Wednesday, September 21, 2011

Pakistan says U.S. warning on militants hurts ties

ISLAMABAD (Reuters) - The U.S. warning on militants based in Pakistan, blamed by Washington for this week's attack on the U.S. Embassy in Kabul, works against counter-terrorism cooperation between the two allies, the Pakistani Foreign Ministry said on Thursday.

It was referring to comments by Defense Secretary Leon Panetta that Washington would do whatever it takes to defend American forces in Afghanistan from Pakistan-based militants.

"We believe these remarks are not in line with the cooperation that exists between the two countries," Foreign Ministry spokeswoman Tehmina Janjua told reporters.

U.S. officials suspect militants from the Haqqani network were behind Tuesday's rocket attack on the U.S. Embassy compound in the Afghan capital, as well as a truck bomb last Saturday that wounded 77 U.S. force ambers.

"Time and again we've urged the Pakistanis to exercise their influence over these kinds of attacks from the Haqqanis. And we have made very little progress in that area," Panetta told reporters flying with him to San Francisco on Wednesday.

"I think the message they need to know is: we're going to do everything we can to defend our forces."

Pakistani officials said there was no proof of such cross-border operations.

The comments are likely to raise tension between the uneasy allies. Relations dropped to a low point after a unilateral U.S. special forces raid killed Osama bin Laden in a Pakistani town in May.

"Pakistan and the United States have strategic cooperation. We hope to discuss these issues in a cooperative manner," Janjua told a news conference.

Pakistani officials said it was the responsibility of U.S.-led forces to crack down on militants when they enter Afghanistan.

"We are using all our resources to fight terrorism. As far as these issues like Haqqani network launching attacks from Pakistani territory is concerned, has any proof ever been given?" said a senior Pakistani military official who asked not to be identified.

Panetta declined to answer questions about what steps the United States might take to defend U.S. forces. The CIA has had success targeting militants in Pakistan using drones, and has tried to take out figures in the Haqqani network.

A senior Pakistani government official involved in defense policy said the South Asian country, reliant on billions of dollars in U.S. aid, was doing all it could to stop militants from crossing the border to Afghanistan.

"But if the militants are doing something inside Afghanistan, then it is the responsibility of the Afghan and Western forces to hold them on the borders," he said.

"They let everyone go scot-free on their side (of the border) and then they say Pakistan is not doing enough."


Salim Saifullah, chairman of the Senate Committee on Foreign Affairs, said comments like Panetta's didn't help, adding that Pakistan would fight militancy cautiously.

"The United States has a temporary relationship with Afghanistan. Pakistan and Afghanistan have a permanent relationship, with a long shared history and common border," he said.

"Pakistan does not support these militants, but it will go after them carefully keeping in mind the situation on the ground."

Panetta, who was CIA director until July, has long pressed Islamabad to go after the Haqqanis, seen as the most dangerous of the Taliban-allied insurgent factions fighting U.S.-led NATO and Afghan troops in Afghanistan.

Pakistan's Directorate of Inter-Services Intelligence has long been suspected of maintaining ties with the Haqqani network, cultivated during the 1980s when Jalaluddin Haqqani was a feared battlefield commander against the Soviet Union in Afghanistan.

Pakistan says it has no links to the group.

Panetta said he was concerned about the Haqqanis' ability to attack American troops and then "escape back into what is a safe haven in Pakistan."

"And that's unacceptable," Panetta said.

Last month, Admiral Mike Mullen, the top U.S. military officer, cited progress curtailing Haqqani group movements within Afghanistan.

Going after the Haqqani network could be risky for Pakistan's army, which is already stretched fighting Taliban militants determined to topple the U.S.-backed government.

"They (Americans) should not dump their failures on this side of the border always, look at their resources, intelligence and surveillance capabilities," said another senior Pakistani military official.

"The militants are not only going from this side of the border, they have their presence and support groups inside Afghanistan and such attacks are being planned and coordinated by those groups."

(Additional reporting by Mark Hosenball in Washington and Phil Stewart in San Francisco; Writing by Michael Georgy; Editing by Robert Birsel)

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NATO says it thwarted Taliban attacks planned for 9/11

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Analysis: Bachmann vaccine comments toxic, doctors say

CHICAGO (Reuters) - No matter how much the U.S. medical community repudiates the suggestion by presidential candidate Michele Bachmann that a vaccine for human papillomavirus (HPV) is dangerous, doctors fear the damage has already been done.

Physicians are bracing for more parents to refuse the HPV vaccine, which protects against the most common cause of cervical cancer, for their daughters.

They say the comments by the Republican candidate will only stoke growing and unfounded fears about a whole class of common immunizations needed to fight disease.

"There are people out there who, because of this kind of misinformation, aren't going to get their daughter immunized," said Dr. Kenneth Alexander, a pediatric infectious disease expert at the University of Chicago Medical Center.

"As a result, there will be more people who die from cervical cancer," Alexander said in a telephone interview.

Dr. Mary Anne Jackson, an infectious disease expert at Children's Mercy Hospital & Clinics in Kansas City, Missouri, said doctors are already struggling to convince parents to immunize girls against HPV, a sexually transmitted virus.

"There will be repercussions of this comment that will directly impact every provider who takes care of adolescents and young women," Jackson said in a telephone interview.

Bachmann first raised the issue during a Republican presidential debate on Monday as a swipe at Republican rival and Texas Governor Rick Perry, who issued an executive order in 2007 mandating girls get the HPV vaccine as part of a school immunization requirement. The order was later overturned.

In that forum, she questioned the state's authority to force "innocent little 12-year-old girls" to have a "government injection" that was "potentially dangerous."

The following day, she told NBC's "Today" show the story of a woman from Tampa, Florida, who approached her after the debate and said her daughter became "mentally retarded" after getting the Gardasil vaccine made by Merck.

Physician groups including the American Academy of Pediatrics (AAP) rushed out statements defending the safety of Merck's vaccine and Cervarix made by GlaxoSmithKline, whose most common side effects include a sore arm, a rash and fever.

As a measure of their incredulity over Bachmann's comments, two bioethicists are offering rewards, one of more than $10,000, if she can bring forward the child who suffered irreparable damage.


The AAP says there is absolutely no scientific validity to Bachmann's statement that the HPV vaccine is potentially dangerous.

"Since the vaccine has been introduced (in 2006), more than 35 million doses have been administered, and it has an excellent safety record," Dr. O. Marion Burton, president of the American Academy of Pediatrics, said in a statement.

But no amount of proof will suffice for some families, who fear that even a small percentage of children may be harmed.

"I recently had a mother who had cervical cancer who refused the HPV vaccine for her child," Jackson said. "I asked her where she got her information and she said, 'the Internet, and innuendo.'"

That may help explain the slow uptake of the HPV vaccine. According to the Centers for Disease Control and Prevention, only 32 percent of adolescent girls last year had gotten all three shots of the HPV vaccine.

"We've got 12,000 women a year in this country getting cervical cancer. The vaccine could prevent about 70 percent of that," Alexander said.

Vaccine fears have already fueled recent outbreaks of measles, mumps and whooping cough, according to the CDC.

Much of the fear stemmed from a study by Dr. Andrew Wakefield, the now-disgraced British doctor who researchers believe falsified data for a 1998 study which convinced thousands of parents that vaccines are dangerous.

Concerns that vaccines might cause autism have not only caused parents to skip vaccinating their children, but also forced costly reformulations of many vaccines.

Bachmann's suggestion that the HPV vaccine may be linked with "mental retardation" only feeds into those fears.

"What is especially disturbing is you've got organizations like the American Academy of Pediatrics, the Advisory Committee on Immunization Practices, the American Academy of Family Physicians and the American College of Obstetricians and Gynecologists -- every learned medical organization in the country and indeed around the world -- in favor of immunization," Alexander of the University of Chicago said.

Jackson said when presented with information about the HPV vaccine, about 85 percent of families decide to have their child vaccinated, about 12 percent are hesitant, and the rest are "flat-out refusers."

It's the families in that 12 percent she is worried about.

"It's not going to impact the flat-out refusers. I worry it is going to impact this group of vaccine-hesitant families."

(Editing by Michele Gershberg and Xavier Briand)

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Suicide bomber kills 25 at funeral in Pakistan

SHINA SAMAR BAGH, Pakistan (AP) — A suicide bomber attacked the funeral service Thursday of a Pakistani tribesman opposed to the Taliban, killing 25 people, police said, two days after Taliban gunmen killed four children from another district in conflict with the militant network.

The blast during Thursday's ceremony in the Lower Dir region, 15 miles (25 kilometers) west of the Afghan border, also wounded 60 people.

The bomber struck as around 200 mourners were attending the funeral in the Shina Samar Bagh village, police officer Sher Hassan Khan said.

Another police officer, Salim Marwat, said the attacker hid in a nearby field and then ran toward the graveyard shouting "Allah Akbar!" — the Arabic phrase meaning "God is Great" that is also a Muslim rallying cry — and then detonated his bomb.

Witness Gull Rehman said he saw the attacker, who was killed in the bombing, describing him as a man with a long beard. Rehman said he was knocked down by the blast but he was able to get up and help transport the injured to hospitals.

The scene of the attack was strewn with bloodstained shoes in the blood-soaked grassy field, and officers collecting pieces of the bomb.

The funeral was for Bakhat Khan, who was a member of a local "lashkar" or militia that is opposed to Taliban rule in the region, police said. He died Wednesday night.

The tribesmen in the northwest have formed several such militias, for which they typically receive some government funding. They have had some success at stopping militant infiltration but are routinely struck by revenge attacks.

Many of the bloodiest bombings of the last three years have targeted "lashkar" members or their families.

On Tuesday, Taliban gunmen killed four children as they were returning from school close to the main northwestern city of Peshawar. The insurgents said the attack was aimed at stopping locals there supporting a tribal militia that is fighting them.


Associated Press Writer Riaz Khan contributed to this report from Peshawar.

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Tuesday, September 20, 2011

U.S. gets set to sanction BP, contractors

WASHINGTON (Reuters) - The U.S. offshore drilling regulator could issue sanctions as early as next week against BP and the major contractors involved in last year's Gulf oil spill, an agency official said on Thursday.

Michael Bromwich, the head of the Bureau of Ocean Energy Management, told reporters at a congressional hearing the agency was preparing official notices for violations uncovered by a government probe of the spill.

Bromwich said companies could be notified of infractions next week. The notices would kick off an administrative process that would likely conclude with civil fines against the companies.

In its final report on the causes of the largest offshore oil spill in U.S. history, the Bureau of Ocean Energy Management outlined a series of rule infractions committed by BP, Transocean and Halliburton related to the drilling disaster.

The report, released on Wednesday, detailed violations of seven federal regulations by BP. Transocean, the owner and operator of the Deepwater Horizon rig used to drill the Macondo well, was also implicated for violations of three of those regulations.

Halliburton, which was responsible for cementing on the well, was deemed jointly responsible for not adhering to three of those regulations.

The companies face fines of up to $35,000 a day, per incident for the violations.

Calling the penalties "pathetically" inadequate for companies that can pay as much as a $1 million a day to rent rigs, Bromwich reiterated his call for Congress to raise the maximum fines for offshore drilling rule breakers.

"The fine structure has got to be increased," Bromwich told reporters. "I think meaningful dollars need to be associated with fines. It's got to start in the six figures, not five figures."

The department did not provide details on the total amount of fines BP and its contractors may incur for their violations, which included failing to take measures to prevent the spill and failing to keep the well under control at all times.

Any civil penalties doled out by the drilling agency would be separate from the ongoing Justice Department lawsuits against BP and Transocean.

(Editing by David Gregorio)

(This article has been modified to indicate the U.S. agency corrects to show Transocean implicated for violations of three regulations rather than four in paragraph 5)

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Obama backs away from Social Security in deficits plan

WASHINGTON (Reuters) - President Barack Obama, yielding to pressure from his political base, has backed off a proposal to reform Social Security retirement benefits in a high-stakes deficits deal Congress needs to reach this year.

The Democratic president upset many core supporters in July when he considered changing how the popular pension funds are linked to inflation during acrimonious negotiations with Republicans over raising the U.S. debt ceiling.

Obama saw the change as a way to ensure the federal program remains viable for future generations, but liberals felt he was giving up too much ground to Republicans.

White House spokesman Amy Brundage said Obama's suggestions on how Congress can get to a $1.2 trillion deficit-reduction target, to be unveiled on Monday, "will not include any changes to Social Security."

A senior administration official said his proposals to 12-member congressional panel tasked with finding the savings by November 23, were still being finalized.

But they are expected to total as much as $3 trillion over 10 years and include tweaks to Medicare and Medicaid, the government's healthcare programs for the elderly and for the poor, and tax changes to close more loopholes for wealthy Americans and companies.

Obama's recommendations will not be binding on the "super committee" of six Republicans and six Democrats, but may influence the tone of the negotiations and will play into the 2012 election campaign rhetoric.

His shift in stance means the Democratic members of the super committee charged with tackling the federal deficit would not have to make immediate concessions in negotiations with their Republican counterparts.

Financial markets and credit ratings agencies are watching those talks closely for signs Washington can move beyond his debt ceiling rancor that provoked a Standard & Poor's downgrade and make a meaningful dent in deficits.

Fitch Ratings has said the U.S. credit outlook hinges on the super committee's action and Moody's Investors Service has warned it may downgrade the U.S. rating if Washington's plan to reduce the budget deficit turned out not to be credible.

If Congress fails to accept the congressional panel's plan, across-the-board spending cuts would be imposed that could further slow U.S. growth and drag on the fledgling global economy.


House Speaker John Boehner, the top Republican in Congress, called on Thursday for the super committee to keep Social Security, the federal pension plan, Medicare and Medicaid on their radar for reforms.

He also signaled a willingness to close some tax loopholes as part of a deficit-cutting plan, a move that was welcomed by Democratic House Leader Nancy Pelosi who said it was important not to "put too much of a burden on the cut side."

In addition to Social Security, Obama had been open in the summer debt talks with Boehner to raise the eligibility age for Medicare health benefits to 67 from 65. He is also considering changes to save hundreds of billions of dollars in Medicare and Medicaid through streamlining and negotiated lower drug prices, as well as higher premiums for wealthier Medicare recipients.

The Wall Street Journal said on Thursday the White House was now looking instead at cuts to providers and increased premiums for wealthier recipients of Medicare, the healthcare program for the elderly.

Republican members of the super committee have questioned whether reaching far beyond the $1.2 trillion target is achievable, especially with Social Security off the table.

White House spokesman Jay Carney declined to say how much deficit-cutting Obama would pursue. "The goal is to do substantial deficit reduction and debt control," he said.

Obama's Social Security shift is a win for advocacy groups for the elderly, who have been pushing to take Social Security off the table because it is not adding yet to the deficit.

Eyeing the 2012 election, congressional Democrats including Senate Majority Leader Harry Reid have also said it should be walled off.

Jared Bernstein, a former economic adviser to Vice President Joe Biden, said protecting Social Security "makes a lot of sense for Democrats."

"These things are critical to the base," he said.

In addition to the proposals from Obama, Boehner and other lawmakers, the super committee members are hearing concerns from defense contractors, aerospace firms, healthcare providers and the pharmaceutical industry, who fear the impact of government spending cuts in their areas.

Boeing, Lockheed Martin, Northrop Grumman, General Dynamics and other aerospace companies have launched a grassroots campaign to highlight their ties to the economy, and health insurers, drugmakers, hospitals and doctors are doing their own lobbying and encouraging patients to present their own concerns to super committee members.

(Additional reporting by Deborah Charles, Donna Smith, Andy Sullivan, Kevin Drawbaugh and Alister Bull; Editing by Ross Colvin and Jackie Frank)

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Uh-oh: Scientists say film 'Contagion' is for real

ATLANTA (AP) — Yes, it could happen. But it's a stretch.

"Contagion," a Hollywood thriller that opened last weekend, rocketed to No. 1 at the box office through its gripping tale of a fictional global epidemic driven by a new kind of virus. Audiences have gasped in horror at what happens to Gwyneth Paltrow.

Before it was out, the movie made real-life disease investigators anxious, too, though for a different reason: They had worried the filmmakers would take so many artistic liberties with the science that the result would be an incredible movie that was ... not credible.

Well, cue the applause.

"It's very plausible," said Dr. Thomas Frieden, head of the Centers for Disease Control and Prevention, which would investigate such an outbreak.

A new virus jumping from animals to humans? Nothing fictional about that. Global spread of a disease in a few days? In this age of jet travel, absolutely. A societal meltdown if things get bad? Plan on it.

Yikes. The only bit of relief here is that several experts think the odds are pretty long that a new virus could be both so deadly and contagious at the same time.

The team behind the film used several expert consultants and went to other lengths to get scientific details correct. That included working with esteemed Columbia University epidemiologist Dr. W. Ian Lipkin to create the fictional MEV-1 virus. It's modeled on the Nipah virus — a dangerous bug first seen in Malaysia a dozen years ago that spread from pigs to farmers.

Efforts also involved actress Kate Winslet sitting down with a female CDC disease investigator so she could correctly copy such things as the investigators clothes, mannerisms and even how the scientist might wear her hair on a field assignment.

Overall health officials say they were very pleased with what resulted. During an advance screening for CDC employees in Atlanta last week, some in the audience laughed appreciatively to see visual details and even lingo that they never imagined would be used in a mass-market motion picture.

"It was very accurate. It kind of made us all chuckle because there were things that we thought only people at CDC might get," said Laura Gieraltowski, an expert in foodborne illnesses.

Indeed, CDC officials have embraced the film. The agency allowed the movie's makers to film at their main campus — the first time the agency has allowed a major motion picture studio such access. And CDC officials have opened up their schedules for media interviews, panel appearances and live Internet chats to talk about the movie and potential real-life contagions.

It's a far better reception than their reaction to "Outbreak," a popular 1995 movie starring Dustin Hoffman, the last time Hollywood took a major stab at telling a story about a nation-threatening, non-zombie epidemic. Like "Contagion," that film had a respected director and an all-star cast, but the scientific miscues were laughable. Some experts still shake their heads at how much time was spent finding an infected monkey and how little time it took — seemingly just a few minutes — to make, test and distribute a life-saving vaccine.

"Contagion" fares far better in the experts' eyes. That said, the scenario painted in the new movie is also considered highly unlikely. A thriller telling a complex story in roughly two hours, it portrays some things that are doubtful at best. Among them:

—The government dispatches only one disease investigator to Minnesota to check out the outbreak. In reality, the government would throw a lot more people at an emerging problem like this. When the first two swine flu cases were reported in San Diego in 2009, neither of them fatalities, the CDC sent five such scientists along with other staff.

—The fictional virus kills more than 1 in 5 of the people it infects. That's extremely high for an epidemic that goes global. The infamous Spanish flu pandemic of 1918-19 — used as the modern-day measuring stick for a terrible international contagion — killed more like 1 in 100. Something this deadly and fast-moving has never materialized, possibly because a bug that kills too efficiently limits its ability to spread because its victims don't have much time to make contact with many other people.

—When a vaccine is released to the public, distribution of initially limited supplies was decided through a lottery based on date of birth. In reality, health officials would prioritize vaccine for people who were deemed most susceptible to the virus. Also at the head of the line would be health-care workers and others essential to keeping emergency response systems running. The movie didn't indicate measures like that.

—As a vaccine to protect against the new disease is being developed, the movie seems to suggest that initial human testing of it hinges largely on a CDC scientist injecting herself and then visiting her diseased father's bedside to see if she gets sick. Officials say a more realistic portrayal would show weeks or months of safety and effectiveness testing in many thousands of volunteers.

Also, "we don't inject ourselves with (experimental) vaccines," said Dr. Ermias Belay, a CDC official who oversees lab scientists handling dangerous pathogens.

Lipkin was involved with the movie for years and even reviewed film clips during production. When an Associated Press reporter reviewed the list of unrealistic points with him, he responded: "It's a movie."

But he also chafed at the idea that this kind of global epidemic won't occur just because we haven't seen one before. "Nobody expected Nipah. Nobody expected HIV. Nobody expected SARS," he said.

One other significant plot point seems pretty implausible, too — how well the epidemic investigation goes.

When new infections start popping up in multiple cities at about the same time, finding the origin can be a nearly impossible task. Yet the movie's disease detectives zero in on the "index case" very quickly.

"In a real-world investigation, that would be a lucky guess," said Dr. Douglas Hamilton, who heads the CDC's Epidemic Intelligence Service.

In their discussions about the movie this week, some CDC officials are making a point of noting that recent budget cuts are threatening their ability and that of state and local health departments to respond as well as the movie portrays. Just one CDC investigator assigned to the scene of a major outbreak?

"Maybe this reflects the future," said Dr. Ali Khan, the agency's director of emergency preparedness.

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Morgan Stanley Chairman Mack to retire at year-end

(Reuters) - Morgan Stanley Chairman John Mack, whose sharp elbows and aggressive cost-cutting tactics earned him the nickname "Mack The Knife," will step down at the end of the year, fully handing the reins to Chief Executive James Gorman.

The move solidifies Gorman's position at the top of the second-largest U.S. investment bank, whose business model he has been overhauling since becoming CEO and taking over day-to-day operations from Mack at the start of 2010.

"Giving the CEO both positions is a vote of confidence," said Douglas Park, principal of DYP Advisors, a corporate governance advisory firm in Palo Alto, California.

"The board is saying it has confidence in Mr. Gorman's leadership and the direction that he's taking the firm."

Morgan Stanley shares surged on the news, closing 7.2 percent higher at $16.59.

Gorman, 53, has been scaling back much of Morgan Stanley's risk-taking in trading and relying more heavily on wealth management to generate stable income.

Schooled as a lawyer and trained as a McKinsey & Co financial services consultant, Gorman joined Merrill Lynch & Co in 1999 as chief marketing officer. Within a few years, he moved into the retail brokerage business, which was a central pillar of Merrill's power on Wall Street.

As head of that business, Gorman, a native of Australia, clashed with Merrill's "thundering herd" of brokers. He cut costs by laying off thousands of employees and focused on clients with at least $1 million in assets.

In what was then a controversial move, he pushed less-wealthy clients to call centers where they received less-personalized treatment.

Gorman is now overseeing the integration of Citigroup Inc's Smith Barney unit into Morgan Stanley's existing brokerage business in a multi-phase acquisition through 2014. He hopes to eventually achieve a return on equity level of 20 percent in that business, double its current level.


Shareholders have been frustrated by the slow progress at Morgan Stanley Smith Barney, and Morgan Stanley's stock has been trading below tangible book value since April, a sign that investors see limited profits and possibly big writedowns for the company.

Sanford Bernstein banking analyst Brad Hintz, who has an "outperform" rating on Morgan Stanley shares, believes that Gorman will boost profitability at Morgan Stanley's wealth management business. He said Gorman, who recently bought $2 million worth of his company's stock, has his incentives aligned with shareholders.

"Admittedly Morgan Stanley has been a value trap for investors," Hintz said. "But for this stock to rebound all we have to believe is that management will work to boost their own net worth and the Merrill model of wealth management can be brought to MSSB."

Hintz is a former Morgan Stanley treasurer.

Mack, 66, first joined Morgan Stanley in 1972 as a bond salesman and worked his way up through the ranks to become president and chief operating officer of Morgan Stanley Dean Witter in 1997.

He left in 2001 after losing to Philip Purcell in a battle for the CEO spot. Over the next few years, Morgan Stanley's performance lagged that of its Wall Street peers and investors and former executives criticized Purcell's strategy and management style. A series of high profile executives left, including Citigroup Inc's current CEO Vikram Pandit, Citi President John Havens and M&A banker Joseph Perella, who launched his own advisory firm, Perella Weinberg Partners.

In 2005, Purcell resigned under board pressure and Mack became CEO.

When Mack returned to the bank, he received a standing ovation on the trading floor. He worked to strengthen Morgan Stanley's trading department, but also piled on risk, a move that generated a big profit in 2006, but hurt Morgan Stanley leading into the financial crisis of 2007 to 2009.

"Working with the remarkable people of Morgan Stanley has enriched my life for more than three decades and helping to lead this great firm, most recently as chairman, was the greatest honor of my career," Mack said in a statement.

"However, I made clear back in 2009 that I would serve in the Chairman role for two years and then move on. Now that time has come."

Mack is retiring from a full-time role, but will remain a senior adviser to Morgan Stanley. Gorman will add the title of chairman on January 1.

Many corporate governance experts argue that splitting the roles of chairman and CEO is beneficial to shareholders, because a CEO who is also chairman can have undue influence over the board, with inadequate checks and balances.

Some large financial firms, including Bank of America Corp, Citigroup Inc and American International Group Inc, have split the roles in the wake of the financial crisis, but others have not.

Goldman Sachs Group Inc and JPMorgan Chase & Co combine the roles, as does Wells Fargo & Co, which transitioned out former Chairman and CEO Richard Kovacevich in a similar fashion to Morgan Stanley's Mack.

Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, advocates splitting the role. He said studies by firms such as Bain & Co have shown that stock performance is better under the fragmented structure.

"It's considered a best practice," Elson said.

(Reporting by Lauren Tara LaCapra in New York; editing by Lisa Von Ahn and Andre Grenon)

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Job market, factory data show weakness

WASHINGTON (Reuters) - New claims for jobless aid rose unexpectedly last week and factory activity along much of the Eastern seaboard contracted early this month, bolstering the case for more action to support the struggling economy.

However, industrial output edged higher in August and consumer prices rose more than expected, reinforcing expectations the Federal Reserve will offer only modest stimulus measures.

The economy barely grew in the first half of this year and a bruising spending battle in Congress spooked consumers into shutting their wallets last month. With growth still limping along, the economy looks very vulnerable to an escalation in Europe's debt crisis.

"Business activity has slowed and confidence has fallen ... but we haven't slipped into a recession yet," said Michelle Meyer, an economist at Bank of America Merrill Lynch in New York. "The Fed can still do some additional easing."

The number of Americans filing new claims for state unemployment aid rose unexpectedly to 428,000 in the week ended September 10, the Labor Department said on Thursday.

It was the second straight weekly increase, taking initial claims to their highest level since the week ended June 25. Wall Street analysts expected a modest dip.

Despite the data, stocks rose and debt prices fell after a plan was offered by global central banks to reintroduce dollar liquidity into the strained European banking system.

Peter Kenny, managing director of Knight Capital in Jersey City, New Jersey, said much of the data was bad but not "apocalyptic," and other analysts agreed.

The Philadelphia Federal Reserve Bank said its business activity index registered minus 17.5 in September, an improvement from August but still pointing to contraction for the second straight month.

The New York Federal Reserve Bank said its manufacturing index for New York state fell to minus 8.82 in September -- its lowest level since November. It was the fourth straight month pointing to contraction.


The data could provide an added sense of urgency for Fed Chairman Ben Bernanke and his colleagues, who are expected to unveil new measures to lift growth when a two-day policy review concludes on Wednesday.

Despite dim prospects of the nation's 9.1 percent unemployment rate coming down much any time soon, many Fed watchers expect a relatively modest step to try to bring down long-term interest rates without ramping up dollar printing.

The unexpectedly stiff reading on inflation could provide fodder for a lively central bank debate.

The Labor Department said in a separate report that its Consumer Price Index increased 0.4 percent last month -- higher than analysts expected, with food prices posting their biggest gain since March.

"It will make it more difficult for the Fed to talk about lower rates, even if the economy needs it," said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto.

The core price index -- which excludes food and energy -- rose 0.2 percent last month, in line with expectations. Both the overall and core readings in August rose more from a year earlier than they did in July.

Analysts now put the odds of a new recession at nearly one-in-three after recent reports showed no employment growth in August and a plunge in consumer confidence. Consumer spending ground to a halt in August as well.

In its report on output at the nation's mines, factories and utilities, the Fed said manufacturing production rose 0.5 percent last month as auto production picked up.

Underscoring the consensus view the U.S. will dodge the recession bullet, General Electric Co Chief Executive Jeff Immelt said he sees "good, decent economic growth everywhere," including the United States.

Still, few expect growth to hum until consumers can heal personal finances damaged by the popping of a housing bubble and subsequent 2007-2009 financial crisis.

Default notices on homes notched their biggest monthly increase in four years in August, a report by RealtyTrac said.

Weak consumers are keeping businesses on edge.

"The last few months, we've seen a bumpy ride that may likely continue," said United Parcel Service Chief Executive Scott Davis, despite his affirmation that the package delivery company was on track for record results this year.

(Additional reporting by David Lawder in Washington, Leah Schnurr and Gertrude Chavez-Dreyfuss in New York and Lynn Adler in Louisville, Kentucky; Editing by Neil Stempleman)

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Unemployment now Americans’ top concern

AP Photo/Rick Bowmer

It's hardly news that Americans are concerned about the economy. But are they mainly worried about the bleak economic situation in general -- things like slow GDP growth, market turmoil, and the weak housing sector -- or about the narrower issue of unemployment? Lately, it looks like the latter.

Gallup asks people every month what they think is the most important problem facing the country, and offers several choices, including "the economy in general," and unemployment/jobs." In reality, of course, the two are closely connected. Unemployment won't significantly decline until the economy itself gets moving again -- and that won't happen until demand picks up. Still, the question helps get at what's on people's minds, and what the specific focus of their concern is.

This month, with the official jobless rate at 9.1 percent, 39 percent of respondents said unemployment, up from 28 percent last month. Meanwhile, the share who said the economy in general declined from 31 to 28.

In the 95 months since the start of 2004, this is just the seventh time that the number of people naming unemployment has exceeded the number naming the economy in general. And the 11-point gap is the largest in favor of unemployment since then.

Only three months ago, the picture was different. In June, thirty-six percent of respondents named the economy in general, while just 24 percent said unemployment.

Why the turnaround? The unemployment has barely budged since the start of the year, it's unlikely that people are responding to the actual prevalence of joblessness. It seems more likely that the recent focus on jobs from Washington -- including a televised speech from President Obama -- has boosted the salience of the issue.

As for other answers about America's biggerst problem, none even came close. Fouteen percent of respondents named "dissatisfaction with the federal government," while 12 percent said the federal budget deficit.

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Monday, September 19, 2011

Sarkozy, Cameron hailed in Libya, offer help

TRIPOLI/BENGHAZI (Reuters) - Nicolas Sarkozy and David Cameron landed in Libya to a heroes' welcome on Thursday, promising help for the new rulers that French and British air power helped to install and being told the favor may be repaid in business contracts.

Just three weeks after rebels backed by NATO bombers overran the capital, French President Sarkozy and the British prime minister promised in Tripoli to help hunt down Muammar Gaddafi and to hand his frozen assets to his successors.

The forces of the National Transitional Council (NTC) later said they had stormed Gaddafi's home town of Sirte, one of three main urban areas still beyond the interim government's control.

NTC fighters were facing strong resistance from loyalist fighters, especially snipers, a military spokesman said.

In Benghazi, seat of the uprising which early intervention by French and British jets helped to save from Gaddafi's army in March, Sarkozy and Cameron were treated to a rowdy welcome on "Freedom Square," shouting to be heard over a cheering crowd of hundreds -- many in the city were unaware of their arrival.

"It's great to be here in free Benghazi and in free Libya," said Cameron as he strained, rock-star hoarse, above the chants in televised scenes both men will hope play well back home.

The French president, struggling for re-election next year, beamed at grateful chants of "One, two, three; Merci Sarkozy!" while the two leaders, flanking NTC chairman Mustafa Abdel Jalil, held his arms aloft like a victorious boxer.

"France, Great Britain, Europe, will always stand by the side of the Libyan people," said Sarkozy, whom many Libyans credit with making a decisive gamble, pulling in a hesitant United States and securing U.N. backing for NATO air strikes to halt Gaddafi's tanks as they closed in to crush Benghazi.

"Your city was an inspiration to the world as you threw off a dictator and chose freedom," Cameron said, clearly enjoying the relative security to speak outdoors in Benghazi after a tight lockdown in tense Tripoli. "Colonel Gaddafi said he would hunt you down like rats but you showed the courage of lions."

Hajja, a 70-year-old swathed in the rebel tricolor, watched the two leaders with a rapture they rarely experience at home: "If we could give them anything, we would -- our lives, our souls ... But for them, we would be history."


In Tripoli, Libyan interim premier Mahmoud Jibril spoke at a news conference of "our thanks for this historic stance" taken by France and Britain to launch the West into a war that did not always look set to end well for the rebels.

Both countries offered continued military support against Gaddafi loyalists holding substantial parts of Libya as well as in hunting the former strongman and others wanted for crimes against humanity. Sarkozy said he would raise the issue with neighboring Niger, a former French colony where some of Gaddafi's senior aides and one of his sons have sought refuge.

"This is not over," Cameron said. "There are still parts of Libya that are under Gaddafi's control. Gaddafi is still at large and we must make sure that this work is completed."

In a sign of progress for the NTC, a spokesman said its forces had entered Sirte, Gaddafi's sprawling home town between Tripoli and Benghazi. But like in other loyalist cities, Libyan fighters were met with strong resistance.

"They have now entered the city. There was a coordinated push from the south, east and west and from along the coast," NTC military spokesman Abdulrahman Busin told Reuters.

"They are coming under heavy fire. There is a particular problem with snipers."

Inland, at Bani Walid, residents were still trying to leave the besieged loyalist stronghold, and reported that others were trapped by gunmen. Deep in the desert, the southern city of Sabha is also still controlled by forces loyal to Gaddafi.

Cameron said a Franco-British move at the United Nations on Friday could mean London alone unfreezing $19 billon of assets, while help with healthcare and disarmament was also ready.

With an eye on public opinion at home, he drew attention to the case of a boy wounded by a grenade at his school who would be treated by British specialists, while Sarkozy rebuffed suggestions of self-interest in the war, declaring: "We did what we did because we thought it was just."


Although Sarkozy hotly denied talk among Arabs of "under the table deals for Libya's riches," interim Libyan leader Abdel Jalil said key allies could expect preferential treatment in return for their help in ending 42 years of Gaddafi's rule.

"As a faithful Muslim people," he told reporters in Tripoli, "we will appreciate these efforts and they will have priority within a framework of transparency."

Other states which did business with Gaddafi, notably China and Russia, have been concerned that their lukewarm attitude to the NTC may cost them economically. While Abdel Jalil stressed a desire to allocate contracts on the best terms for Libya, and to honor existing contracts, he said some could be reviewed.

Those deals signed by Gaddafi which were skewed by personal corruption could be canceled, he said, noting that he had served as a minister under the old regime and knew its secrets.

Cameron appeared keen to avoid public triumphalism. "I'm proud of our role," he said. "But this was your revolution, not our revolution." And with an eye on events in Syria and elsewhere, he said Libyans could inspire others: "This is a moment when the Arab Spring could become a summer and we see democracy advance in other countries too."

The need for Sarkozy and Cameron to visit Benghazi as well as Tripoli is a sign of the obstacles Libya still faces in transforming itself into a peaceful, unified democracy. The NTC has not yet been able to establish a government safely in a capital still bristling with militiamen from disparate groups.

Cameron offered Jibril and Abdel Jalil a personal vote of confidence, saying they "continually proved the skeptics wrong." But the country is deeply divided. Many of its new rulers hail from Benghazi in the east, while the fighters who won the battle for Tripoli mostly come the west.

Sarkozy got a big cheer in Benghazi when he called for a "united Libya" and "a new courage, that of forgiveness."

(Reporting by Maria Golovnina near Bani Walid, Libya, William MacLean, Alexander Dziadosz, Joseph Logan and Emmanual Jarry in Tripoli, Sherine El Madany in Ras Lanuf, Emma Farge in Benghazi, Mark John and Bate Felix in Niamey, Barry Malone and Sylvia Westall in Tunis, Keith Weir and Alastair Macdonald in London, Catherine Bremer and John Irish in Paris; Writing by Alastair Macdonald; Editing by Rosalind Russell)

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The 6 most wanted Republican endorsements for 2012

Chris Christie (Julio Cortez/AP)

It's that time of year. Presidential candidates are cozying up to their prominent friends and colleagues to ask for their public support ahead of the 2012 campaign for the Republican nomination.

Just this week, Rick Perry and Mitt Romney each rolled out high-profile endorsements. Governors Brian Sandoval of Nevada and Bobby Jindal of Lousiana endorsed Perry, while Tim Pawlenty, the former Minnesota governor and presidential candidate, endorsed Romney.

But some of the biggest names in the Republican party have kept their mouths shut--and the public guessing--about whom they plan to endorse. Below, we rank the five most coveted Republican endorsers (omitting those who are currently running) and explain why they're a big deal and what the signs indicate about their plans for 2012.

6. Haley Barbour: An endorsement from Barbour, the Mississippi governor, provides access to Barbour's extensive fund-raising network stemming from his time as one of Washington's most powerful lobbyists and also from his stint as head of the Republican National Committee. With Mitch Daniels, the Indiana governor and a personal friend of Barbour, declining to run, it's unclear whom Barbour would support. Barbour has said he will remain neutral in the primaries, but others suggest the Southern connection makes Rick Perry, the governor of Texas, Barbour's likely pick.

5. Sarah Palin: If she doesn't enter the race herself, the endorsement of the former Alaska governor and 2008 vice presidential nominee will give someone major tea party bona fides as well as major starpower. Palin campaigned for and against many congressional candidates in the 2010 race and has proven her willingness to place herself in the middle of intra-party battles. Many speculated that during Palin's Labor Day weekend swing through Iowa, she would endorse someone. And most thought Perry, a fellow tea party favorite, would be her pick.

4. Jim DeMint: The senator from South Carolina was the original tea party senator. He significantly influenced the 2010 elections with his political action committee, Our Country Deserves Better, and he quickly became something of a kingmaker within the Republican party. His endorsement comes with a tea party stamp of approval, a conservative stamp of approval, and a leg up in the early voting state of South Carolina. DeMint has already inserted himself into the 2012 race--he asked the candidates to show him their stuff at a Labor Day forum he co-hosted and in which he participated as a questioner.

3. Marco Rubio: The junior senator from Florida is a triple threat in the areas of ideology, ethnicity and geography. He is a major tea party star and a favorite of the conservative base; he's of Cuban descent and fluent in Spanish; and he is a statewide officeholder in perhaps the largest swing state in the country (which is also planning to be the fifth state, and the first large state, to vote in the nominating process in 2012.) Rumors of a Rubio vice presidential campaign still continue to circulate despite his repeated attempts to slap them down, but short of a ticket spot, Rubio's endorsement will mean much to his favorite pick. Rubio hasn't offered clues as to whom he would support, but his choice candidate will likely be a conservative.

2. Nikki Haley: There is perhaps no better backer in South Carolina, which will hold the nation's second presidential primary and thinks of itself as the state that could break a potential tie between Iowa and New Hampshire, than the state's popular governor. Candidates have been hounding Haley, tea party star, at dinners, meet and greets, and visits. Last week, she flatly rejected the idea of endorsing Jon Huntsman, the former Utah governor and ambassador to China, for president during an interview with radio host Laura Ingraham, suggesting he wasn't someone with whom she could philosophically agree. But she expressed excitement about the rest of the field, saying the candidates have the "brains," "talent" and "executive experience" to defeat President Obama. She has not indicated whom she will support, but she did praise former House Speaker Newt Gingrich's recent debate comments about Republicans joining together to defeat President Obama, and she gushed about Perry on the day of his campaign announcement.

1. Chris Christie: If Republicans can't get New Jersey's governor to run for president, or be the running mate on their ticket, they will certainly settle for his endorsement. Christie, unlike some of the tea party stars on this list, has an appeal that crosses all Republican boundaries. His fans range from Republican moderates in his Democratic-leaning home state to tea party leaders. Christie is known for being a strong fiscal conservative and for being tough and blunt-talking--a reason to believe his endorsement speech and follow-up interviews in the news media would be especially effective.

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RIM reports sharp drop in profit

(Reuters) - Research In Motion reported a sharp drop in quarterly profit on Thursday, hurt by an aging lineup of BlackBerry smartphones that was only refreshed very late in the quarter and tepid sales of its PlayBook tablet computer.

The Waterloo, Ontario-based company's adjusted net profit fell 47 percent to $419 million, or 80 cents per diluted share, on revenue of $4.2 billion.

RIM shipped 10.6 million smartphones and 200,000 PlayBook tablet computers in the three months to August 27, sharply below the average estimate of analysts.



"The shipments were below their forecasts even though they got BlackBerry 7 out when they expected to."

"The guidance for shipments in November would imply a down year-over-year shipment number even though you've a full quarter of the new phones.:

Year-over-year is a more meaningful than sequential growth, he said.

"Of course you're going to be shipping up sequentially from Q2 where there were very few product launches,"

McCourt also criticized the third-quarter earnings and revenue guidance. "The revenue is still down year-over-year."

"It's pretty clear the BlackBerry platform is now in decline. They really need QNX to reinvigorate the business."

"If QNX is a bust that's when RIM needs to make strategic decisions as to whether it can go it alone."

"Given where the company is trading there's not a tremendous amount of confidence they'll be able to execute the transition."

McCourt said investors will be anxious to hear the RIM's comments on device activations in the second quarter.

"That's a really key metric. You'd want to see a much higher number for activations than shipments. If its higher things aren't so bad. If its lower they still have channel inventory issues."


"I have to tell you, I was stunned that the device number was below their guidance, and I'm pretty astounded they weren't more conservative than their November unit guidance, given that fact."

"I think the shares are reacting to what effectively is a miss on device unit for the August quarter, low-end revenue and EPS and then a guide that isn't matching expectations at the midpoint for the street, but we still think that that guide (for the November quarter) could be aggressive




"Given management's consistent history of overpromising and under-delivering, we lack faith that the company can successfully hit the guidance that they've set."

"The company was looking for the PlayBook to be a new avenue of growth, and it looks like the numbers were very underwhelming relative to expectations, and I think overall the market needs to re-examine its estimates for the Playbook longer term."

"Right now the street probably needs to look past Blackberry 7 and focus on the QNX-based devices, but I still lack faith in management's ability, and given recent execution issues, we wouldn't be surprised if it is either delayed or pushed through with some functionality omitted."


"This report is another nail in the coffin of management. Even though they guided down for this quarter they still fell short of that."

Regarding the guidance for third quarter phone shipments he said: "If that happens it would be good but so far their track record of being able to predict their own performance has been abysmal."

"They did release a lot of new phones ... but I think investors are going to sit on the sidelines until they see actual results. These results are not good."

"I don't think anybody believes their guidance. Management's credibility is at an all time low."

"We're well past the point these guys should be replaced."


"The question is, are they closing the gap with Apple and Android, and even Windows Phone 7? And we don't see that happening, because the real transition for RIM is just beginning, they're going to be moving everything to QNX."

"They've got to focus on their future, which is QNX, and they need to revisit where their market position is going to be, because they're having a tough time competing in the high end, and the low to mid end is going to get very crowded, very soon, with Android and Nokia phones."


"The numbers look bad, but the good news is that they are probably at an inflection point and in the midst of a transition."

(Reporting by Allison Martell in Toronto and Sinead Carew in New York; editing by Frank McGurty)

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Obama awards Medal of Honor to young US Marine

WASHINGTON (AP) — President Barack Obama on Thursday bestowed the highest U.S. military honor on Dakota Meyer, a young and humble Marine who defied orders and barreled straight into a ferocious "killing zone" in Afghanistan to save 36 lives at extraordinary risk to himself.

"You did your duty, above and beyond," Obama told Meyer after reciting his dramatic story. Though the corporal and a fellow Marine were going against orders — commanders considered their effort too dangerous — they were doing what they thought was right, Obama said.

The president placed the Medal of Honor ribbon around Meyer's neck, patted his back and shook his hand as the audience in the White House East Room applauded.

At age 21, Meyer charged through heavy insurgent gunfire on five death-defying trips in an armored Humvee to save 13 Marines and Army soldiers and an additional 23 Afghan troops pinned down by withering enemy fire.

Meyer killed at least eight insurgents despite suffering a shrapnel wound in his arm as he manned the gun turret of the Humvee and provided covering fire for the soldiers, according to the military.

He had been supporting a patrol on Sept. 8, 2009, into a village in the Ganjgal Valley on the day of the ambush.

Meyer and the other Americans had gone to the area to train Afghan military members when, suddenly, the village lights went out and gunfire erupted. About 50 Taliban insurgents on mountainsides and in the village ambushed the patrol.

As the forward team called for air support that wasn't coming, Meyer, a corporal at the time, begged his command to let him head into the incoming fire to help.

Four times he was denied his request before Meyer and another Marine, Staff Sgt. Juan Rodriguez-Chavez, jumped into the Humvee and headed into the fray. For his valor, Rodriguez-Chavez, a 34-year-old who hailed originally from Acuna, Mexico, would be awarded the Navy Cross.

"They told him he couldn't go in," said Dwight Meyer, Dakota Meyer's 81-year-old grandfather, a former Marine who served in the 1950s. "He told them, 'The hell I'm not,' and he went in. It's a one-in-a-million thing" that he survived.

Meyer and Rodriguez-Chavez began evacuating wounded Marines and American and Afghan soldiers to a safe point. Meyer made five trips into the kill zone, each time searching for the forward patrol with his Marine friends — including 1st Lt. Michael Johnson — whom Meyer had heard yelling on the radio for air support.

With Meyer and Rodriguez-Chavez ready to test fate a fifth time, a UH-60 helicopter arrived at last to provide overhead support. Troops aboard the chopper told Meyer they had spotted what appeared to be four bodies. Meyer knew those were his friends and he had to bring them out.

"Dakota, I know you've grappled with the grief of that day, that you said your efforts were somehow a failure because your teammates didn't come home," the president said. "But as your commander in chief and on behalf of everyone here today and all Americans, I want you to know it's quite the opposite."

Meyer and Obama chatted informally Wednesday evening, on a patio outside the Oval Office, over a beer.

In the ceremony, Obama praised Meyer's humility and work ethic, noting that he would not even take a call from the president during his shift at a construction job because he was working. He is now out of the Marines. So they two arranged to talk over his lunch hour. Obama jokingly kidded him with thanks for taking the call.

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U.S. nets thousands in offshore tax dodge crackdown

WASHINGTON (Reuters) - Major progress is being made in a crackdown on international tax evasion, the U.S. Internal Revenue Service said on Thursday.

In a program that offers leniency in exchange for volunteering information about undisclosed offshore assets and income, the IRS said that as of this month it had collected $2.7 billion from thousands of U.S. taxpayers.

"We have pierced international bank secrecy laws, and we are making a serious dent in offshore tax evasion," said IRS Commissioner Doug Shulman in a statement.

"Not only are we bringing people back into the U.S. tax system, we are bringing revenue into the U.S. Treasury."

The IRS and the U.S. Justice Department have also boosted criminal investigations of international tax evasion, he said.

The IRS in 2009 launched a disclosure effort giving taxpayers with undisclosed assets or income offshore a chance to get compliant with tax laws and avoid potential charges.

About 30,000 voluntary disclosures have resulted, involving "cases come from every corner of the world, with bank accounts covering 140 countries," the agency said.

More taxes and interest income to the government is expected to result from the latest disclosures.

"This dollar figure will grow," Shulman said. "But just as importantly, we have changed the risk calculus. Americans now understand that if they try to hide assets overseas, the chances of being caught continue to increase."

People hiding assets offshore have received jail sentences and have been ordered to pay millions of dollars.

Swiss bank UBS AG agreed in 2009 to pay $780 million in fines, penalties, interest and restitution under a deferred prosecution agreement with the U.S. government.

The program has yielded a wealth of information on banks and advisors assisting people with offshore tax evasion, which will be used in enforcement efforts, the IRS said.

(Reporting by Kevin Drawbaugh)

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'Rogue’ author: Sarah Palin is "a vindictive hypocrite’

(Gilles Mingasson/TLC via Getty)

Joe McGinniss, the author of the upcoming salacious new book about Sarah Palin--"The Rogue"--that has the sent the political and sports worlds in a frenzy, appeared in a segment on the Today show on Thursday.

McGinniss, who spent four months living in Wasilla, Alaska, in a rented house next to Palin's, said he interviewed approximately 200 of Palin's former associates, acquaintances and friends for the 318 page tell-all. The book includes a number of bombshell claims that have already stirred wide attention, including a report that Palin snorted cocaine, and slept with former University of Michigan basketball star Glen Rice while she was a sports reporter at a local Alaskan television station.

"An utter fraud," McGinniss said of the former Alaskan governor. "An absolute and utter fraud."

McGinniss continued: "At best, she is a hypocrite. At worst, she is a vindictive hypocrite. The thing that I found that really surprised me was that the people who know her best like her least."

The segment comes a day after the National Enquirer published leaked excerpts from the book--and thereby sent the media world buzzing on Wednesday.

McGinniss told the Today show that the book doesn't include any revelations gleaned from his tour as a neighbor to the Palin family. He is, however, a character in the book, though McGinniss claims that was not his intent.

"Sarah made me a character," McGinniss said. "She's a phenomenon. I said that to Todd when he came tromping across my lawn to confront me for living next door. He said 'Why are you writing about her anyway?' I said, 'Well Todd, I've been writing about politics since 1968. Your wife is a phenomenon. There's been no one like her in American politics before, no one who has come from nowhere to get so far.'"

He continued: "I was surprised at Sarah's reaction but it taught me something very interesting. She overreacts. She has no modulation in her responses to stress. In other words, she freaks out."

According to McGinniss, Rice, a former NBA player, said of his encounter with Palin: "In a short time, we got to know a lot about one another. It was all done in a respectful way, nothing hurried. She was a gorgeous woman, super nice. I was blown away by her. Afterward, she was a big crush that I had."

Todd Palin released a statement on Wednesday disputing McGinniss' claims, calling him, among other things, a liar and a stalker:

This is a man who has been relentlessly stalking my family to the point of moving in right next door to us to harass us and spy on us. He traffics in innuendo and falsehoods. A few years ago he interviewed members of Sarah's administration for a magazine article, and afterwards they said that he was the most disingenuous and intellectually dishonest writer they'd ever dealt with. He's spent the last year interviewing marginal figures with an axe to grind in order to churn out a hit piece to satisfy his own creepy obsession with my wife. I'd ask that people consider these facts when evaluating his latest lies. I'd ask the fathers and husbands of America to consider our privacy when one summer day I found this guy on the deck of the rental property, just 18 feet away next door to us, staring like a creep at my wife while she mowed the lawn in her shorts, unbeknownst to her that he was prying. As well as our teenage daughters while they tried to enjoy our traditional Alaskan summer days outdoors. Joe's son told the media he advised his dad not to move from the East Coast to become our next door neighbor, but said his dad 'was just waiting for Todd to be out of the picture.' Sarah has never spoken to this intruder into our lives, our friends and family don't speak to him, so we have no idea where he would come up with content for his book. He was on our doorstep one day trying to make conversation with our son until Track cut the conversation short after discerning Joe's odd behavior, and I spoke to him one time when I saw him 18 feet away, just to find out who he was. He took that conversation and reported it to the media as me 'threatening' him.

For what it's worth, McGinniss doesn't think Palin will run for president in 2012, as many have predicted.

"I think she's going for the easy money," he said. "She's going to take the path of least resistance. I don't think that she's going to run for president."

You can watch the Today Show interview below.

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Sunday, September 18, 2011

Final night of NY Fashion Week features big names

NEW YORK (AP) — Marc Jacobs. Calvin Klein. Ralph Lauren. Spring previews wrap up Thursday at New York Fashion Week with shows by some of the most influential designers in the business before the industry moves on to the runways of London, Milan and Paris.

Lauren's show always seems to come at the right time, when the exhausted crowd needs a breath of fresh elegance after eight days of non-stop fashion.

They got it this time around with Lauren's loose "Great Gatsby" silhouettes and wide-legged pants and shorts suits, some paired with men's ties that looked more Tom than Daisy.

The pale palette shimmered in soft pinks, silvers, whites and greens. It was a distinct departure from the bursts of bright color and less-dainty florals that dominated eight days of shows for editors, stylists and retailers.

Feathers in boas were carried over to the neck and hemlines of flapper dresses in outfits complete with hats of the era.

Another classic American brand, Bill Blass, preserved the past and forged a future in the hands of Jeffrey Monteiro. He was chosen almost two years ago to revive the line after years of tough going for the company.

He showed familiar, impeccably tailored navy coats and blazers, but underneath a navy twill peacoat was a bandeau top. A white halter jumpsuit had no back at all. A number of looks for evening exposed an equal amount of skin.

As soon as the Lincoln Center tents come down, London Fashion Week begins Friday.


The intersection of sportswear and elegance happens on the Ralph Lauren runway. It gives him a place on the American fashion scene like no one else.

There was a feminine hint of ruffle in a floral print, optic white menswear suits, luxe liquidlike fabrics and Deco beading were all part of Lauren's reimagining of '20s style.

Lauren showed great skill in balancing simple shapes the hardest thing to do well — with glamorous details: an ostrich feather scarf here or beaded bag there.

The ivory skirt suit with a hammered-satin tank top, accessorized with an embroidered linen clutch bag and ivory sandal is a lot harder to pull off than something dripping with decoration.

"He's so renowned for desirable, memorable and modern clothes," said Glenda Bailey, editor in chief of Harper's Bazaar.

Virginia Smith, fashion market director at Vogue, added: "It's sort of Ralph Lauren's world and we're living in it."

She especially liked the gowns — the knockout floral lame and the off-the-shoulder goddess style — among them. "They were a tour de force."

The catwalk featured more dressy styles than Lauren has recently turned out.

Olivia Wilde had the coveted seat next to the Lauren family. They always gather en masse in the front row. She seemed to show particular interest in the robin's egg-blue georgette dress with beading on one hip.

How fast can the Lauren team get that gown on the plane for Sunday's Emmy Awards?


Other interesting accents? A shirt tail hem on a black racerback tank, trailing gracefully behind the wearer, and a black organza top with an accordion pleat back. And while a red long-sleeved gown with an accordion pleat skirt seemed a little stodgy, the navy-and-white satin halter gown with a dot georgette skirt looked fresh and chic.

Nodding to the trend of big color, Monteiro included not only bright red — a signature color of Blass, who left the company in 1999 and died in 2002 — but also a bold yellow. A sequined gown of that color was a surprising, almost jarring burst of brightness.

In a backstage interview, Monteiro made it clear he was honoring the past. "We have the archive, and that's always the inspiration," he said. "Classic American sportswear. Sophisticated and easy."

His ideal client is versatile. "It's the classic American woman," he said. "She evolves, but she always comes back."


Considered one of the most influential collections on the runways here, duo Lazaro Hernandez and Jack McCollough seemed one step ahead with more trim, tailored shapes.

But they also confirmed emerging trends with optimistic flashes of yellow and aqua, clean shapes and a lot of prints.

The first model wore a buttoned-up jacket and tasteful, though super-short, shorts in dark brown with a tiger print.

From there, the designers moved down the spectrum from crocheted raffia, with a slight sheen and geometric details that oozed crafty chic, to very modern tech-crepe fabrics that hug the body. Both showed that Hernandez and McCollough continue to experiment with texture as much as silhouette.


To build on artful, architectural and expensive wardrobes, Rucci offered several modern looks with sheer plastic panels. Sometimes it was an inset around the bodice, sometimes more subtle on the cuff of a jacket or hem of a skirt.

And there was a white neoprene coat, paired with a faille straight skirt, like you've never seen neoprene before.

He used silver python for a banded skirt that was worn with a sheer chiffon button-front blouse. For evening there was black caviar-beaded blouson dress — using the tiniest beads one could imagine — that had little fringe at the hemline.

The clothes are grand but not showy — and Rucci received a standing ovation for his effort.


AP National Writer Jocelyn Noveck in New York contributed to this report.


Samantha Critchell tweets fashion at

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Perry supplemented wealth with profitable deals

AUSTIN, Texas (AP) — When it comes to presidential candidates, Texas Gov. Rick Perry is a man of modest means.

Perry's state salary peaked at $150,000 after two decades as a public official, and he and his wife earned just over $2 million in wages between 1991 and 2009.

Perry is worth is at least $1.1 million. His chief Republican rival for the GOP nomination in 2012, businessman Mitt Romney, is worth more than $190 million.

Perry became a millionaire through a practice common to many other politicians over the years, by participating in profitable deals involving political friends and their businesses. He made more than $800,000 in 2007 reselling a resort development plot he had gotten from a Republican friend in the Legislature, and he cleared $38,000 in 1995 by flipping stock in a company owned by one of his top campaign donors.

Private deals involving campaign supporters are widely criticized by government reformers as a potential form of backdoor donations or influence-buying. But they are often legal. In Perry's case, the Securities and Exchange Commission did not act on a complaint about his stock windfall.

"It's a familiar pattern to see politicians do well with their own personal investments," said Richard Hasen, an expert on money in politics at the University of California at Irvine School of Law. He noted that wealthy people often like to cut favored politicians in on financial opportunities. "That's not to say that there is anything necessarily illegal or unethical about it, but it is how the world works."

Perry's financial record portrays a politician of humble rural beginnings who built both a career and comfortable lifestyle with the help of well-heeled supporters. His competition against far richer candidates will rely heavily on his deep network of conservative donors and fundraisers.

Perry and his wife, Anita, who does consulting work for nonprofits, have earned about $2.4 million from real estate deals, stock trades, oil and gas leases and two trust funds. Mark Miner, a spokesman for the Perry campaign, said all of the governor's financial dealings have been legal, ethical and repeatedly reviewed.

"Everything was fully disclosed and it's been looked at numerous times and he filed the appropriate paperwork," Miner said.

To Craig McDonald, the director of Texans for Public Justice, a nonpartisan group that tracks campaign money and lobbying activities in Texas, the transactions do raise ethical questions.

"It clearly looks like he got some special favors," McDonald said. "Perry has a lifestyle that is probably beyond even his own million-dollar finances because people want to get close for many reasons to the governor of the state of Texas."

Perry placed the majority of his assets in blind trusts in 1996 to avoid questions about potential conflicts of interest. The governor's office declined to provide the current value of the trust. In September 2009, spokeswoman Allison Castle said it was worth $896,000. Perry also owns a home in College Station valued at $243,900.

While campaigning for the White House, Perry talks about his humble upbringing in Paint Creek, a West Texas town where he worked on the family cotton farm before getting into politics. In 1991, he reported that most of his income came from his $72,000 salary as state agriculture commissioner.

His assets grew as his political career advanced and he made a number of investments.

The biggest single profit reported on Perry's tax forms was the sale of land at the Horseshoe Bay luxury development outside Austin. He purchased the lot for $314,770 in 2001 and sold it for $1,138,536 in 2007.

Perry acquired the land from his childhood friend, Troy Fraser, a Republican state senator, after Perry had sold his house in Austin. Fraser said Perry used the cash from that sale and paid the original purchase price of $300,000, plus interest, for the lot. Fraser said the governor's legal team reviewed the deal and his press office issued a news release on the day of the sale. "It was a very straightforward real estate transaction."

Six years later, Perry sold the property to one of the resort developer's business partners for a profit of $823,766; the transaction fell outside the blind trust. A bank appraiser said the lot was worth the $1.1 million sale price, but the Burnet County tax appraisal office listed the land's value at only $600,000.

Perry and the others involved have repeatedly denied that the price was inflated and insisted they tax appraiser's valuation was too low.

"It clearly looks like he got some special favors," McDonald said. "The property was sold to him low, and a buyer was found to buy it from him at a very high price."

In another deal, Perry sold a 9.3-acre tract to computer magnate Michael Dell for nearly four times what he paid for it. Influential Texas lobbyist Mike Toomey represented Perry at the sale. Toomey later represented Merck and Co. in lobbying Texas to mandate an HPV vaccine for young girls to prevent cervical cancer.

The 9.3-acre West Austin property sold for $465,000 in 1995, when Perry was agriculture commissioner, and gave the Dell property access it needed to an adjacent municipal sewage district. Toomey had served as Perry's chief of staff and now runs the pro-Perry political action committee "Make Us Great Again."

Since Perry became governor, Dell and the Dell PAC have given his campaign $15,000.

Perry established his blind trust about six months after the stock deal that led U.S. Rep. Gene Green, D-Texas, to request an investigation by the SEC.

On Jan. 13, 1995, Perry bought $38,875 worth of stock in Kinetic Concepts. The owner is Jim Leininger, a San Antonio physician, conservative activist and major Perry campaign donor.

Perry invested an additional $35,167 in the company on Jan. 24, 1996, the same day he spoke at a luncheon that Leininger attended. Later that day, an investment firm bought 2.2 million shares of Kinetic Concepts stock, driving up its price. Perry sold his Kinetic Concepts holdings a month later for a $38,382 profit. Leininger and Perry acknowledged they spoke at the luncheon but denied discussing the stock.

Miner said all the transactions were legal and involved no insider information. The SEC did not act on the complaint and Leininger declined comment. But the incident fueled Democratic Party complaints of what they call Perry's crony capitalism.

Not all of Perry's investments have brought big returns. Perry has reported losing $308,496 from the holdings in his blind trusts from 1996 to 2009, a period that included the recent recession and stock market decline. He has requested an extension for filing his 2010 return.

Perry also owns interests in oil and gas dating back to 1991 and has earned $34,305 in royalties. The land partnership he holds with his father, J.R. Perry Co., has earned him $110,278.

Judging the business investments of politicians is difficult, said Hasen, who said public disclosure is the best recourse. "There could be things that cross the line, and (transparency) allows journalists, opposing candidates and the public to ferret out what might be an impermissible deal," he said.

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Treasury probes $528M loan to bankrupt solar firm

WASHINGTON (AP) — The Treasury Department's inspector general has opened an investigation of a $528 million government loan to Solyndra Inc., the now-bankrupt solar panel manufacturer once cited as a model of the Obama administration's clean energy program.

A spokesman said Thursday that the inspector general is reviewing the role and actions of the Federal Financing Bank, a government corporation supervised by the Treasury Department. The bank provided the low-interest loan to the Fremont, Calif.-based company.

The Treasury investigation is the latest government inquiry into the collapse of Solyndra, which filed for bankruptcy last month.

The FBI has executed search warrants at Solyndra's headquarters and talked to top executives. The Energy Department's inspector general and the House Energy and Commerce Committee also are investigating Solyndra and the DOE's Energy Loan Program, which has provided billions in loan guarantees to renewable energy companies.

The loan guarantees essentially make it easier for the companies to get financing, because the government guarantees repayment in the event of default. In Solyndra's case, the loan came from the government itself, but private banks often provide the financing.

The Obama administration is moving to finalize as many as 15 loan guarantees for renewable energy companies before a federal stimulus program ends on Sept. 30. Republicans question whether that could lead to more loans to companies that fail like Solyndra.

A spokesman for the Energy Department said the department won't take any shortcuts during the approval process.

"We will only close the deals that are ready to close on Sept. 30," said spokesman Damien LaVera.

The House energy committee released documents Wednesday that appeared to show senior staff at the White House Office of Management and Budget chafing about having to conduct "rushed approvals" of a loan guarantee for Solyndra.

Republican members of the committee said the emails raised questions about whether the loan was rushed to accommodate a Solyndra groundbreaking ceremony in September 2009 that featured Vice President Joe Biden and Energy Secretary Steven Chu.

"We would prefer to have sufficient time to do our due diligence reviews and have the approval set the date for the announcement rather than the other way around," said one of the emails from an unidentified OMB aide to Biden's office.

In another email exchange obtained by the committee, an Energy Department official asked a staff member at OMB if "there is anything we can speed along on the OMB side." Again, neither official was identified.

"I would prefer that this announcement be postponed," the OMB official replied. "This is the first loan guarantee and we should have full review with all hands on deck to make sure we get it right."

White House spokesman Jay Carney said Wednesday the emails don't suggest that the White House was pushing for the loan to be made.

"What the emails make clear is there was urgency to make a decision on a scheduling matter," Carney told reporters at the White House. "It is a big proposition to move the president or to put on an event and that sort of thing so people were simply looking for answers about whether or not people could move forward."

"It had nothing to — and there is no evidence to the contrary — nothing to do with anything besides the need to get an answer to make a scheduling decision," he said.

Solyndra once was the showcase for President Barack Obama's efforts to increase investment in renewable energy and to generate jobs. But the marketplace for its products changed dramatically over the past year. Chinese companies have flooded the market with inexpensive solar energy panels, and Europe's economy weakened demand from customers. The result has been an unprecedented drop in solar cell prices this year. Two other solar panel manufacturers also filed for bankruptcy in the past month.

Administration officials stressed that private investors thought so highly of Solyndra's prospects that they put more than $1 billion of their own money into the company.

But Republicans on the panel said there appeared to be a rush in approving financing for Solyndra, and they expressed concern that a similar rush may be taking place now with agreements that would have the federal government guaranteeing an additional $10 billion in loans if all the guarantees are approved before Sept. 30.


Associated Press Writer Kevin Freking contributed to this story.

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U.S. men in Iran to be freed soon with Talabani help: envoy

TEHRAN (Reuters) - Two U.S. citizens convicted of spying in Iran will be freed soon after Iraqi President Jalal Talabani negotiated their release with Iranian officials, an Iranian daily quoted an Iraqi envoy to Tehran as saying.

Shane Bauer, 28, and Josh Fattal, 29, were arrested on the border with Iraq in 2009 where they said they were hiking. They were found guilty of illegal entry and espionage and were sentenced last month to eight years in prison.

On Wednesday, Iran's judiciary rejected President Mahmoud Ahmadinejad's announcement that Bauer and Fattal would be freed "in a couple of days."

"The Iraqi president contacted top Iranian officials after the pair's families asked for his mediation ... They will be handed over to the Swiss embassy in Tehran early next week," the Thursday edition of Sharq daily quoted Nazem Dabbagh as saying.

The Swiss embassy represents U.S. interests in Tehran since Washington broke off diplomatic ties after the 1979 Islamic revolution that toppled the U.S.-backed Shah.

During a meeting with U.S. Deputy Secretary of State William Burns on Thursday, Iraq's Foreign Minister Hoshiyar Zebari confirmed Baghdad's intervention in the two men's case.

"The Iraqi government has made intensive efforts to obtain the release of the two Americans. We sent letters, many times, to a high level (in Tehran)," Zebari said in Arabic.

"It was the (Iraqi) president, PM and foreign minister who did that. They (Iranian officials) promised us more than once to release them. Now we have a clear promise and we are waiting for them to be released."

Relations between Iran and Iraq, which fought an eight-year war in the 1980s, have improved since the ousting of Saddam Hussein in the 2003 U.S.-led invasion.

Many Iraqi politicians, mainly Shi'ite and Kurdish, spent years in exile in Iran when Saddam was in power.

The United States accuses Iran and its elite Revolutionary Guards of funding, training and equipping Iraqi militias. Iran denies a role in the violence, which it blames on the presence of U.S. troops, and says it wants a stable neighbor.

The lawyer for the U.S. men said on Tuesday the two would be released on $500,000 bail each. Iran's judiciary said their release was under review.

Bauer and Fattal were arrested on July 31, 2009, along with a third American, Sarah Shourd. She was allowed home on $500,000 bail in September 2010.

Washington has denied they were spies and on Tuesday U.S. Secretary of State Hillary Clinton said she was encouraged by Ahmadinejad's remarks.

The release of the two could ease tension between Tehran and Washington, particularly before Ahmadinejad visits New York next week to attend the United Nations General Assembly.

Iran and the United States are at odds over the Islamic state's disputed nuclear program, which Washington says is a cover to build bombs.

Tehran denies this, saying its nuclear program is aimed at generating power and has so far refused to halt its nuclear work.

(Additional reporting by Waleed Ibrahim; Writing by Parisa Hafezi; editing by Rosalind Russell)

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A look at life in North Korea's remote northeast

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Saturday, September 17, 2011

Central banks expand dollar operations

FRANKFURT (Reuters) - Major central banks around the world will cooperate to offer three-month U.S. dollar loans to commercial banks in order to prevent money markets from freezing up in the wake of Europe's sovereign debt crisis.

The European Central Bank said on Thursday it would hold three fixed-rate operations between October and December to provide banks as many dollars as they needed, in order to ease any funding crunch over the year-end.

"The European Central Bank has decided, in coordination with the (U.S.) Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank, to conduct three U.S. dollar liquidity-providing operations with a maturity of approximately three months covering the end of the year," the ECB said.

The announcement sharply boosted European bank shares and the euro. Shares in French bank BNP Paribas climbed as much as 22 percent from the previous day's close before ending 13 percent higher.

Some banks are finding it hard to obtain dollar funding for periods of longer than a few days as U.S. money market funds and other traditional dollar lenders become increasingly nervous about the threat of a Greek debt default, which could destabilize markets throughout the region. European bank stocks have lost a third of their value since July.

"This is a very welcome decision," Silvio Peruzzo, economist at RBS, said of the ECB's announcement.

"Market reaction is strong given the news in recent days that some big banks are struggling to get funding. This eases many funding concerns that there are regarding many European banks."


The British and Swiss central banks said they would conduct three-month dollar lending operations simultaneously with the ECB on October 12, November 9 and December 7. The Bank of Japan, which already holds three-month dollar tenders, will add one on October 18.

The Fed, which in the past has faced criticism from lawmakers in Washington for its role in rescue efforts for European banks, will not itself offer three-month loans to banks in the United States. But it maintains dollar swap lines with the ECB and other central banks to ensure they can obtain additional supplies of dollars when needed.

The ECB already offers seven-day dollar loans every week. Two unidentified banks tapped this funding on Wednesday, borrowing a total of $575 million. It was the second time in a month that the facility was used; previously, it had not been tapped since February.

At the height of the global financial crisis in 2008-09, the ECB regularly held three-month dollar operations, before calmer conditions allowed it to phase them out. It held a one-off, three-month operation in May 2010 around the time of Greece's first international bailout.

Bank of France Governor Christian Noyer said this year's three-month dollar operations would buy European banks time as they adjusted their dollar business, which he said was necessary because U.S. money market funds were "withdrawing from Europe."

"All European banks, and the French are no exception, will have to readjust their activity in dollars," Noyer told France's Les Echos newspaper. "They must shrink their balance sheet without at the same time hurting their core businesses, such as export loans."

(Editing by Andrew Torchia)

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Amish men jailed after refusing to put orange triangles on buggies

The jailed Amish men's mug shots (Smoking Gun)

Judge Deborah Hawkins Crooks sentenced nine Amish men on Monday to up to 10 days in jail after they refused to pay fines for not putting an orange reflective triangle on the back of their horse-drawn buggies.

The men, who belong to the ultra-conservative Old Order Swartzentruber group, said that using the orange triangle violated their religion's modestly rules, which forbid bright colors. They asked to use gray reflective tape and lanterns instead, but the courts refused. The Graves County jail provided them with dark-colored jumpsuits.

The men, who are being represented by the American Civil Liberties Union, are appealing their case to Kentucky's Supreme Court, according to the Courier Journal. They refused to pay the fines because they don't think they should be punished for abiding by their religious beliefs. (Via The Smoking Gun.)

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$2 billion rogue trade suspect held in London

LONDON/ZURICH (Reuters) - UBS said a trader who lost the Swiss bank around $2 billion in unauthorized deals had been arrested in London, with sources close to the situation naming the man as 31-year-old Kweku Adoboli.

Adoboli -- working as a director of exchange traded funds and Delta 1 trading, according to his profile on LinkedIn -- was arrested during the night at UBS's London office on suspicion of fraud, the sources told Reuters on Thursday.

UBS said it discovered the problem on Wednesday afternoon, but gave no details of the trades involved. Police said they had arrested a man at 0230 GMT on Thursday, 2-1/2 hours after being contacted by the bank.

"The man was taken to a City of London police station for questioning and he remains in custody while officers are continuing to investigate this matter," City of London police Commander Ian Dyson told reporters.

Adoboli, a University of Nottingham computer science and management graduate, was described by a former landlord as a good tenant of a 1,000 pound ($1,600) per week apartment close to UBS in London's East End, where he lived until recently.

"I can confirm that an employee of the bank was arrested in London in connection with the statement," a UBS spokesman said, after the bank had revealed the loss.

UBS shares dropped to their lowest close since March 2009, ending the day down 10.8 percent after it said it might post a third-quarter loss following the trades, a huge blow as it struggles to rebuild its credibility after years of crises.

The loss effectively cancels out the 2 billion Swiss franc ($2.3 billion) saving it had hoped to make in a cost-cutting program announced last month in which it will axe 3,500 jobs.

It also threatens the future of UBS's investment bank, which is being reviewed by chief executive Oswald Gruebel as part of a wide-ranging restructuring following heavy losses in the credit crisis and a damaging scandal over bankers helping rich U.S. clients dodge taxes.

It also undermines claims by the Swiss bank and the industry that such events are a thing of the past.

UBS, which said no client positions were affected, is scheduled to hold an investor day on November 17 at which it was expected to announce a major overhaul of the investment bank.

"The matter is still being investigated, but UBS's current estimate of the loss on the trades is in the range of $2 billion," the bank said in a statement.

UBS employed almost 18,000 people in its investment bank at the end of June, most of them outside Switzerland, particularly in London and the United States.

"(This) is a staggering demonstration that all the clever systems that the banks now have, especially after the financial crisis, still cannot stop a determined individual getting round them if they want to," said Chris Roebuck, Visiting Professor at Cass Business School in London.

"It will yet again confirm to the majority of shareholders who are Swiss that investment banking is not 'proper' banking, as private banking is."

UBS had started to see client confidence return this year after it had to be rescued by the Swiss state in 2008 following massive losses on toxic assets held by its investment bank. The bank has had a history of major risk management glitches followed by repeated pledges to fix risk systems.


Any losses in UBS's investment bank risk scaring rich clients and prompting a further flight from its huge private bank, the core of its business that used to be the world's biggest wealth manager but has slipped to third place.

"This loss has the scope to have a material impact on the perception of UBS's private bank, impacting its future operating trends," Goldman Sachs analysts Jernei Omahen and Peter Skoog said in a note.

"Today's announcement therefore adds to the long list of arguments (and pressure) for a substantially smaller investment bank."

UBS's news caused disbelief among market operators.

The last similar case was when Jerome Kerviel, then a trader at Societe Generale, racked up a $6.7 billion loss in unauthorized deals revealed in 2008. Kerviel was sentenced to three years in prison in October 2010.

Both Kerviel and Adoboli were the same age when the scandal broke and both worked with so-called Delta 1 products, derivatives which closely track the underlying securities and give the holder an easy way to gain exposure to several asset classes. Examples include equity swaps, forwards, futures and exchange-traded funds.

"It is amazing that this is still possible," said ZKB trading analyst Claude Zehnder. "They obviously have a problem with risk management. Even when the amount isn't so high, it is once more a loss of confidence that casts UBS in a poor light."

Switzerland's financial markets regulator FINMA said it had been informed of the case and was in close contact with UBS, while a regulatory source said Britain's Financial Services Authority was in close contact with Swiss authorities.


The bank has in the past two years tried to rebuild the investment bank that nearly felled it during the financial crisis. It needed a state bailout after heavy losses on U.S. subprime mortgage-related securities.

Under Gruebel and investment bank boss Carsten Kengeter -- themselves both once traders -- it hired hundreds of traders in a bid to boost its bond business.

Several analysts said the incident made it more likely Kengeter would be in the firing line, while Gruebel could step down sooner rather than later.

"Gruebel saved the bank from destruction, so his main job is done. It is only a matter of time before he steps down. If it means he leaves a little sooner, it does not change a lot. But the investment bank is a bit of a disaster, and the knives will be out for Kengeter," said Peter Thorne, analyst at Helvea.

Former Bundesbank head Axel Weber is due to join the UBS board in May and take over as chairman in 2013.

The weak performance of the investment bank and tough capital rules in Switzerland had already attracted intense scrutiny over how UBS will cope. Analysts have called for a retrenchment, while Swiss politicians are debating how to make sure big banks can weather future crises without having to be bailed out by the state.

($1 = 0.870 Swiss franc)

(Additional reporting by Andrew Thompson in Zurich, and Sarah White, Huw Jones, Steve Slater, Keith Weir, Stefano Ambrogi and Douwe Miedema in London; Writing by Sophie Walker and Alexander Smith; Editing by Dan Lalor and Will Waterman)

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