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Fate of federal budget in hands NDP (Reuters)
OTTAWA (Reuters) – If the Conservative government wants to hang on to power when it presents its budget on March 22 it will need the support of a small opposition party with which it shares almost no common ground.
The Conservatives do not have enough seats in the House of Commons to pass the budget by themselves and need the backing of one of the three opposition parties. If all three vote against the budget, the government will fall and Canadians will head for an election in early May.
This leaves the government's fate in the hands of the New Democrats, the only party that has not already said it will reject the budget.
Leader Jack Layton says Canadians want Parliament to work and is pressing the government to commit to a series of measures to help seniors, cut home heating costs and hire more doctors.
Layton, whose party favors more social programs and higher corporate taxes, often attacks the tax-cutting tough-on-crime Conservatives and is an odd political partner for Prime Minister Stephen Harper and Finance Minister Jim Flaherty.
But two crucial factors are at play: Layton's health, and whether the New Democrats can shrug off polls showing the party would lose seats in an election.
The energetic 60-year-old is under treatment for prostate cancer and recently suffered a hairline fracture of the hip, which means he is walking on crutches. Aides insist this would not overly hinder his traditionally hard-driving style of campaigning, which often involves a string of 16-hour days.
"Mr. Layton is doing well ... He is ready to campaign whenever the election may come," said spokesman Karl Belanger.
If the government gives Layton enough of what he wants, he will back the Conservatives while telling supporters that only his party is able to get things done in Ottawa.
Belanger said Harper and Flaherty "can decide to help Canadian families by including some of the practical and affordable proposals the NDP has put forward. We hope that these measures will be included in the budget, but so far, we haven't been given any guarantees."
Flaherty said on Tuesday he was still talking to some opposition legislators and had not finalized his budget plans.
"There are lots of things we can do in the budget ... there are a group of older people in Canada who are not entitled to (state pension) benefits who could use some support from government," he told reporters.
If the government makes enough concessions this could help Layton gain popularity at the expense of the Liberals, a traditionally big tent centrist party that has been inching left.
In 2005, the New Democrats kept the then minority Liberal government in power in return for pledges to boost spending on social programs. Both parties are now fighting for the support of the same segment of the electorate, a factor which helps the Conservatives stay in power.
If Layton decides to bring down the Conservatives, polls indicate the NDP would lose some of the near-record 37 seats it won in the 2008 election. It now holds 36 seats.
This would pain Layton, who took over as leader in 2003 when the party only about a dozen seats and was regarded as politically irrelevant. The House of Commons has 308 seats.
(Reporting by David Ljunggren; editing by Peter Galloway)
Motive unclear in killing of two US airmen at Frankfurt airport (The Christian Science Monitor)
Frankfurt – German authorities charged a Kosovar man for today's killing of two US airmen at the Frankfurt airport, a major transit point for American forces in Europe.
A police spokesperson said it was too early to determine if the attack was politically motivated or a planned act of terrorism. It has been reported that the shooter, identified as a Muslim in his early 20s, shouted "Allah Akbar" ("God is greatest") before opening fire.
The gunman apparently approached the bus full of airmen around 3 p.m. local time and shot and killed a soldier standing in front of the vehicle before killing the bus driver and wounding two other passengers, said Boris Rhein, Interior minister for the state of Hesse.
Gallery: The world's top military spenders
"I am consciously speaking of homicide and not an attack," Mr. Rhein said at the scene. "But at the moment, nothing can be ruled out."
The airmen are based in the UK at the Lakenheath Airfield in Eastern England, which is home to the only F-15 fighter wing in Europe. It employs 4,500 active-duty military members. They had just arrived In Germany and were on their way to a base when the attack happened.
Frankfurt’s airport is Europe’s third busiest and armed police are a common sight in the airport's lobby. But the shooting took place in a public, nonsecure area just outside one of the two main terminals.
Germany is home to two-thirds of some 75,000 US troops stationed Europe, and Frankfurt's airport is a major transit point for the country's 18 US bases. The airport is also about an hour from the US Air Force's headquarters in Europe, Ramstein Air Force Base, which is often used as a logistical hub for operations in Afghanistan or Iraq.
"We use the airport all the time," says David Crawford, a former US military officer now living in the Frankfurt area. "It is a tragic event."
"It is very distressing, this is my home airport, this is the airport I go in and out of," says a woman married to a US airman who declined to give her name.
Gallery: The world's top military spenders
Copy that: Plagiarism charges unseat Germany's 'superstar' Defense minister (The Christian Science Monitor)
Frankfurt, Germany – He was Germany’s favorite politician, a conservative star boosting his party’s standing in the polls, a doer who pushed through a historic reform of the German armed forces.
But in a development that's rare for a country that never seemed to care much about politicians' private lives or personal indiscretions, Baron Theodor zu Guttenberg resigned this week amid Internet-fueled charges that he plagiarized his PhD dissertation. It was an embarrassment to Chancellor Angela Merkel's battered center-right Christian Democratic Union and the downfall of a politician whose career marked a departure from traditionally bland German politics.
"We’re seeing the failure of a concept where a person presents himself as superstar, where a politician tries to rise so high with so much glamour that he thinks he is an icon," says Gero Neugebauer of the Free University in Berlin.
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Mr. Guttenberg, whose wife is the great-great granddaughter of former chancellor Otto von Bismarck, seemed to flaunt his family name the way no German politician had done before. He was seen as a man of action, responsible for pushing through a plan to end the draft in the boldest reform of the armed forces since World War II.
Like many politicians here who see getting a doctorate as a way to increase their political fortunes, Guttenberg wrote his PhD dissertation in 2006 on the development of the US and European constitutions. But trouble started only two weeks ago when a law professor doing a review of the unpublished thesis uncovered incidents of plagiarism.
On Feb. 16, a German newspaper reported that parts of the thesis appeared to draw on articles in other newspapers, a US State Department website, and other essays without attribution. That news led to the development of a website, GuttenPlag Wiki, that made it possible for others to read the dissertation and discuss it.
Saying that Guttenberg, who became known as "baron cut and paste," had violated basic academic standards of honesty and integrity, 51,000 scholars signed a letter asking Chancellor Merkel for Guttenberg's dismissal.
Guttenberg initially dismissed the charges as "absurd." Merkel, too, treated it as a side issue, saying she’d hired a minister, not a research assistant. But when the University of Bayreuth, which had awarded his doctorate, withdrew Guttenberg’s degree, he resigned. "I’ve always been prepared to fight but I have reached the limits of my strength," he said Monday.
"The academic community acted collectively and said, ‘We’re not going to let that happen,' " says Mr. Neugebauer. "It was a milestone that scholars, and not politicians, were the ones that drove a politician to step down."
The scandal "is a reassertion of academic sovereignty vis-à-vis the political sphere," says Paul Nolte, a German historian who is currently a visiting professor of history at the University of North Carolina (UNC) at Chapel Hill. "But perhaps the lesson is that German politicians should think of themselves as doing politics, not at the same time pursuing some kind of academic career."
On Wednesday, Chancellor Merkel replaced Guttenberg, a potential chancellor candidate, with one of her most trusted aides, and seemingly increased her political chances for the future at the same time.
"Angela Merkel has lost a formidable competitor for chancellor," says Professor Nolte. "If there was anybody having the stature of a chancellor, it was Guttenberg and nobody else."
De Maiziere, the new Defense minister, is the best choice to continue Guttenberg’s milestone reform of the Army, says Nolte. "It’s striking a good deal for Merkel."
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Official: No chance of more NZ quake survivors (AP)
WELLINGTON, New Zealand – New Zealand declared the effort to find anyone else alive in the rubble of last week's massive earthquake to be over Thursday, saying no one who was trapped could have survived this long.
Families of more than 200 people listed as missing after the quake devastated the southern city of Christchurch on Feb. 22 had been holding out hope that a remarkable survival story would yet emerge. Officials say many of those listed as missing are among 161 bodies recovered but that have not yet been identified.
"We now face the reality that there is no chance that anyone could have survived this long, and efforts have to shift to the recovery of loved ones and their return to their families," Civil Defense Emergency Management national controller John Hamilton told a news conference Thursday.
"As time has gone on, the chance of finding someone alive has diminished and, sadly, there becomes a point where the response effort shifts in focus from rescue to body recovery," he said. "We have now reached that point."
Among the missing and presumed dead are dozens of foreigners, most of them students and staff of an English language school that was in an office building that collapsed completely in the disaster.
Rescuers pulled 70 people from the rubble in the first 26 hours after the quake struck just before 1 p.m. on Feb. 22, but no one has been found alive since.
Christchurch Mayor Bob Parker said New Zealanders' hearts went out to the families of those missing both locally and from overseas.
"It is a terrible day," he said. "It has been a tragic event and it has been something that none of us ever wanted or wished or even believed could happen in our city. So our thoughts, our hearts, our city, is with each and everyone of you."
Two Israeli backpackers were the first foreigners named among the dead, as the painstaking work of confirming the identities of scores of others gained pace.
The process of identifying the victims has been slowed by the extensive injuries to people who were crushed, and by the task of picking through the vast amount of rubble left behind by the magnitude 6.3 temblor.
Police Superintendent Sam Hoyle said Thursday that one more body had been found overnight, taking the overall count to 161, though just 13 have been publicly identified. Many other people remain missing, and officials have said the final death toll could be more than 200.
Hoyle said 90 of the bodies found so far were pulled from the Canterbury Television building, which housed a regional broadcaster and other offices including the language school, which taught students from Japan, China, the Philippines and other nations.
He said police and those responsible for identifying bodies had met victims families to explain why the process of was proceeding so slowly.
Superintendent Russell Gibson, another police commander involved in the recovery operation, said Thursday work had finally started at the collapsed bell tower of the Christchurch cathedral, which had to be braced before crews could enter. Up to 22 bodies may be buried in the rubble.
Other parts of the city were slowly returning to normal, though many of the 350,000 residents still have cut or limited water and power supplies and are using thousands of portable toilets deployed on street corners because of damage to the sewage system.
Another Christian Martyred in Pakistan (Time.com)
In another chilling message to Pakistani politicians willing to speak out for the rights of suffering minorities, extremists on Wednesday murdered the country's Minister of Minorities. The assassination of Shahbaz Bhatti, the only Christian in the ruling cabinet, came just two months after the slaying of Punjab governor Salmaan Taseer, shot 27 times by his own bodyguard because he had called for changes in a blasphemy law used to persecute religious minorities. Bhatti was killed when gunmen ambushed his vehicle outside his home. And in both cases, the killers gleefully boasted that the same fate awaits anyone else who dares challenge their brutally intolerant brand of Islam.
For Pakistan's Christians, the assassination is a grim reminder of the peril that attaches to merely practicing their faith. "We've been attacked many, many times in our history," says Shimon Gill, a member of the All Pakistan Minority Alliance. "But now we have been orphaned. Who will speak up for us now?" Gill, a campaigner who had worked alongside Bhatti to secure the rights of Pakistan's minorities, says that the minister had long endured threats to his life. Those threats, however, had escalated after Bhatti joined forces with Taseer to speak in defense of Aasia Noreen, a Christian farm laborer sentenced to death under the draconian blasphemy laws. "Bhatti was undaunted," says Gill. "He told us that he was prepared to be martyred for our cause." In his home village, Bhatti's supporters came out on to the streets to torch tyres, beat their chests in protest and denounce his killers. (See pictures of Christians under siege in the Muslim world.)
Militants linked to the Pakistani Taliban are suspected to be behind the assassination. Before the killers sped away in a car, they left pamphlets at the scene, proclaiming that "The only punishment for blasphemy against the Prophet is death". Bhatti's attempts to have Pakistan's blasphemy laws repealed was itself, in the eyes of his killers, an act of blasphemy. The pamphlet says that the assassination was a warning to "infidels" and "apostates". It was signed by "The organization of Al-Qaeda and the Punjabi Taliban," an odd formulation, combining the global jihadist group and the Punjabi branch of the Pakistani Taliban. Some of the language the document used to revere Islam's Prophet, however, is more commonly associated with the milder Barelvi sect, which is followed by the majority of Pakistani Muslims - and is at odds with the more austere Deobandi school of Islam favored by the local Taliban. Mumtaz Qadri, Taseer's confessed assassin, was a Barelvi.
Bhatti had predicted his own death, saying in a recently recorded video, "The forces of violence, militant banned organization, the Taliban and al-Qaeda, want to to impose the radical philosophy in Pakistan. Whoever stands against their radical philosophy, they threaten them." Bhatti insisted he was ready to "die for a cause", adding that he wanted defend the rights of his beleaguered community. "These threats and these warning cannot change my opinion and principles, he said. I would prefer to die for my principles, and for the justice of my community, rather than compromise on these threats." (See pictures of the battle against the Taliban.)
In the weeks since Taseer's slaying, Pakistan's government has rushed to distance itself from the more tolerant advocacy associated with the slain governor and with Bhatti. A parade of ministers has repeatedly insisted that the ruling Pakistan Peoples Party (PPP) - to which both Taseer and Bhatti belonged - would not touch the blasphemy laws. The government had hoped the controversy over the controversial laws would die down. "Clearly the government was wrong," says Ali Dayan Hasan of Human Rights Watch. In the time that has passed, the religious right - composed of disparate and often fractious sects - has forged rare consensus over the issue of blasphemy and taken to the streets of Pakistans cities in tens of thousands. Qadri, Taseer's assassin, has been celebrated as a hero. Banned terror organizations such as the Lashkar-e-Taiba, blamed for the November 2008 Mumbai massacre, have joined them. And for the past month, they have sustained their fury by focusing it on the demand for the execution of Raymond Davis, a CIA contractor registered as a diplomat who killed two Pakistanis in January but says he acted in self-defense and who has claimed diplomatic immunity with the support of the U.S. government.
"The government has chosen to pursue a policy of appeasement in order to keep itself in power," laments Hasan of Human Rights Watch. "This policy is misguided and self-defeating. If the last three months are any indication, President Asif Ali Zardari may be the last man standing. The problem is that he wont be standing for very long. If one by one, the people who are supposed to uphold the politics of tolerance remain silent, they will have no viable prospects left." Bhatti's assassins warn in their pamphlet that they will "pick out" others from Zardari's "infidel government" and dispatch them "to hell" in the same manner. (See more about Pakistan's deepening religious divide.)
The assassination also appears to have vanquished any hopes of reclaiming the secular Pakistan envisioned by its founder, Muhammad Ali Jinnah. "Jinnah's Pakistan died long ago," says Gill. The tragedy for Pakistan's minorities, adds Hasan, is that many of them don't have the option to leave. "They will have to live here regardless," he says. "The issue is not that they will become second class citizens, because they have been second class citizens for many, many years." (Comment on this story.)
Still, Gill and other Christians remain resolute. "We refuse to be frightened," he says, his voice thick with emotion. "We have lost Bhatti, but we have not lost his philosophy. We are clear. We will continue to fight for our rights. Bhatti's martyrdom will give us the strength to do so."
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Malaysia lukewarm on Australia asylum centre plan (AFP)
CANBERRA (AFP) – Malaysia's prime minister has offered lukewarm support to Australia's proposal for a regional processing centre for asylum seekers, during his first visit to the country since taking office.
Najib Razak discussed the plans for the regional refugee facility, which Australia hopes to build in neighbouring East Timor, during a meeting with his counterpart Julia Gillard in Canberra.
People-smuggling is a hot-button issue in Australia after more than 6,300 asylum seekers made their way to the country by boat last year -- the highest number on record -- and Malaysia is considered a key transit nation.
"We need a bit of time to study the Australian proposal but we will be as positive as we can," Najib told reporters after the talks, saying it would be discussed further at an upcoming regional human-trafficking meeting in Bali.
"We have to take a regional outlook first and we will be as cooperative as possible," he said, when pressed about his position.
Najib, who came to office in 2009, highlighted a recent amendment to Malaysia's anti-trafficking act -- which was welcomed by Gillard -- saying the penalties for people-smuggling were now "very severe".
"We will do our part to make sure that Malaysia is never a transit point for these people and this is where cooperation in terms of exchange of timely intelligence will be very useful for us to make the appropriate interdiction," he said.
Gillard's centre-left Labor government claims offshore detention will have a deterrent effect on the thousands of asylum seekers who head through Southeast Asian countries on their way to Australia every year.
East Timorese President Jose Ramos-Horta has said the proposed centre to be built in his impoverished nation had to be temporary and could cost about US$30 million.
Australia has a policy of detaining immigrants on arrival and the large influx of boat people -- mostly from Afghanistan, Iraq and Sri Lanka -- has stretched its facilities to breaking point.
In December, about 50 people were killed when a ship sank carrying scores of asylum seekers travelling from Indonesia sank at the remote Indian Ocean outpost of Christmas Island, Australia's main immigration detention centre.
Venezuela: Chavez discusses mediation with Gadhafi (AP)
By CHRISTOPHER TOOTHAKER, Associated Press Christopher Toothaker, Associated Press – 2 hrs 27 mins ago
CARACAS, Venezuela – President Hugo Chavez has spoken with Moammar Gadhafi about creating a bloc of friendly countries to help mediate a resolution to Libya's crisis, Venezuela's information minister said Wednesday.
Venezuela's president, who has forged close ties with Gadhafi and refused to condemn him for his crackdown on protesters, spoke with the Libyan leader on Tuesday, Information Minister Andres Izarra said through Twitter.
Venezuela has already reached out to its allies in Latin America and beyond to discuss the creation of a friendly bloc of nations — dubbed the Committee of Peace — to mediate the crisis.
Venezuelan officials did not say how Gadhafi had responded to the proposal.
Foreign Minister Nicolas Maduro said the creation of such a bloc could help resolve the conflict in Libya, adding that his government felt diplomacy — rather than military threats — should be used to end the violence sweeping the North African nation.
Maduro criticized U.S. and European Union officials for adopting policies aimed at isolating Gadhafi and raising the possibility of providing military support to Libyans rebelling against the embattled leader.
Such policies "point at giving the empire authorization for an invasion against the Libyan people," Maduro said, according to the state-run AVN news agency.
Chavez — who shares a mutual opposition to Washington with Gadhafi — has said he won't cave into international pressure to condemn Gadhafi and he has warned that Washington is preparing a military invasion of Libya.
"Hopefully in the coming days we could create a committee of friendly countries that go to talk with the government of Col. Gadhafi as well as the opposition that his taken up arms in some regions," Maduro said.
In a speech to chanting and clapping supporters in Tripoli on Wednesday, Gadhafi lashed out against Europe and the United States for their pressure on him to step down, warning that "thousands of Libyans will die" if U.S. and NATO forces intervene in the conflict.
Chavez has built close ties with Libya and visited the Arab country several times.
Gadhafi awarded Chavez in 2004 with the Libyan leader's annual human rights prize for battling "the effects of imperialism and the enemies of freedom inside and outside" Venezuela.
During a visit last year to Venezuela, Gadhafi pitched his tent outside a hotel during a summit of African and Latin American leaders. Gadhafi also received a special gift from Chavez: a replica of the sword that once belonged to Venezuela's 19th-century independence hero, Simon Bolivar.
Venezuela's opposition has strongly criticized Chavez for his close relationship to Gadhafi.
Earlier this week, a coalition of opposition parties warned that Chavez's failure to take a stand against Gadhafi's violent crackdown is smearing Venezuela's reputation abroad. Opposition politician Gustavo Azocar demanded that Chavez ask Gadhafi to return the replica of Bolivar's sword, saying the government should explain why it "gave the sword of the Liberator, Simon Bolivar, to an assassin like Gadhafi."
Venezuela: Chavez discusses mediation with Gadhafi (AP)
By CHRISTOPHER TOOTHAKER, Associated Press Christopher Toothaker, Associated Press – 2 hrs 27 mins ago
CARACAS, Venezuela – President Hugo Chavez has spoken with Moammar Gadhafi about creating a bloc of friendly countries to help mediate a resolution to Libya's crisis, Venezuela's information minister said Wednesday.
Venezuela's president, who has forged close ties with Gadhafi and refused to condemn him for his crackdown on protesters, spoke with the Libyan leader on Tuesday, Information Minister Andres Izarra said through Twitter.
Venezuela has already reached out to its allies in Latin America and beyond to discuss the creation of a friendly bloc of nations — dubbed the Committee of Peace — to mediate the crisis.
Venezuelan officials did not say how Gadhafi had responded to the proposal.
Foreign Minister Nicolas Maduro said the creation of such a bloc could help resolve the conflict in Libya, adding that his government felt diplomacy — rather than military threats — should be used to end the violence sweeping the North African nation.
Maduro criticized U.S. and European Union officials for adopting policies aimed at isolating Gadhafi and raising the possibility of providing military support to Libyans rebelling against the embattled leader.
Such policies "point at giving the empire authorization for an invasion against the Libyan people," Maduro said, according to the state-run AVN news agency.
Chavez — who shares a mutual opposition to Washington with Gadhafi — has said he won't cave into international pressure to condemn Gadhafi and he has warned that Washington is preparing a military invasion of Libya.
"Hopefully in the coming days we could create a committee of friendly countries that go to talk with the government of Col. Gadhafi as well as the opposition that his taken up arms in some regions," Maduro said.
In a speech to chanting and clapping supporters in Tripoli on Wednesday, Gadhafi lashed out against Europe and the United States for their pressure on him to step down, warning that "thousands of Libyans will die" if U.S. and NATO forces intervene in the conflict.
Chavez has built close ties with Libya and visited the Arab country several times.
Gadhafi awarded Chavez in 2004 with the Libyan leader's annual human rights prize for battling "the effects of imperialism and the enemies of freedom inside and outside" Venezuela.
During a visit last year to Venezuela, Gadhafi pitched his tent outside a hotel during a summit of African and Latin American leaders. Gadhafi also received a special gift from Chavez: a replica of the sword that once belonged to Venezuela's 19th-century independence hero, Simon Bolivar.
Venezuela's opposition has strongly criticized Chavez for his close relationship to Gadhafi.
Earlier this week, a coalition of opposition parties warned that Chavez's failure to take a stand against Gadhafi's violent crackdown is smearing Venezuela's reputation abroad. Opposition politician Gustavo Azocar demanded that Chavez ask Gadhafi to return the replica of Bolivar's sword, saying the government should explain why it "gave the sword of the Liberator, Simon Bolivar, to an assassin like Gadhafi."
Gunman kills two U.S. airmen at Frankfurt airport (Reuters)
FRANKFURT (Reuters) – German police arrested a man on Wednesday after two U.S. airmen were shot dead and two wounded in an incident on a U.S. Army bus at Frankfurt airport, authorities said.
Security round the airport was tightened and an investigation into the "terrible, senseless crime" was under way, said Boris Rhein, interior minister for Hesse state.
"Whether the incident was linked to terrorism I cannot say at this stage," he told reporters.
The suspected gunman was apparently a Kosovo national, he said. Police said he was 21.
A spokesman for Frankfurt airport operator Fraport said the shooting took place in a U.S. Army bus in front of Terminal 2. U.S. President Barack Obama said he was outraged by the attack.
Authorities in Kosovo believed they knew the identity of the suspected gunman but could not confirm it yet, Kosovo Interior Minister Bajram Rexhepi told Reuters in Pristina.
A police official identified the man as Arif Uka from the city of Mitrovica but no official confirmation was given yet.
"The government of the Republic of Kosovo is extremely touched and strongly condemns the killing of two American citizens and the wounding of two others by a citizen from Kosovo that happened today in Germany," the government said in a statement.
The United States has had troops in Kosovo since 1999, when a NATO bombing campaign pushed out Serbian forces. The U.S. troops there now are helping to oversee a fragile peace that has held since Kosovo declared independence from Serbia in 2008.
Major Beverly Mock, spokeswoman for the U.S. Air Force at Rammstein air base in Germany, said the identities of the dead airmen had not yet been confirmed.
"The German authorities have the shooter in custody," she said.
Chancellor Angela Merkel, speaking in Berlin, told a news conference: "We don't know the details but I would like to express how upset I am. We have to do everything we can to find out what happened."
(Reporting by Tilman Blasshofer; additional reporting by Fatos Bytyci in Pristina, Annika Breidthardt and Sarah Marsh in Berlin and Maria Sheahan in Frankfurt; writing by John Stonestreet; editing by Angus MacSwan)
Bangladesh's Microfinance Pioneer Muhammad Yunus Faces a Political Battle to Survive (Time.com)
By SUMON K. CHAKRABARTI / NEW DELHI Sumon K. Chakrabarti / New Delhi – 1 hr 10 mins ago
The clock started ticking for Nobel Peace laureate Professor Muhammad Yunus in 2007. That was the year the celebrated economist and microcredit guru made a brief foray into Bangladeshi politics. Two squabbling political parties have run the country throughout its history, but in 2007 a military caretaker government was in charge. Yunus launched the "Citizens' Power" party, billing itself as a clean, efficient alternative to political unrest. Instead, the move opened the door to political attacks. In March 2007, Awami League politician A.M.A. Muhith told a reporter for the Christian Science Monitor: "The fact that Yunus is being able to carry on political activities when all the other parties are straitjacketed by the state of emergency implies a tacit endorsement by the current regime."
His party never took off. In 2009 elections, the Awami League won national elections, returning its leader, Sheik Hasina, to power and putting Yunus and the Grameen Bank, the microlending bank that he founded in 1983, back under scrutiny. In November 2010, a Norwegian television documentary accused Yunus and Grameen of improperly moving funds donated by the Norwegian government. The Nobel laureate was subsequently vilified in the Bangladeshi media and faced an investigation in Norway. Oslo cleared Yunus and Grameen of any financial impropriety, but the damage was done. Prime Minister Sheikh Hasina branded Yunus a "blood-sucker of the poor" and pushed for his removal from the helm of Grameen. Muhith, who is now finance minister, has called for him to "stay away" from the bank. On Wednesday afternoon, the government fired the 70-year-old Yunus from the institution he'd founded. (See pictures of Yunus' career.)
"Muhammad Yunus has been removed from the post of managing director of Grameen Bank," A F M Asaduzzaman, deputy general manager of the country's central bank, told reporters in Dhaka. The central bank declared that Yunus had violated the country's retirement laws by staying on as Grameen's head long past the mandatory retirement age of 60.
But the real drama began an hour later, when Jannat-E-Quanine, the spokesperson for Grameen Bank, stoutly defended its founder, announcing that Yunus will remain in charge and denying that he has violated any laws. The bank said in a statement: "Grameen Bank has been duly complying with all applicable laws. It has also complied with the law in respect of appointment of the Managing Director." A spokesperson for Yunus said he declined to make any further comment about the charges against him. (Watch "10 Questions for Muhammad Yunus.")
But Khondaker Muzammel Huq, the government-appointed chairman of Grameen Bank, told TIME that Yunus had been relieved of his duties for failing to get the mandatory clearance from the central bank when he was appointed managing director in 1999. "In the by-laws of Grameen Bank, it is clearly stated that the managing director should be appointed by the board with the prior approval of the Bangladesh Bank," Huq said. "That was not done. So he has been relinquished of his duties. We have sent a letter accordingly to Grameen bank."
Sheikh Hasina's government, meanwhile, is working overtime to convince the international community that their move was not illegal. On Monday, U.S. Ambassador James F. Moriarty met Muhith to express his concerns. Muhith is expected to meet ambassadors of various countries and representatives of World Bank, International Monetary Fund and Asian Development Bank to clarify the government's decision on Yunus today. He told AFP, "We'll deal with it gracefully." (Comment on this story.)
The Friends of Grameen, a group of charities led by former Irish President Mary Robinson, last month alleged that Yunus was being subjected to "politically orchestrated vilification." Yunus, too, has called the charges against him politically motivated in the past. But his widespread support abroad has fueled criticism of him at home as someone caught up in his own fame. "The government seems to be legally right, but this is surely a politically incorrect move, now that some international celebrities, whose credibility you probably cannot question, are campaigning for Muhammad Yunus," says Toufique Imroze Khalidi, editor-in-chief of BDNEWS24. Khalidi says the government's role in helping to start Grameen Bank, in which it holds a small minority stake, has been ignored. "Professor Yunus simply outsmarts the government internationally with his superb PR skills."
The government in Dhaka has also capitalized on a wider disaffection with microfinance. The Grameen bank's micro-credit model is a "death-trap for the poor," says Professor Anu Mohammed, a leading Bangladeshi economist. "Their programs are such that do not reduce but reproduce poverty." Those same criticisms have hit microfinance lenders from Latin America to Africa to India, and Bangladesh is no exception. A five-member review committee on Grameen Bank was constituted on Jan. 11 to conduct a special audit of the bank, focusing on the rates of interest at which it borrows money and then lends to the poor. Defenders of microcredit acknowledge that the model cannot do much to help the poorest of the poor, but says it does serve an important function. As an editorial in the Financial Times put it: "Microfinance may not on its own lift people out of poverty, but it does enhance financial inclusion, letting poor borrowers smooth their incomes so they can cope with illness or other temporary shocks."
Grameen, too, has begun to expand its model beyond just microfinance, into savings programs and "social businesses" that might do more to directly ease poverty. But for now, those efforts will be on hold. Yunus will likely be spending much of his time in court in the coming months, fighting what looks set to be a long legal battle.
Sumon K Chakrabarti is the Chief National Correspondent of CNN-IBN
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Pakistan media warns of growing chaos as minister slain (Reuters)
ISLAMABAD (Reuters) – Pakistan is being swept toward violent chaos by a growing wave of Islamist extremism, newspapers said on Thursday, a day after Taliban militants killed the country's only Christian government minister.
The assassination of Minister for Minorities Shahbaz Bhatti in broad daylight in the capital Islamabad on Wednesday, threatens to further destabilize the nuclear-armed U.S. ally where secular-minded politicians are imperiled by a rising strain of violent religious conservatism in the society.
"Mr. Bhatti's brutal assassination has once again highlighted the fact that we are fast turning into a violent society," the liberal Daily Times said in its editorial.
"This is not the time to be frightened into silence. It is time to implement the law and not surrender in front of extremists."
Bhatti is the second senior official to be assassinated this year for challenging the country's controversial blasphemy law, which sanctions the death penalty for insulting Islam or its Prophet Mohammad. Punjab provincial governor Salman Taseer was shot dead by his own bodyguard in January for calling for curbing abuses in the law.
"Terrorists silence another voice of interfaith harmony," the daily Dawn ran a banner headline on its front page. "Shahbaz Bhatti silenced forever," said The News.
President Asif Ali Zardari told a party meeting on Wednesday he would resist the slide toward extremism.
"We have to fight this mindset and defeat them. We will not be intimidated nor will we retreat the official APP news agency quoted him as saying.
Mehbood Ahmed, a senior police official, said around 20 people had been detained for questioning, but police did not yet know who was responsible. "But we are confident we will get hold of culprits," he said.
Condemnation poured in from around the world after news of Bhatti's killing broke, with the Church of England and the Vatican decrying the violence against Christians in Pakistan.
"I hope the government of Pakistan will not only hold the killers to account, but reflect on how it can more effectively confront the extremism which is poisoning Pakistani society," United Nations human rights chief Navi Pillay said from Geneva on Wednesday.
These killings, along with frequent militant attacks and chronic economic problems have raised fears for the future of the U.S.-ally, where an unpopular coalition government is struggling to cope.
'THERE'S BLOOD ON THEIR HANDS'
Ties between the two old allies have hit new lows after the arrest in January of Raymond Davis, a U.S. Central Intelligence Agency contractor, who shot dead two armed men in the city of Lahore. The United States says Davis has immunity, but Pakistan has said it is for the courts to decide.
In the meantime, Davis was in court on Thursday for the second hearing of his murder trial. His immunity hearing is March 14.
The government of President Asif Ali Zardari has repeatedly said it would not change the blasphemy law, and officials have distanced themselves from anyone calling for amendments for fear of a backlash from extremists, a move that dismayed moderates and liberals.
"Of course the silent majority, which keeps silent over these things, also must bear responsibility," I.A. Rehman, director of the Human Rights Commission of Pakistan, told the Express 24/7 television channel Wednesday night. "There's blood on their hands also."
The law has been in the spotlight since last November, when a court sentenced a Christian mother of four to death after her neighbors complained she had insulted Prophet Muhammad. Both Taseer and Bhatti championed the cause of poor Christian woman.
Al Qaeda-linked Pakistani Taliban militants, fighting to bring down the state, had called for Bhatti's death because of his attempts to amend the law.
The funeral of Bhatti, a Catholic, is expected to take place on Friday or Saturday, his family friends said.
Christians and other religious minorities have staged protests in several cities, denouncing his death and have called on the government to provide them protection.
(Additional reporting by Chris Allbritton and Robert Evans in Geneva, editing by Andrew Marshall)
Afghans, Western backers in contact with Taliban: Karzai (Reuters)
LONDON (Reuters) – The Afghan government and its Western backers are in contact with Taliban insurgents but it could take one to three years to reach a resolution, Afghan President Hamid Karzai said on Wednesday.
In an interview with Britain's Channel 4 News, he also advised Western nations not to intervene militarily in Libya, where Muammar Gaddafi faces a revolt against his 41-year rule.
Karzai said his government was in direct conversation with some members of the Taliban, who are waging an increasingly bloody insurgency in Afghanistan.
"The contacts are going on. The contacts don't get to a fixed address unfortunately, because that address is not there," he said, speaking during a visit to Britain where he held talks with Prime Minister David Cameron.
Karzai said contacts were being increasingly channeled through the High Peace Council, set up last year to seek a negotiated end to decades of violence.
"At the same time there are contacts by our international partners," he said.
Asked if the United States and Britain were talking to the same people the Afghan government was talking to, Karzai said: "There are contacts, but they will not be with the same people."
He said negotiations were just beginning although he hoped they would reach an end point soon.
Asked to be more precise, he said: "Unfortunately it doesn't mean weeks. I wish it did. It doesn't mean months. It probably will be one or two or three years."
Violence across Afghanistan is at its worst since the Taliban were ousted in 2001 and the insurgency has grown in the past year despite the presence of about 150,000 foreign troops.
The New Yorker magazine reported this month that the United States had entered direct talks with leaders of the Taliban in Afghanistan, but contacts were exploratory and not yet a peace negotiation.
Advising against Western military intervention in Libya, Karzai said it would stir "nationalistic fervor" among Libyans and cause more suffering for all concerned.
Admitting that there was "friction" with his Western allies over strategy in Afghanistan, Karzai said he had told his allies the military surge should be scaled back to permit negotiations.
"The military is less inclined to accept it (this argument). The political side, the civilian side, is more inclined to it," he said.
Karzai said the Western media had greatly exaggerated the extent of corruption in Afghanistan.
A scandal at Afghanistan's biggest private bank, Kabulbank, which has lost hundreds of millions of dollars, could jeopardize Western aid to Afghanistan.
"The Kabulbank is a corrupt case, sure, but so are the banks in the UK, so are the banks in America," Karzai said.
Allegations about his half brother, were "totally wrong, absolutely wrong, politically motivated," he said. Ahmad Wali Karzai, a leader in Kandahar province, has been accused of amassing a fortune from drugs, intimidating rivals and of having links with the CIA, charges he denies.
(Editing by Janet Lawrence)
Trial for accused CIA shooter resumes in Pakistan (Reuters)
LAHORE, Pakistan (Reuters) – A Pakistani court resumed on Thursday the trial of CIA contractor accused of killing two Pakistanis in a case that has strained relations between the United States and its important Asian ally.
The American contractor, Raymond Davis, 36, shot dead two men in the eastern city of Lahore on January 27. He said he acted in self-defense and the United States says he has diplomatic immunity and should be repatriated.
The case has inflamed anti-American sentiment in Pakistan and is testing the often-fraught ties between the allies. Pakistani efforts against Islamist militants on its border with Afghanistan are seen as crucial for ending the Afghan war.
The trial resumes a day after Pakistani Taliban militants shot dead a government minister, Shahbaz Bhatti, who was also the only Christian in the cabinet, for his criticism of a law that mandates the death penalty for insulting Islam.
Hardline religious parties, which have been campaigning vociferously to prevent any reform of the blasphemy law, have also called for Davis to be hanged.
The United States had retaining a retired judge, Zahid Hussain Bokhari, who is also a former government prosecutor, to help with the Davis case, Bokhari said.
"The U.S. consulate has contacted me and I will represent Raymond Davis," Bokhari told Reuters before the hearing.
Security was tight at Kot Lakhpat jail, where the trial is being held for security reasons. Machine guns were installed on top of water towers inside the jail and concrete barriers were placed on the road leading to it.
Davis, a former U.S. special forces officer, has been charged with double-murder and faces possible execution.
DIPLOMATIC STANDOFF
There have been conflicting accounts about the identity of the two men Davis shot, with Davis and a police report indicating they were armed robbers while Pakistani media and some officials have portrayed them as innocent victims.
On March 14, the Lahore High Court will decide whether Davis enjoys diplomatic immunity, another contentious issue that the government has said must be decided legally, at the risk of angering the United States and jeopardizing up to $3 billion a year in U.S. military and civilian aid.
But with public anger and anti-American feeling running high, President Ali Asif Zardari's unpopular government had little choice but to let the case go through the courts.
In addition to causing a diplomatic standoff, the case has strained relations between the CIA and Pakistan's main Inter-Services Intelligence (ISI) spy agency, which says it did not know of Davis' presence in the country.
Relations between the spy agencies -- essential to the almost decade-old war in neighboring Afghanistan -- took a blow in December, when the CIA station chief in Islamabad was forced to leave the country after his name was published in a court filing over attacks in Pakistan by pilotless U.S. aircraft.
The latest case has made things worse, as even the usually tight-lipped ISI noted.
"Post incident conduct of CIA has virtually put the partnership into question ... it is hard to predict if the relationship will ever reach the level at which it was prior to the Davis episode," the ISI said in a letter to the Wall Street Journal last month.
(Additional reporting by Sheree Sardar; Writing by Chris Allbritton; Editing by Robert Birsel)
Top SEC lawyer did not recuse himself on Madoff (Reuters)
By Sarah N. Lynch Sarah N. Lynch – Mon Feb 28, 6:29 pm ET
WASHINGTON (Reuters) – The top attorney for the U.S. securities regulator was advised not to recuse himself from handling Bernard Madoff matters for the agency, even though his family's estate had invested with the swindler.
Outgoing Securities and Exchange Commission General Counsel David Becker discussed his rationale for continuing to work on Madoff matters in a letter to several House of Representatives Republicans who inquired about the issue last week.
Becker, whose last day at the SEC was on Friday, is the subject of a lawsuit by Madoff Trustee Irving Picard. Picard filed suit against Becker and his brothers in December seeking to recover $1.5 million in phony profits the Becker family estate received from Madoff investments. Becker is a co-executor of his mother's estate. His mother passed away in 2004.
The suit does not claim Becker or his brothers knew anything about the fraud and merely seeks to recover money to harmed investors. Madoff was arrested in December 2008 after admitting he ran a decades-long, multibillion-dollar swindle, considered the biggest investment fraud in history.
Key House Financial Services Republicans last week raised ethical questions about Becker's family's investments and his role as general counsel at the SEC. Becker worked at the SEC between 1998 and 2002, serving as general counsel for part of that time. He later returned to work as general counsel under SEC Chairman Mary Schapiro in February 2009.
In a letter to Republicans, Becker said he disclosed his mother's investments to the SEC ethics attorney William Lenox in 2009 right around the time of his return.
"At the time, the SEC was focused on bringing enforcement actions against Mr. Madoff and others, and in the view of the ethics counsel, those matters did not have a direct and predictable effect on my financial interests," Becker wrote in a letter dated February 25, and disclosed on Monday.
Congressman Randy Neugebauer, the chairman of the House Financial Services Subcommittee on Oversight and Investigations, told Reuters on Monday his staff is still reviewing Becker's responses to ensure that everything was properly disclosed.
"I think there are some unanswered questions there," he said.
In the letter, Becker said he sought counsel from the SEC's ethics lawyer on a second occasion in May 2009 after law firms wrote to the SEC asking the agency to get Picard to change his interpretation for how people could file claims to get their money back.
He said he recognized this issue could affect his financial interests because it could "affect the trustee's decision to bring clawback actions against persons like me."
The ethics counsel decided he could advise the SEC on how to respond to the letters from the law firms questioning Picard's interpretation of the term "securities positions" because it would "not have a direct and predictable effect on the trustee's decision to bring clawback actions."
Becker also said that, when he previously served as general counsel from 2000 to 2002, he did not interact with Madoff and was unaware of the tips the agency received about the Ponzi scheme from Harry Markopolos.
Becker added that "no one specifically considered the issue of whether to notify the public" about his mother's Madoff account when he rejoined the SEC in 2009.
Becker sent his responses to the top Republicans on the House Financial Services Committee, including Chairman Spencer Bachus and Vice Chairman Jeb Hensarling, as well as House Financial Services oversight subcommittee Chairman Randy Neugebauer and House Financial Services capital markets subcommittee Chairman Scott Garrett.
(Reporting by Sarah N. Lynch; editing by Gerald E. McCormick and Andre Grenon)
TSX turns lower on financials, oil worries (Reuters)
TORONTO (Reuters) – Toronto's main stock index turned lower on Tuesday afternoon, weighed down by falling financial shares and by economic worries sparked by high oil prices.
The Toronto Stock Exchange's S&P/TSX composite index fell 2.03 points to 14,134.47, following drops on U.S. stock markets. Heavyweight financials were down 0.6 percent, leading seven of the index's 10 main sectors lower.
U.S. Federal Reserve Chairman Ben Bernanke said on Tuesday the recent surge in oil prices was unlikely to derail the U.S. economy, but his comments did little to reassure investors worried that the turmoil in the Middle East could affect Saudi Arabia, the world's largest oil exporter.
(Reporting by Ka Yan Ng; editing by Peter Galloway)
How the major stock indexes fared Monday (AP)
Stabilizing oil prices and signs that the economy may be improving pushed stock indexes higher Monday. The Standard and Poor's 500 index, the benchmark for most U.S. mutual funds, finished its third straight month of gains.
The Dow Jones industrial average rose 95.89, or 0.8 percent, to at 12,226.34.
The Standard & Poor's 500 index rose 7.34, or 0.6 percent, to 1,327.22.
The Nasdaq composite rose 1.22, or 0.1 percent, to 2,782.27
For the year to date:
The Dow is up 648.83, or 5.6 percent.
The S&P is up 69.58, or 5.5 percent.
The Nasdaq is up 126.40, or 4.9 percent.
Egypt delays expected reopening of stock market (AP)
CAIRO – Egyptian officials have again delayed the restart of the country's stock exchange, a move that brokers said Tuesday would likely only undercut investor confidence in a market many expect to take a hammering as the country struggles to regain footing after massive protests that ousted its longtime president.
The Egyptian Exchange, shuttered for over a month, was to resume trading on Tuesday. But in an overnight statement, exchange officials said the market would reopen instead on March 6 to "allow investors to profit from the government's support to guarantee stability in the bourse."
The decision reflected the strong undercurrent of unease in the Arab world's most populous nation where the market's benchmark stock index had shed almost 17 percent in two consecutive trading sessions before it closed at the end of the business day on Jan. 27.
"No doubt, it is certainly eroding investor confidence, and we're losing credibility by the day in international markets," said Karim Helal, managing director of brokerage CI Capital. "If the decision is to allow the market to absorb losses, it won't make a difference. It will just make it worse."
The exchange's closure was repeatedly extended as protests in Egypt gained momentum demanding Hosni Mubarak's ouster. Even after he was pushed from power, the suspension continued as massive labor strikes gripped the country and banks closed for a week.
To allay concerns about a panic sell-off, market officials set up safeguards to ensure that the broader EGX100 index would not collapse in one session, including setting up so-called trading circuit-breakers that would halt trading in the case the index shifted by 5 percent and then 10 percent.
The government, already facing a sharp economic blow from the expected downturn in tourism and foreign investment linked to the anti-regime unrest, said it would provide backing for smaller investors and brokerages.
But many remained unconvinced that a crash would be averted. And, as the market geared up for a restart, protests began in front of the exchange.
Analysts and brokers say the decision to delay the restart, however, may also be linked to the investigations of several prominent businessmen with close ties to the Mubarak regime. Many of these businessmen head some of Egypt's largest private sector companies.
Several have had their assets frozen and brokers have been ordered to go through their books and ensure that they can verify the identity of all their clients as many of these businessmen's holdings include significant amounts of shares.
The aim, ostensibly, is to ensure that these individuals do not convert their shares into cash and transfer them out of the country using a pseudonym.
The continuation of the halt in the exchange's operations, however, will likely do little to avoid what many expect will at least be a first day sell-off.
Stock markets across the region have been seeing sharp drops over the past few days because of the violent protests in Libya. Meanwhile the spread of the demonstrations in the oil-rich Gulf Arab region is also stoking fears that it could spillover to OPEC kingpin Saudi Arabia.
"There's a combination of reasons" for the continued closure, said Helal, including the "continuing presence of some investors who are demanding the suspension until things stabilize."
"I'm not sure what they mean by that," he said, adding that keeping the market closed will not avert a sell-off.
SGX CEO says no more concessions on $7.7 billion ASX bid (Reuters)
SINGAPORE/HONG KONG (Reuters) – The head of the Singapore Exchange Ltd (SGXL.SI) drew a line under his $7.7 billion bid for Australian bourse operator ASX Ltd (ASX.AX), saying on Tuesday he did not plan any further concessions to win approval for the deal.
Magnus Bocker's bid for ASX last year was the first salvo in a spate of merger and acquisitions that has since erupted in the global exchanges industry, but has run into mounting opposition from Australian politicians and regulators.
SGX relaxed its terms for the takeover last month and Bocker heads to Australia later on Tuesday to campaign for the deal, but he signaled the offer would not be changed.
"We are not considering further concessions," Bocker, the chief executive of SGX, said at the Reuters Future Face of Finance Summit.
SGX and ASX want to team up to cut costs, fight growing pressure from alternative trading platforms and avoid being left behind as rivals in North America and Europe get together.
In less than three weeks, Deutsche Boerse announced a bid for NYSE Euronext, London Stock Exchange (LSE.L) unveiled plans to take over Toronto Stock Exchange parent TMX Group Inc (X.TO), and BATS Global Markets said it would buy fellow privately-owned venue operator Chi-X Europe.
To try to overcome opposition to its deal, SGX agreed last month to allow ASX to have an equal number of directors in the merged company as it seeks an agreement to lift a 15 percent cap on foreign ownership and counter calls for the merger to be scrapped. Yet, under the agreement, SGX will still own a 64 percent share after the merger.
Bocker, a 49-year-old Swede who made his mark bringing together seven Nordic bourses to form OMX AB, said he was not contemplating any other mergers or acquisitions.
"I don't see myself as a dealmaker. I see myself as an operator. I like building, changing and growing exchanges," he said, before heading to Australia to campaign for the ASX deal.
HONG KONG LIKES ICE
The surge of merger activity has shone a spotlight on the role SGX's larger Asian rival, Hong Kong Exchange and Clearing Ltd (0388.HK), will play in the consolidation.
HKEx Chairman Ronald Arculli told the Reuters Summit in Hong Kong he was watching moves closer and would love to replicate IntercontinentalExchange's (ICE.N) model of buying up businesses focused on commodities futures.
"If I could replicate the ICE model from the old international petroleum exchange, I would do it tomorrow, today, or now," Arculli said.
"If you look at the ICE model, it really is an amazing achievement. They have a lot of components and started out small, but now it's got a market cap of $8-9 billion."
The Hong Kong Exchange, the world's largest exchange operator by market value, has been seen as a possible buyer in any acquisition, although the company has previously said it does not have any targets currently.
U.S-based ICE started off as a physical commodities exchange trading energy products such as oil, and later expanded into the derivatives, options and futures businesses through a series of acquisitions.
It has been reported as looking at a rival bid with Nasdaq OMX (NDAQ.O) for NYSE Euronext (NYX.N), in an attempt to break up the Big Board's deal with Deutsche Boerse (DB1Gn.DE).
CHINA EYED
The HKEx, with its $23 billion market capitalization and $5 billion in cash, is also looking to neighboring Shanghai and Shenzhen for closer co-operation, where some of China's top companies such as the world's most valuable lender ICBC (1398.HK)(601398.SS) have a dual listing.
However, current restrictions on China's yuan currency, its closed capital account and hefty valuations on Shenzhen's Nasdaq-style technology board makes any such tie-up difficult, Arculli said.
"I think the situation is a bit more complex than that, neither Shanghai or Shenzhen are listed," he said.
"Clearly we would keep our ears and eyes open, we would look at developments that are going on in other markets - we do not rule out doing joint ventures or strategic alliances, but we don't see that equity is necessary a component of any possible co-operation," he said.
Seemingly unruffled by the merger mania hitting the exchanges space, he confidently argued his bourse's greatest weakness right now is being so successful.
Riding on China's coattails, HKEx has been the world's biggest IPO market for the past two years.
Buoyed by that growth, HKEx shares have risen about 60 percent from their May 2010 low, giving it the top ranking among exchanges by market value.
"I think in some ways our strength may be our weakness - in the sense that people think of Hong Kong Exchange as a must go-to place in Asia," Arculli said.
"I get a little worried because you want them to come for all the right reasons and not just because we're flavor of the month."
Arculli doesn't seem to be fazed by much. Before the interview, he accidentally knocked over a freshly poured cup of coffee near his lap.
In less than a minute, he was leaning back in the chair again, mess cleaned up, not an drop of coffee showing on his tailored suit, white shirt, or yellow tie.
He also brushed aside talk of competition from alternative trading platforms such as dark pools, which match stock orders by institutions that are not visible to regular retail investors.
"Their business model doesn't seem to propel them to great financial success," he said. "While they have been able to gain a modest market share, their impact in Asia hasn't been as significant as the impact in North America and in Europe."
For his part, Ned Phillips, the chief executive of CHi-East, the "dark pool" joint venture between Singapore Exchange and Nomura's (9716.T) Chi-X, said the consolidation in the exchanges sector was positive.
"I think it's good because exchanges are looking at platforms like us and saying we have to be more like those guys - exchanges know they have to be leaner and realize that the trading community wants to have more efficiency at a lower cost," Phillips told the summit in Hong Kong.
Chi-East completed the roll-out of its trading platform for securities listed in Hong Kong, Japan and Singapore in January. (Additional reporting by Alison Leung, Charlie Zhu, Michael Flaherty, Elzio Barreto and Rachel Armstrong in HONG KONG and Raju Gopalakrishnan in SINGAPORE; Writing by Lincoln Feast; Editing by Neil Fullick)
European markets and euro gain ground (AFP)
LONDON (AFP) – Europe's main stock markets and the euro edged higher on Tuesday, thanks partly to receding concerns over the impact of unrest in the Middle East and North Africa, analysts said.
London's FTSE 100 index of top shares rose 0.18 percent to 6,005.22 points nearing the half-way stage. The Paris CAC 40 added 0.27 percent to 4,122.89 points and Frankfurt's DAX 30 firmed 0.61 percent to 7,315.32 points.
The pan-European Stoxx 50 index of top eurozone companies was up 0.26 percent to 3,031.79.
"European bourses continued to reclaim lost ground on Tuesday with the FTSE 100, DAX and CAC all climbing in early trading, led chiefly by demand in heavyweight mining shares," said City Index analyst Joshua Raymond.
"Investor concerns regarding the crisis in the Middle East and North Africa seem to have abated of late, a fact helped no end by the stabilising of crude oil prices.
"Should crude prices continue to consolidate, this may open up potential for stronger equity moves as traders (review) valuations."
In foreign exchange deals on Thursday, the euro rose as high as $1.3855, compared with $1.3803 late in New York on Monday, as investors absorbed a series of economic data releases.
Eurozone inflation rose to 2.4 percent year-on-year in February from 2.3 percent in January, according to official EU estimates on Tuesday.
That rate was above the European Central Bank's medium-term inflation target of slightly below two percent across the 17-nation bloc.
Rising inflation pressures will likely overshadow an ECB monetary policy meeting on Thursday.
But "as the rise in inflation so far has been driven largely by higher energy prices, it still looks premature for the ECB to move to an outright shift in its statement regarding inflation risks at Thursday's meeting," said HSBC economist Janet Henry.
Rising inflation has fanned speculation that the ECB could advance a rate hike that many currently expect early in the third quarter of this year.
At the same time, the European Commission raised its eurozone 2011 growth forecast to 1.6 percent on Tuesday but warned that markets remain fragile and unrest in the Arab world threatens to drive up inflation.
The European Union's executive arm, which last November had forecast 2011 growth of 1.5 percent, said the improved outlook was supported by "better prospects for the global economy and upbeat EU business sentiment."
But the recovery is expected to remain uneven among the 17 nations that share the euro, with the export-driven German economy leading the pack while debt-stricken southern countries lag behind as they slash spending.
In Asian trade earlier Tuesday, markets were also higher with Tokyo performing strongly after a rally on Wall Street and as oil prices stabilised.
Tokyo rose 1.22 percent as exporter stocks were boosted by a weaker yen -- a result of dealers moving out of the safe-haven Japanese currency amid renewed risk appetite.
Hong Kong rose 0.25 percent while Shanghai gained 0.47 percent after a top official suggested inflation would fall in February, boosting hopes that further Chinese interest rate hikes in the near term can be avoided.
Sydney ended lower however after the Australian central bank said it would keep rates on hold at 4.75 percent.
CME to slash rate traders' costs to fight NYSE (Reuters)
WASHINGTON/NEW YORK (Reuters) – CME Group Inc (CME.O) unveiled a plan that would slash costs for interest-rate traders to shore up its key Treasury futures franchise ahead of an imminent challenge from NYSE Euronext (NYX.N).
The move on Monday comes the same day the U.S. Securities Exchange Commission is expected to rule on an application by NYSE's partner in its co-owned clearinghouse to offer similar margin reductions. The plan also highlights increasing competition in the rapidly consolidating global exchange industry.
NYSE earlier this month agreed to a takeover by Germany's Deutsche Boerse (DB1Gn.DE), a combination that would dominate European futures trading and squarely take on CME on the world stage. CME, whose Chicago Board of Trade unit has dominated interest-rate futures since its inception, wants to keep the New York exchange operator from making inroads in that business.
"It would seem that CME has added another feature to its market that will make it even more difficult for a competing fixed-income derivatives clearing house to crack into CME's safe," BMO Capital Markets analyst Michael Vinciquerra told investors in a note Monday. "It's likely that the new program will be very attractive to a meaningful portion of CME's customer base."
Shares of CME closed down 0.7 percent at $311.28, while NYSE closed unchanged at $37.
CME will create a new clearing membership class that will offer margin discounts to traders of both Treasury securities and Treasury futures. The new membership category -- called Financial Instruments Clearing Membership -- will provide margin benefits of up to 65 percent between interest rate futures and Treasury securities.
The company, whose clearinghouse holds rate futures with a notional value of $30 trillion, plans to introduce the service by the end of the current quarter.
CME has been working on the margining plan for about two years, managing director Derek Sammann told Reuters.
"It's a significant margin-saving opportunity," Sammann said, though he added he could not provide an estimate for the dollar value of the savings.
Sammann said that by lowering the cost of the so-called basis trade -- buying or selling Treasury futures against Treasury securities -- the plan also could boost overall volume at the CME. He could not say how many traders would be able to take advantage of the new margining system, saying only the number is "bigger than a breadbasket."
CME named four trading firms -- Breakwater Trading, Endeavor Trading, Henning-Carey Proprietary Trading and HTG Capital Partners -- that have tested the offering and are working toward becoming FICM members. CME is also speaking to a number of brokers that may participate, Sammann said.
Meanwhile, the New York Stock Exchange parent expects in March to launch NYSE Liffe U.S., a rate futures market, at the same time as its partly owned New York Portfolio Clearing clearinghouse for the products.
NYPC won approval from the Commodity Futures Trading Commission last month. On Monday, the SEC is expected to rule on a cross-margining plan from NYPC's other owner, the Depository Trust & Clearing Corp, that would offer similar margin discounts.
SAME, BUT DIFFERENT
CME and NYPC will use different mechanisms to offer traders cost savings.
At NYPC, margins put up for Treasury futures and for Treasury securities will go in a single pot, allowing the clearinghouse to give traders margin reductions when positions offset each other.
Proprietary traders at CME will get similar discounts as long as they trade their Treasury cash and futures contracts at a single broker. The broker will provide CME information on the trader's cash positions, and CME will reduce the margins it takes on the futures accordingly.
As part of the new service, CME will contribute an extra $100 million to its guarantee fund, to which proprietary traders will also have to provide money.
CME's version of cross-margining will primarily benefit traders, who may use the freed up cash to do more trading, BMO's Vinciquerra said. NYPC's version will benefit dealers, he said.
An NYPC spokesman declined to comment on CME's cross-margining plan.
(Editing by Maureen Bavdek, Lisa Von Ahn and Steve Orlofsky)
SEC charges defense contractor, 3 ex-directors (AP)
WASHINGTON – Federal regulators on Monday charged a U.S. defense contractor and three of its former board members with accounting fraud, saying the company overstated earnings to investors.
The Securities and Exchange Commission said DHB Industries Inc. settled the civil charges without receiving any penalty. The company, which makes bullet-proof vests for the U.S. military and law enforcement agencies, agreed not to repeat the alleged violations.
The SEC said the settlement terms took into account corrective measures taken by DHB Industries.
The Pompano Beach, Fla., company changed its name to Point Blank Solutions Inc. in 2007 and is operating while in bankruptcy proceedings. Its main plants are in Florida and Tennessee.
Charges against former directors Jerome Krantz, Cary Chasin and Gary Nadelman are pending. The SEC said the directors from outside the company, who made up the board's audit and compensation committees, allowed senior managers to overstate income and other data in financial reports from 2003 to 2005.
Attorneys for Chasin and Nadelman disputed the SEC's charges. A lawyer representing Krantz didn't immediately return a telephone call seeking comment.
Former DHB Industries CEO David Brooks and former Chief Operating Officer Sandra Hatfield were convicted of criminal charges including securities fraud and conspiracy in September. The company's former chief financial officer, Dawn Schegel, pleaded guilty to conspiracy to commit fraud and testified against Brooks and Hatfield.
The SEC also accused Krantz, Chasin and Nadelman of "willful blindness" that allowed Brooks to siphon $10 million from DHB Industries to another company he controlled, and take another $4.7 million or so to pay for luxury cars, jewelry, art, real estate and prostitutes.
The SEC is seeking unspecified restitution and civil fines from the three former board members and wants them barred from serving as officers or directors of any public company.
Chasin's attorney, Amy Millard, said her client "faithfully carried out his role as an outside director of DHB (and) he looks forward to a resolution of this matter."
Nadelman lawyer Robert Gottlieb said "Mr. Nadelman is a good and decent man who did not willfully or knowingly do anything to justify today's SEC's action."
Summary Box: Stocks end 3rd straight month higher (AP)
OIL HOLDS STEADY: Stocks rose Monday as oil prices stabilized. Oil settled at a little less than $97, down from a high of $103 last Thursday.
THE INDEXES: The Dow Jones industrial average rose 95.89 to 12,226.34. The S&P 500 rose 7.34 to 1,327.22. The Nasdaq composite rose 1.22 to 2,782.27.
MONTHLY STREAK: All three indexes ended the month higher. The Dow rose 2.8 percent, the S&P gained 3.2 percent, and the Nasdaq rose 3 percent. The S&P 500 is on a three-month stretch of gains, its longest since April 2010.
Asia shares fall on fears oil price to slow growth (AP)
BANGKOK – Asian markets fell sharply Tuesday as traders dumped shares following steep drops on Wall Street amid concerns that political unrest in Iran and Libya could send oil prices soaring and paralyze the global economic recovery.
Oil prices rose to more than $100 a barrel, and the dollar strengthened against the yen and the euro.
Japan's Nikkei 225 stock average was down 2.2 percent to 10,513.37 while South Korea's Kospi slipped 0.7 percent to 1,926.02. Hong Kong's Hang Seng index was down 1.7 percent to 23,007.29.
Investor sentiment wilted over higher fuel prices and their effect on the global economy, as unrest in oil-producing countries continued. Iran clamped down on anti-government protesters and forces loyal to Libya's leader Moammar Gadhafi launched counterattacks against rebels expanding control over the country.
Fears that the unrest might spread to Saudi Arabia, the world's largest oil exporter, is keeping many investors on the sidelines, said Matthew Lewis, head of sales trading in Sydney at CMC markets.
"The trigger, I think, is that the Libyan crisis looks like it is not going to go away as easily as it did in Egypt. Iran is showing a little bit of unrest," he said. "There is growing concern that Saudi Arabia is in the middle of that. What would happen to oil prices if there were civil unrest in Saudi Arabia?"
Australia's S&P/ASX 200 was off 0.6 percent to 4,797.80. The Australian economy grew 0.7 percent in the final quarter of 2010, according to official figures released Tuesday. That met expectations and didn't have much impact on the market, said Lewis.
Shares in New Zealand, mainland China, Taiwan and Singapore were also lower. Indian markets are closed Wednesday for the holiday of Mahashivratri.
In Tokyo, fears of a further global slowdown weighed on exporters like major electronics and car manufacturers. Toshiba Corp. was down 2.2 percent and Sony Corp. lost 2 percent. Toyota Motor Corp. was 2.5 percent lower.
Sharp Corp. dropped 4.6 percent after Morgan Stanley cut its rating in a report that went out early Wednesday, citing concerns over its LCD panel business.
Airline shares also fell on concerns over fuel prices. Qantas Airways Ltd. dipped 2.1 percent, while Cathay Pacific Airways Ltd. lost 2.3 percent. China Southern Airlines Co. Ltd. was down 4 percent and All Nippon Airways Co. Ltd. lost 2.7 percent.
The falls came after big drops in the U.S., where the Dow Jones industrial average lost 1.4 percent to 12,058.02, and the broader Standard & Poor's 500 index fell 1.6 percent to 1,306.33.
Federal Reserve Chairman Ben Bernanke told the Senate Banking Committee that a sustained increase in crude prices could pose a risk to the U.S. economic recovery. Also in the U.S., the Commerce Department said the amount of new homes and offices started by builders fell in January. The annual rate was near its decade low, set in August.
Benchmark crude for April delivery was up 38 cents at $100.01 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $2.66 to settle at $99.63 a barrel on Tuesday.
In currencies, the dollar climbed to 81.89 yen from 81.84 yen late Monday in New York. The euro slid to $1.3754 from $1.3775.
Tuesday, March 1, 2011
U.S. hedge fund manager gets deferred prosecution deal (Reuters)
SAN FRANCISCO (Reuters) – A Northern California hedge fund manager faces one count of wire fraud for improperly diverting more than $12 million, but that charge will be dismissed after three years provided he fulfills an agreement with U.S. prosecutors, according to a court filing.
Lawrence Goldfarb, of Baystar Capital Management in Larkspur, California, also settled civil charges for transferring the money to other entities he controlled, securities regulators announced on Tuesday.
Attorneys for Goldfarb did not respond to repeated requests for comment.
Goldfarb allegedly redirected some money from the Baystar Capital II fund, which was worth more than $100 million at its peak, the U.S. Securities and Exchange Commission said in a court filing on Tuesday.
The diverted funds came from a "side pocket" investment, which is commonly used by hedge funds to separate illiquid assets from the rest of the fund's investments, the SEC filing said.
Instead of returning money to fund investors, Goldfarb diverted it to several entities he controlled, including a separate real estate fund, a San Francisco record company and various other private companies.
Along with Goldfarb, the company Baystar Capital Management also faces a wire fraud count. But a deferred prosecution with the U.S. Attorney's Office in San Francisco provides for the criminal charge to be dismissed after three years -- provided Goldfarb makes full restitution and cooperates with the government.
A spokesman for the U.S. attorney's office in San Francisco declined to comment.
Goldfarb agreed to pay more than $14 million to settle the SEC case, including nearly $2 million in prejudgment interest and a $130,000 penalty.
He will also be barred from associating with any investment adviser or broker for three years, according to the deferred prosecution agreement.
In addition to managing Baystar, Goldfarb also ran LRG Capital Group, which promotes itself as a global investment, banking and advisory boutique, the SEC said in its filing.
According to LRG's website, Goldfarb once worked at Credit Suisse (CRP.N) as a partner and director of mergers and acquisitions. Before that, he was an attorney at law firms including Skadden, Arps, Slate, Meagher & Flom, the website says.
A Credit Suisse representative had no comment, and Skadden spokesman Brendan Intindola said Goldfarb worked as an associate at the firm over 20 years ago.
(Reporting by Dan Levine; Editing by Maureen Bavdek, Matthew Lewis and Richard Chang)
SEC charges ex-Goldman director in insider case (Reuters)
NEW YORK (Reuters) – A former Goldman Sachs Group Inc director leaked secret details to Galleon Group hedge fund manager Raj Rajaratnam about Warren Buffett's plan to invest $5 billion in the Wall Street bank at the height of the financial crisis, a U.S. securities regulator charged.
The U.S. Securities and Exchange Commission said the director, Rajat Gupta, tipped Rajaratnam by phone just minutes before the public learned of the investment by Buffett's Berkshire Hathaway Inc, which helped ensure Goldman's stability.
Gupta, a former worldwide managing director at consulting firm McKinsey & Co, was also accused of tipping Rajaratnam about quarterly earnings at Goldman and Procter & Gamble Co, where he was a director before resigning on Tuesday.
The 62-year-old Gupta is one of the highest-ranking corporate executives implicated in the government's wide-ranging insider trading probe, which has resulted in criminal or civil charges against dozens of individuals.
Tuesday's charges mark the first time that activity said to have occurred at Goldman was directly implicated in the probe.
The SEC said Rajaratnam, who faces a March 8 criminal insider trading trial, used the tips to trade at his firm, Galleon Group, reaping more than $18 million of illegal gains. It said Gupta invested in at least some Galleon hedge funds.
"Gupta was honored with the highest trust of leading public companies, and he betrayed that trust by disclosing their most sensitive and valuable secrets," SEC enforcement chief Robert Khuzami said in a statement. "Directors who violate the sanctity of board room confidences for private gain will be held to account for their illegal actions."
The SEC began administrative and cease-and-desist proceedings against Gupta. It described Gupta as a "friend and business associate" of Rajaratnam.
"Based on the allegations in the order instituting the administrative proceedings, it appears the SEC has a powerful, circumstantial case against Gupta," said Kathleen Hamm, managing director at Promontory Financial Group in Washington and a former SEC enforcement official.
"TOTALLY BASELESS" CHARGES, LAWYER SAYS
Gary Naftalis, a lawyer for Gupta, called the SEC allegations "totally baseless," and said his client had lost his entire $10 million investment in a Galleon fund that Rajaratnam managed, known as GB Voyager.
"Mr. Gupta has done nothing wrong," Naftalis said in a statement. "There is no allegation that Mr. Gupta traded in any of these securities or shared in any profits as part of any quid pro quo."
Gupta sat on Goldman's board from November 2006 until last May and served on its corporate governance committee.
The Westport, Connecticut, resident had served on Procter & Gamble's board since 2007 before resigning on Tuesday.
"He's stepping down in the interest of the company, to prevent any distraction to the P&G board or our business," company spokesman Paul Fox said.
Rajaratnam also faces SEC civil charges. He has denied wrongdoing.
"This is simply an effort to destroy a favorable witness," John Dowd, a lawyer for Rajaratnam, said in a statement about the Gupta charges. "There is no case, absolutely none. No conversations, no benefit, no nothing. These are old friends and Mr. Gupta is a distinguished human being."
Goldman spokesman Ed Canaday declined to comment. Berkshire did not return a request for comment.
"It is striking the SEC refers to phone calls immediately before the trades," said Kip Weissman, a partner at Luse Gorman Pomerenk & Schick PC in Washington and a former SEC enforcement lawyer. "This suggests there was a witness, or that the SEC has more circumstantial evidence."
Gupta is one of a web of associates in Corporate America that investigators have said Rajaratnam used to learn advance tips about potentially market-moving news.
A Harvard Business School graduate, Gupta was previously worldwide managing director at McKinsey, where he worked for more than three decades.
The Gupta case "does not help in instilling confidence in Main Street investors that they're getting a fair shake at these multinational companies," said Michael Nix, co-chief investment officer at Greenwood Capital Associates LLC.
In trading on the New York Stock Exchange on Tuesday, Goldman fell $2.47, or 1.5 percent, to close at $161.31, while Procter & Gamble fell 31 cents, or 0.5 percent, to $62.74.
MULTIPLE TIPS ALLEGED
Prosecutors have said a Morgan Stanley banker also leaked inside information that found its way to Rajaratnam.
Former McKinsey consultant Anil Kumar pleaded guilty in January 2010 to leaking inside information about a possible merger to Rajaratnam, in return for $1.75 million.
White-collar defense lawyers said civil administrative proceedings may afford the SEC a more friendly forum in which to pursue its case. They also allow the regulator to avoid having to amend its own lawsuit against Rajaratnam.
"It's faster, the evidence rules are more liberal, and the SEC can wield a bigger hammer in penalties, which can include barring someone from the securities industry." Weissman said.
The SEC alleged Gupta tipped Rajaratnam about Goldman's results for the second and fourth quarters of 2008, resulting in more than $16.6 million of illicit gains.
It said he also tipped Rajaratnam about Procter & Gamble's results for the final quarter of 2008, resulting in more than $570,000 of profit.
The SEC said Gupta had at least two phone calls with Rajaratnam shortly before Goldman announced Berkshire's investment on September 23, 2008.
It said one call came just before the market closed that day, immediately after Gupta had disconnected from a phone link to the board meeting where Goldman approved the investment. Goldman announced the Berkshire stake after markets closed.
Rajaratnam's trades in Goldman based on these tips resulted in more than $900,000 of profit, the SEC said.
(Reporting by Jonathan Stempel in New York; additional reporting by Matthew Goldstein, Grant McCool and Phil Wahba in New York; Joe Rauch in Charlotte, North Carolina and Jessica Wohl in Chicago; editing by Dave Zimmerman and John Wallace)
Global stocks tumble as oil rises on Mideast worries (Reuters)
HONG KONG (Reuters) – Oil rose toward a 2-1/2 year high and stocks fell on Wednesday as investors shunned risky assets on concern that escalating tension in Libya would spread in the Middle East and disrupt fuel supplies.
Brent crude's dizzying 15 percent jump in less than two weeks has fanned worry about a stifling impact on the economic recovery, sending investors into relative safe assets such as gold and government bonds in volatile trading.
Though Asian stocks have gyrated to the swings in oil, markets have been largely resilient this time around compared with January's sell-off when investors dumped shares because of worry about inflation.
While oil's jump has put monetary policy behind the curve in some countries, many Asian central banks have already tightened considerably since the recovery began and therefore policy is not excessively loose in the region, IHS Global Insight said.
Shares in most Asian markets fell after Wall Street's slide overnight and as the CBOE Volatility Index VIX (.VIX), the so-called fear gauge, jumped sharply.
Tokyo (.N225) lead the losers with stocks falling more than 2 percent on futures-led selling. Seoul (.KS11) and Taiwan (.TW11) were down nearly a percent each.
Yahoo Japan (4689.T) was the notable outperformer with shares surging by 4.5 percent after a Reuters report that Yahoo Inc (YHOO.O) was in advanced talks to wind down its joint venture in Japan with Softbank Corp (9984.T).
"The market is volatile as oil's persisting gains and civil unrest in the Middle East is negatively affecting investor sentiment," said Lee Sun-yeb, a market analyst at Shinhan Investment Corp.
"But as long as we do not see the turmoil spreading to other countries within the region, current volatility will be contained and will eventually recover," Lee added.
The broader MSCI index of Asia-ex Japan stocks (.MIAPJ0000PUS) was down more than a percent. It fell two percent in February.
In the credit space, Asian sovereign spreads weakened with the Philippines widening the most by 4 bps to 140/143 bps.
Markets will keenly watch developments in the Middle East, especially Saudi Arabia, where stock markets tanked by nearly 7 percent on Tuesday and CDS spreads jumped.
GOLD, BONDS GAIN
U.S. Treasuries, a safe-haven asset, held near one-month lows with 10-year yields stabilizing at 3.40 percent, well below a peak of 3.74 percent hit last month..
Japanese government bonds too rose, with futures snapping a three-day losing streak.
Gold held just below a record high of $1,434 an ounce while spot silver hit a 31-year high.
In the currency markets, the euro dipped slightly after failing to break through a key resistance level, though further declines for the common currency may be limited a day before a European Central Bank (ECB) meeting.
Given euro zone inflation holding well above the ECB's target, markets expect the central bank to ramp up its anti-inflation talk with U.S. Federal Reserve Chairman Ben Bernanke's comments reinforcing market speculation that the ECB would raise rates before the Fed.
In Asian FX, the won is among the leading underperformers with the stock market working through a major support level.
The New Zealand dollar fell sharply after Prime Minister John Key said he expected the Reserve Bank of New Zealand (RBNZ) would cut interest rates next week after the devastating earthquake in Christchurch.
The Aussie/kiwi was last at NZ$1.3616 after hitting a high of NZ$1.3667, levels not seen since August 1992.
(Additional reporting by Jungyoun Park in SEOUL, Mantik Kusjanto in WELLINGTON, Krishna Kumar in SYDNEY, Jonathan Rogers at IFR; Editing by Robert Birsel)
Oil price fuels Wall Street selling (Reuters)
NEW YORK (Reuters) – Concerns that rising oil prices could hurt economic recovery prompted investors on Tuesday to sell stocks and hedge against further declines.
The CBOE Volatility Index VIX (.VIX), Wall Street's so-called fear gauge, jumped 14.5 percent to 21.01 on growing uncertainty about oil. The index measures the cost of using options as insurance against a decline in the S&P 500 (.SPX) index.
"We've been seeing how quickly the VIX can spike up, and there is no reason to believe that it won't double from where it is now," said Harry Rady, CEO of Rady Asset Management in San Diego, California.
Brent crude rose above $116 a barrel as supply disruptions persist and political violence spreads in the Middle East and North Africa. Higher oil translates into increased energy and gasoline costs for consumers.
U.S. crude and gasoline futures extended gains in extended-hours trading after data showed domestic crude inventories unexpectedly fell. U.S. stock index futures fell slightly, with S&P futures off 3.3 points.
Federal Reserve Chairman Ben Bernanke said the recent surge in oil was unlikely to derail the economy, but his comments did little to reassure investors worried that turmoil in the Middle East could hit Saudi Arabia, the world's largest oil exporter. The Dow Jones Transports index (.DJT) fell 2.5 percent.
Stocks have taken their cue from oil since the start of turmoil in the Middle East and North Africa in January. The S&P had its weakest performance since November last week but still tallied three months of gains.
The Dow Jones industrial average (.DJI) fell 169.38 points, or 1.39 percent, at 12,056.96. The Standard & Poor's 500 Index dropped 21.04 points, or 1.59 percent, to 1,306.18. The Nasdaq Composite Index (.IXIC) lost 44.86 points, or 1.61 percent, to 2,737.41.
About 8.67 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, higher than last year's daily average of 8.47 billion. Volume has recently been solid on days when the market falls, but often comes under 7 billion on up days.
Investors took a cautious stance as cyclical sectors experienced the biggest losses, while defensive sectors such as utilities, healthcare and consumer staples limited losses.
Wal-Mart Stores Inc (WMT.N) and Coca-Cola Co (KO.N) helped the Dow to limit losses. Wal-Mart rose 0.2 percent to $52.06, while Coca-Cola was up 1.5 percent to $64.91.
Gasoline and heating oil futures each gained about 3.5 percent to $3. The S&P's materials (.GSPM) index dropped 2.3 percent while the industrials (.GSPI) dropped 2.2 percent. According to AAA, the national average price of regular unleaded gasoline is currently at $3.35 per gallon.
"The real story is gasoline," said Nick Kalivas an analyst, at MF Global in Chicago. "The market is getting worried that you could see $4 gasoline in the U.S."
Financial stocks came under pressure after JPMorgan Chase & Co (JPM.N) said it could face "material" fines and "significant" legal costs from a wide-ranging probe into the industry's foreclosure practices.
JP Morgan fell 2.3 percent to $45.60 while the KBW bank index (.BKX) fell 2.3 percent.
Declining stocks outpaced advancing stocks on the NYSE by a ratio of about 3 to 1, while on the Nasdaq, decliners beat advancers by a ratio of 10 to 3.
(Reporting by Angela Moon, Editing by Kenneth Barry)
SEC's timeline in alleged insider trading (AP)
WASHINGTON – The Securities and Exchange Commission has charged a former Goldman Sachs board member, Rajat Gupta, with illegal insider trading. The SEC says Gupta passed confidential information about major investment bank Goldman Sachs and big consumer products maker Procter & Gamble to Raj Rajaratnam, the central figure in a major hedge fund probe.
Here's a timeline of events according to the SEC's order against Gupta:
_June 10, 2008: Goldman CEO Lloyd Blankfein calls Gupta and other directors that evening to inform them of Goldman's strong earnings for the quarter ending May 30.
Gupta later call Rajaratnam's home. .
_June 11: Rajaratnam makes another call to Gupta before the market opens. After the market opens, Rajaratnam directs Galleon Tech funds' to buy more than 5,500 contracts that are worthless unless the stock hits $170. Goldman shares had opened trading at $167. Rajaratnam also buys more than 350,000 of straight Goldman shares over the next two days.
_June 16: Goldman issues a positive earnings preview for the quarter, sending the stock price up more than 2 percent. Sometime after, Rajaratnam sells the 5,500 contracts. Profit: around $7 million.
_June 17: Goldman announces its quarterly earnings before the market opens; they beat analysts' estimates. Shares open at $185.04, up 1.6 percent from the close the day before. After the announcement, Rajaratnam sells the funds' shares purchased after he got the confidential information from Gupta on June 10. Profit: around $6.6 million.
_Sept. 21: Wall Street is reeling from the failure of big investment bank Lehman Brothers six days earlier. CEO Blankfein tells his firm's board of a possible rescue investment by billionaire investor Warren Buffett's Berkshire Hathaway. Over the next two days, Rajaratnam has the Galleon Tech funds buy 120,000 Goldman shares. He picks up a third of those shares while on the phone with Gupta.
_Sept. 23: 3:15 p.m.: Goldman's board has a special meeting by telephone. The directors consider and approve a $5 billion investment by Berkshire and a $2.5 billion public offering of Goldman stock.
Around 3:53 p.m.: Gupta disconnects from the call. Immediately, he calls Rajaratnam from the same line. Less than a minute after their conversation — and just minutes before the 4 p.m. market close — Rajaratnam snaps up another 175,000 Goldman shares. Goldman shares close at $125.05.
After the market close: Goldman publicly announces the Berkshire investment and the public stock offering.
_Sept. 24: Goldman shares open at $128.44 and climb to a closing price of $133, up 6.4 percent from the day before. Rajaratnam sells the funds' Goldman shares that were purchased the day before and makes more than $900,000 in profit.
_Oct. 23: Blankfein, Goldman Chief Financial Officer David Viniar and other top executives have a call with the board, bringing directors up to speed about the firm's financial status for the quarter that would end Nov. 28. At that point, Goldman would be operating at a loss of $1.96 a share.
Gupta gets off the call. He calls Rajaratnam 23 seconds later.
_Oct. 24: At the market open, Rajaratnam has the funds begin selling their holdings of Goldman stock, more than 120,000 shares. They're sold at between $97.74 and $102.17 a share. As a result, the funds avoid losses of about $3 million.
_Jan. 29, 2009: The audit committee of Procter & Gamble's board has a telephone meeting to discuss the planned release of financial results for the past quarter. Gupta's on the call. A draft of the release was mailed to committee members two days earlier. It says P&G expects sales from pre-existing business lines to grow 2 percent to 5 percent in the fiscal year, below the 4 percent to 6 percent range the company had previously predicted.
Early afternoon: Gupta calls Rajaratnam.
Late afternoon: Galleon funds sell short about 180,000 P&G shares.
_Jan. 30: Procter & Gamble releases its earnings before the market opens. Its shares open at $56.50, down from the previous day's close of $58.22. They fall to $54.50 at the close. The Galleon funds reap profit of about $570,000 from the short sales.
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