Life in OUR America, The Livyjr Files Volume 7 Options

[Livyjr]

"Japan's stocks dive on weak dollar"

Associated Press

Last updated: 6:32 a.m., Thursday, March 13, 2008

TOKYO -- Japan's main stock index plunged to its lowest close in 2 1/2 years Thursday, as market anxieties were stirred by the dollar's dive against the yen and by persistent concerns about the U.S. economy.

The benchmark Nikkei 225 stock index tumbled 427.69 points, or 3.33 percent, to close at 12,433.44 on the Tokyo Stock Exchange.

The figure set a new low for the year, and marked the index's lowest close since Aug. 31, 2005.

Shares dropped as the dollar fell precipitously close to the 100-yen mark.

The greenback sagged to as low as 100.02 yen in the Asian trading session, its lowest level since hitting 99.94 yen on Nov. 10, 1995.

"The major reason of the decline in the Tokyo market is the sudden weakening of the dollar against the yen, but it'll probably be temporary," said Yutaka Yoshino, technical analyst at Nikko Citigroup.

If the Federal Reserve cuts U.S. interest rates by half a percentage point next week, as the market has been expecting, the dollar will probably recover, he said.

Investors may also be done selling shares of exporters for now, which could provide stocks some support in the near-term, Yoshino said.

"We believe that the Nikkei will likely to be supported around 12,280," he said.

Exporters were hit hardest by the dollar's tumble, which erodes their overseas income.

Toyota Motor Corp. fell 3 percent to 5,250 yen, Honda Motor Co. dropped 4.2 percent to 2,940 yen and Sony Corp. shed 4 percent to 4,300 yen.

Bank and insurance shares performed poorly, tracking the performance of their U.S. counterparts overnight.

Mizuho Financial Group tumbled 6.8 percent to 385,000 yen, Mitsubishi UFJ Financial Group slipped 6.8 percent to 844 yen, and Sumitomo Mitsui Financial Group skidded 7.3 percent to 678,000 yen.

Insurer T&D Holdings shed 8 percent to 5,280 yen, while Millea Holdings fell 5.1 percent to 3,700 yen.

Commodity-related stocks rose as crude futures ended at a record after oil crossed the $110 a barrel mark overnight.

Inpex Holdings rose 5.1 percent to 1.24 million yen and Showa Shell added 3.2 percent to 1,036 yen.

Trading house Mitsui & Co. added 1.1 percent to 2,285 yen, while Marubeni rose 0.7 percent to 869 yen.

The broader Topix index, which includes all shares on the exchange's first section, shed 39.26 points, or 3.13 percent, to 1,215.87.

[Livyjr]

"Officials say Spitzer spent tens of thousands of dollars _ maybe $80,000 _ on call-girl ring"

By MICHAEL GORMLEY, Associated Press

Last updated: 7:42 p.m., Tuesday, March 11, 2008

ALBANY -- With pressure mounting on Gov. Eliot Spitzer to resign over a call-girl scandal, investigators said Tuesday he was clearly a repeat customer who spent tens of thousands of dollars -- perhaps as much as $80,000 -- with the high-priced prostitution service over an extended period of time.

On Monday, when the scandal broke, prosecutors said in court papers that Spitzer had been caught on a wiretap spending $4,300 with the Emperors Club VIP call-girl service, with some of the money going toward a night with a prostitute named Kristen, and the rest to be used as credit toward future trysts.

In the court papers, an Emperors Club employee was quoted as telling Kristen that Client 9 -- Spitzer, according to investigators -- "would ask you to do things that ... you might not think were safe," and Kristen responded by saying:

"I have a way of dealing with that."

"... I'd be, like, listen, dude, you really want the sex?"

THE FINANCIAL TIMES

"Regulators will feel loss of a risk-taker"

By Aline van Duyn in New York and Brooke Masters in London

Published: March 13 2008 02:00 | Last updated: March 13 2008 02:00

Eliot Spitzer's departure as New York governor raises questions about whether the state's regulators will be able to maintain the pivotal position in global financial regulation they have had since Mr Spitzer's days as attorney-general.

In recent weeks, Mr Spitzer played a vital behind-the-scenes role in persuading banks to pitch in on the rescue of Ambac, one of the world's biggest bond insurers.

The race to prop up Ambac was led by Eric Dinallo, the New York-insurance superintendent, a regulator appointed by Mr Spitzer.

Mr Spitzer had encouraged Mr Dinallo to adopt the proactive - and risky - approach that has been the hallmark of his years as a state official.

A $1.5bn (€970m, £750m) Ambac deal was completed on Friday, just days before the scandal broke about Mr Spitzer's liaison with a prostitute.

If the news had come earlier the deal might not have scraped through as it did, say bankers involved.

One area in the spotlight upon his departure is the role of New York as the most powerful regulator of the US insurance industry.

Highlighting the political importance of the theme, which is growing as municipal borrowers face funding difficulties due to the confidence crisis around bond insurers such as Ambac, the congressman Barney Frank told a hearing:

"This has not been a traditional Federal role - insurance has been state-regulated."

"That's not going to continue."

"I think the government has to be a partner with state regulators."

Mr Spitzer sharply increased the scope of what states could try to do.

His investigations of biased Wall Street research and sleazy mutual fund trading uncovered dramatic e-mails and wrung billions of dollars in penalties from financial services firms.

The probes embarrassed the Securities and Exchange Commission and gave him national prominence - he was dubbed the "Sheriff of Wall Street" and "Crusader of the Year".

He also waded into other areas usually left to the Federal government, filing lawsuits against out-of-state polluters, challenging George W. Bush's environmental policies and seeking to investigate racial patterns in lending.

Other state officials began to follow Mr Spitzer's example.

California, for example, passed a law that granted its attorney-general new powers to investigate financial services, which was modelled on New York's Martin Act, an important Spitzer tool.

Mr Spitzer was key to keeping alive the US system of competing regulators, in which states and the national government have overlapping responsibilities.

Mr Dinallo described a January meeting he held with banks about the bond insurance crisis as "like Nixon going to China" and urged them last month to "reward the risk I am taking".

"Only by rewarding regulators who take these risks will we be able to change the regulatory paradigm," he said.

Mr Dinallo yesterday said that he did not expect his department's work to change after Mr Spitzer's resignation.

Yet without the backing of a risk-taker such as Mr Spitzer, many financial industry executives are wondering whether that will be possible.

Additional reporting by Stacy-Marie Ishmael in New York

http://www.ft.com/cms/s/0/5638c10e-f0a0-11...?nclick_check=1

[Livyjr]

"Stocks rise after S&P report"

By MADLEN READ, Associated Press

Last updated: 5:52 p.m., Thursday, March 13, 2008

NEW YORK -- A fractious Wall Street rebounded from an early plunge to finish moderately higher Thursday, after Standard & Poor's predicted financial companies are nearing the end of the massive asset write-downs that have devastated the stock and credit markets.

The S&P projection gave investors some hope that the seemingly unrelenting losses from the mortage and credit crisis might indeed be bottoming out.

Standard & Poor's Ratings Services said it estimates writedowns of subprime asset-backed securities could reach $285 billion globally, up from its previous projection of $265 billion, but added that "the end of write-downs is now in sight for large financial institutions."

"The S&P comment was a positive for the market because investors were relieved to think that the subprime problem may be behind us," said Al Goldman, chief market strategist at A.G. Edwards.

Wall Street clearly remains anxious, however.

On Tuesday, the stock market launched its largest rally in more than five years after the Federal Reserve said it would auction $200 billion in Treasurys to help alleviate investment banks' financial bind.

But since then, stocks have been extremely volatile.

Kim Caughey, equity research analyst at Fort Pitt Capital Group, said that while she is a market bull, it's possible investors extrapolated a bit too much good news from the S&P report.

"I would rather see fewer foreclosures and housing prices bottoming out to decide that the credit crisis is drawing to a close," she said.

The S&P's note arrived on the heels of a spate of troubling news.

A Carlyle Group fund warned late Wednesday it expects creditors will seize all the fund's remaining assets after unsuccessful negotiations to prevent its liquidation.

Meanwhile, the government reported Thursday an unexpected dip in retail sales, and a research firm said nearly 60 percent more U.S. homes faced foreclosure in February than in the same month last year.

The Dow Jones industrial average finished up 35.50, or 0.29 percent, at 12,145.74, after being down more than 220 points early in the session and then popping up more than 100.

Broader market indexes also recovered from steep early losses.

The S&P 500 index rose 6.71, or 0.51 percent, to 1,315.48, while the Nasdaq composite index rose 19.74, or 0.88 percent, at 2,263.61.

Bond prices fell as stocks rose.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.54 percent from 3.44 percent late Wednesday.

As investors contend with tight credit markets, they also face weakness in the U.S. dollar and soaring commodities prices.

The dollar dropped to fresh lows against the euro and fell below 100 yen during Asian trading Thursday, the weakest level for the greenback against the Japanese currency in 12 years.

Gold surpassed the psychological benchmark of $1,000 an ounce for the first time, and crude oil briefly passed $111 a barrel.

Light, sweet crude rose 41 cents to settle at a record $110.33 on the New York Mercantile Exchange.

The Fed's Open Markets Committee meets next Tuesday and is widely expected to lower interest rates, with many analysts forecasting a drop of 0.50 percentage point.

However, in the past few weeks investors have been questioning whether another rate cut will help the economy.

Talk of regulatory changes for the mortgage industry Thursday were largely shrugged off by the market.

Treasury Secretary Henry Paulson outlined a plan to provide stronger oversight of mortgage lenders, whose lax standards are blamed for touching off the concerns about souring debt that have led to turmoil in the credit markets.

The market remains worried about more evidence of weak consumer spending.

The Commerce Department reported that retail sales fell 0.6 percent last month, after analysts predicted an increase of 0.2 percent.

Friday, the government releases data on consumer prices.

"Things just aren't good for the consumer, and thus, they're not good for Wall Street," Caughey said.

And on the corporate side of the coin, no one is positive which companies and which investors are going to end up losing money if more funds collapse.

"It is going to be difficult to see who has the Old Maid card."

"And time will tell," she said.

In other economic news, Labor Department said the number of workers seeking unemployment benefits was unchanged last week.

A government report released last week said employers cut payrolls by 63,000 in February -- the second straight month of losses -- and sent a wave of unease across Wall Street.

Advancing issues outnumbered decliners by about 9 to 7 on the New York Stock Exchange, where consolidated volume came to 4.94 billion shares, up from 4.27 billion Wednesday.

The Russell 2000 index of smaller companies rose 12.40, or 1.86 percent, to 679.71.

Overseas, Japan's Nikkei 225 index tumbled 3.3 percent to its lowest level in 2 1/2 years.

Britain's FTSE 100 fell 1.45 percent, Germany's DAX index slid 1.50 percent, and France's CAC-40 lost 1.42 percent.

------ On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

[Livyjr]

"Gold hits record $1,000 an ounce"

By MAE ANDERSON and LAUREN SHEPHERD, Associated Press

Last updated: 2:23 p.m., Thursday, March 13, 2008

NEW YORK -- Bargain-hunting at the local jewelry store just got harder.

Gold, which has soared to record levels in the past year, hit a new milestone Thursday, rising to $1,000 an ounce for the first time in futures trading -- a boon for investors, but a deterrent to consumers shopping for jewelry.

Michelle Findlay, a manager at a toll operator company in New York, said she has stopped buying pure gold pieces.

Her latest buy was a silver bracelet plated in 18-karat gold.

"I noticed lately the price has been going up," she said, while browsing at Gold Panel jewelry store on 34th Street in New York.

"I'll wait, definitely, for the prices to go down" before buying another gold item, she said.

The price of gold has jumped nearly 20 percent since the start of the year after rising nearly 32 percent in 2007.

The huge advance is mainly the result of a weaker dollar and record-high crude oil prices.

The dollar fell below 100 yen Thursday for the first time in 12 years and hit another new low against the euro, while oil traded above $110 a barrel Thursday.

Lower interest rates -- and the prospect of more cuts -- bringing the dollar's value down makes dollar-based commodities like gold cheaper for foreign buyers.

The weak currency has also made gold more attractive because the metal is a hedge against inflation.

"Interest rates are low and that doesn't help our dollar," said Scott Meyers, senior trading analyst with Pioneer Futures, a division of MF Global.

After topping $1,001 on the New York Mercantile Exchange, gold for April delivery fell back to settle at $993.80 an ounce on Thursday.

Analysts say gold could still go higher, especially if the Federal Reserve cuts interest rates again next week as expected.

When gold becomes more expensive on futures markets, it doesn't immediately translate into higher prices for jewelry.

But in the long term, the price tags on gold rings, bracelets and necklaces do go up.

Exactly when the increases from this latest jump will show up on price tags depends at least in part on a retailer's size.

Big retailers like Tiffany & Co. and those that sell jewelry to large department stores order products up to a year in advance and keep more in stock.

Those stores likely didn't pay as much for the jewelry when they ordered it, so they wouldn't need to raise prices as quickly to offset costs.

Instead, since some of those larger stores are already buying merchandise for the 2008 Christmas holiday season, consumers may see higher prices toward the end of the year.

Tiffany spokesman Mark L. Aaron said that while there is not a direct correlation between the rising price of gold and the cost of its gold jewelry -- the labor that goes into a piece is an important factor -- Tiffany does adjust prices based on the cost of precious metals.

If gold keeps rising, a price increase this year would be a "fair assumption," he said.

Independent jewelry stores, meanwhile, order products closer to when they appear on the shelves.

Patrick J. Murphy, owner of Murphy Jewelry in Pottsville, Pa., said he doesn't raise the price of gold jewelry he has in stock but he must when he reorders pieces.

For example, an 18-inch gold chain in stock has a retail price of $189.95, but if he reordered the chain at the same length, weight and style, it would be priced at $346.

"That's been our challenge," he said.

When the makers of branded jewelry and accessories raise their prices, he has to pass the increase on to customers.

He cited a recent price increase by Rolex as one example.

Patti Warshauer, owner of Main Street Goldworks in Half Moon Bay, Calif., said consumers are buying less, but it's not the price of gold that's getting to them -- it is all the other financial pressures they're contending with.

"Discretionary income is much more affected by the price of other things, gas and things like that," she said.

"They're still buying gold if they need it, if it's what they like."

Browsing jewelry stores in New York's diamond district, Kathleen Pierri, from Smithtown, N.Y., said the rising price of gold might make her buy less, but "if you really like it, you'll buy it," she said.

"Jewelry is a feel-good item, you're going to buy it if you need it," Pierri said.

Helen Antalg, a jewelry appraiser from Australia, said she was on watch for a good deal during a vacation in New York.

"I'm looking to see if there's anything that catches my eye and at a good price," she said.

"I'm tending to go to the pawnbrokers as opposed to the retail side of things" in order to get better deals, she said, but added that she hasn't changed her jewelry-buying habits due to rising prices.

With prices rising, selling those not-so-beloved Valentine's Day presents or family heirlooms might sound like a good way to make a few extra bucks.

Dave Adelman, who owns two pawn shops in Atlanta, said he's seen an increase in the number of people coming in to sell their gold.

But he said he can't be sure whether that can be pegged to gold prices rising or other economic factors.

"When they come in, we don't know whether they're doing it based on the gold price or because of need," he said.

Whether consumers are buying gold or selling it, Murphy, a jeweler for 30 years, said he's amazed the price has jumped so high.

He remembers when gold was just $35 an ounce.

"I didn't think we would ever be talking about $1,000 an ounce," he said.

"It's crazy."

[Livyjr]

"Citi CEO paid $3.16M compensation in '07"

By MADLEN READ, Associated Press

Last updated: 7:12 p.m., Thursday, March 13, 2008

NEW YORK -- Citigroup Inc.'s new chief executive Vikram Pandit received $3.16 million in total compensation during 2007 -- the year that started with him running his own hedge fund and ended with him at the top of the largest U.S. bank by assets.

And to convince Pandit to stay with the troubled bank while he works to extricate it from losing bets on mortgages and the now-frozen credit markets, Citigroup's board in January signed off on awards valued at about $102 million.

That includes a $2.5 million retention equity award; nearly $27 million worth of stock, and 3 million options that in January were worth around $73 million.

For his six months at Citigroup last year, Pandit received a salary of $250,000, according to a Thursday regulatory filing.

He received no cash bonus and no perks, but got stock and option awards in July worth $2.91 million.

After working for most of his career at the investment bank Morgan Stanley and then starting up his own hedge fund, Old Lane, Pandit arrived at Citigroup in July 2007 when Citi bought Old Lane.

At the time, Pandit received $165.2 million in payment for the sale of his partnership interest in Old Lane.

He invested $100 million back into an Old Lane fund, where it will remain invested until July 2011, Thursday's filing said.

By mid-December, Citi's board named Pandit chief executive, about a month after then-CEO Charles Prince was ousted amid huge mortgage-related losses at the bank.

Citi ended up paying Prince more than it did Pandit during 2007.

Prince received a $40 million payout from stock awards, a bonus and other benefits, according to regulatory filings.

That amount does not include the 1.61 million Citi shares he already owned, his $1 million salary for 2007, or his perks for the year -- which included nearly $171,000 in aircraft use.

The AP's total pay calculations include executives' salary, bonus, incentives, perks, above-market returns on deferred compensation and the estimated value of stock options and awards granted during the year.

The calculations don't include changes in the present value of pension benefits, and they sometimes differ from the totals companies list in the summary compensation table of proxy statements filed with the Securities and Exchange Commission.

In the fourth quarter of 2007, Citigroup posted a loss of nearly $10 billion, its biggest ever, after its investments in bad debt lost $18.1 billion in value.

When Pandit took the CEO spot in December, he said he would conduct a "dispassionate review" of Citi's many operations around the globe.

The review, still under way, has so far included streamlining and paring back Citi's mortgage business.

Pandit was not the only executive at Citi to earn big incentive awards in January.

The filing said that in January 2008, Citigroup approved a $1.95 million cash bonus, $3.09 million in stock awards under the company's Capital Accumulation Program (CAP) and $1.95 million in retention equity awards for Win Bischoff -- the Citi veteran who was named chairman of the company in December.

For Gary Crittenden -- who was named CFO last February -- Citi in January approved a cash bonus of $2.85 million, $4.59 million in stock awards under CAP, and $5.35 million in retention equity awards.

Meanwhile, Citigroup approved in January total incentive and retention awards of $19.3 million for Citi's Global Banking CEO Michael Klein; $12 million in total awards for Citi's Global Wealth Management CEO Sallie Krawcheck; $8.3 million in total awards for Vice Chairman Lewis Kaden; and $10.25 million in total awards for Vice Chairman Stephen Volk.

[Livyjr]

"Gas, oil rise to records as dollar falls"

By JOHN WILEN, Associated Press

Last updated: 3:42 p.m., Thursday, March 13, 2008

NEW YORK -- Gas and oil prices jumped again to new highs Thursday as the dollar weakened, although crude's advance was limited by fresh evidence of a U.S. economic slowdown.

At the pump, gas prices surged 2.1 cents overnight to a record national average of $3.267 a gallon, according to AAA and the Oil Price Information Service.

Gas prices are likely to rise much higher this spring; estimates range from about $3.50 a gallon in the Energy Department's latest forecast to $3.75 or even $4 a gallon according to some analysts.

Diesel fuel, used to transport the vast majority of the nation's consumer goods, also hit a new record.

Diesel prices rose another 3.3 cents overnight to a record average of $3.909 a gallon.

Gas and diesel are following crude, which has risen to records in 12 of the last 13 trading sessions.

Analysts blame oil's ascent on weakness in the dollar, which dropped to yet another new low against the euro Thursday.

Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is weak.

Interest rate cuts further weaken the dollar, and have helped fuel oil's rise, especially with another reduction expected next Tuesday at the Federal Reserve's regularly scheduled monetary policy meeting.

Light sweet crude for April delivery rose 41 cents to settle at a record $110.33 a barrel on the New York Mercantile Exchange Thursday after earlier surging to a new trading record of $111.

"This cocktail's been whipped up by the Federal Reserve," said James Cordier, founder of OptionSellers.com, a Tampa, Fla., trading firm.

Analysts said the Commerce Department's report that retail sales fell in February raised new worries that the economy is headed for recession, and might curtail demand for oil.

Those concerns limited oil's gains, but analysts expect any oil price weakness to be short-lived, and for oil to maintain its upward track.

For consumers, that means pain at the pump -- and in the form of higher prices for food and consumer goods, primarily related to rising fuel costs -- will continue into the foreseeable future.

"There's really no end in sight to this," Cordier said.

Other energy futures were mixed Thursday.

April gasoline futures fell 4.58 cents to settle at $2.6828 a gallon, while April heating oil futures rose 10.04 cents to settle at a record $3.1248 a gallon after earlier rising to a trading record of $3.1275 a gallon.

April natural gas futures rose 21.9 cents to settle at $10.23 per 1,000 cubic feet.

The Energy Department reported that gas inventories fell by 86 billion cubic feet last week, slightly higher than the 83 billion cubic foot withdrawal analysts surveyed by Dow Jones Newswires were expecting.

In London, April Brent crude rose $1.27 to settle at $107.54 a barrel on the ICE Futures exchange.

[Livyjr]

"Stocks rise after S&P report"

By MADLEN READ, Associated Press

Last updated: 5:52 p.m., Thursday, March 13, 2008

NEW YORK -- A fractious Wall Street rebounded from an early plunge to finish moderately higher Thursday, after Standard & Poor's predicted financial companies are nearing the end of the massive asset write-downs that have devastated the stock and credit markets.

The S&P projection gave investors some hope that the seemingly unrelenting losses from the mortage and credit crisis might indeed be bottoming out.

Standard & Poor's Ratings Services said it estimates writedowns of subprime asset-backed securities could reach $285 billion globally, up from its previous projection of $265 billion, but added that "the end of write-downs is now in sight for large financial institutions."

"The S&P comment was a positive for the market because investors were relieved to think that the subprime problem may be behind us," said Al Goldman, chief market strategist at A.G. Edwards.

Kim Caughey, equity research analyst at Fort Pitt Capital Group, said that while she is a market bull, it's possible investors extrapolated a bit too much good news from the S&P report.

"I would rather see fewer foreclosures and housing prices bottoming out to decide that the credit crisis is drawing to a close," she said.

"Carlyle Capital woes signals trouble"

By VINNEE TONG, Associated Press

Last updated: 6:24 p.m., Thursday, March 13, 2008

NEW YORK -- A mortgage-backed investment fund created by the Carlyle Group faltered near collapse Thursday, in what analysts saw as a sign that more bad investments need to be cleared out before markets can begin righting themselves.

Shares of Carlyle Capital plummeted nearly 90 percent and rattled stock markets around the globe after the fund said late Wednesday that it expected creditors to seize all of its remaining assets -- investment-grade mortgage-backed securities -- because negotiations to prevent liquidation had failed.

"Someone somewhere has got to fail and this is it," said Andrew Wilkinson, senior market analyst at Interactive Brokers Group LLC.

"I think there comes a point when you need to see some of this stuff get flushed out."

"The bad news just keeps getting deeper every day."

An S&P report gave investors hope that financial companies are nearing the end of the massive asset write-downs that have been unsettling world markets since last summer.

"The end of write-downs is now in sight for large financial institutions," it said.

That helped Carlyle Capital shares, which had traded as low as 15 cents, regain some ground to end the day at 35 cents, down 87.5 percent.

The shares, which went public at $19 a share in July on the Euronext exchange, traded at $12 just last week.

The Carlyle Group, one the world's biggest private equity groups, said in a statement that it had taken "extraordinary measures" and worked "exhaustively" to get financing for Carlyle Capital, but talks had ended because the terms of the proposed debt had become too expensive.

Asked whether the fund would simply shut down, spokeswoman Emma Thorpe said, "We're evaluating options for the fund."

She declined to elaborate.

Carlyle Capital said it has defaulted on about $16.6 billion of its debt as of Wednesday, and the rest is expected to go into default soon.

About $5.7 billion of the defaulted debt has been sold, the Carlyle Group said Thursday.

Thorpe said she couldn't say what has been done with the rest.

The fund shook financial markets last week after it was unable to offer more collateral to protect its $21.7 billion portfolio of residential-mortgage-backed bonds.

The banks that had loaned money demanded more collateral, known as a margin call, to cover the gap between the previous value of the securities and their current, lower level.

Carlyle's troubles amplified fears that billions more dollars in depressed mortgage-backed securities will flood the market, driving their value even lower.

The reports helped drive down markets in Europe and Asia, and Dow Jones industrials sank more than 220 points before the S&P report mollified the market.

The Dow ended the day 35 points higher.

The sell-off of Carlyle Capital's assets would be a huge setback for the Washington, D.C.-based Carlyle Group.

Carlyle Capital, registered in Britain but managed by New York-based executives, was the first of its 55 funds to go public and the first of the group's funds to lose money.

Carlyle Group said the defaults would not affect its other investments.

"We believe it will not have a measurable impact on any of our other funds, investments and portfolio companies," the Carlyle Group said in a statement.

It manages $81.1 billion and has invested $43 billion of equity in 774 corporate and real estate transactions that cost a total of $229.3 billion.

More than a year ago, Carlyle Capital leveraged its $670 million equity 32 times to finance a $21.7 billion portfolio of AAA-rated residential mortgage-backed securities issued by Freddie Mac and Fannie Mae.

It borrowed money from at least a dozen banks and firms, including Bank of America Corp., Citigroup Inc. and Merrill Lynch & Co.

But the value of mortgage-backed securities has plummeted as U.S. home prices fall and foreclosures surge, prompting the banks to ask Carlyle Capital for more than $400 million in additional capital.

Since the beginning of the credit crunch, Carlyle Group extended loans to Carlyle Capital to help meet margin calls, including a $150 million revolving loan, Citigroup analyst Donald Fandetti told investors in a research note March 6.

"It appears CCC is fully drawn on this line and so far no further loans have been provided."

Hopes for refinancing fell apart after lenders said the value of the collateral had fallen further, and negotiations disintegrated late Wednesday as banks asked for even more collateral worth about $97.5 million.

Wilkinson, of Interactive Brokers Group, said it didn't make sense for Carlyle Group to keep bailing out its mortgage-focused fund.

"If it's a standalone entity that's vulnerable to failure, then you let it go and you bear the consequences but you certainly don't throw good money after bad," he said.

------

AP Business Writers Joseph Altman and Stephen Bernard contributed to this report.

[Livyjr]

"Former National Century execs convicted"

By ANDREW WELSH-HUGGINS, Associated Press

Last updated: 5:53 p.m., Thursday, March 13, 2008

COLUMBUS, Ohio -- A federal jury on Thursday convicted five former executives of a health care company in a $1.9 billion scheme to defraud investors.

The officials worked for National Century Financial Enterprises, described as the nation's largest health care financing firm before its 2002 bankruptcy.

The five -- some of the company's highest ranking executives -- were convicted of conspiracy to commit wire and securities fraud.

The defendants and their attorneys listened without emotion as U.S. District Judge Algenon Marbley read the verdicts from a 27-count indictment one by one.

Some of the defendants' family members sitting in the courtroom appeared stunned.

Those convicted were: Donald Ayers, the company's former chief operating officer; James Dierker, the company's former vice president of client development; Roger Faulkenberry, a former executive vice president who raised money from investors; Rebecca Parrett, the company's former vice chairman; and Randy Speer, National Century's former chief financial officer.

The defendants face a minimum of 20 years in prison, and prison terms could go as high as 30 years behind bars depending on the number of counts they were convicted of.

The judge, over the objections of government prosecutors, allowed the defendants to remain free while they await sentencing but required them all to wear an electronic monitoring device.

Sentencing was expected in two to three months.

National Century offered financing to small hospitals, nursing homes and other health care providers by purchasing their accounts receivable, usually for 80 or 90 cents on the dollar, so they wouldn't have to wait for insurance payments.

National Century then collected the full amount of the payments.

The company, based in suburban Dublin, raised the money to fund its business by selling bonds to investors.

Prosecutors argued that the company's executives authorized millions in unsecured loans to those health care providers, then misled investors about the loans.

Attorneys for the five defendants said prosecutors took the company's activities out of context by showing jurors only a tiny slice of National Century's operations.

The government said the unsecured loans caused shortfalls that the executives covered up by moving money between accounts.

The government alleged the executives fabricated data and lied to investors about the shortfalls and loaded false information onto a company computer system.

"If they did nothing wrong, then why did they have to lie and cheat and cover it up month after month, year after year?" federal trial attorney Kathleen McGovern said to jurors.

The government's star witness, former Executive Vice President Sherry Gibson, testified last month that the company kept two sets of books, one for public consumption filled with false information, the other that showed the firm's actual shortfalls.

Gibson is one of four former National Century executives who previously pleaded guilty to fraud charges and have cooperated with the government.

Over a day and a half of closing arguments, defense attorneys attacked the government's case on the grounds that the evidence was thin and the witnesses unreliable.

"The deeper we look at this, the more flimsy the government's case becomes," Leonard Yelsky, who represented Dierker, told jurors.

Missing from the trial has been National Century's former president and chief executive, Lance Poulsen, a chief target of the government's allegations.

Before his own trial on the fraud charges in August, Poulsen is scheduled for a trial Monday before Marbley on charges of witness tampering.

Defense attorneys argued that the FBI's 2002 raid on the company caused National Century's bankruptcy because it wasn't allowed to close its books properly.

Prosecutors dismissed the notion, saying the shortfalls would have emerged eventually.

The jury, which had deliberated since Tuesday, had to sift through hundreds of documents and recall hours of testimony over five weeks, some of it lasting hours and dwelling on highly complex financial issues.

[Livyjr]

"Treasurys off after S&P issues forecast"

By LESLIE WINES, Associated Press

Last updated: 5:43 p.m., Thursday, March 13, 2008

NEW YORK -- Treasury prices plunged Thursday after Standard & Poor's Ratings Services said financial firms may be nearing the end of write-downs of subprime asset-backed securities.

The ratings service estimated that write-downs could reach $285 billion globally, up from a previous $265 projection.

Still, S&P's statement said "the end of write-downs is now in sight for large financial institutions."

This view allowed investors to hope that the financial markets may soon recover from months of subprime contagion that have damaged nearly every sector of the credit market except Treasurys and some ofter federal agency debt.

The statement encouraged investors to pull back from a Treasury rally and venture into some of the riskier assets that have been out of favor throughout the subprime crisis.

The benchmark 10-year Treasury note gave up gains to close down 20/32 at 99 23/32 with a yield of 3.53 percent, up from 3.44 percent late Wednesday, according to BGCantor Market Data.

Prices and yields move in opposite directions.

The 30-year long bond dropped 30/32 to 98 21/32 with a yield of 4.46 percent, up from 4.40 percent.

The 2-year note dropped 2/32 to 100 23/32 with a yield of 1.62 percent, down from 1.59 percent.

After hours trade had only a slight effect on yields.

At 5:30 p.m. Eastern time, the 10-year yield was still 3.53 percent.

The 30-year yield was down to 4.45 percent and the 2-year yield remained at 1.62 percent.

The 3-month note fell to 1.37 percent from 1.45 percent Wednesday as the discount rate dropped to 1.34 percent from 1.42 percent.

Prices also were depressed by a disappointing auction of $10 billion in 10-year notes.

Bids from domestic accounts and foreign central banks were well below average.

The poor auction results play into fears that foreign bidders are moving away from dollar-denominated assets like Treasurys and seeking instruments in the higher-yielding euro and Swiss franc.

The dollar hit a new low against the euro.

Earlier, Treasurys rallied on a combination of data showing weak consumer activity alongside the record high prices for oil and gold.

The Commerce Department reported that retail sales dropped 0.6 percent last month, far worse than the 0.2 percent increase forecast by Thomson/IFR.

The report was especially unnerving because the U.S. consumer has been viewed as one of the few remaining drivers of the economy.

Consumer spending accounts for two-thirds of total economic activity.

Economists fear that higher food and energy prices, on top of a crumbling housing sector and a wobbly labor market are finally beginning to take a toll.

"This risks the first quarterly pullback in real spending since the 1991 recession," said Sal Guatieri, an economist at BMO Capital Markets.

The Labor Department Thursday reported that jobless claims in the latest week were unchanged from the prior week at 353,000.

That level is consistent with a weak labor market.

Gold futures briefly broke $1,000 an ounce for the first time as crude futures surged to a record high of $111 a barrel.

There is strong concern that the commodities rally has intensified inflation at the same time that the economy is slowing.

The bond market abhors inflation because it erodes the value of fixed income.

In addition, an increase in inflation that occurs alongside an economic slowdown complicates the task of the Federal Reserve, which will be tempted to raise rates to choke inflation, but also tempted to cut rates to stimulate the economy.

Treasury Secretary Henry Paulson Thursday called for a complete revamping of credit market rules to ensure that the current credit crisis can be avoided in the future.

Paulson said regulators failed to keep pace with innovations in credit markets.

"The objective here is to get the balance right -- regulation needs to catch up with innovation and help restore investors confidence but not go so far as to create new problems, make our markets less efficient or cut off credit to those who need it," Paulson said at the National Press Club.

[Livyjr]

"Stricter mortgage rules proposed"

By JEANNINE AVERSA, Associated Press

Last updated: 5:22 p.m., Thursday, March 13, 2008

WASHINGTON -- Economic policymakers on Thursday recommended stricter regulation of mortgage lenders as part of a broad effort to prevent a repeat of a credit crisis threatening to drive the country into recession.

With problems in the credit and housing markets worsening, the Bush administration now seems to favor a larger role for government -- an approach for which Republicans generally have had little appetite.

Recommendations from a presidential advisory group on financial markets cover mortgage lenders and other institutions, as well as investors, credit ratings agencies and regulators.

Treasury Secretary Henry Paulson, who leads that group, said the effort is not about "finding excuses and scapegoats."

The suggested actions, he said, are intended to avoid another meltdown in the credit and housing markets.

"The objective here is to get the balance right."

"Regulation needs to catch up with innovation and help restore investor confidence but not go so far as to create new problems, make our markets less efficient or cut off credit to those who need it," Paulson said.

Federal and state regulators should strengthen oversight of mortgage lenders, according to the group's report released Thursday.

Also, states should follow strong, uniform licensing standards for mortgage brokers.

Legislation in Congress would create a nationwide licensing system.

Sen. Charles Schumer, D-N.Y., said administration officials are "beginning to put their toe in the water when it comes to government involvement to help the economy."

"The bad news is they're going to have to do a lot more than that to address the problem."

Other recommendations urge improvements by credit rating agencies, criticized for not accurately assessing risk on complex mortgage investments.

These kinds of business transactions soured, causing market chaos.

The report also suggests clearer disclosures and assessments of risks on investments.

Greg McBride, senior financial analyst at Bankrate.com, likened the recommendations to "putting up a traffic light only after a series of auto accidents."

"It is purely reactionary," he said.

"The ideas themselves are not necessarily new but the pressure to do something is growing as housing problems become more pronounced."

The housing and credit woes have shaken Wall Street, propelled home foreclosures to record highs and forced financial companies to absorb multibillion losses on bad investments in mortgage-backed securities.

For the first time since 2001, recession is a serious threat.

Federal Reserve Chairman Ben Bernanke said the proposals are "an appropriate and effective response to the deficiencies in our financial framework that contributed to the current turmoil in financial markets."

The central bank chairman serves on the advisory group, created after the 1987 Wall Street crash to monitor markets, as do the heads of the Securities and Exchange Commission and the Commodity Futures Trading Commission.

Paulson said in a speech at the National Press Club that the report "is not about finding excuses and scapegoats."

"Those who committed fraud or wrongdoing have contributed to the current problems; authorities need to, and are prosecuting them."

"But poor judgment and poor market practices led to mistakes by all participants."

The next step, Paulson said, is to push to get the recommendations in place.

The administration did not lay out a timetable; analysts said the process could drag on for months.

Answering questions after his speech, Paulson hewed to the position of past secretaries when he said a strong dollar is in the national interest.

The dollar dropped to a new low Thursday against the euro and a 12-year low against the Japanese yen.

That helps sales of U.S. exports to foreign buyers because it makes U.S. goods less expensive.

But the drooping dollar increases inflationary pressures.

The advisory group also recommended that credit-rating agencies differentiate between ratings on complex investment products and conventional bonds.

The ratings agencies also should disclose conflicts of interest, Paulson said.

SEC Chairman Christopher Cox said Congress recently gave the SEC the power to address issues including conflicts of interest involving credit-rating agencies.

"We will use that authority to help restore investor confidence," he said.

To Paulson, "there is no single, simple solution to the problems that have emerged ... yet we have determined that market participants' behavior must change."

The financial problems started with certain home loans, known as subprime mortgages, that are made to people with tarnished credit histories or low incomes.

These borrowers got clobbered when the housing slump dragged down home prices and mortgage rates rose.

Foreclosures and late payments soared as these borrowers found it difficult, if not impossible, to make monthly mortgage payments.

Easy credit during the housing boom enabled people to move into homes they otherwise could not afford.

The mess later spread to more creditworthy borrowers.

------

On the Net:

President's Working Group on Financial Markets report: http://tinyurl.com/2exje6

[Livyjr]

"Home prices plunge across California"

By ALEX VEIGA, Associated Press

Last updated: 3:13 p.m., Thursday, March 13, 2008

LOS ANGELES -- Median home prices plunged in many of California's most populous counties in February, with Southern California leading the slide with an overall drop of 17.9 percent compared to a year earlier, according to new housing data released Thursday.

The drops reflect a deepening housing crisis in the state, which saw home values soar during the housing boom then decline sharply in most areas.

Median home prices fell this year in 15 major counties, DataQuick Information Systems said.

The median price in a six-county area of Southern California fell to $408,000 -- the lowest level since October 2004, when it was $402,500.

That median is 19.2 percent below the region's peak price of $505,000 last summer, and it's 1.7 percent below January's median, the firm said.

In the nine counties of the San Francisco Bay Area, the median price fell 11.6 percent to $548,000 compared to a year earlier and 17.6 percent from the region's peak median price of $665,000 last summer.

Bay Area prices were essentially flat from January.

Home sales volume also kept sliding last month.

Sales fell 39 percent from a year earlier in Los Angeles, Orange, San Diego, Riverside, San Bernardino and Ventura counties.

In all, 10,777 homes were sold in February in those six counties, up 8 percent from January, DataQuick said.

Southern California's home sales volume has hit new lows every month since September.

The nine San Francisco area counties saw a similar slowdown, as sales dropped 36.7 percent last month from February 2007.

Some 3,989 homes were sold in San Francisco, Marin, San Mateo, Napa, Alameda, Sonoma, Contra Costa, Santa Clara and Solano counties.

That was up 11.2 percent from January.

Even as prices fall, buyers remain slow to dive into the market, with many waiting for prices to fall further.

Others have been unable to find affordable financing because lenders stung by soaring mortgage defaults and foreclosures have cut back on the easy lending that helped propel the housing boom.

The dynamic has worsened the prospects for many homeowners desperate to sell as falling home values drain their equity.

Statewide figures were expected later Thursday.

[Livyjr]

"Stricter mortgage rules proposed"

By JEANNINE AVERSA, Associated Press

Last updated: 5:22 p.m., Thursday, March 13, 2008

WASHINGTON -- Economic policymakers on Thursday recommended stricter regulation of mortgage lenders as part of a broad effort to prevent a repeat of a credit crisis threatening to drive the country into recession.

With problems in the credit and housing markets worsening, the Bush administration now seems to favor a larger role for government -- an approach for which Republicans generally have had little appetite.

Recommendations from a presidential advisory group on financial markets cover mortgage lenders and other institutions, as well as investors, credit ratings agencies and regulators.

Answering questions after his speech, Paulson hewed to the position of past secretaries when he said a strong dollar is in the national interest.

The dollar dropped to a new low Thursday against the euro and a 12-year low against the Japanese yen.

"Dollar's clout sinks worldwide"

By ALAN CLENDENNING, Associated Press

Last updated: 3:13 p.m., Thursday, March 13, 2008

SAO PAULO, Brazil -- Antique store owners in lower Manhattan, ticket vendors at India's Taj Mahal and Brazilian business executives heading to China all have one thing in common these days:

They don't want U.S. dollars.

Hit by a free fall with no end in sight, the once mighty U.S. dollar is no longer just crashing on currency markets and making life more expensive for American tourists and business people abroad; its clout is evaporating worldwide as foreign businesses and individuals turn to other currencies.

Experts say the bleak U.S. economic forecast means it will take years for the greenback to recover its value and prestige.

Negative dollar sentiment is growing in nations where the dollar was historically accepted as equal or better than local currency -- and dollar aversion is even extending to some quarters in the United States.

At the Taj Mahal, dollars were always legal tender, alongside rupees, for entry into the palace.

But because of the falling value of the dollar, the government implemented a rupees-only policy a month ago.

Indian merchants catering to tourists have also turned bearish on the dollar.

"Gone are the days when we used to run after dollars, holding onto them for rainy days," said Vijay Narain, a tour operator in the city of Agra where the Taj Mahal is located.

"Now we prefer the euro."

"It gives us more riches."

In Bolivia, billboards feature George Washington's image on a $1 bill alongside a bright pink 500 euro note, encouraging savers to turn to the euro to tuck away money earned abroad or sent home in remittances.

"If the dollar's going down ... save it in Euros!!!" say the signs popping up around La Paz for Bolivia's Banco Bisa.

And in neighboring Brazil, the Confidence Cambio money-changing service was the first to start offering yuan so travelers to China no longer have to change the money into dollars first.

The service is already a hit because Brazil does big business with China, and lots of Brazilians are heading to the Olympics this summer.

"Now we tell people not to take dollars when they go abroad, it's better to change it directly to the local currency," said Fabio Agostinho, one of the firm's managing partners.

"If people leave here with dollars and go abroad, they lose when they exchange them."

"It's the same thing whether they're heading to China, Europe or even Argentina."

In Manhattan's Bowery district, Billy LeRoy, the owner of Billy's Antiques & Props, prefers payment in euros so he can stockpile the currency for his annual antique buying trip to Paris.

"Whip out dollars at the French flea market now, and they'll shoo you away," he said at his store near apartment buildings where Europeans are snapping up units because they've become dirt cheap.

"Before it was like the second coming of Christ, but now they don't want it or if they do take dollars, they're going to take their pound of flesh."

The dollar has steadily eroded in value against the euro and other currencies since 2002 as U.S. budget and trade deficits ballooned, but fears of an American recession and credit crisis have sent the dollar to stunning lows amid predictions the slump will continue for a long time.

The euro traded for a record $1.5625 before declining to $1.5586 Thursday while the dollar dropped below 100 Japanese yen for the first time since November 1995.

It traded as low as 99.75 yen before recovering some ground to 101.68 yen.

The dollar also recently hit a 10-year low against the Chilean peso, and fell to its lowest level against Brazil's real since the nation floated its currency in 1999.

While low dollar cycles have come and gone for decades, experts caution that it's now much more difficult to predict when this one will end because the euro didn't exist as competition for the dollar before.

During previous U.S. economic downturns, big foreign funds typically snapped up U.S. treasuries, helping to shore up the dollar to a certain degree.

But the euro and currencies from other nations are now seen as legitimate options, and interest rates are higher outside the United States -- meaning the funds can get better returns on investments elsewhere.

"You have the U.S. still holding this trade deficit, but now you have the possibility of a U.S. led recession, and you have a weakening currency."

"So it's a very dark outlook for the dollar," said Gareth Sylvester, senior currency strategist with the British firm HIFX Inc., which executed $40 billion in currency trades last year.

Nations that were once seen as incredibly risky for investments -- such as Brazil -- are now seen as good long-term bets.

And countries such as China and Russia, with burgeoning coffers of money to invest abroad, are thought to be shifting some of their reserves or diversifying fresh income to destinations and currencies outside the United States.

It used to be important for most countries "to accumulate dollars as a precautionary element against rainy days, but the accumulation of reserves has become so large in most emerging market countries that the balance is way beyond what's needed for precautionary reasons," said Eliot Kalter, a fellow at Tufts University's Fletcher School of Law and Diplomacy and a former International Monetary Fund official.

While most experts believe the dollar will eventually regain strength, no one is willing to predict when that will happen.

"I think the factors that are affecting the weakness of the dollar will be reversed, but no time soon," Kalter said.

The problem right now, is that "people just don't want to be holding U.S dollars and U.S.-based equities," Sylvester added.

"If you are an investor with a million dollars to invest, you look for the highest yield -- you're looking at South Africa, Australia, New Zealand."

And it's not only the big time investors that are looking for other options.

In Peru, where savings in U.S. dollars were long a popular hedge against inflation, many citizens are closing dollar accounts in favor of Peruvian soles.

At the same time, businesses like supermarkets, movie theaters and cable TV companies that used to accept dollars are now demanding soles.

Edwin Figueroa, a 29-year-old systems engineer, switched his checking account from dollars to soles seven months ago as the dollar's decline started worrying him.

He doesn't think he'll be going back anytime soon.

The Peruvian sol "is stable now," he said.

"And maybe in a year, the dollar will even go lower."

--------

Associated Press Writers Biswajeet Banerjee and Leslie Josephs contributed from Lucknow, India, and Lima, Peru.

[Livyjr]

"Oil prices slip from record levels"

By PABLO GORONDI, Associated Press

Last updated: 8:12 a.m., Friday, March 14, 2008

Oil prices retreated Friday after jumping as high as a record $111 a barrel in the previous session as investors fled the declining dollar in search of a haven in commodities.

Analysts said the decline reflected the volatility that has characterized crude futures trading in recent weeks.

"When there are no immediate supply side concerns that justify surging to new record everyday, some pullback is inevitable," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

"This is just part of the volatility of trading."

Light, sweet crude for April delivery on the New York Mercantile Exchange dropped 29 cents to $110.04 a barrel in electronic trading by midday in Europe.

In London, Brent crude futures lost $1.34 to $106.20 a barrel on the ICE Futures exchange.

Shum said the expiration of options on the April Nymex crude contract on Friday added to the volatility of trading.

The contract surged Thursday to an all-time trading high of $111 before settling at a record close of $110.33 a barrel, up 41 cents from the previous session.

Crude has risen to records in 12 of the last 13 trading sessions.

Analysts blame oil's ascent on the weak dollar, which dropped to yet another low against the euro Thursday.

Crude futures and other commodities offer a hedge against a falling dollar; as well, oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is weak.

Interest rate cuts further weaken the dollar and have helped drive oil's rise, and another reduction in U.S. benchmark lending rates is expected at the Federal Reserve's regularly scheduled monetary policy meeting next Tuesday.

"The dollar traders will be watching the release later (Friday) of the U.S. inflation number for February as an indicator of the Fed decision next Tuesday," said Olivier Jakob, of Petromatrix in Switzerland.

"What central banks decide next Tuesday should be more relevant to oil prices than any recent OPEC meetings."

Analysts said the U.S. Commerce Department's report Thursday that retail sales fell in February raised new worries that the economy is headed for a recession that would curtail demand for oil.

But analysts expect any oil price weakness to be short-lived.

"In the near term, despite the fact that oil pricing is pulling farther from market fundamentals, this bull run could continue because of the expectation of further (Fed) interest rate cuts and continued weakening of the U.S. dollar," Shum said.

In other Nymex trading, heating oil futures dropped 0.39 cent to $3.1209 a gallon while gasoline prices fell 1.23 cents to $2.6705 a gallon.

Natural gas futures fell 1.6 cents to $10.214 per 1,000 cubic feet.

------

Associated Press writer Gillian Wong in Singapore contributed to this report.

[Livyjr]

"Nikkei falls 1.5 percent on weak dollar"

Associated Press

Last updated: 3:52 a.m., Friday, March 14, 2008

TOKYO -- Japan's main stock index extended losses Friday to a fresh low for the year as traders sold exporter issues because of the weak dollar.

The benchmark Nikkei 225 stock index fell 191.84 points, or 1.54 percent, to 12,241.60 on the Tokyo Stock Exchange, also marking the index's lowest close since Aug. 10, 2005.

The Nikkei fell 3.33 percent Thursday.

Traders said the near-term outlook is unclear, with a string of economic data due out next week and many investors watching Washington for signs of more financial measures to buoy markets.

But they said they don't expect a recovery anytime soon.

"There are so many factors that it is tough to say, but I expect it (the Nikkei) to stay near where it is now," said Teruhisa Ishikawa, manager at Mizuho Investors Securities.

"There aren't many buyers in this environment."

Automakers, often seen as exporter bellwethers when foreign exchange rates are volatile, were among the day's biggest losers.

Toyota Motor Corp., which brings in about half of its revenues from the U.S., fell 3 percent to 5,090 yen.

Mazda Motor Corp. slid 5 percent to 358 yen.

The dollar was trading at 100.17 yen midafternoon after briefly dipping below 100 earlier Friday.

The U.S. currency nose-dived on Thursday to 12-year lows below 99.80 yen.

Shipping companies, caught up in both foreign exchange and oil price woes, were also among the decliners Friday.

Mitsui O.S.K. Lines Ltd. shares dropped 4.6 percent to 1,189.

The Topix index of all the Tokyo Stock Exchange First Section issues fell 22.64 points, or 1.86 percent, to 1,193.23.

[Livyjr]

"White House played role in smog rule"

By H. JOSEF HEBERT, Associated Press Writer

14 March 2008

WASHINGTON - The Environmental Protection Agency agreed to weaken a key section of its new smog requirements announced this week after being told at the last minute that President Bush preferred a less stringent approach, according to government documents.

The documents depict a series of tense exchanges between the EPA and the White House Office of Management and Budget during the days before the new smog air quality standard was announced Wednesday.

Changes directed by the White House were inserted into the smog regulation only hours before it was issued with the late flurry of activity forcing the EPA to delay the announcement for five hours.

The disagreement revolved around the amount of protection from ozone, or smog, should be afforded wildlife, farmlands, parks and other open spaces.

This so-called "public welfare" or "secondary" smog standard is separate from a decision to tighten the smog requirements for human health, which the EPA decided to do by reducing the allowable concentrations of ozone in the air from 80 parts per billion to 75 parts per billion.

The revised human health standard got all the attention when it was unveiled Wednesday.

But the sharpest behind-the-scene tug-of-war centered on the public welfare standard, according to papers inserted in the EPA regulatory docket on Thursday.

The memos and documents indicate that senior EPA officials had wanted to make the public welfare standard more stringent than the health standard, although still not as protective as some scientists had recommended.

But the White House Office of Management and Budget insisted that both standards be identical, according to the documents.

When EPA officials balked, the issue was taken to Bush, who sided with the Office of Management and Budget.

The White House involvement in the EPA smog decision was first reported by The Washington Post.

Susan Dudley, head of OMB's Information and Regulatory Affairs, alluded to Bush's direct involvement in a last minute memo she sent to EPA Administrator Stephen Johnson.

"The president has concluded that consistent with administration policy, added protection should be afford to public welfare by strengthening the secondary ozone standard and setting it to be identical to the new primary standard," she wrote in a memo to Johnson.

It should not be weaker or more stronger than the human health standard, the OMB insisted.

Although dated March 13, the memo was faxed to the EPA on March 12, only hours before the rule's announcement.

Parts of the memo were included in the rule's preamble posted on the EPA web site.

"Never before has a president personally intervened at the 11th hour, exercising political power at the expense of the law and science, to force EPA to accept weaker air quality standards than the agency chief's expert scientific judgment had led him to adopt," said John Walke, clean air director at the Natural Resources Defense Council, a private advocacy group.

"It is unprecedented and an unlawful act of political interference."

Dudley in an earlier March 6 memo had questioned the EPA's justification for have a stronger smog requirement for public welfare than for human health.

The "public welfare" — or secondary — standard is fashioned in a way to protect against long-term harm to the environment.

The limits on ozone under this standard are likely to have more impact on rural areas than urban centers.

Environmentalists and ecologists have argued that the standard should be more stringent than the human health ozone standard.

Last year the EPA staff as well as a science advisory panel on clean air also concluded that protection of forests, agricultural lands and the nation's ecosystem requires a "substantially different" ozone standard than the one for protection of human health.

In recent weeks the Agriculture Department, however, weighted in heavily against making the public welfare ozone standard tougher.

The department expressed concerns about the impact additional pollution controls might have on agriculture and development of biofuels, especially ethanol.

The Agriculture Department made its concerns known to OMB, which in a March 6 memo sent by Dudley to the EPA, questioned the needed for a different public welfare ozone standard.

EPA officials replied that the need is clear and that drifting ozone pollution has been found to cause "adverse effects" on agricultural crops, forests and vegetation.
___

On the Net:

Environmental Protection Agency: http://www.epa.gov

[Snuffysmith]

ECONOMY
George W. Hoover

In a recent Wall Street Journal survey of the nation's top economists, 70 percent said the economy is in a recession and half said that "this year could be worse than the 2001 and 1990-91 downturns." "The evidence is now beyond a reasonable doubt," said one Wells Fargo & Co. senior economist. The Commerce Department also said last week that retail sales -- which account for more than 70 percent of U.S. economic activity -- fell 0.6 percent in February. Last month also saw the national unemployment rate increase as the Labor Department announced that the nation had lost 63,000 jobs -- the second consecutive monthly job decline. While the American public is in line with economists on the realities of the economy, President Bush has only recognized a "slowdown." Bush recently acknowledged that the "root cause of the economic slowdown has been the downturn in the housing market." But in a speech last week, Bush echoed President Herbert Hoover's sentiments regarding government intervention into a struggling economy, saying he "strongly disagree[s]" with "massive government intervention in the housing market." Bush said in his Saturday radio address: "The market now is in the process of correcting itself, and delaying that correction would only prolong the problem."

MORE BAD NEWS FOR BUSH: Beyond job losses, a decrease in retail sales, and the housing market crisis, a Center for American Progress (CAP) economic outlook shows that wages remain flat, family debt has hit record highs, fewer people have health insurance, and an increasing number are paying more for basics. In addition to housing woes, Federal Reserve Chairman Ben Bernanke said last month that the nation's credit crunch is also fueling the economy's downturn. Additionally, government spending is in the red. The Treasury Department announced last week that "the U.S. federal government ran a monthly budget deficit of $175.56 billion in February, a record for any month" and "46% bigger than the deficit of $119.99 billion in February 2007." Last week, Sen. Sheldon Whitehouse (D-RI) illustrated that the federal debt incurred during Bush's presidency has reached $7.7 trillion. The value of the dollar is also in free fall, plunging below the 100 yen level last week for the first time in 12 years and "hitting a new low against the euro" today. Iraq war costs are reaching astronomical proportions, with projections ranging anywhere from $10-12 billion per month. The war has also helped oil prices skyrocket -- prices per barrel have recently reached record highs. Naturally, Bush has passed the buck. When asked during a recent interview about the rising oil prices, Bush deferred to "experts," saying: "I’m just a simple president."

BUSH'S QUICK AND EASY FIX: Regarding the housing and credit crises, the federal government has turned to a quick fix. "Hoping to avoid a systemic meltdown in financial markets," the Federal Reserve announced last night that it approved a $30 billion credit line to help JPMorgan Chase acquire one of the largest firms on Wall Street, Bear Stearns Cos., "which had been teetering near collapse because of its deepening losses in the mortgage market." The fire sale cost JPMorgan $2 per share, or "less than one-tenth the firm's market price" last Friday. The Fed coupled its "highly unusual maneuver" with a "new lending program [that] would make money available to the 20 large investment banks that serve as 'primary dealers' and trade Treasury securities directly with the Fed." However, experts are skeptical of the Fed's move, seeing that its recent plan to lend Wall Street $200 billion in exchange for mortgage-backed securities "failed to soothe investors and lenders, who are worried about the true value and default risk of many debt securities or are hoarding cash to meet their own needs."

PROGRESSIVE SOLUTIONS: Reacting to the Fed's announcement, President Clinton's former Treasury Secretary Lawrence Summers said "emergency provision of loans is necessary but not sufficient." The current economic situation needs progressive solutions. Andrew Jakabovics, CAP's Associate Director of the Economic Mobility Program, recently noted that "too many U.S. homeowners facing foreclosure and too many of their neighbors potentially lining up behind them." CAP's Great American Dream Neighborhood Stabilization, or GARDNS proposal "would provide $4 billion to buy up real-estate owned by banks and put deserving families in those homes" which would "cope with the foreclosure crisis and all its cascading ramifications for world financial markets and the U.S. economy." Addressing the other root cause of the nation's poor economy -- the credit crisis -- another CAP plan calls for a a credit card safety rating system to "give consumers better information about their credit cards and thus help them make better decisions." As more Americans struggle with paying for their everyday expenses in the midst of an economic downturn, such a system would lead to a better understanding about the ways the access credit. This would not preclude Congress from mandating "a higher level of fairness in credit card terms."

[Livyjr]

"FBI probes 14 companies over home loans"

By ALAN ZIBEL, Associated Press

Last updated: 7:02 a.m., Wednesday, January 30, 2008

WASHINGTON -- The FBI on Tuesday said it is investigating 14 companies for possible accounting fraud, insider trading or other violations in connection with home loans made to risky borrowers.

The announcement comes weeks after authorities in New York and Connecticut said they are investigating whether Wall Street banks hid crucial information about high-risk loans bundled into securities sold to investors.

Morgan Stanley, Goldman Sachs Group Inc. and Bear Stearns Cos. all disclosed in regulatory filings Tuesday that they are cooperating with requests for information from various, but unspecified, regulatory and government agencies.

"S&P mulls $500B in mortgage downgrades"

Associated Press

Last updated: 5:52 p.m., Wednesday, January 30, 2008

NEW YORK -- Standard & Poor's Ratings Services is considering slashing its rating on more than $500 billion of investments tied to bad mortgage loans, the ratings agency said Wednesday.

The massive downgrade would threaten a broad swath of the world's finance industry, S&P said, ranging from Wall Street's trading desks to regional banks to local credit unions.

Ratings from agencies like S&P play a vital role in how much investments are worth.

Many funds can only buy investments carrying strong ratings, and some people blame the agencies for granting top-notch credit scores to risky investments during the housing boom.

The 238-page list of bonds considered for downgrade includes transactions involving virtually all the major investment banks, including Citigroup Inc., Lehman Brothers Holdings Inc., Bear Stearns Cos., and Merrill Lynch & Co.

"Financials cause slide in S&P 500 profit"

By JOE BEL BRUNO, Associated Press

Last updated: 1:32 a.m., Saturday, February 2, 2008

NEW YORK -- It doesn't take highly paid Wall Street analysts to figure out why corporate earnings are trending toward their worst performance in six years.

With roughly half the companies in the Standard & Poor's 500 having reported fourth-quarter results, banks and brokerage have proven to be the biggest drag on the overall earnings picture.

Global banks and brokerages have written down almost $150 billion due to steep losses from investments tied to the subprime mortgages that went sour last year as interest rates rose and the housing market slumped.

Don't expect the problems in the financial sector to abate anytime soon, especially amid concerns about more write-offs at banks.

This means the S&P 500 has -- at least temporarily -- lost its biggest profit driver.

Losses from financial players like Citigroup Inc., Bear Stearns Cos. and Merrill Lynch & Co. wiped about $61 billion from the S&P 500's overall profit during the fourth quarter.

That represents roughly one-third of the proposed economic stimulus package currently being debated in Washington.

"Regulators' subprime mortgage cases"

Associated Press

Last updated: 3:02 p.m., Monday, February 18, 2008

State regulators and cities that have filed cases or disclosed investigations targeting Wall Street firms' roles in the subprime mortgage market:

-- Massachusetts' top securities regulator, Secretary of State William Galvin, has accused a unit of investment bank Bear Stearns Cos. of failing to disclose to investors a conflict of interest in its trading with two Bear Stearns-managed hedge funds.

The funds collapsed after making bad bets in subprime-linked investments.

"Stocks slide on mixed news, surging oil"

By MADLEN READ, Associated Press

Last updated: 5:52 p.m., Monday, March 10, 2008

Wall Street had no bleak economic data to contend with Monday, but instead faced a steady drumbeat of negative news on companies exposed to mortgages.

Mortgage lenders dropped after Thornburg Mortgage Inc. was downgraded by a Jefferies & Co. analyst and Countrywide Financial Corp. was reported to be under investigation by the government for securities fraud.

Then, Bear Stearns Cos. dropped as Moody's Investors Service downgraded a batch of Bear securities backed by Alt-A mortgages, which are home loans given to people lacking proof of income or with minor credit problems.

Bear Stearns fell $7.78, or 11.1 percent, to $62.30 on the Moody's move and also amid market rumors about a liquidity squeeze at the company.

Bear Stearns said in a statement there was "absolutely no truth" to the rumors.

"Treasurys rise; stocks fall on earnings"

By LESLIE WINES, Associated Press

Last updated: 5:42 p.m., Monday, March 10, 2008

Investor wariness about risks in other markets also was stoked by unconfirmed rumors that Bear Stearns Cos. is having funding problems.

The rumors were dismissed by Bear Stearns, but nonetheless undermined market sentiment.

Worries about liquidity at banks and brokerages sparked record high prices this week and last in the credit default swap market that allows investors to buy protection against possible default on bonds.

"Fed and rival bail out Bear Stearns"

By STEPHEN BERNARD and JOE BEL BRUNO, Associated Press

Last updated: 6:12 p.m., Friday, March 14, 2008

NEW YORK -- On the verge of a collapse that could have shaken the very foundations of the U.S. financial system, investment bank Bear Stearns Cos. was bailed out Friday by a rival and the federal government.

The near-miss raised new alarm about the credit crisis -- and whether other big firms might be in jeopardy.

The rescue came from JPMorgan Chase & Co. and, in an extraordinary step, the Federal Reserve, both rushing to pump new money into the venerable Wall Street firm after its financial state deteriorated so much in a 24-hour period that it threatened to fail.

Bear Stearns stock lost nearly half its market value, about $5.7 billion, in a matter of minutes, and pulled the broader market down with it.

The Dow Jones industrial average fell nearly 200 points.

If Bear Stearns were to go under, "it has the potential of bringing down the whole market," said Richard Bove, an analyst at Punk, Ziegel & Co.

"This is the crescendo of the crisis."

JPMorgan and the central bank agreed to extend loans for 28 days to Bear Stearns, the nation's fifth-largest investment bank and the one hit hardest by the subprime mortgage mess.

Two hedge funds managed by Bear Stearns failed last summer, setting off a credit crisis that has swept up banks and brokerages around the globe.

In backing up JPMorgan, the Fed dusted off a rarely used, Depression-era provision to provide loans.

It also said it was ready to step in to fight an erosion of confidence in the nation's largest financial institutions.

Officials from the Fed and the Securities and Exchange Commission held conference calls throughout the day Thursday to assess the potential impact on the broader economy, according to a Treasury official, who spoke on condition of anonymity because of the sensitive nature of the discussions.

For Bear, the crisis started when market speculation grew that it might have to seize collateral -- mostly mortgage-backed securities worth next to nothing -- from the private equity firm Carlyle Group.

Carlyle runs a bond fund and has come under intense pressure during the past week from creditors demanding collateral to back their investments.

As speculation swelled in the market, investors, customers and lenders raced to withdraw their money or rescind their credit lines.

By Thursday night, Bear Stearns Chief Executive Alan Schwartz said, the bank realized the withdrawals might outpace the bank's resources -- so it reached out to JPMorgan for help.

JPMorgan, the nation's third-largest bank, has been hurt far less by the mortgage mess than other financial institutions.

It will provide secured loans to Bear for four weeks -- insured, in essence, by the Fed.

Schwartz said it would buy Bear time and allow it to convince customers "that we have the ability to fund ourselves every day, to do business as usual."

No one has disclosed how large the financing offered to Bear Stearns is.

The CEO also confirmed -- as many on Wall Street had suspected -- that Bear Stearns could be up for sale.

He told analysts on a conference call that the bailout is a "bridge to a more permanent solution."

Bear is working with investment bank Lazard Ltd. to explore its options.

That may include an outright sale of Bear Stearns to JPMorgan, something top executives from both banks were discussing, according to a person familiar with the talks who was not authorized to speak on the record.

JPMorgan is considered to have one of the strongest balance sheets among Wall Street banks, and is not already involved in a rescue like Bank of America's purchase of Countrywide Financial Corp., the nation's largest mortgage lender.

Bear Stearns, which has about 14,000 employees worldwide, has struggled since the two hedge funds under its control lost billions of dollars after investing heavily in securities backed by pools of subprime mortgages.

"They were the dominant firm for repackaging mortgages," said Andrew Wilkinson, senior market analyst at Interactive Brokers Group.

"That's where all earnings came from."

"They had the least-diversified earnings stream of all of Wall Street securities firms, and as a result, they're paying the price today."

As delinquencies and defaults swelled among subprime mortgages, investors shied away from buying securities backed by the troubled loans.

Those fears expanded to encompass all but the safest bonds and securities, forcing investment banks to significantly reduce the value of their holdings and drying up money throughout the market.

Bear Stearns has racked up $2.75 billion in write-downs since last year, and releases first-quarter results on Monday that could show more losses.

The bank lost $859 million during the quarter that ended Nov. 30, a stark contrast to its $558 million profit during the same period just one year earlier -- before the credit crisis.

The broader financial services sector has racked up nearly $160 billion in write-downs since the middle of last year.

"My guess is by next week, there will be rumors of other large, familiar institutions" that could be in trouble, said Anil Kashyap, a professor at the Graduate School of Business at the University of Chicago.

JPMorgan said it would not expose itself to any serious risk by helping Bear, but its shares dropped anyway, down $1.57, or about 4 percent, to $36.54.

Bear stock plummeted 47 percent, or $27, to $30.

------

AP Business Writers Madlen Read and Dan Seymour in New York and Martin Crutsinger and Marcy Gordon in Washington contributed to this report.

[Livyjr]

"Stocks retreat on credit fears"

By TIM PARADIS, Associated Press

Last updated: 6:42 p.m., Friday, March 14, 2008

NEW YORK -- Wall Street plunged anew Friday after a near meltdown at Bear Stearns Cos. handed investors the unwelcome confirmation that the credit market's troubles are far from over.

Word that the investment bank needed rescuing touched off a wave of selling that left each of the major indexes down more than 1.5 percent on the day; the Dow Jones industrial average fell nearly 200 points.

The plan by the New York Federal Reserve and JPMorgan Chase & Co. offers Bear Stearns relief from a sudden liquidity crunch that analysts surmised could have felled the investment bank.

But the company's position on the precipice of financial disaster left many investors shaken and spoiled some hopes that troubles in the moribund credit market are on the mend.

Stocks showed moderate increases in the early going after a Labor Department report showed the Consumer Price Index remained flat for February.

Wall Street has been expecting inflation would show an increase.

But the gains quickly disappeared after investors learned about the severity of troubles at Bear Stearns.

"This is another chapter in a book rather than a one-act play," said Phil Orlando, chief equity market strategist at Federated Investors.

He said the market is worried that further trouble in the credit markets will emerge and that the ramifications of the credit strains and a slowing economy could result in recession.

"Investors thought they are probably more the norm than the exception and maybe this is the tip of the iceberg," he said, referring to Bear Stearns.

"Our sense is that this is sort of an amoeba here and this is sort of a broadly spreading situation."

The Dow fell 194.65, or 1.60 percent, to 11,951.09.

The Dow had been down as much as 313 points.

Broader stock indicators also declined but pulled off their lows.

The Standard & Poor's 500 index fell 27.34, or 2.08 percent, to 1,288.14, and the Nasdaq composite index fell 51.12, or 2.26 percent, to 2,212.49.

For the week, the major indexes were mixed, with the Dow showing a modest gain, the Standard & Poor's 500 index slipping and the Nasdaq composite index finishing exactly where it began.

The Russell 2000 index of smaller companies fell 16.81, or 2.47 percent, to 662.90.

Bond prices jumped as stocks retreated.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.44 percent in late trading from 3.53 percent late Thursday.

Comments from the Fed might have helped corral some of investors' nervousness Friday.

The central bank said it voted unanimously to sign off on the arrangement between JPMorgan and Bear Stearns and that it is ready to provide resources to stave off further credit troubles.

Fed Chairman Ben Bernanke also said Friday he would do what was possible to aid struggling homeowners.

Still, investors remained nervous.

The Chicago Board Options Exchange's volatility index, known as the VIX, and often referred to as the "fear index," jumped 14.2 percent.

Declining issues outnumbered advancers by about 5 to 1 on the New York Stock Exchange, where consolidated volume came to 5.18 billion shares compared with 4.94 billion shares traded Thursday.

"The Bear Stearns news reversed the early positive sentiment from the inflation data," said Peter Cardillo, chief market economist at Avalon Partners.

"There had been nervousness about Bear Stearns for some time and now the market's concerns about the company have been proven true."

Friday's pullback comes a day after an anxious stock market rebounded from an early plunge following a Standard & Poor's prediction that financial companies are nearing the end of the massive asset write-downs that have pummeled the stock and credit markets for months.

The S&P projection had given investors some hope that the seemingly unrelenting losses from the mortgage and credit crisis could have been bottoming out.

Bear Stearns' woes rekindled investors' nervousness about the troubles in the financial sector.

The company's shares skidded $27, or 47 percent, to $30, while JPMorgan fell $1.57, or 4.1 percent, to $36.54.

Other financial names declined as well.

Lehman Brothers Holdings Inc. fell $6.73, or 15 percent, to $39.26 and Merrill Lynch & Co. slid $2.75, or 5.9 percent, to $43.51.

Stock market investors Friday were also eyeing the dwindling dollar and events in the soaring commodities market.

Gold prices touched another fresh record Friday.

Light, sweet crude, which set a fresh record Thursday, fell 12 cents to $110.21 per barrel on the New York Mercantile Exchange.

Oil came close to its record of $111 set Thursday.

The market's fall Friday caps a big week for the markets.

On Monday, stocks continued a sell-off from last week, falling more than 1 percent as oil again moved into record territory.

Then, on Tuesday, stocks surged after the Fed said it would put up $200 billion to loosen tight credit markets.

The Dow surged nearly 417 points, its biggest one-day percentage gain in five years.

Stocks posted more modest losses and gains Wednesday and Thursday as investors speculated over how much help the Fed's plan would ultimately provide.

On top of Friday's concerns, Wall Street remains anxious for Tuesday's Fed meeting at which the central bank is still expected to lower interest rates.

While Wall Street would welcome cheaper access to cash to help consumers and businesses, the freer flow of money would likely fan inflation concerns and could further weaken the dollar.

Overseas, Japan's Nikkei stock average finished down 1.54 percent.

Britain's FTSE 100 closed down 1.07 percent, Germany's DAX index fell 0.75 percent, and France's CAC-40 lost 0.82 percent.

----------------

The Dow Jones industrial average ended the week up 57.40, 0.48 percent, at 11,951.09.

The Standard & Poor's 500 index finished down 5.23, or 0.40 percent, at 1,288.14.

The Nasdaq composite index ended the week unchanged at 2,212.49.

The Russell 2000 index finished the week up 2.79, or 0.42 percent, at 662.90.

The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index that measures 5,000 U.S. based companies -- ended Friday at 12,992.93, down 59.24 points, or 0.45 percent, for the week.

A year ago, the index was at 14,046.10.

------

On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

[Livyjr]

"Gas, diesel rocket to new records"

By JOHN WILEN, Associated Press

Last updated: 5:22 p.m., Friday, March 14, 2008

NEW YORK -- The rally in energy prices gained momentum Friday, with retail gas prices rising further into record territory and diesel and heating oil futures setting records of their own amid concerns about strong global demand and tight supplies.

Crude oil prices fell modestly as a sharp downturn in the stock market and worries about the economy prompted some profit-taking.

But with the Federal Reserve expected to cut interest rates again next week, analysts expect the dollar to weaken further, propelling crude to new records.

At the pump, gas prices set records for the fourth straight day, rising 1.3 cents Friday to a national average price of $3.28 a gallon, according to AAA and the Oil Price Information Service.

Average prices are nearing $4 in some parts of Hawaii.

Diesel, meanwhile, rose 2.9 cents to a new record national average of $3.938 a gallon.

Heating oil, a fellow distillate and close cousin of diesel, jumped to new records on the New York Mercantile Exchange.

Diesel, used by trucks, trains and ships, is used to move the vast majority of the world's goods.

While the U.S. economy appears to be slowing, the global economy continues to grow.

"Demand for diesel worldwide has been incredible," said Phil Flynn, an analyst at Alaron Trading Corp., in Chicago.

April heating oil futures rose 2.17 cents to settle at a record $3.1465 a gallon after earlier setting a new trading record of $3.222 a gallon.

Oil prices fell for a change Friday, following stocks lower after Bear Stearns Cos. acknowledged serious financial problems, and the Federal Reserve and JPMorgan Chase & Co. bailed the investment bank out.

Light, sweet crude for April delivery fell 12 cents to settle at $110.21 on the Nymex Friday after rising earlier to within pennies of its latest trading record of $111, set Thursday.

It was oil's first decline in a week.

Futures rose $5.60, or 5 percent, this week.

Despite the respite, analysts see little on the horizon to change the upward pressure on oil prices, which have set new records for seven straight sessions, and have risen nearly 12 percent since last week.

Analysts blame the weak dollar, which set a new low against the euro on Friday, for oil's recent rally.

Crude futures and offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is weak.

Interest rate cuts further weaken the dollar and have helped drive oil's rise.

Another reduction in benchmark lending rates is expected at the Fed's regularly scheduled monetary policy meeting on Tuesday.

The Labor Department's report Friday that consumer prices were unchanged last month -- a sign inflation remains low -- appeared to clear the way for a substantial interest rate cut.

"We still have this link to the dollar, and that's not going to go away at any point," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.

That means pain at the pump will continue for American consumers.

The Energy Department expects gas prices to rise to near $3.50 a gallon this spring, while some analysts say prices could peak as high as $3.75 or even $4 a gallon.

Diesel, which is a big part of the reason prices of food and consumer goods are on the rise, is likely to breach the $4 a gallon level soon.

High fuel prices are sure to cut demand at some point, analysts say.

Demand for gasoline has fallen nationwide every week since late January.

However, diesel may be more immune from price pressure than gas, analysts say.

Analysts gas and diesel prices will eventually fall, but believe the decline may come only after high prices have pushed the economy into a severe slowdown.

"This is a bubble, and everyone is waiting for it to pop," Flynn said.

In other Nymex trading Friday, April gasoline futures rose 0.66 cent to settle at $2.6894 a gallon, and April natural gas futures fell 36.2 cents to settle at $9.868 per 1,000 cubic feet.

In London, April Brent crude futures rose 1 cent to settle at $107.55 on the ICE Futures exchange.

[Livyjr]

"'King of Torts' cops a plea"

By EMILY WAGSTER PETTUS, Associated Press

Last updated: 7:33 p.m., Friday, March 14, 2008

JACKSON, Miss. -- Richard "Dickie" Scruggs, the legendary trial lawyer who made Big Business tremble every time he set foot in court, pleaded guilty Friday to conspiring to bribe a judge -- a crime that could send him to prison and spell the end of his storied legal career.

Federal prosecutors are asking for the maximum of five years behind bars for the 61-year-old Scruggs, the multimillionaire "King of Torts" who combined a shrewd legal mind and aw-shucks country-lawyer charm to extract billions of dollars from the tobacco and asbestos industries, among others.

He will also lose his license to practice law.

Scruggs and another lawyer in his firm, Sidney Backstrom, pleaded guilty to conspiracy to defraud for offering a $50,000 cash bribe to a Mississippi judge for a favorable ruling in a dispute over legal fees from a Hurricane Katrina insurance lawsuit.

In return for Scruggs' guilty plea, prosecutors will recommend that the judge drop several other counts against him, including fraud.

No sentencing date was set during the hearing at the federal courthouse in Oxford.

Scruggs' son and law partner, Zach, also is charged in the case but did not enter a plea and is expected to go to trial.

For months, Scruggs appeared intent on fighting the charges, and many reporters who had closely followed the case were caught off-guard by the plea bargain.

Scruggs folded after two of his co-defendants turned on him, one of them secretly tape-recording him for the FBI.

Federal prosecutors refused to comment, and Scruggs' attorneys did not immediately return calls.

A giant of the nation's plaintiffs' bar, Scruggs was a chief architect of the $206 billion nationwide tobacco settlement in the 1990s, working with whistleblower Jeffrey Wigand, a former tobacco company scientist.

The actor Colm Feore played Scruggs in the 1999 movie about the case, "The Insider," starring Al Pacino and Russell Crowe.

After Katrina struck in 2005, Scruggs sued insurance companies on behalf of hundreds of homeowners whose claims were denied.

Many industries that have tangled with Scruggs regard him as a buccaneer, a shakedown artist with a law degree.

Scruggs has been "the bane of Wall Street," and leaders of some of the companies he sued might take satisfaction in his downfall, said Stephen Gillers, a New York University law professor and authority on legal ethics.

He described Scruggs as "an exceptionally prominent American lawyer with astonishing success and wealth from law practice."

Scruggs' license to practice law will be revoked, which is standard in the case of a felony conviction, said Bobby Bailess, president of the Mississippi Bar Association.

Under the rules, Mississippi lawyers who are disbarred for a felony cannot seek reinstatement.

Scruggs was indicted along with his son and three associates in November.

They were accused of conspiring to bribe Lafayette County Circuit Judge Henry L. Lackey, who was overseeing a dispute between Scruggs and other lawyers over $26.5 million in legal fees from a mass settlement of Katrina cases.

Lackey reported the bribe overture to the FBI and worked undercover.

Two of the men indicted, lawyer Timothy Balducci and former Mississippi State Auditor Steve Patterson, pleaded guilty and began working with the prosecution.

Balducci admitted to the FBI that he paid the judge $50,000 in cash and said he did so at the behest of the Scruggses and Backstrom.

Balducci also wore a wire and recorded incriminating statements from Scruggs.

Scruggs lives in Oxford and flies to and from legal engagements around the South in his personal jet.

The Mississippi native is also supremely well-connected politically as both the brother-in-law of former Sen. Trent Lott, R-Miss., and a major contributor to Democrats.

A graduate of the University of Mississippi, he is one of the school's largest donors.

The music department building at Ole Miss bears his name.