens."

Sarkozy wants the United States to champion firm regulations of financial systems, from tax havens to hedge funds. His ideas were shared by many in the immediate wake of the financial crisis but momentum for dramatic changes has since slowed.

"We should invent a new global monetary order," he said Monday, insisting that new regulations would "save capitalism."

After wagging his finger at American bankers, he stressed that France remains a friend and ally to the United States, especially in fighting terrorism.

"When New York was attacked, it was all the democracies of the world who were attacked," he said. "When Moscow is attacked, it is all of us who are attacked," he said of deadly bombings Monday in the Moscow metro.

In Afghanistan, Sarkozy told his U.S. audience, "We will remain at your side." That is a sentiment he's certain to share with Obama, who is just back from an Afghan trip. Obama wants European allies to send more troops and trainers.

Sarkozy's room for maneuvering is limited. France has 3,750 troops in Afghanistan, but public support in France for the war is low — as is public support for Sarkozy, whose conservative party lost big in regional elections a week ago and poll ratings are down as low as 30 percent.

Columbia organizers said the French flew in a special podium and rug just for him, and procured a special espresso machine at his request, too. Sarkozy entered the Low Library rotunda not from behind a curtain as most speakers do, but by climbing the grand staircase that faces the campus.

More than two hours before Sarkozy was to deliver his speech, hundreds of people lined up in the rain to pass through stringent airport-style security and nab seats.

Sarkozy's speech was meant to cover the 200-year-old French-American friendship but instead primarily focused on current affairs.

The French president had loaded words of praise for the U.S. health care reform law just signed by Obama last week. The law is expected to extend coverage to 32 million uninsured Americans and aim to crack down on unpopular insurance industry practices such as denying coverage for people with pre-existing medical conditions.

From the European perspective, "when we look at the American debate on reforming health care, it's difficult to believe ... the very fact that there should have been such a violent debate simply on the fact that the poorest of Americans should not be left out in the streets without a cent to look after them."

"You can't let people simply die," he said. Then he delivered the line that brought his hearty applause from the audience: "If you come to France and something happens to you, you won't be asked for your credit card before you're rushed to the hospital."

Sarkozy meets later in the day with U.N. Secretary-General Ban Ki-moon, with the stalled Mideast peace process and Iran's nuclear program on the agenda. Sarkozy also visited with his third son, Louis, who goes to school in New York and lives primarily with Sarkozy's ex-wife Cecilia.

Sarkozy and the first lady will join the Obamas for a private dinner in the White House on Tuesday.

Asian stocks gain after US consumer report

2010-03-30T03:12:00.000-07:00

HONG KONG: Asian stock markets gained modestly early Tuesday after a report showing U.S. consumers continued to spend last month buoyed optimism about growth in the world's largest economy.

The dollar slipped against the yen and was little changed against the euro, and oil prices hovered above $82 a barrel.

Helping sentiment were overnight gains in the U.S., where Wall Street was boosted by news that consumer spending rose for a fifth straight month in February. Consumers' spending is by far the biggest source of economic activity in the U.S. and drives Asian export demand, and the 0.3 percent rise added to hopes they are regaining confidence.

Japan's Nikkei 225 stock average rose 51.61 points, or 0.5 percent, to 11,038.08, and South Korea's Kospi was up 8.54 points, or 0.5 percent, at 1,700.53. Hong Kong's Hang Seng index rose 122.55, or 0.6 percent, to 21,357.21.

Elsewhere, markets in Taiwan and Singapore rose. Shanghai was off 0.1 percent.

In currencies, the dollar was trading at 92.30 yen from 92.51 yen. The euro was flat at $1.3477.

The benchmark oil contract was flat at $82.17 a barrel.

Investors were also keeping watch over Greece's debt crisis, with the good news of a bailout plan offset by caution about the details.

The debt-strapped Greek government raised $6.74 billion Monday by issuing seven-year bonds. The country's ability to borrow is an important sign of confidence after European leaders and the International Monetary Fund last week agreed to provide a financial safety net for Greece and other countries that use the euro if they couldn't issue debt.

In the U.S. on Monday, the Dow rose 45.50, or 0.4 percent, to 10,895.86. The index is at its highest level since September 2008 and closer to the psychological threshold of 11,000.

The broader Standard & Poor's 500 index rose 6.63, or 0.6 percent, to 1,173.22, and the Nasdaq composite index rose 9.23, or 0.4 percent, to 2,404.36.

Grasshopper outlook strikes fear on Western range

2010-03-30T03:09:00.000-07:00

NEWCASTLE, Wyo. – Grasshopper infestations have taken on mythic tones here on the arid prairie of northeastern Wyoming — they blanket highways, eat T-shirts off clotheslines and devour nearly every scrap of vegetation on ranches and farms.

The myth may come closer to reality this summer than at any time in decades in several states in the West and the Plains.

A federal survey of adult grasshoppers last fall indicated that parts of Wyoming, Montana, South Dakota, North Dakota, Nebraska and Idaho could face costly grasshopper infestations this summer.

Ranchers and farmers as well as federal and municipal pest control agencies are praying for well-timed cool and wet weather to stifle the young grasshoppers when they hatch around May and June.

In the meantime, they're scrambling to line up the millions of dollars it will cost to battle an outbreak with aerial insecticide.

"They're grass eaters," said Tom Wright, a rancher near Newcastle in northeast Wyoming about 20 miles from the South Dakota border. "They'll eat the leaves and leave the stem. And they will eat the stems finally.

"When they're really thick, people say they'll eat T-shirts on a line," he said as he recalled a time in the mid-1980s when the grasshoppers were so thick that you couldn't put your hand on the shady side of a fence post without squashing one.

Grasshoppers are found across the United States, but outbreaks of pest species are most common in the Plains and Western states. Different species range from a length of under an inch to more than 3 inches.

They provide some ecological benefits, serving as a food source for other animals. However, some pest species are capable of eating their body weight daily in vegetation and can waste up to six times more by dropping forage to the ground.

Making matters worse is the prevalence of migratory species in the latest surveys — insects that can fly 60 miles in a day.

The Wyoming acreage infested with 15 or more grasshoppers per square yard increased more than 10-fold from 2008 to 2.9 million acres last summer, according to federal surveys.

Regionwide, surveys predict at least 48 million acres of outbreak-level infestation this summer.

"In some states, we may see some of the most severe grasshopper outbreaks that we've seen in nearly 30 years," said Charles Brown, the national grasshopper suppression program manager at the U.S. Department of Agriculture's Animal and Plant Health Inspection Service.

No government agency keeps a comprehensive tally of the economic damage from grasshoppers, but the cost of spray programs can exceed a million dollars for a single county.

Last summer, when an outbreak first surfaced in Wyoming, the voracious insects hurt hay production and prompted some ranchers to downsize their herds.

Wright didn't sell any cattle because of grasshoppers, but his calves weighed 30 pounds lighter than normal last fall as a result of the insects eating up forage. The grass damage also forced the ranch to buy extra feed to help its cows through the winter, costing about $10,000, he said.

Paying to participate in a spray program could make sense if it was cheaper than the alternatives, he said.

"At the point that (grasshoppers) eat all the grass, you have to either sell all your cows, lease grass somewhere else or buy hay," he said.

Grasshopper eggs tend to survive better in untilled soil, but that doesn't stop the grown insects from hopping to cropland and eating crops such as corn, alfalfa, sunflowers, soybeans and sugar beets.

"In the past couple of years, we've had some crop damage by grasshoppers, especially alfalfa and soy beans," said Dave Boxler, a research technologist in entomology for the University of Nebraska based in North Platte.

In Wyoming, Gov. Dave Freudenthal announced this month a $2.7 million plan to help local pest districts and to pay for spraying on state lands this summer. Freudenthal and the state's congressional delegation have also urged the federal government to make more money available for treating federal rangeland.

Pest managers combat rangeland grasshoppers by using planes to spray alternating strips of land with an insecticide that kills the bugs in the nymphal stage, meaning it must be applied within a few weeks after eggs hatch.

Entomologist Scott Schell of the University of Wyoming said the insecticide, Dimilin 2L, has a very low toxicity level for mammals, reptiles and birds. It also has little effect on bees, he said.

Gail Mahnke, supervisor of the Niobrara County Weed and Pest Control District, said she expects grasshopper treatment in the eastern Wyoming county to run about $1.2 million this summer. That works out to a cost to landowners of about $1.65 a protected acre. The district plans to spend its $60,000 in emergency reserves on the project, she said.

Mahnke said she's not sure what will happen if weather conditions unexpectedly kill off the grasshoppers.

"When you're talking a $1.2 million deal just in this county, and getting it all set up and having all that money sitting here, and then those conditions just happen to hit perfect, what do you do?" she said.

Australia worries about Rio Tinto verdict

2010-03-30T03:08:00.000-07:00

SYDNEY – Australia's prime minister said Tuesday that secrecy surrounding China's trial of four Rio Tinto workers for commercial spying leaves room for doubt about the convictions and a major Australian commerce group said the result could harm business confidence.

The Chinese government rejected criticism that the trial was not open enough and accused Australia of making "irresponsible remarks."

Canberra says the jail sentence handed to Australian citizen Stern Hu on bribery charges was harsh, and has criticized the decision to keep media and diplomats out of the court while it considered the other charges of stealing commercial secrets. Nevertheless, Australia says the case will not harm its relations with China.

Hu, Rio Tinto's executive in charge of iron ore negotiations in China before his arrest last July, was sentenced in a Shanghai court on Monday to a total 10 years in prison. Three Chinese colleagues were imprisoned for between seven and 14 years.

The case was closely watched by foreign companies operating in China. The rulings suggest Chinese authorities are taking a sterner stance toward foreign companies caught violating the country's often selectively enforced corruption code.

Australia Prime Minister Kevin Rudd, a Chinese-speaking former diplomat to Beijing, said closing the court during the commercial secrets part of the trial left "serious unanswered questions about this conviction."

"In holding this part of the trial in secret, China I believe has missed an opportunity to demonstrate to the world at large transparency that would be consistent with its emerging global role," he told reporters.

In Beijing, Chinese Foreign Ministry spokesman Qin Gang was asked at a briefing to respond to the Australian claim about transparency.

"We express serious concern about that," Qin said. "The Rio Tinto case is an individual criminal case and relevant judicial authorities have issued the verdict of the first trial. The Australian side should respect that result and should stop making such irresponsible remarks."

London-based Rio Tinto is a key industry negotiator in price talks with China's state-owned steel mills, and the arrests of its employees last August were initially thought linked to Beijing's anger over high prices it paid for iron ore — a key commodity for China's booming economy. That belief was shaken last week after the four pleaded guilty to taking bribes from steel mills trying to get preferential access to ore supplies.

Australia said Hu's sentence wouldn't affect ties with China, but some experts said the trial underlined worries companies already have about doing business in a country where legal proceedings are often opaque.

The Australian Chamber of Commerce and Industry, which represents 350,000 companies, said Hu's case raised issues about foreigners operating in China that need to be clarified. These included rules in China about detention without trial and a lack of transparency.

"These broader issues are important for the Australia-China relationship and the necessary confidence Australian business executives require when doing business abroad," said Nathan Backhouse, the chamber's international affairs spokesman, in a statement.

The verdict also comes as other faultlines appear between Beijing and the global corporations eager to tap its fast-growing market of 1.3 billion people.

A recent survey showed a growing number of foreign businesses in China feel shut out under government policies meant to promote homegrown technology. Internet search giant Google's high-profile decision to move its Chinese site to Hong Kong after a spat over censorship and hacking added to the unease.

China has chronic problems with corruption so the Rio case "is not as simple as China sending a warning message to a particular country or company" said Jin Linbo, a senior research fellow with the China Institute of International Studies. "It's time China should deal with this problem or more serious cases will emerge."

Beijing has staged repeated anticorruption crackdowns but big foreign companies are rarely targeted.

Australian Foreign Minister Stephen Smith and Rio Tinto said separately they were satisfied that there was substantial evidence that bribery had occurred.

Rio Tinto said if would fire Hu and his colleagues.

"I am determined that the unacceptable conduct of these four employees will not prevent Rio Tinto from continuing to build its important relationship with China," CEO Tom Albanese said in a statement. The company is increasingly dependent on its business with China.

Smith said corporations would be disappointed at the secrecy of the commercial secrets elements of the trial.

"Clearly the international business community has been watching and transparency and clarity on this point would have been of assistance," he told reporters.

Gov't to give $600M in housing aid to 5 states

2010-03-30T03:06:00.000-07:00

The Obama administration on Monday announced $600 million in financial support for five more states with high unemployment that have been slammed by the housing bust.

Ohio got the largest share of funding, at $172 million, followed by North Carolina at $159 million and South Carolina at $138 million. Oregon and Rhode Island are due to receive $88 million and $43 million respectively.

The money will be given to state housing finance agencies. They will design mortgage assistance programs that meet broad criteria provided by the Treasury Department.

"The purpose of this is to foster innovation in dealing with what is a highly localized problem around the country," said Herbert Allison, an assistant Treasury secretary, adding, "we want to learn from the innovations."

Last month, the Obama administration said it would give $1.5 billion to state housing agencies in Arizona, California, Florida, Michigan and Nevada, which have some of the highest foreclosure rates in the nation.

Monday's action is the latest tactical change for the Obama administration, which has been under pressure to do more to tackle the foreclosure crisis. On Friday, the administration launched a plan to reduce the amount some homeowners owe on their mortgages and give jobless homeowners a temporary break.

The Obama administration targeted North Carolina, Ohio, Oregon, South Carolina, and Rhode Island because they have the largest share of residents living in counties with unemployment rates above 12 percent.

In Rhode Island, for example, about 60 percent of the population lives in counties with jobless rates above that benchmark, compared to about 15 percent of the population nationally. Sen. Jack Reed, D-R.I., who pushed for the help, called the aid "a smart investment that will help Rhode Island and other states that have been hit hardest by the recession."

Other states, such as Alabama, Illinois and Mississippi, actually have higher statewide unemployment rates than Oregon or Ohio, but did not meet the government's criteria.

"The goal was to try to target the states which have more concentrated economic distress," said Alan Krueger, the Treasury Department's top economist.

Gov't will sell Citi stock, reap bailout profits

2010-03-30T03:03:00.000-07:00

NEW YORK – Bank bailouts are turning out to be great business for the government. Unfortunately for taxpayers, other federal rescues will almost certainly wind up in the red.

The Treasury Department said Monday it will begin selling its stake in Citigroup Inc. at a potential profit of about $7.5 billion — not a bad haul for an 18-month investment.

The move is a major step in the government's effort to unravel investments it made in banks under the $700 billion Troubled Asset Relief Program at the height of the financial crisis.

Yet a year and a half after Congress passed the big bailout, other parts of it — particularly troubled automakers General Motors and Chrysler and insurer American International Group — show no signs of being profitable.

Despite the returns from Citi and other banks, analysts and even the Treasury Department predict the bailout will wind up costing taxpayers at least $100 billion. The bailouts of mortgage giants Fannie Mae and Freddie Mac, which were not included in TARP, will add billions more.

But the money the government makes off banks helps offset the damage. With the sale of the Citi shares, the eight major banks that got bailout money funds will have repaid the government in full. Those investments have netted the government $15.4 billion from dividends, interest and the sale of bank stock warrants, which gave the government the right to buy stock in the future at a fixed price.

Based on Monday's share price, selling its 27 percent stake in Citi would add about $7.5 billion in profits. The stock fell 3 percent to $4.18 a share Monday after news of the planned Treasury sales. But that still puts it well above the $3.25 a share the government paid. The government also still holds Citi stock warrants, which will add to its profits down the road.

Overall, it's a 14 percent rate of return on the $165 billion invested in the biggest banks. Hundreds of smaller banks also received money and have been paying the government a steady stream of dividends and interest.

By comparison, someone who invested money in the Standard & Poor's stock index in early October 2008, when the bailout was passed, would actually have lost about 3 percent.

"Overall, TARP may cost taxpayers money. But the banking part of it is going to be a moneymaker," banking analyst Bert Ely said. "When you strip away all that emotion," he added, "this has turned out to be a good bet."

The government's bank profits can be misleading. The banks benefited heavily from other subsidies, including the $182 billion bailout of AIG. Tens of billions of that money went to banks that had suffered losses with AIG, and the banks didn't have to repay a penny.

"It's baloney to say we've made money off the bank bailouts," said Simon Johnson, a professor at the Massachusetts Institute of Technology and a former chief economist at the International Monetary Fund. "You have to add up all the money we've put into the economy and other firms" related to banks.

Douglas Elliott, a fellow at Brookings Institution and former investment banker at J.P. Morgan, predicted the government will lose about $100 billion on the overall bailout program. That's slightly less than Treasury's own estimate of $117 billion.

Most of those losses are for the bailouts of AIG, General Motors and Chrysler, and automaker financing arms GMAC and Chrysler Financial.

And those estimates don't include losses expected from the takeover of Fannie Mae and Freddie Mac. In September 2008, the government seized the mortgage companies and has since pumped $126 billion into them to keep the housing market from plummeting further. That number is only expected to grow, and the Obama administration has not detailed any exit strategy.

The banks have been the one bright spot in the government's portfolio. And few benefited as much from taxpayer help as Citigroup.

Citi, one of the hardest-hit banks during the credit crisis and the recession, received a total of $45 billion in bailout money, one of the largest rescues in the TARP program.

Of the $45 billion, $25 billion was converted to the government's ownership stake in the bank. Citi repaid the other $20 billion in December.

The government received 7.7 billion shares of Citigroup in exchange for the $25 billion. It said it will sell the shares over the course of this year, depending on market conditions.

Understandably, the government will probably hold on to its shares if prices fall steeply. But Citi stock has been steadily rising with the broader market in recent months, which means the Treasury Department stands to pocket a hefty profit.

The Treasury had been planning to sell 20 percent of its stock at the time Citi was issuing new shares late last year. At a price of $3.15 a share, the government would have lost $158.7 million on the sale, so it opted to wait.

Selling at today's prices would give the government an 18 percent return on its $45 billion investment in Citigroup, according to Linus Wilson, a finance professor at the University of Louisiana at Lafayette.

But he said taxpayers could have done even better if the government had paid market value when it bought the bank's preferred shares. Instead, it paid a hefty premium to help boost the bank's capital.

"Citigroup stands to be our most profitable bank investment, bar none," Wilson said. "But we also took the most risk with Citi."

Others say that even if the government were to lose money on the deal, it was worth it.

"It kept the recession from getting considerably worse," Brookings' Elliot said. "That's worth whatever amount we end up losing."

Obama to sign student loan legislation in Virginia

2010-03-30T03:01:00.000-07:00

WASHINGTON – President Barack Obama prepared Tuesday to sign the piece of his sweeping health care overhaul that makes the government the primary lender to students and strips banks of that power.

Obama's hard-fought legislative victory packaged two of his domestic priorities. Obama already signed the bulk of the health care legislation, but a final set of tweaks provided a route for the education package, the largest rewrite of federal college assistance programs in four decades.

The legislation has a wide reach. About half of undergraduates receive federal student aid and about 8.5 million students are going to college with the help of Pell Grants.

Under the measure, private banks would no longer get fees for acting as middlemen in federal student loans. The government would use the savings to boost Pell Grants and make it easier for some workers to repay their student loans. In addition, some borrowers could see lower interest rates and higher approval rates on student loans.

Obama has touted the changes as a way to make college more affordable for students and their debt load more manageable after graduation. He used his weekend radio and Internet address to cite expected benefits for young people: more student lending, caps on those repayments and more money for minority colleges and universities.

"This reform of the federal student loan programs will save taxpayers $68 billion over the next decade," Obama said in his weekly address. "And with this legislation, we're putting that money to use achieving a goal I set for America: By the end of this decade, we will once again have the highest proportion of college graduates in the world."

The plan caps student loan repayment at 10 percent of a graduate's income when the law takes effect in 2014.

France, Germany agree on eurozone, IMF bailout

2010-03-27T04:51:00.000-07:00

BRUSSELS: Diplomats say France and Germany are backing a eurozone and International Monetary Fund bailout program for Greece and other troubled members of Europe's currency union.

They were speaking on condition of anonymity Thursday because details have not been agreed by all 16 nations that use the euro.

One diplomat said France and Germany struck a deal "that precisely describes the conditions in which the euro member states intervene" and "goes well beyond Greece."

Another diplomat said an agreement would be announced later tonight after markets close that would offer some €22 billion aid for Greece, combining individual loans from the IMF and eurozone nations, with the largest share of the aid coming from Europe.

World trade to see 9.5 pct growth in 2010: WTO

2010-03-27T04:48:00.000-07:00

GENEVA: The World Trade Organization said Friday that it expected 9.5 percent growth in merchandise trade this year, in a strong recovery from the steepest commercial contraction since the Great Depression.

The rebound will be led by an 11 percent growth in exports from developing countries such as China, India and Brazil, the WTO said. Exports from wealthy nations should rise 7.5 percent.

World trade shrunk by 12 percent in 2009, as the economic crisis destroyed consumer confidence, weakened demand, damaged credit lines for exporters and, in some instances, led to increased protectionism from governments.

The WTO said it was the "sharpest decline in more than 70 years."

Greece plan to stabilize euro: Eurozone leaders

2010-03-27T04:46:00.000-07:00

BRUSSELS: A hard-won deal to provide a safety net for Greece provided the debt-ridden country with some welcome relief Friday, with its cost of borrowing on international markets edging down slightly and labor unions at home saying they would hold off on any further strikes — at least for now.

Prime Minister George Papandreou said that while Greece still faced problems, the new plan would give it breathing space to implement his Socialist government's harsh austerity program, designed to reduce its massive budget deficit and pull Greece out of a financial crisis that has rocked the European Union's common currency.

Greece's 12.7 percent deficit for 2009 is four times over the EU limit, pointing to the eurozone's inability to restrict members' debt and deficits. Worries of a Greek default also highlighted the lack of a European only safety net for eurozone countries that can't pay their bills.

"Europe and Greece come out of this crisis much stronger," Papandreou said. "We know we're not yet out of the woods. We are on a track of implementing our (austerity plan) and we're determined to do so. But we have shown... that we have a strong will to take tough, indeed unprecedented measures, to react swiflty to the difficult circumstances."

The plan agreed on Thursday by the 16 eurozone countries would provide individual loans from other eurozone countries and funding from the International Monetary Fund, in order to rescue Greece if the country found itself unable to borrow or pay its debts.

However, the short text outlining the rescue package — which is short on details — specifies it can only be used as a last resort, and requires unanimous agreement of all eurozone members.

The agreement was reached after months of European wrangling, notably between Germany, which strongly opposed having to pay to bail out a country that had been overspending for years and consistently falsified its financial statistics, and France, which argued that a eurozone memeber should be supported and could not be allowed to sink.

Papandreou insisted he did not believe he would ever have to ask for a rescue.

"We do hope and we believe we will never need to use this mechanism, but the fact that it is there is a very positive signal. Europe is backing us," he said, adding that the plan's existance "will allow us in a very calm and organized fashion to implement our program."

The day after the announcement, the euro recovered from a 10-month low against the U.S. dollar, to $1.3374 in midday trading in Europe from below $1.33 on Thursday. The interest rate gap, or spread, between Greek 10-year bonds and equivalent German issues — a key indicator of market trust — narrowed to 305 basis points from about 330 Thursday. The narrower the spread, the more confidence markets are showing in Greece.

EU Commission President Jose Manuel Barroso echoed the sentiment, saying that "I hope that financial markets will now act on fact and not on fiction."

The deal also won the Greek government a slight reprieve from labor unions at home, who have staged a series of strikes to protest the austerity plan. Greece's largest umbrella union, GSEE, said Friday that while it feared a spike in unemployment, it would hold off on staging more strikes to help the government improve public finances.

"We have an appreciation of the situation the country is in ... We maintain a realistic and responsible position of readiness," GSEE spokesman Stathis Anestis told the newsmen.

German Chancellor Angela Merkel, who vociferously had opposed an immediate bailout for Greece, said she was "very satisfied" with the outcome.

"I think that it demonstrated Europe's capability to handle things and at the same time did something for the stability of the euro and for solidarity with a country that is in difficulty," Merkel said Friday.

"For us, it is also important in the long term that the euro, which is such a success for peace and unity, remains stable. Yesterday was an important day for the euro," she said.

French President Nicolas Sarkozy said the eurozone would offer around two-thirds of any loan package with the IMF taking the remaining third.

US dollar gains against euro

2010-03-27T04:43:00.000-07:00

KARACHI: The US dollar has gained ground against the euro last week.

The US currency soared by 0.9 in the week to reach to 1.34 per euro from 1.35.

The investors losing interest in euro due to Greece economic crisis and preferring dollar over the European currency, analysts said.

British Airways passengers face disruptions

2010-03-27T04:40:00.000-07:00

LONDON: British Airways workers are taking to the picket lines for the second round of strikes against the struggling airline.

Union officials say some 12,000 members are taking part in the four-day strike that began Saturday.

BA has been taking a hard line against strikers, and has promised to fly more than three-quarters of booked passengers. But its Heathrow services will be severely depleted — down to 55 percent for short haul and 75 percent for long haul — as the dispute over pay and changes to working conditions trudges on.

Both the airline and the union say they are willing to return to negotiations but there is little sign of reconciliation from either side.

A first round of strikes last week cost the airline around 21 million pounds ($31 million).

British Airways cabin crew start four-day strike

2010-03-27T04:36:00.000-07:00

LONDON (AFP) – British Airways cabin crew launched a four-day strike on Saturday, the second wave of action in a week as part of a bitter, long-running dispute over pay and conditions.

BA has pledged that more than three-quarters of its passengers -- or over 180,000 out of 240,000 -- will still be able to travel as planned during the walkout, which follows a similar three-day action last week.

A further 18 percent of customers have been rebooked with other airlines, or have switched their travel dates to avoid the strike period, it said.

BA chief executive Willie Walsh, who insists the company could fold in a decade unless the changes he wants take place, said the "vast majority" of staff were "pulling together to serve our customers and keep our flag flying".

"At the same time, I feel really sorry for those customers whose plans have been ruined by the Unite union's completely unjustified action," he added.

Amid growing hostility between BA and Unite, the trade union which represents BA's 12,000 cabin crew, the union claimed the cost to the airline would be 100 million pounds.

By contrast, BA said Monday that a three-day walkout from last Saturday would cost seven million pounds a day and that an assessment of the cost of the full seven-day action could only be made after it was finished.

Talks between the two sides broke down eight days ago, on the eve of the first strikes.

In a letter to The Guardian newspaper Friday, 116 industrial relations experts from universities across Britain accused Walsh of trying to break Unite.

They said he had withdrawn an offer which could have prevented the strikes and noted he had used other airlines -- including budget carrier Ryanair -- to help carry passengers and undermine the effectiveness of the action.

BA has also axed highly-prized travel discounts for striking workers.

"It is clear to us that the actions of the chief executive of British Airways... are explicable only by the desire to break the union which represents the cabin crew," the academics' letter read.

BA denies this, and in an interview with the Daily Telegraph Saturday, Walsh said the reforms he wanted were vital to the company's survival.

"We are trying to transform the way we operate because the industry is changing and the economic conditions have changed so radically that we've got to change," Walsh said.

"We're doing this to make sure BA still exists in 10 years. If we don't do this, BA won't exist in 10 years."

The airline is hoping to fly a full schedule from London's City and Gatwick airports during the strikes and at Heathrow will operate 70 percent of long-haul and 55 percent of short-haul flights.

A BA spokesman said around 0900 GMT on Saturday that cabin crew were reporting as normal at Gatwick and there were enough staff at Heathrow to operate their published schedule.

However, Heathrow passenger John Cawley from Liverpool said he would never fly with BA again.

Cawley, 54, was due to fly to the United States with his family from Heathrow but their internal flight was cancelled and they had to spend hundreds of pounds on a hire car to drive to the airport instead.

"We'll never use BA again, we wouldn't want to go through all this again," he said.

BA, which is attempting to merge with Spanish rival Iberia, said last month it expected to notch up a record loss in the current financial year due to weak demand for air travel.

In December, it won a legal battle to prevent a 12-day walkout by cabin crew over Christmas and New Year after a judge ruled that a ballot of staff by Unite was invalid.

Prime Minister Gordon Brown has condemned the strike but, just weeks before a general election, faces accusations of a weak response from the Conservatives because Unite is a major donor to Labour.

Obama's health insurance rule — it was a GOP idea

2010-03-27T04:34:00.000-07:00

WASHINGTON – Republicans were for President Barack Obama's requirement that Americans get health insurance before they were against it. The obligation in the new health care law is a Republican idea that's been around at least two decades. It was once trumpeted as an alternative to Bill and Hillary Clinton's failed health care overhaul in the 1990s. These days, Republicans call it government overreach.

Mitt Romney, weighing another run for the GOP presidential nomination, signed such a requirement into law at the state level as Massachusetts governor in 2006. At the time, Romney defended it as "a personal responsibility principle" and Massachusetts' newest GOP senator, Scott Brown, backed it. Romney now says Obama's plan is a federal takeover that bears little resemblance to what he did as governor and should be repealed.

Republicans say Obama and the Democrats co-opted their original concept, minus a mechanism they proposed for controlling costs. More than a dozen GOP attorneys general are determined to challenge the requirement in federal court as unconstitutional.

Starting in 2014, the new law will require nearly all Americans to have health insurance through an employer, a government program or by buying it directly. That year, new insurance markets will open for business, health plans will be required to accept all applicants and tax credits will start flowing to millions of people, helping them pay the premiums.

Those who continue to go without coverage will have to pay a penalty to the IRS, except in cases of financial hardship. Fines vary by income and family size. For example, a single person making $45,000 would pay an extra $1,125 in taxes when the penalty is fully phased in, in 2016.

Conservatives today say that's unacceptable. Not long ago, many of them saw a national mandate as a free-market route to guarantee coverage for all Americans — the answer to liberal ambitions for a government-run entitlement like Medicare. Most experts agree some kind of requirement is needed in a reformed system because health insurance doesn't work if people can put off joining the risk pool until they get sick.

In the early 1970s, President Richard Nixon favored a mandate that employers provide insurance. In the 1990s, the Heritage Foundation, a conservative think tank, embraced an individual requirement. Not anymore.

"The idea of an individual mandate as an alternative to single-payer was a Republican idea," said health economist Mark Pauly of the University of Pennsylvania's Wharton School. In 1991, he published a paper that explained how a mandate could be combined with tax credits — two ideas that are now part of Obama's law. Pauly's paper was well-received — by the George H.W. Bush administration.

"It could have been the basis for a bipartisan compromise, but it wasn't," said Pauly. "Because the Democrats were in favor, the Republicans more or less had to be against it."

Obama rejected a key part of Pauly's proposal: doing away with the tax-free status of employer-sponsored health care and replacing it with a standard tax credit for all Americans. Labor strongly opposes that approach because union members usually have better-than-average coverage and suddenly would have to pay taxes on it. But many economists believe it's a rational solution to America's health care dilemma since it would raise enough money to cover the uninsured and nudge people with coverage into cost-conscious plans.

Romney's success in Massachusetts with a bipartisan health plan that featured a mandate put the idea on the table for the 2008 presidential candidates.

Democrat Hillary Rodham Clinton, who failed in the 1990s to require employers to offer coverage, embraced the individual requirement, an idea advocated by her Republican opponents in the earlier health care debate.

"Hillary Clinton believed strongly in universal coverage," said Neera Tanden, her top health care adviser in the 2008 Democratic campaign. "I said to her, 'You are not going to be able to say it's universal coverage unless you have a mandate.' She said, 'I don't want to run unless it's universal coverage.'"

Obama was not prepared to go that far. His health care proposal in the campaign required coverage for children, not adults. Clinton hammered him because his plan didn't guarantee coverage for all. He shot back that health insurance is too expensive to force people to buy it.

Obama remained cool to an individual requirement even once in office. But Tanden, who went on to serve in the Obama administration, said the first sign of a shift came in a letter to congressional leaders last summer in which Obama said he'd be open to the idea if it included a hardship waiver. Obama openly endorsed a mandate in his speech to a joint session of Congress in September.

It remains one of the most unpopular parts of his plan. Even the insurance industry is unhappy. Although the federal government will be requiring Americans to buy their products — and providing subsidies worth billions — insurers don't think the penalties are high enough.

Tanden, now at the Center for American Progress, a liberal think tank, says she's confident the mandate will work. In Massachusetts, coverage has gone up and only a tiny fraction of residents have been hit with fines.

Brown, whose election to replace the late Democratic Sen. Edward M. Kennedy almost led to the collapse of Obama's plan, said his opposition to the new law is over tax increases, Medicare cuts and federal overreach on a matter that should be left up to states. Not so much the requirement, which he voted for as a state lawmaker.

LAS VEGAS – Sarah Palin and thousands of tea party activists plan to descend on Sen. Harry Reid's hometown in the Nevada desert Saturday to call for t

2010-03-27T04:32:00.001-07:00

WASHINGTON – The government's bold new plan to stem the foreclosure crisis aims to succeed where previous efforts have fallen flat. Yet just as before, the odds are long, and many struggling borrowers won't qualify.

In theory, the effort unveiled Friday would help millions of troubled homeowners who owe more on their mortgages than their homes are worth, or who are jobless and need a break on their payments.

But it depends on cooperation from investors and bankers, many of whom have been locked in disputes over whether to reduce the debt owed by homeowners.

And just like the bank bailouts, this rescue plan poses risks. If it doesn't slow the wave of foreclosures or if home prices nosedive, the tentative recovery in the housing market could fizzle.

The Obama administration says the plan will help stabilize the real estate market by keeping many borrowers out of foreclosure. If it succeeds, the plan would limit damage to the overall economy.

The new effort is designed to help two groups:

• Borrowers who owe more on their loans than their houses are worth. More than 15 million homeowners fall into this category, according to Moody's Analytics. About 10 million of them owe at least 20 percent more than their house's current value.

Their mortgage companies can cut the total amount they owe, or they can refinance into loans backed by the Federal Housing Administration. FHA will get $14 billion in incentive money from the federal bailout fund.

• Unemployed borrowers. People receiving unemployment benefits would have their mortgage payments cut to no more than 31 percent of their monthly income for three to six months.

That's intended to give homeowners more time to find a job. Once they do, they may qualify for a loan modification that would permanently reduce their payments under the administration's existing $75 billion loan modification program.

The plan aims to help 3 to 4 million borrowers avoid foreclosure — the same target the administration tried to reach with its original plan last year. Even with the changes, the effort will likely prevent no more than 1.5 million foreclosures, estimates Mark Zandi, chief economist at Moody's Analytics.

Disputes among banks and investors, who would have to approve any cuts in loan principal, could prevent the effort from stopping more foreclosures, as could another drop in home prices.

"Practically speaking, this is probably going to prevent foreclosures. But I don't think they're ever going to reach 3 to 4 million homeowners," said Chris Mayer, a real estate professor at New York's Columbia Business School. "These plans always turn out to be harder than we think."

The administration's existing program to prevent foreclosures hasn't made much of a dent in the foreclosure crisis. A lack of planning and shifting rules on who qualifies produced a huge backlog in the program, the special inspector general for the federal financial bailout fund told lawmakers this week.

Still, analysts said this effort has a better chance of success than past efforts because it would reduce principal for some struggling borrowers — a method more effective at helping homeowners than reducing interest payments or other forms of aid. Laurie Goodman, a widely followed mortgage securities analyst with Amherst Securities Group, called it "a huge step forward."

The plan comes after pressure from the administration's Democratic allies in Congress to intensify efforts to help Americans at risk of losing their homes.

The overhauled plan came together after several months of negotiations between the Treasury Department, major banks and investors in mortgage securities. A major sticking point so far has been getting everyone involved to agree on restructuring loans.

The problem is that most of the troubled mortgages aren't owned by the banks themselves. They were bundled into securities during the housing boom and sold to investors.

To reduce principal payments on those mortgages, banks often must get permission from the investors who hold the securities — and may not be willing to take less.

Banking industry officials were optimistic that investors would negotiate.

"You have two choices: Modify the mortgage and help a borrower stay in their home or possibly get nothing if they foreclose," said Scott Talbott, the chief lobbyist for the Financial Services Roundtable, an industry group.

The plan risks angering Americans like Jim Truschel, a homeowner in La Mirada, Calif., who said he was disappointed the government is spending taxpayer money on another homeowner bailout effort.

"I feel very sorry for the people that are in these situations, but they have to be somewhat to blame themselves," said Truschel, a retiree. "They should have realized that they were getting into things that they weren't going to be able to pay for."

The administration says irresponsible borrowers will not benefit. The plan will not help investors, speculators or "Americans living in million-dollar homes or defaulters on vacation homes," an administration fact sheet said.

Diana Farrell, a White House economic adviser, acknowledged the plan won't prevent many of the expected 10 to 12 million foreclosures expected over the next three years. Doing so, she said, "wouldn't be fair, it would be too expensive and we probably wouldn't succeed in any case, because many people got into homes that they simply cannot afford."

Rep. Barney Frank, chairman of the House Financial Services Committee, praised the new steps, particularly giving jobless borrowers a break on their payments for three to six months.

"The whole economy is hurt by these foreclosures," Frank said.

For taxpayers, the government's plan carries some risk. Lenders will probably sell their most troubled loans to the FHA so they can be insured against default, said Mayer of Columbia Business School. Experts have warned that the FHA faces rising losses from foreclosures and might need a bailout.

"There's more risk to taxpayers," Mayer said. "There's a big incentive for lenders to give the government the worst of their loans, the ones they fear they won't get paid back on."

One "underwater" homeowner, Joe Clarke, a police officer in Oxnard, Calif., welcomed word of the plan. He owes $390,000 on his home, which is only worth about $250,000, and he fears his adjustable-rate loan will reset to a higher rate in August.

"I've made my payments," he said. "I didn't walk away from my house. I'm just not being afforded the opportunity to refinance my home, even at the current value, without taking the principal off."

___

Associated Press Writers Jim Kuhnhenn and Christopher S. Rugaber in Washington, Adrian Sainz in Miami, Alex Veiga in Los Angeles and Ieva M. Augstums in Charlotte, N.C. contributed to this report.

Obama's health insurance rule — it was a GOP idea

2010-03-27T02:40:00.000-07:00

"It could have been the basis for a bipartisan compromise, but it wasn't," said Pauly. "Because the Democrats were in favor, the Republicans more or less had to be against it."

Romney's success in Massachusetts with a bipartisan health plan that featured a mandate put the idea on the table for the 2008 presidential candidates.

FACT CHECK: Spinning the new health care law

2010-03-24T03:46:00.000-07:00

WASHINGTON – The tumultuous health care debate that brought you death panels and socialism has spun off a catalog of popular myths that will keep growing as President Barack Obama and all sides battle toward the midterm elections this fall.

At a White House signing ceremony Tuesday, Obama ventured the hope that Americans on all sides will judge the legislation for what it actually says and does. "When I sign this bill," he declared, "all of the overheated rhetoric over reform will finally confront the reality of reform."

Wishful thinking, Mr. President.

Facts are stubborn, the saying goes. But myths about the legislation are likely to persist as well. And a lot of people don't agree on which is which.

"People have taken away from the debate a number of beliefs about the bill that are very difficult to shake based on objective reports," said Robert Blendon, a Harvard public health professor who follows opinion trends. "There is enough skepticism out there that questions about how it's going to help the country are likely to continue."

Here's a look at some of the myths and realities, from both sides of the issue:

• Obama has put the nation on a slippery slope toward socialism.

Hello? Government's role in health care has been steadily growing since Medicare and Medicaid were established 45 years ago. Even if Republicans were to take control of Washington and repeal this bill, government would still be on track to pick up more than half the nation's health care tab by 2012, according to a report last month from Medicare.

"The Republican myth is that the government is for the first time going to take over the health care sector," said economist Joe Antos of the business-oriented American Enterprise Institute. "The takeover was probably largely accomplished in 1965 with the creation of Medicare and Medicaid. Since the early days, Medicare has called the shots on a lot of policy issues that private insurance fell in line with."

Still, the new law will undoubtedly expand the government's influence. Sen. Judd Gregg, R-N.H., warned Tuesday it will lead to the "quasi-nationalization of the health industry."

Underline "quasi." Democrats dropped their idea of a government insurance plan to compete with private carriers. So any "socialization" will be channeled through Wellpoint, UnitedHealthcare and other private insurance giants.

• Health care overhaul is going to lower your health insurance premiums.

Obama says that once new competitive insurance markets open for business, in 2014, individuals buying coverage comparable to what they have today will pay 14-20 percent less. Family coverage costs about $13,400 a year, so that could be real money.

But the president's assurance is based on a selective reading of a Congressional Budget Office report that found most individuals would probably buy better, more expensive coverage than what's available today.

And Obama skips over an important caveat: The budget office didn't say premiums would be lower than currently. It said premiums for some people would be lower than they would have been without the bill. Premiums for others would be higher.

With the U.S. population getting older, and medical science pushing the technological envelope, there's very little reason to think premiums will go down. The best Obama can hope for is to slow the pace of increases.

• You will be forced to pay for other people's abortions.

Only if you join a health insurance plan that covers abortion. In that case, the costs of paying for abortions would be spread over all the enrollees in the plan — no differently from how other medical procedures are handled, except a policyholder would have to write a separate check for it.

Timothy Jost, a law professor at Washington and Lee University, said people who don't want to pay for abortion could simply pick a plan that doesn't offer it.

There would definitely be a demand for such plans, and not just from people with moral objections. Single men and older women would have no reason to pay an extra premium for abortion coverage.

• The Democratic bill will lead to government health care rationing.

The legislation sets up a research center to compare the effectiveness of medical treatments, and critics fear that bureaucrats will start issuing justifications for denying patients access to the latest medical technology.

Republicans as well as Democrats had previously called for a major investment in such research to help make sense of which kinds of treatments, medications and technologies are worth the cost.

The legislation specifies that the research findings cannot be used to impose mandates, guidelines or recommendations for payment, coverage, or treatment — or used to deny coverage.

Acceptance of the research is likely to be slow in coming, and the medical community — not government and insurance companies — will probably take the lead in vetting it.

• The American people have already rejected Obamacare.

Although some polls show a majority oppose the bill, most surveys find the public about evenly divided. Blendon, the public opinion expert, believes it's premature to say that the public has rejected it. Curiously, many individual components — doing away with insurance denials for pre-existing conditions, tax credits to help pay premiums, insurance purchasing pools — are widely popular.

Obama reads those findings to mean that Democrats have a chance to turn around public opinion, and he's embarking on a campaign to sell the bill.

• The legislation will save Medicare from bankruptcy.

Democrats say the bill — even as it cuts Medicare to pay for expanded coverage for working families — will add at least nine years of solvency to the program's giant hospital insurance trust fund, now projected to be exhausted in 2017.

Technically that's true — but only on paper.

Savings from the Medicare cuts will be invested in government IOUs, like any other trust fund surplus. The special Treasury securities count as an asset on Medicare's books — making the program's precarious financial situation seem more reassuring. But the government will spend the actual money. And when time comes for Medicare to redeem the IOUs, lawmakers will have to scramble to come up with the cash.

The key point is that the Medicare savings will be received by the government only once, the Congressional Budget Office said, "so they cannot be set aside to pay for future Medicare spending and, at the same time, pay for current spending ... on other programs."

JPMorgan closes in on tax refund deal with FDIC: report

2010-03-24T03:42:00.000-07:00

(Reuters) – JPMorgan Chase (JPM.N) is closing in on a deal with the Federal Deposit Insurance Corp (FDIC) that could result in a tax refund of about $1.4 billion for the bank, the Wall Street Journal reported, citing people familiar with the talks.

JPMorgan was not available to comment on the report.

As part of a larger settlement with Washington Mutual's bondholders, JPMorgan can claim $1.4 billion of funds in the FDIC receivership to protect itself against exposure to mortgages that WaMu serviced, the Journal said.

Washington Mutual Inc (WAMUQ.PK), which is tied to the biggest bank failure in U.S. history, is eligible to receive about $5.6 billion in tax refunds as part of a court settlement. WaMu was seized by the FDIC in 2008 and was later sold to JPMorgan for $1.9 billion.

On March 12, Washington Mutual agreed to split the two potential tax refunds with JPMorgan and the FDIC.

WaMu agreed to receive $900 million of a $2.6 billion expected return, with the rest going to JPMorgan. A second $2.6 billion return will be bring in $1.04 billion for Washington Mutual with the rest going to the FDIC.

(Reporting by Anuradha Ramanathan in Bangalore; Editing by Dan

British Airways cabin crews strike for 2nd day

2010-03-22T05:05:00.001-07:00

LONDON: British Airways cabin crews walked off the job for a second day Sunday, upsetting travel plans for scores of customers, but the airline said its contingency plans were working well and more planes were taking off than expected.

The airline — locked in a bitter dispute with workers over a pay freeze and changing working conditions — said it was able to add several extra flights because many crew members ignored the three-day strike call.

"Our contingency plans are continuing to work well on Sunday morning around the world," it said in a statement.

BA said all long-haul aircraft from overseas airports were able to arrive in London as planned on Sunday morning. The airline added there has been no evidence of strikes at any overseas airports directed at its flights.

Union leaders, however, dispute those claims. Unite, the union representing BA cabin crew, said scores of BA planes were grounded and that 10,000 members walked out on Saturday.

BA was able to avoid extended chaos because it leased planes and crew from rival carriers to take up some of the shortfall. About 1,100 flights out of the 1,950 BA flights scheduled to operate during the three-day walkout were expected to be canceled.

The airline had said at the start of the strike that it could handle as many as 49,000 passengers a day on both Saturday and Sunday — compared to the average 75,000 for a normal weekend day in March.

The airline on Sunday declined to provide details of whether that goal was achieved or discuss the number of flights canceled or delayed, but it said that it managed to reinstate more than a dozen of the canceled flights — including those to Paris, Miami and Los Angeles.

The acrimonious dispute with its workers will be financially crippling for BA. Analysts estimated it could cost the airline more than the 63 million pounds ($95 million) that Chief Executive Willie Walsh is trying to save through the changes to workers' pay and conditions.

BA argues that the disputed changes — including a pay freeze in 2010, a switch to part-time work for 3,000 staff and a reduction in cabin crew sizes from 15 to 14 on long-haul flights from Heathrow airport in London — are critical for its survival. The union argues it was not properly consulted on the changes.

Unite planned a second, four-day walkout due to begin March 27 and had said more strikes will be scheduled after April 14 if the dispute is not resolved. The union has pledged not to walk out over the busy Easter period.

Europe divided on aid to Greece before summit

2010-03-22T05:04:00.001-07:00

BERLIN: European leaders sent out conflicting signals at the weekend over aid to Greece, with Germany's Angela Merkel urging Athens to solve its debt problems alone and Italy's Silvio Berlusconi strongly backing EU support.

The 16-nation euro zone is divided over whether and how best to provide financial help to Greece, whose struggles to cope with soaring debt and deficits have plunged the currency bloc into the deepest crisis of its 11-year existence.

Chancellor Merkel, who faces a key state election in May, is keenly aware that the German electorate overwhelmingly opposes a bailout for Greece and has hardened her line against the EU making a concrete pledge of financial support.

An FT/Harris poll to be published in Monday's Financial Times shows a third of Germans think Greece should be asked to leave the euro, while 40 percent believe Germany would be better off outside the currency bloc.

Merkel's stance pits her against Brussels and major European partners, who favour strong action to end a speculative assault on Greek assets that has made it twice as expensive for Greece to borrow as for Germany.

On German radio Merkel denied Greece had any "acute financial needs" and rejected suggestions by European Commission President Jose Manuel Barroso that EU leaders agree a standby aid package for Athens at a summit this week.

"I don't see that Greece needs money at the moment and the Greek government has confirmed that. That's why I'd urge us not to stir up turbulence in the markets by raising false expectations for Thursday's council meeting," Merkel said, referring to the March 25-26 summit.

"Aid will not be on the agenda at the meeting on Thursday because Greece says itself it doesn't need help right now."

Barroso told Monday's edition of the Handelsblatt newspaper that the European Union urgently needed to resolve the Greece problem "regardless of the political agenda in member states".

"Securing the stability of the currency union is in Germany's interest," Barroso told the German daily. "I'm sure Germany will make a constructive contribution to resolving the current crisis."

Gas the next fuel to fire Australia boom

2010-03-22T04:29:00.001-07:00

KARRATHA: First gold, then coal and iron ore. Now, a new bonanza is about to be unleashed from beneath Down Under: Australia's got gas.

Projects being ramped up to tap huge undersea fields off the country's northwest could quadruple Australia's exports of liquefied natural gas in the next few years and turn it into what the country's resources minister has called an "energy superpower."

It will be the next stage of a long boom that has enriched Australia and made it a key supplier of the raw materials underpinning Asia's development — from the girders in city skyscrapers to the fuel burned to light them.

"We have what the world, and particularly the rapidly growing economies of Asia, want — iron ore, energy and minerals," said Colin Barnett, the premier of Western Australia state, which is at the heart of the new boom.

The mostly desert state has become known for a frontier atmosphere not unlike that of Australia's 19th century gold rush, the country's first mining boom that drew enough migrants to almost triple Australia's population within a decade.

As a major source of the materials driving Asia's economic surge, Australia has increasingly been drawn into the orbit of emerging giants China and India, spawning tensions and discord. There are also nagging worries over economic overheating and long-lasting environmental damage caused by its thriving resource industry.

Gas was discovered off Australia's remote northwest coast in the 1970s. But its exploitation has lagged behind iron ore and coal that have been easier to get and more in demand.

Now, gas is gaining popularity as a cleaner-burning alternative to coal in power generation, with a fraction of the greenhouse gas emissions.

The biggest boost in the sector came last September, when Chevron and joint venture partners ExxonMobil and Royal Dutch Shell announced they would go ahead with the massive Gorgon project.

The venture will drill fields about 80 miles (130 kilometers) offshore to tap into an estimated 40 trillion cubic feet of gas, build pipelines and a liquefaction plant and port for about AU$43 billion ($41 billion) — roughly the size of Guatemala's gross national product.

If that sounds big, the numbers stack up. The decision to proceed came on the heels of news that ExxonMobil Corp. had signed a 20-year deal worth about AU$50 billion to supply PetroChina Co. with LNG from its share of Gorgon. Similar deals for Gorgon gas worth another AU$70 billion were struck with power companies in Japan, South Korea and India.

The Australian government says Gorgon could generate exports worth AU$300 billion during the next 20 years. And that's just one project. There are at least a half dozen other large gas plans in the works, including Australian company Woodside's $12 billion plan to tap the Browse fields holding an estimated 20 trillion cubic feet of gas.

Yet even as the projects pile up, Australia is trying to tamp down strains with China that have taken some of the gloss of its mineral and energy endowments.

On Monday an Australian executive of mining giant Rio Tinto will face court in China charged with stealing commercial secrets in a trial Australian lawmakers are concerned is linked to Beijing's unsuccessful campaign to get lower iron ore prices. The case has added to unease about close China relations after a string of deals for state-owned Chinese firms to buy into Australian resource projects.

Other problems are local but no less intractable.

Obama achieves health law success that eluded past

2010-03-22T03:58:00.000-07:00

WASHINGTON – Rarely does the government, that big, clumsy, poorly regarded oaf, pull off anything short of war that touches all lives with one act, one stroke of a president's pen. Such a moment has come.

After a year of riotous argument, decades of failure and a century of spoiled hopes, the United States is reaching for a system of medical care that extends coverage nearly to all citizens. The change that's coming will reshape a sixth of the economy and shatter the status quo.

To the ardent liberal, President Barack Obama's health care plan, passed by the House on Sunday night, is a shadow of what should have been, sapped by dispiriting downsizing and trade-offs.

To the loud foe on the right, it is a dreadful expansion of the nanny state.

To history, it is likely to be judged alongside the boldest acts of presidents and Congress in the pantheon of domestic affairs. Think of the guaranteed federal pensions of Social Security, socialized medicine for the old and poor, the civil rights remedies to inequality.

Change is coming, but in steps, not overnight. The major expansion of coverage to 32 million people — powered by subsidies, employer obligations, a mandate for most Americans to carry insurance, new places to buy it and rules barring insurance companies from turning sick people away — is four years out.

In contrast, on June 30, 1966, after a titanic struggle capped by the bill signing a year earlier, President Lyndon Johnson launched government health insurance for the elderly with three simple words, as if flicking a switch: "Medicare begins tomorrow."

Obama practically needs a spreadsheet to tell people what's going on and when with the law he will sign after the Senate takes final action this week.

Yet he and LBJ share a distinction: They are the only two presidents to succeed with a transcendent health care law.

"We rose above the weight of our politics," Obama said late Sunday night in relishing the House victory on a 219-212 vote. "We proved that we are still a people capable of doing big things."

You can be sure Obama, a student of history, is aware of how LBJ captured the moment when Medicare became law with his pen. That happened in Independence, Mo., in the presence of the very first American to sign up for the program: Harry Truman. The ex-president had ended a world war but could not achieve national health insurance in his time.

"Care for the sick, serenity for the fearful," Johnson promised that day. "In this town, and a thousand other towns like it, there are men and women in pain who will now find ease."

Said Truman: "I am glad to have lived this long."

Ted Kennedy lived long enough to see a goal of his lifetime take shape but not long enough for it to happen. His death last summer was almost the death of the whole plan because a Republican won his Senate seat, changed the voting balance and left despondent Democrats in search of a second wind, which they found.

Why is this so hard? In part, because self-reliance and suspicion of a strong central government intruding into people's lives are rooted in the founding of the republic, and still strong.

In 1854, President Franklin Pierce vetoed a national mental health bill on the basis that it would be unconstitutional to treat health as anything but a private matter that is none of the government's business.

Seventy-five years later, the American Medical Association denounced proposals for organized medical services as an "incitement to revolution" at the hands of "Medical Soviets."

And that wasn't even about government-run health care. The AMA's fierce opposition to collectivism included objections to private health insurance, the norm today, and the pooling of doctors into what became health maintenance organizations decades later.

No wonder would-be health reformers were thwarted one generation after another even as they made deep imprints on the nation in other ways.

Teddy Roosevelt couldn't do it — and he's carved into Mount Rushmore.

Franklin D. Roosevelt rewrote the social compact with his job and retirement security and regulatory expansion, all in the jagged teeth of the Depression, then took the nation to war. He made national health insurance a second-tier priority and it eluded him.

Even so, social responsibility for medicine grew.

In 1930, citizens paid nearly 80 percent of the nation's medical costs from their own pocket. Government at all levels covered a mere 14 percent, with industry and philanthropy picking up the few remaining crumbs. Insurance was barely in the picture.

Federal and state programs now cover half the cost of health care purchased in the country and were expected to go over 50 percent in the next year or two even absent Obama's plan. By that measure, the government takeover of health care that opponents warn about is happening regardless of congressional action.

Why the creep of government in health care? In part, because individualism isn't the entire American story. The idea of watching out for each other is also in the nation's fabric.

Besides, as much as Americans hate overbearing government and higher taxes, give them a federal benefit and then just try to take it away. Today's hot potato becomes tomorrow's cherished check.

That's one reason government programs grow — and why Democrats dared to push for a less than popular package mere months from congressional elections, when people were telling their leaders to create jobs instead.

Johnson, full of beans after his Medicare victory, realized all of this.

"The doubters predicted a scandal; we gave them a success story," he crowed a month after the law took effect, as hundreds of thousands of patients entered hospitals for treatment covered by the government and some 6 million children and needy adults began getting benefits.

"Where are the doubters tonight?" he asked. "Where are the prophets of crisis and catastrophe? Well, some of them are signing their applications; some of them are mailing in their Medicare cards because they now want to share in the success of this program."

Obama can only hope for such a first-blush reception. He took on the cause of universal coverage after a campaign in which he did not promise it, intending only to secure insurance for all children and shrink the pool of uninsured adults. His health care ambition grew in office, quickly.

More than a quarter century before, Ted Kennedy came close to the prize with none other than the Republican president, Richard Nixon, who embraced ideas that mainstream Republicans today cannot tolerate. Nixon was ready to force businesses to provide health insurance to their workers or pay heavy penalties.

Sound familiar? It will.

At its core, Nixon's proposal is a pillar of Obama's plan today. Nixon's willingness to subsidize coverage for the working poor is also seen in the plan, though writ larger.

Back then, Kennedy's union and liberal allies gambled that by spurning Nixon, they'd get something better later. They didn't. In similar fashion years after that, President Bill Clinton aimed high and crashed hard.

Clinton no doubt drew on his own failure when, in December, he advised Democrats to pass what they could manage and not make it an all-or-nothing fight. "America," he said, "can't afford to let the perfect be the enemy of the good."

Obama absorbed these lessons.

For him, a system with government as the sole or principal payer of everyone's medical bills was a nonstarter, nice for the ideologues and other countries but not the American way. He would have liked the option of a government-run plan competing in the marketplace, but didn't need it.

For months he stood so far back from the legislative nitty-gritty that it was hard to tell what he stood for.

In the end, he stood for more than the incremental steps that succeeded in the past, and for less than the towering ideas that failed

House passes Democratic changes to health bill

2010-03-22T03:56:00.000-07:00

WASHINGTON – The House has passed key changes to its just-approved overhaul of health care legislation. The changes are part of a prearranged agreement to guarantee passage of the historic legislation.

The changes passed by a 220-211 vote. That bill now goes to the Senate for final approval, where it only requires a simple majority to pass.

The fast-track measure eliminates targeted provisions for specific states in the main health care bill. It softens a tax on high-value insurance plans opposed by organized labor.

It also contains an education provision that is a domestic priority of President Barack Obama. That measure increases college assistance for needy students and ends government reliance on private lenders for higher education loans.

Obama lauds House for passing health care bill

2010-03-22T03:54:00.000-07:00

WASHINGTON – Capping a long day and a consuming political journey, President Barack Obama celebrated the passage of health care legislation with hugs, high fives and an emboldened attitude. Said the president to the nation, "Tonight, we answered the call of history."

At nearly midnight in Washington, with a big swath of country asleep or headed that way, Obama strode into the ornate East Room with Vice President Joe Biden backing him. There was no hour too late for the president to embrace this moment.

"I want to thank every member of Congress who stood up tonight with courage and conviction to make health care reform a reality," Obama said as the top members of his own health care team stood beaming nearby. "I know this wasn't an easy vote for a lot of people. But it was the right vote."

Obama was proud but not unrestrained in victory, mindful that the Senate still has not gotten to a companion bill to fix problems with the one that just passed. The sense in the West Wing was one of perseverance after a debate with so many turns and doubts.

"We did not fear our future," Obama said. "We shaped it."

The final day had been a low-key one for Obama. No more fiery speeches, no trips to Capitol Hill, no ventures outside the White House gates at all.

Instead, the most visible spokesman for health care reform spent the final day of an exhaustive lobbying campaign out of public view.

Aides said he was roaming the West Wing, getting updates, calling lawmakers with thanks as a huge legislative win was imminent.

As the president said when he crashed a morning meeting of senior staff, this was a big day. But the spotlight fell on the House of Representatives.

The first glimpse of the president on Sunday did not come until late at night, after the final House vote on legislation to revamp health insurance rules for millions of people. But the announcement that he would give such a statement underscored that Obama was sensing victory — and history.

Beforehand, the White House released two photos showing hand-picked images of a president in a serious fight for votes until the end.

In one, Obama was on a cell phone talking to an unidentified lawmaker from the office of his chief of staff, Rahm Emanuel. The president was surrounded by Emanuel and four other legislative and political advisers. There wasn't a smile in the room.

The other photo showed Obama in the Oval Office, sleeves rolled up, working the phones again in conversation with another unnamed lawmaker.

Obama called more than a dozen lawmakers on Sunday and got in touch with more than 90 during the week, the White House said without identifying them.

Before nightfall, the only burst of Obama news came in a press release around 4 p.m.

Obama revealed he would issue an executive order to make sure that the emerging health care legislation would uphold all federal funding restrictions on abortion. That step had the enormously important effect of locking in the votes of a bloc of anti-abortion House Democrats.

After that, around the White House, it was mostly a matter of counting down until the House acted.

Obama watched the main House vote on the Senate-approved health care bill in the Roosevelt Room with Biden and about 40 other members of the White House staff. When the bill won enough votes to pass, the room burst into applause and hugs.

Had this been any other spring day in Washington, Obama might have ventured out for basketball or golf.

Not on this Sunday, when no hint of taking the vote for granted would be allowed.

However, Obama did have time, like many Americans, to absorb the reality of his own busted March Madness bracket.

The president picked Kansas to win the men's NCAA basketball title; the Jayhawks fell in a big upset on Saturday. The basketball tournament continued Sunday, when some TVs in the West Wing were tuned to the games and other carried the action on the House floor.

Obama caught some of both.

House sends health care overhaul bill to Obama

2010-03-22T03:51:00.000-07:00

WASHINGTON – A transformative health care bill is headed to President Barack Obama

for his signature as Congress takes the final steps in Democrats' improbable and history-making push for near-universal medical coverage.

On the cusp of succeeding where numerous past congresses and administrations have failed, jubilant House Democrats voted 219-212 late Sunday to send legislation to Obama that would extend coverage to 32 million uninsured Americans, reduce deficits and ban insurance company practices such as denying coverage to people with pre-existing medical conditions.

"This is what change looks like," Obama said later in televised remarks that stirred memories of his 2008 campaign promise of "change we can believe in."

"We proved that this government — a government of the people and by the people — still works for the people."

Obama's young presidency received a much needed boost from passage of the legislation, which would touch the lives of nearly every American. The battle for the future of the health insurance system — affecting one-sixth of the economy — galvanized Republicans and conservative activists looking ahead to November's midterm elections.

A companion package making a series of changes sought by House Democrats to the larger bill, which already passed the Senate, was approved 220-211. The fix-it bill will now go to the Senate, where debate is expected to begin as early as Tuesday. Senate Democrats hope to approve it unchanged and send it directly to Obama, though Republicans intend to attempt parliamentary objections that could change the bill and require it to go back to the House.

Obama is expected to sign the larger bill early this week.

The complicated two-step process was made necessary because Senate Democrats lost their filibuster-proof supermajority in a special election in January, a setback that caused even some Democratic lawmakers to pronounce the yearlong health care effort dead. Under the relentless prodding of House Speaker Nancy Pelosi, in particular, it was gradually revived, and the fix-it bill will be considered under fast-track Senate rules that don't allow minority party filibusters.

"We will be joining those who established Social Security, Medicare and now, tonight, health care for all Americans," said Pelosi, D-Calif., partner to Obama and Senate Majority Leader Harry Reid in the grueling campaign to pass the legislation.

"This is the civil rights act of the 21st century," added Rep. Jim Clyburn of South Carolina, the top-ranking black member of the House.

GOP lawmakers attacked the legislation as everything from a government takeover to the beginning of totalitarianism, and none voted in favor. "Hell no!" Minority Leader John Boehner, R-Ohio, shouted in a fiery speech opposing the legislation. "We have failed to listen to America and we have failed to reflect the will of our constituents."

Thirty-four Democrats also voted "no" on the Senate-passed bill.

Sunday night's votes capped an unpredictable and raucous weekend at the capitol, with Democratic leaders negotiating around the clock for the final votes as hundreds of protesters paraded outside, their shouts of "Kill the Bill! Kill the Bill!" audible within the Capitol.

A last-minute deal with a critical group of anti-abortion lawmakers Sunday afternoon sealed Democrats' victory. The leader of the anti-abortion bloc, Rep. Bart Stupak, D-Mich., didn't get to add stricter anti-abortion language to the underlying bill, but was satisfied by an executive order signed by Obama affirming current law and provisions in the legislation that ban federal funding for abortions except in cases of rape, incest or danger to the life of the mother.

Republican abortion foes said Obama's proposed order was insufficient, and when Stupak sought to counter them, a shout of "baby killer" was heard coming from the Republican side of the chamber.

Far beyond the political ramifications — a concern the president repeatedly insisted he paid no mind — were the sweeping changes the bill held in store for Americans, insured or not, as well as the insurance industry and health care providers.

The nonpartisan Congressional Budget Office said the legislation awaiting the president's approval would cut deficits by an estimated $138 billion over a decade. For the first time, most Americans would be required to purchase insurance, and face penalties if they refused. Much of the money in the bill would be devoted to subsidies to help families at incomes of up to $88,000 a year pay their premiums.

The second measure, which House Democrats demanded before agreeing to approve the first, included enough money to close a gap in the Medicare prescription drug coverage over the next decade, starting with an election-season rebate of $250 later this year for seniors facing high costs.

It also included sweeping changes in the student loan program, an administration priority that has been stalled in the Senate for months.

For the president, the events capped an 18-day stretch in which he traveled to four states and lobbied more than 60 wavering lawmakers in person or by phone to secure passage of his signature domestic issue. He also postponed an overseas trip to remain in Washington and push for the bill.

Obama watched the vote in the White House's Roosevelt Room with Vice President Joe Biden and dozens of aides, exchanged high fives with Rahm Emanuel, his chief of staff, and then telephoned Pelosi with congratulations.

Now Obama will have to sell the bill to the public, and a White House aide said he was likely to take at least one trip this weekend to emphasize the legislation's benefits.

The measure would also usher in a significant expansion of Medicaid, the federal-state health care program for the poor. The insurance industry, which spent millions on advertising trying to block the bill, would come under new federal regulation. Parents would be able to keep children up to age 26 on their family insurance plans.

To pay for the changes, the legislation includes more than $400 billion in higher taxes over a decade and cuts more than $500 billion from planned payments to hospitals, nursing homes, hospices and other providers that treat Medicare patients.

VATICAN CITY – Pope Benedict XVI rebuked Irish bishops Saturday for "grave errors of judgment" in handling clerical sex abuse and ordered a Vatican

2010-03-20T05:36:00.001-07:00

LONDON – British Airways canceled more than 1,000 flights after its cabin crew launched a three-day strike Saturday, wreaking havoc on the plans of tens of thousands of passengers just before the busy spring holiday season.

Hoping to keep as many passengers happy as possible, BA scrambled to rebook some on other services, chartered planes from rival airlines and drafted in volunteer crew. But it still had to scrap more than half of its 1,950 scheduled flights over the period.

Chief Executive Willie Walsh issued a direct apology via YouTube for the walkout, the airline's first in almost 15 years, saying it was a "terrible day for BA."

The strike — backed by some unions in the United States, Germany and Spain — also risked harm to Britain's Labour government before a tough general election expected before June.

On Saturday morning at BA's London Heathrow hub, the cavernous Terminal 5 was nearly deserted after some passengers had flown out early to avoid the strike or simply stayed away altogether. But delays were beginning to mount.

One man trying to get home to Sweden said he was already looking at a four-hour delay.

"Our flight from Dallas arrived two hours late, and now we're waiting to go to Stockholm — that flight is two hours late as well," said Bjorn Barka, a high school principal.

Michael Clements, a security director for a California-based company, was able to check in for his business trip to Amsterdam but was told it would be an hour before he could check in his heavy luggage. "Not enough people," he said with a shrug.

The Eurostar train service between London and continental Europe and Virgin's rail services between London and Scotland were expected to be busy as passengers sought alternate routes.

BA also warned that the disruption would likely last several days beyond the three-day strike, because of a knock-on effect on flights that would carry through to the end of a second strike planned for March 27-30.

"We're in limbo land," said Susan Danby, a school worker from the northern English city of Hull. She is due to fly March 29 to Las Vegas with friends to celebrate their 50th birthdays. "This is our dream trip, we booked it last August and we've been planning it for years."

"We all want more money and better conditions, but people shouldn't ruin other people's holidays," Danby said.

As protesters were readying picket lines Saturday outside London's Heathrow international airport, analysts estimated BA has already lost more than 25 million pounds (more than $37 million) because of canceled tickets and contingency costs.

The two planned strikes combined could cost the airline more than the 63 million pounds ($95 million) that Walsh is trying to save through the disputed changes to workers' pay and conditions.

BA's pilots are not part of the strike, after their union resolved a separate dispute over pay with the airline.

U.S., German and Spanish unions have given some support for Unite's action, but stopped short of pledges for coordinated activity that would disrupt BA's ability to refuel and service the planes it is operating during the walkout.

The U.S. International Brotherhood of Teamsters, which represents 40,000 aviation industry workers, urged travelers to find alternatives and said it was keeping its options "open." The U.S. Association of Professional Flight Attendants also expressed support for BA.

Aside from hurting BA financially, the strike is also an unwelcome event for Britain's governing Labour Party before the upcoming national elections.

Prime Minister Gordon Brown irritated Unite, a major political donor, by calling the union "deplorable" and saying as late as Friday night that it should call off the strike.

Britain faces even more possible travel chaos in the run-up to the April 2-5 Easter break, as railway signal workers voted last week to join rail maintenance workers in a strike. The Rail Maritime and Transport union has not called dates for the walkout, but refused to rule out the long Easter weekend.

And over this weekend, engineering works on the London Underground were forcing closures between central London and Heathrow, though the Heathrow Express train service was operating as normal.

Opposition Conservative Party leader David Cameron criticized the stranglehold that unions such as Unite have over the Labour Party.

"Once again, under Gordon Brown the vested interests triumph and the people lose out," Cameron said Saturday. "This threatens the future of one of Britain's greatest companies along with thousands of jobs."

BA said it would handle as many as 49,000 passengers on both Saturday and Sunday. That compares with the average 75,000 for a normal weekend day in March.

At its Heathrow base, more than 60 percent of long-haul flights will operate, but only 30 percent of short-haul. At Gatwick, all long-haul flights and more than half short-haul flights will run as normal.

Any passengers with canceled flights from Saturday through the end of the second planned strike on March 30 will be allowed to rebook on another BA flight within 355 days at no extra charge, but no refunds were being offered, the airline said.

Walsh said Friday it was "deeply regrettable" that the union rejected the airline's proposals. BA says the disputed changes are critical to the airline's survival.

The airline on Friday offered a compromise on a proposed pay freeze this year, offering a 3 percent rise next year and the year after and then an inflation-linked increase in 2013/14 capped at 4 percent.

Unite joint general secretary Tony Woodley, who has warned it will schedule more strikes for after the Easter break if the dispute is not resolved, said BA "ultimately wants to go to war with this union."

Unite argues it was not properly consulted on the changes, which also include a switch to part-time work for 3,000 staff and a reduction in cabin crew sizes from 15 to 14 on long-haul flights from Heathrow.

Police: Arrest in NJ Walmart racial comment case

2010-03-20T05:34:00.000-07:00

WASHINGTON TOWNSHIP, N.J. – Police say they have made an arrest in the case of a racial comment being made over the public-address system at a Walmart store in southern New Jersey.

The Washington Township Police Department said on its Web site early Saturday that an arrest has been made in a "bias incident" at the retail store. The posting says the police and Gloucester County Prosecutor's Office will announce the arrest at a midday news conference.

Washington Township Police declined to comment early Saturday.

A male voice came over the Walmart public address system Sunday evening and calmly announced: "Attention, Walmart customers: All black people, leave the store now." The announcement provoked an immediate apology from the store manager.

Officials for Bentonville, Ark.-based Wal-Mart Stores Inc., said the announcement was "unacceptable."