NEW YORK – The government has handed its ATM card to beleaguered mortgage giants Fannie Mae and Freddie Mac.

The Treasury Department said Thursday it removed the $400 billion financial cap it will provide to keep the companies from failing. Already, taxpayers have shelled out $111 billion to the pair.

Treasury Department officials said the $400 billion limit would be replaced with a flexible formula to ensure the two agencies can stand behind the billions of dollars in mortgage-backed securities they sell to investors.

Fannie Mae and Freddie Mac provide vital liquidity to the mortgage industry by purchasing home loans from lenders and selling them to investors. Together, they own or guarantee almost 31 million home loans worth about $5.5 trillion, or about half of all mortgages.

Without government aid, the firms would have gone broke, leaving millions of people unable to get a mortgage.

The biggest headwind facing the housing recovery has been the rise in foreclosures as unemployment remains high. The Treasury's latest move could allow Fannie and Freddie to play a bigger role in restructuring mortgages for troubled borrowers.

The news follows the announcement Thursday that Fannie's and Freddie's chief executives could get paid as much as $6 million for 2009, despite the companies' dismal performances this year.

Fannie's CEO, Michael Williams, and Freddie CEO Charles "Ed" Haldeman Jr. each will receive $900,000 in salary, $3.1 million in deferred payments next year and another $2 million if they meet certain performance goals, according to filings with the Securities and Exchange Commission.

The pay packages were approved by the Treasury Department and the Federal Housing Finance Agency, which regulates Fannie and Freddie.

That pay is far less than what their predecessors earned. Former Fannie CEO Daniel Mudd received $10.2 million in 2008 and former Freddie CEO Richard Syron pocketed $13.1 million. Both execs were ousted when federal regulators seized the companies in September 2008. The federal government blocked exit packages for the pair worth up to $24 million.

The chief executives' pay could spark new criticism about the government's numerous bailouts, but that may be unfounded, said Mark Borges, principal with management consulting firm Compensia.

Haldeman and Williams each could command between $5 million and $10 million in a similar position in the private sector, Borges estimated, and without the notable challenges and public scrutiny they face at these companies.

"I doubt too many people would look at these jobs and say, 'Gosh, I would love to go there for my next career move,'" Borges said instant payday loans. "The government is getting top notch executives to solve problems that are not easy to solve."

The bulk of their pay is also not guaranteed, Borges said, so these executives can't pocket and run and must meet certain long-term goals or risk giving some of it back.

Freddie Mac's board sets the performance goals for the chief executive, which won't be disclosed until next year. Fannie Mae's filing outlined its corporate goals including "being a recognized leader in the housing recovery," "protecting taxpayers," and "managing risk more effectively."

Fannie Mae and Freddie Mac declined to offer further details on CEO performance goals.

Public anger over Wall Street pay boiled over earlier this year. In response, the Obama administration imposed pay curbs on banks that received government bailouts. All the major banks have since repaid their federal money, largely to escape caps on executive pay.

Former Bank of America Corp. CEO Ken Lewis, for example, agreed to forgo his salary and bonus this year under pressure from the government. Last year, he pocketed more than $9 million in total compensation. Bank of America received $45 billion in government assistance, which it has since repaid.

Freddie Mac hired Haldeman, a former mutual fund executive, in July. At the time, the company disclosed his annual salary of $900,000 but did not disclose other incentive payments. In September, the company hired a new chief financial officer, Ross Kari, and said his pay package would be worth up to $5.5 million.

Williams, formerly Fannie Mae's chief operating officer, took over as CEO in April after the first government-appointed CEO, Herbert Allison, took a job at the Treasury Department. Williams earned a base salary of $676,000 last year, plus a retention award of $260,000.

Washington-based Fannie Mae was created in 1938 in the aftermath of the Great Depression. It was privatized 30 years later to limit budget deficits during the Vietnam War. In 1970, the government formed its sibling and competitor McLean, Va.-based Freddie Mac.

Though the Obama administration has yet to divulge its long-term plans for the two companies, they are unlikely to return to their former power and influence.

___

AP Real Estate Reporter Alan Zibel in Washington contributed to this report.

Treasury removes cap for Fannie and Freddie aid

Hot News: MGIC shares drop after lawsuit disclosure

SEATTLE (AP) &<51; A federal appeals court upheld a lower court ruling on Tuesday and ordered Microsoft to stop selling its Word program in January and pay a Canadian software company $290 million for violating a patent,.

But Microsoft expects the decision to have little impact on Word or Microsoft&S217;s Office package in the United States. Microsoft said Tuesday that new versions of the product, with the computer code in question removed, will be ready for sale when the injunction begins Jan. 11.

The case started in 2007 when the software company, i4i Inc. of Toronto, sued Microsoft, saying it owned the technology behind a tool in the popular word processing program. The technology gives Word users an improved way to edit XML, or code that tells the program how to interpret and display a document&S217;s contents.

A Texas jury found that Microsoft Word willfully infringed on the patent. Microsoft appealed that decision, but the United States Court of Appeals for the Federal Circuit upheld the lower court&S217;s damage award and the injunction against future sales of infringing copies of Word guaranteed payday loans.

A founder and co-inventor of i4i, Michel Vulpe, said in a statement that the company was pleased with the decision, calling it &S220;an important step in protecting the property rights of small inventors.&S221;

Microsoft said it has been preparing for such a judgment since August. Copies of Word and Office sold before Jan. 11 are not affected by the court&S217;s decision. And Microsoft said it had &S220;put the wheels in motion to remove this little-used feature&S221; from versions of Word 2007 and Office 2007 that would be sold after that date.

The company said however, that it might appeal further, asking for either a rehearing in front of the appeals court&S217;s full panel of judges or in front of the Supreme Court.

Court Upholds Patent Ruling Against Microsoft

NANJING, China (Reuters) – The euro zone does not risk the sort of debt problems plaguing Dubai, senior European Union officials said on Sunday.

Dubai was forced to seek a debt standstill last week, rocking global markets and reviving concerns about the fiscal health of some euro zone members, notably Greece.

Luxembourg Prime Minister Jean-Claude Juncker, who chairs the Eurogroup of euro zone finance ministers, said he saw no risk of such a default in the euro area.

European Central Bank Governor Jean-Claude Trichet "entirely" confirmed what Juncker said guaranteed online payday loans.

The two were speaking at a news conference after a day of talks with Premier Wen Jiabao and other senior Chinese officials.

(Reporting by Simon Rabinovitch and Chris Buckley; Writing by Alan Wheatley; Editing by Mike Nesbit)

Euro zone sees no default spillover from Dubai woes

Hot News: China to keep macroeconomic policy stance in 2010 with flexibility

Bear Stearns and Lehman Brothers paid their executives largely in stock, and that stock lost most or all of its value when those companies collapsed.

Many people on Wall Street say these examples help make the case that pay incentives were not what caused executives at these fallen firms to take excessive risks.

But three professors at Harvard are disputing that logic in a new study, saying it is an urban myth that executives at Bear and Lehman were wiped out along with their companies.

Though the chiefs at both investment banks lost more than $900 million in their stock holdings, the professors argue that it is important to also consider all the riches the bankers took off the table in the years preceding the crisis.

At Lehman, the top five executives received cash bonuses and proceeds from stock sales totaling $1 billion between 2000 and 2008, and at Bear, the top five received more than $1.4 billion, according to the study, which was released on Sunday night on the Web site of the Program on Corporate Governance at Harvard Law School.

The payouts came in the form of cash bonuses as well as thousands of shares of stock that the executives sold as the share prices of their companies soared. Most of the executives sold far more shares during that period than the number they held when their companies hit bottom.

&S220;There&S217;s no question they would have done massively better had their firms not collapsed,&S221; said Lucian Bebchuk, one of the study&S217;s authors. &S220;But the wealth of those top executives was hardly wiped out. The idea that they were devastated financially has kind of colored the picture people have about what payoffs they were facing.&S221;

Many of the solutions that policy makers and regulators are considering for Wall Street pay are tactics that were already in place at Lehman and Bear. Both firms required executives to wait several years before selling their stock. Both firms paid heavily in stock.

Critics of compensation reform have pointed to these two firms as examples of why change in pay practices may not make a difference and have said the focus should be on things like risk management and regulatory oversight.

However, the Harvard study says the executives may have had reason to focus on the short-term prices they could attain with stock selling.

Mr. Bebchuk has been advising the Treasury Department on compensation at bailed-out companies. He advocates locking up stock compensation for longer periods as well as pay clawback provisions for years later.

James E. Cayne, the former Bear chief executive, stands out for selling fewer shares over the years than he held at the firm&S217;s demise. Mr. Cayne sold 2,720,845 shares for $289 million over eight years, beginning in 2000. He was still holding 5,685,591 shares at the start of 2008 payday loan.

The other Bear executives sold nearly five times as many shares in the years leading up to the firm&S217;s collapse as they held in 2008, and at Lehman, the executives sold about 1.3 times the shares they owned at the end.

The study does not take into account that the executives might have sold shares in part to pay hefty tax bills. Shares of stock are not taxed until they transfer in ownership to executives, which was a period of multiple years at both investment banks. At that time, some executives sold the number of shares needed to pay the tax bill on the shares they still held.

Some compensation experts said over the weekend that the study did not seem to prove that compensation caused the crisis and that it instead just pointed out that the bankers were wealthy.

&S220;I don&S217;t think anybody would question that they were well compensated,&S221; said Ren&>33; Stulz, a professor at Ohio State University who has studied bank compensation. &S220;It&S217;s certainly true that the incentive effects are different if you&S217;re already very wealthy, but that does not mean that the incentive effects are not there.&S221;

Executives at companies that were bailed out by the government have in many cases had their stock holdings recover in value in the last year, and that might have been the case at Bear or Lehman if they had received the same treatment.

Shortly after Bear collapsed, Richard S. Fuld Jr., the chief executive at Lehman, called Peter J. Solomon, an investment banker who used to work at Lehman.

&S220;He reiterated the fact that when firms like Bear Stearns fold and if Lehman Brothers got into trouble, the executives own so much stock that they were losing a lot,&S221; Mr. Solomon recalled over the weekend.

But Mr. Solomon, who has been critical of pay levels and of the fact that investment banks are publicly traded, said the executives who presided over Wall Street&S217;s collapse have suffered, despite the money they retained.

&S220;There&S217;s not one person involved in the demise of Lehman Brothers, Bear or even the troubles that have fallen on Citigroup who thinks they&S217;re living happily ever after,&S221; Mr. Solomon said, &S220;because their reputations have been tarnished, and what do you have at the end of the day but your reputation?&S221;

Through intermediaries, several of the executives examined in the study declined to comment. The other authors of the study were Alma Cohen, a professor visiting Harvard from Tel Aviv University, and Holger Spamann, a lecturer at Harvard.

Executives Kept Wealth as Firms Failed, Study Says

TOKYO/AMSTERDAM (Reuters) – Japan&&9;s Canon (7751.T) plans to buy Dutch copier and printer maker Oce (OCEN.AS) for 730 million euros (&&6;1.09 billion), challenging rivals Ricoh (7752.T) and Xerox (XRX.N) in a hunt for growth during the sector downturn.

Copier and digital camera maker Canon and Oce said in a joint statement Monday that Canon intends to offer 8.60 euros per share, or 730 million euros, for Oce&&9;s outstanding shares. The offer represents a premium of 70 percent to Oce&&9;s Friday close.

Canon&&9;s offer follows little over a year after Japan&&9;s Ricoh, the world&&9;s largest copier maker, bought U.S. office equipment distributor Ikon Office Solutions, a deal which hit Canon&&9;s U.S. operations hard as Canon machines had represented 60 percent of the products Ikon handled before the acquisition.

Canon, Oce and rivals have suffered from the economic slump, which forced companies to cut spending, including costs on copying and printing.

Oce, which was loss-making in the past two quarters, has been cutting costs and jobs and has not paid a final 2008 dividend, while Canon and Ricoh reported sharp falls in their quarterly profit last month.

"The deterioration of the economic market circumstances has influenced the performance of the industry but it was not the initiator for the strategic review process which, after thorough and careful evaluation, led to this proposal of joining forces with Canon," Oce CEO Rokus van Iperen told reporters.

Canon and Oce products are mutually supplementary, with the Japanese company having strength in regular office machines and mid- to lower-end production printers, while Oce excels in high-end production printers and advertisement-use large-sized printers, the Tokyo-based company said.

Production printers, or digital commercial printers, are used to print such documents as product manuals and direct mail quickly and in large volume, and are a fast-growing segment of the global printer market.

Oce shares were up 68.5 percent at 8.53 euros by 1119 GMT, after earlier reaching their highest level since June last year.

Including debt and other obligations, the deal values Oce -- which competes with Xerox (XRX payday loans.N) and Konica Minolta Holdings (4902.T) -- at about 1.5 billion euros (&&6;2.2 billion), Van Iperen said.

HP, KYOCERA POSSIBLE COUNTERBIDDERS

Analysts said the deal was good for Oce shareholders, as it solved most or all of the problems the company faced due to the drop in demand. They were divided about a possible rival offer.

SNS Securities said in a note Hewlett-Packard (HPQ.N) and Kyocera (6971.T) had sufficient financing options for a counter bid, while Ricoh and Konica Minolta currently had high debt levels and relatively low earnings generation.

Petercam analyst Eric de Graaf, however, said it was unlikely that another bidder would emerge because of the bid price and commitment of some shareholders and Oce&&9;s boards.

Preference share holders Ducatus, ASR and ING -- which together hold 19 percent of Oce&&9;s share capital -- agreed to sell their interests to Canon, while Oce shareholder Bestinver Gestion S.A. has agreed to tender its 9.5 percent stake.

Oce&&9;s management and supervisory boards support and will recommend the intended offer, Oce and Canon said.

Canon, the world&&9;s largest digital camera maker, is Japan&&9;s 6th-most valuable company with market capitalization totaling &&6;50 billion. Its printers and copiers accounted for 65 percent of total revenues in 2008.

Analysts said the deal is positive for Canon, while potentially negative for rival Japanese copier and printer maker Konica Minolta, which is in a business alliance with Oce.

"Konica Minolta procures high-end production printing machines from Oce, while Oce procures lower-end machines from Konica Minolta," Mizuho Securities analyst Ryosuke Katsura said.

"(The) chances are Canon machines will replace Konica Minolta gear in this relationship," he said.

Shares in Canon closed down 1.5 percent at 3,370 yen ahead of the announcement, underperforming the benchmark Nikkei average (.N225), which gained 0.2 percent.

(&&6;1=89.60 Yen)

(&&6;1=.6685 euros)

(Editing by Joseph Radford, Mike Nesbit and Simon Jessop)

Canon seeks printer power with $1.1 billion Oce bid

WASHINGTON, Oct. 29 (Xinhua) -- The U.S. economy rose at a pace of 3.5 percent in the third quarter after four consecutive quarters of contraction, reported the Commerce Department on Thursday.

The increase is better than economists' expectation of 3.3 percent, indicating the strongest signal that the worst recession since the 1930s has ended.

The growth of real gross domestic product (GDP) -- the output of goods and services produced by labor and property within U personal loan for poor credit.S. borders -- in the July to September quarter was mainly propelled by the government's economic stimulus package.
Special Report: Global Financial Crisis

U.S. economy rises 3.5% in third quarter

CHICAGO (Reuters) – Federal prosecutors in the Galleon Group case have sent a subpoena to a former employee of Steven A. Cohen&&9;s SAC Capital Advisors, a sign that the scope of the problem into the largest hedge fund insider trading case in history is expanding, the Wall Street Journal reported, citing people familiar with the matter.

The subpoena seeks trading records from a former SAC hedge fund manager, Richard Grodin, who employed a cooperating witness in the insider trading case announced last week, the Journal said.

The Journal reported that the subpoena does not suggest wrongdoing. Nor does it suggest that Cohen -- one of the nation&&9;s most well known and successful hedge-fund managers -- has been implicated in the scandal.

Galleon and SAC Capital could not be immediately reached to comment.

Last week, federal investigators brought criminal charges against Galleon founder Raj Rajaratnam and five others in the largest hedge fund insider trading case in history pay day advance.

Galleon, which managed &&6;3.7 billion at the end of last week and boasted strong returns through September, has told investors it will wind down its funds.

The trading scandal has also entangled big names such as Intel Corp, consulting firm McKinsey & Co, IBM, and rating agency Moody&&9;s.

According to regulators&&9; complaints, an employee at investor relations firm Market Street Partners tipped off a Galleon informant in July 2007 that Google Inc&&9;s earnings would be below market expectations.

Galleon traded on that information, netting a profit of &&6;9 million, the biggest illegal trades identified in the complaints, which said a total of &&6;20 million had been made by trading on nonpublic information.

(Reporting by Lisa Shumaker, Editing by Sandra Maler)

Probe widens in Galleon case to SAC Capital: report

PARIS &S212; In a preliminary earnings report, Deutsche Bank said Wednesday that its third-quarter profit would be about &S364;1.4 billion, or $2.09 billion, beating analysts&S217; expectations.

The bank did not detail where most of its profit came from, but it said that tax exemptions and credits, partially resulting from wrapping up audits for earlier years, added about &S364;100 million to the bottom line. A full report will be issued Oct. 29.

&S220;It is expected that all business segments will report positive results,&S221; said Deutsche, the biggest German lender.

The bank&S217;s second-quarter profit of &S364;1.09 billion, which represented an increase of 68 percent from a year earlier, was tarnished by higher provisions against bad loans to corporate and retail clients. But so far, those fears have not materialized as losses.

Deutsche&S217;s Tier 1 capital ratio, a measure of the reserves a lender has to protect it from collapse, is now 11.7 percent, significantly higher than those of many of its European peers.

The preliminary report Wednesday of &S364;1.3 billion in pretax profit came as a surprise. Bloomberg News reported that analysts had estimated a pretax profit of &S364;1.19 billion for the quarter. A year ago, the bank took in just &S364;435 million in profit before taxes.

Although the bank booked a loss of &S364;4.8 billion in the fourth quarter of 2008, during the worst of the financial crisis, it managed to do without government aid even as rivals at home and abroad turned to their governments for bailouts payday loan.

&S220;They are one of the winners of the global crisis,&S221; said Christian Gattiker, research and strategy chief at Julius Baer in Zurich.

Deutsche shares slipped by &S364;1.70, or more than 3 percent, Wednesday to &S364;53.64 in morning trading in Frankfurt, but they remained up more than 90 percent for the year.

&S220;Tax issues are maybe not the best reasons for an unexpected profit,&S221; said Mr. Gattiker. But, he said, with the bank shares rising over the past couple weeks, &S220;It may be a case of &S216;Buy the rumor, sell the fact.&S217; &S221;

The bank said Tuesday that it had reached an agreement in principle with the Dutch Finance Ministry to purchase parts of ABN Amro, a troubled bank rescued by the Dutch government last year. The sale was initially announced last year, but negotiations have dragged on. The final terms of the transaction have not yet been announced, but last year, for the same assets, Deutsche said it would pay &S364;709 million.

The acquisition would strengthen Deutsche&S217;s commercial banking business and make it, by its own estimates, the fourth-largest investment bank in the Netherlands.

Deutsche Bank Seen Beating Earnings Forecast

WHEN the economy appears on the verge of rebounding &<51; as it does today &<51; investors tend to gravitate toward economically sensitive stocks, which stand to benefit from improving financial conditions.

Often, this leads them to traditional growth sectors, like technology, materials and consumer discretionary stocks, which include retailers. Economically cyclical companies in areas like financial services and manufacturing may also seem appealing.

True to form, these five sectors have been among the best-performers in the Standard &&8; Poor&S217;s 500-stock index so far this year.

And, since March, each of these categories has surged more than 70 percent. That&S217;s roughly double what many of these sectors have averaged in gains in the first 12 months of new bull markets since 1949, according to S.&&8; P.

&S220;Certainly, we&S217;ve seen a tremendous run-up in the most economically sensitive stocks,&S221; said Jeffrey N. Kleintop, chief market strategist at LPL Financial in Boston.

Now, some market strategists are beginning to wonder whether these stocks have already had their day.

At the very least, prices of the most economically sensitive groups already reflect expectations of a robust recovery.

For example, the price-to-earnings ratio for the materials sector of the S.&&8; P. 500 (which includes companies like Dow Chemical and International Paper) has more than doubled over the past year, to 36 from 17, according to S.&&8; P. This figure is based on 2009 operating earnings.

But Wall Street analysts are forecasting a 99 percent rise in earnings for that category in 2010. Based on these projections, the so-called forward P/E of the materials sector is a much more palatable 18.

Analysts are similarly betting on huge earnings recoveries in 2010 for several other economically sensitive groups, like financials.

Mr. Kleintop says these earnings expectations aren&S217;t necessarily unreasonable.

&S220;But you do need to see some follow-through here,&S221; he said. &S220;You can&S217;t just see higher and higher valuations on the hope for more growth. At some point, you have to see companies, particularly in those sectors that have risen the most &<51; like consumer discretionary, technology and industrials &<51; deliver on those earnings expectations, or the market will be disappointed.&S221;

That test is beginning, with the start of the third-quarter earnings season.

Christian Anderson, an associate portfolio manager at Russell Investments in Tacoma, Wash instant payday loan., said the rally that started in early March might be entering a second phase. In the first stage, the stocks that fared best were economically cyclical shares and those that had been beaten up in the bear market.

Now, with valuations starting to come into question, investors may want to turn their attention to what Mr. Anderson calls &S220;organic growth&S221; stocks &<51; shares of companies that don&S217;t rely entirely on a robust recovery to expand their business and profits.

He said technology might be an area to consider. Many tech companies don&S217;t have any debt on their balance sheets, and tend to enjoy healthy cash flows. And unlike, say, retailing, this sector doesn&S217;t require a quick consumer recovery, he said.

What&S217;s more, technology is a growth sector in which valuations still look reasonable.

JACK A. ABLIN, chief investment officer at Harris Private Bank in Chicago, says that growth stocks in general have been outperforming the rest of the market for the past couple of years.

&S220;The group is beginning to look expensive and tired,&S221; he said.

Still, tech stocks have generally not seen their valuations rise, he added. Indeed, the average P/E ratio for tech companies in the S.&&8; P. 500 is now 22.2, based on 2009 operating earnings. That&S217;s lower than it was in the second quarter this year &<51; and well below the sector&S217;s median P/E of 30.5 since 1995.

Tech is the sector most favored by investment managers now, according to a survey by Russell Investments. Health care comes in second. While health care stocks don&S217;t depend on a strong recovery, they are still traditionally considered growth investments. And they&S217;re currently cheap. The P/E for health care stocks in the S.&&8; P. 500 is 12.8 &<51; about where it was a year ago.

The consumer discretionary sector, another traditional growth area, may be worth a look, although it is dependent on a rebound not just in the economy but also in consumer spending. But earnings here have already started to improve &<51; up 64 percent this year.

As in the technology sector, valuations for these stocks have already started to fall even as stock prices have soared. So if the overall market were to plunge, these stocks&S217; more modest prices might cushion their fall.

Fundamentally: The Proof Will Be in the Profits

WASHINGTON, Oct. 16 (Xinhua) -- The U.S. federal deficit of the 2009 fiscal year reached a record high of 1.42 trillion U.S. dollars, the Treasury Department announced Friday.

The U.S. government imbalance for the fiscal year ending Sept. 30, 2009, more than tripled last year's record. As a portion of the economy, the deficit accounted about 10 percent, the highest since World War II.

For fiscal year 2009, the government collected 2.1 trillion dollars in revenues, a 16.6 percent drop from 2008, while government spending jumped to 3.52 trillion dollars, up 18.2 percent over 2008.

The Treasury Department projected that the deficits would total 9.1 trillion dollars over the next decade unless corrective action is taken.

Treasury Secretary Tim Geithner pointed to the skyrocketing federal debt as a result of the government's actions to tackle the worst economic recession since the Great Depression of the 1930s.

The Obama Administration launched a 787-billion-dollar stimulus bill to boost the economy and another 700 billion dollars to stabilize the financial system since the president took office at the beginning of the year.

Besides, Geithner said, the debt was also a heritage of the George W. Bush period.

The 2009 deficit was largely the product of the spending and tax policies inherited from the previous Administration, according to the department.

"This year's deficit is lower than we had projected earlier this year, in part because we are managing to repair the financial system at a lower cost to taxpayers," Geithner said.

"It was critical that we acted to bring the economy back from the brink earlier this year," White House budget director Peter Orszag said in a statement. "The president recognizes that we need to put the nation back on a fiscally sustainable path."

President Barack Obama has vowed to reduce the deficit once the economy returns to growth and the unemployment rate starts falling.

But critics said the government lacks of the political will to take necessary steps to balance its budget, such as raise taxes and cut spending short term personal loans.

The U.S. federal deficit is unsustainable if the government does not impose fiscal discipline, observed William Gale, senior fellow of the Washington think tank Brookings Institute.

Other economists believe that the debt and unemployment are key problems that will test the future of the Obama administration. New York-Wall Street rallies on Federal Reserve??s positive predictive of U.S. economy

U.S. stock rallied on after the Federal Reserve's positive predictive of a more stable economy.

The Federal Reserve said in the latest statement, which followed its decision to leave interest rates unchanged at record low levels of 0.25 percent, that economic activity is "leveling out." Full story U.S. federal deficit hits $1.38 trln

WASHINGTON, Sept. 11 (Xinhua) -- The U.S. federal deficit has topped 1.38 trillion dollars with one month left in this fiscal year, according to Treasury Department statistics released on Friday.

The Department reported that the U.S. federal government spent 111.4 billion dollars more than it made in August, pushing the red ink so far in the current fiscal year to a new record. Full story U.S. Federal Reserve launches new credit card rules

WASHINGTON, Sept. 29 (Xinhua) -- The U.S. Federal Reserve (Fed) Board on Tuesday proposed new rules to protect consumers who use credit cards from a number of potentially costly practices.

"This proposal is another step forward in the Federal Reserve's efforts to ensure that consumers who rely on credit cards are treated fairly," said Federal Reserve Governor Elizabeth A. Duke. "The rule bans several harmful practices and requires greater transparency in the disclosure of the terms and conditions of credit card accounts." Ful story
Special Report: Global Financial Crisis

U.S. federal deficit hits record high of $1.4 trln

(Reuters) – EBay has signed a definitive agreement to sell Skype in a deal valuing the communications business at &&6;2.75 billion.

Here are the highlights. eBay:

* Says to receive approximately &&6;1.9 billion in cash; retain approximately 35 percent stake.

* Says buyer is investor group led by Silver Lake.

* Says buyer is investor group includes Index Ventures, Andreessen Horowitz, Canada Pension Plan investment board.

* Says transaction not subject to financing condition, expected to close in the fourth quarter of 2009 same day payday loans.

* Says is expected to get about &&6;1.9 billion cash upon completion of sale, note from buyer in principal amount of &&6;125 million.

* Says buyer will control an approximately 65 percent stake.

EBay to sell Skype for $2.75 billion

HOUSTON, Aug. 24 (Xinhua) -- A U.S. federal appeals court ruled on Monday that indicted U.S. billionaire Allen Stanford must remain jailed until his fraud trial.

The 5th U.S. Circuit Court of Appeals in New Orleans on Monday upheld a lower-court ruling that revoked the Texan financier's bond on the grounds that he is a flight risk and should remain in custody until his trial, which could be a year away.

Stanford was initially granted bail by a magistrate judge, but U.S. District Judge David Hittner revoked the bond after prosecutors argued that the 59-year-old Texas financier is a serious flight risk.

Stanford's attorneys had argued that Stanford was not a flight risk, and appealed for his release on bail so he can assist in defending investment fraud charges that may lead to a life sentence for him.

Stanford and four executives of his now defunct Stanford Financial Group are accused of orchestrating a massive Ponzi scheme and swindling investors of as much as 7 billion U.S. dollars.

Stanford has been in federal custody since his arrest on June 18. He will return to court Thursday for a public hearing to determine who will represent him legally, according to local media reports. Texas billionaire Allen Stanford appears before federal Magistrate Judge M. Hannah Lauck in U.S. District Court in Richmond, Virginia in this June 19, 2009 courtroom sketch. Lauck ordered Stanford, a flamboyant 59-year-old financier, be transferred to Houston for a hearing on whether he should be granted bail on fraud and obstruction charges stemming from a $7 billion pyramid scheme to bilk investors. Stanford could face up to 250 years in prison if convicted on all of the charges brought by a grand jury in Texas.(Xinhua/Reuters Photo)
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U.S. financier Allen Stanford to be jailed until fraud trial

Hot News: Wikipedia to Add Layer of Editing to Some Articles

President Barack Obama has spoken with his Brazilian counterpart, Luiz Inacio Lula da Silva, about "issues of mutual interest and concern in the Americas."  Brazil's leader expressed concern about a plan to give the U.S. military greater access to seven bases in Colombia.In a statement, the White House said the two leaders spoke Friday morning.Pres. Barack Obama (front R) shares a word with Brazil's Pres. Luiz Inacio Lula Da Silva at the G8 summit, L'Aquila, Italy, 09 Jul 2009It said President Obama reaffirmed his commitment to long-standing U.S. relationships in the region, and his desire to work with Brazil and others in the hemisphere to help advance democracy, security and prosperity for the people of the Americas.  The United States recently reached a provisional agreement with Colombia, giving U.S. forces access to Colombian bases to tackle regional drug-trafficking and terrorism.  South American nations such as Bolivia, Ecuador and Venezuela have criticized the plan, with Venezuelan President Hugo Chavez saying the U.S. forces could threaten his country.The statement said Mr. Obama looks forward to seeing President da Silva next month at the Pittsburgh G-20 Summit, and continuing to strengthen the U.S. partnership with Brazil.

Some information for this report was provided by AP.

US, Brazilian Presidents Discuss Issues of Concern in Americas

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DEARBORN, Mich. &<51; The government&S217;s cash-for-clunkers program has been so popular with consumers that one automaker, the Ford Motor Company, will increase production to meet the higher demand.

Ford said on Thursday that it would add 10,000 vehicles to its production schedule in the third quarter and significantly increase its fourth-quarter output as well. The company now plans to make 570,000 vehicles in its North American plants during the last three months of the year.

That would amount to a 33 percent increase compared with production in the period a year earlier, and 15 percent more than Ford had planned before the clunkers program began in late July.

&S220;Under the cash-for-clunkers program, the Ford Escape and Focus are flying off dealer lots,&S221; said Mark Fields, who oversees Ford&S217;s operations in the Americas, &S220;and we&S217;re doing all we can to ensure our dealers are well stocked with fuel-efficient vehicles that customers really want.&S221;

Ford&S217;s move is the latest indication of the boost that the clunkers program has given to the new car market, which has been mired in its worst slump in 25 years.

&S220;The pace of sales is extremely fast,&S221; said George Pipas, Ford&S217;s chief market analyst. &S220;Retail sales are eye-popping compared to a year ago.&S221;

The Obama administration&S217;s clunkers program gives consumers up to $4,500 toward trade-ins of older gas guzzlers for newer, more fuel-efficient models.

The government&S217;s original $1 billion allocation for the program was exhausted in a week, as dealers submitted 245,000 transactions to federal officials for approval.

Most large car companies benefited immediately from the program. In July, industry sales fell just 12 percent from a year earlier, compared with a 32 percent decline for the year to date.

And since $2 billion was added to the program last week, the rush to take advantage of it has continued.

About $300 million of the $2 billion has already been used, and the funds are drying up quickly, Ellen Hughes-Cromwick, a Ford economist, said.

&S220;The appetite is there,&S221; Ms. Hughes-Cromwick said. &S220;This thing could pretty much expire in the next three or four weeks.&S221;

While Ford is the only auto company to announce a production increase because of the clunkers program, both General Motors and Chrysler are considering similar moves.

G.M. executives said this week that the company might increase production in the fourth quarter. Suppliers to G.M. have been told to expect an increase of at least 50,000 vehicles.

Car companies are starting to run short of some models that have been the best sellers as a result of the program. Toyota, for example, said it had less than a two-week inventory for its Prius gas-electric hybrid.

Ford said it had an inventory of vehicles that would last about 48 days &<51; a major decline from the 80-day supply it reported earlier this year.

The company is planning to add shifts and increase overtime at plants in Michigan and Missouri to raise supplies of the Escape sport utility vehicle and the Focus compact car, two of its most fuel-efficient models.

Ford, the only American automaker to have avoided a bankruptcy filing, has generated impressive momentum in the market since the clunkers program started.

The company posted a rare 2 percent increase in sales in the United States in July from a year earlier. It was Ford&S217;s first year-over-year increase since 2007, according to company executives.

One analyst said that Ford&S217;s improving sales gave another indication that consumers were gravitating to its showrooms at the expense of G.M. and Chrysler, both of which were bailed out by the government this year.

&S220;It has become increasingly apparent that consumers are viewing Ford in a different light than its troubled cross-town rivals, which along with strong product, should continue to drive sales for the company,&S221; John Murphy, an analyst at Merrill Lynch, wrote in a research note to clients.

Ford said that its share of the cars sold under the clunkers program was about 16 percent. By contrast, the company&S217;s retail share of the United States market is 13 percent, Mr. Pipas said.

Most of the vehicles being bought with clunker cash are smaller sedans and crossover vehicles that rank high in fuel economy.

Besides the Escape and the Focus, the top sellers in the first phase of the program were the Honda Civic, Jeep Patriot and Toyota Corolla.

Ms. Hughes-Cromwick of Ford said that, based on current clunker trade-ins, participants would save more than $800 a year on gasoline bills.

She also estimated that 30 percent to 40 percent of the people taking advantage of the program would not have purchased a new vehicle so soon without the clunker cash.

&S220;Whether it&S217;s pent-up demand or not,&S221; she said, &S220;the numbers of this program have really been a blockbuster.&S221;

Invigorated by Clunker Cash, Ford Moves to Increase Output

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WASHINGTON (Reuters) – President Barack Obama is unlikely to tip his hand as soon as financial markets would like on whether he plans to name Federal Reserve Chairman Ben Bernanke to another term.

Many investors have signaled they would prefer Bernanke to get a new four-year term after his first one expires on January 31, 2010 and they would like Obama to lay to rest any uncertainty about the renomination without delay.

But the president is likely to take his time as he weighs whether Bernanke&&9;s role in the runup to the credit crisis will be a political liability going forward and if there is firm evidence the economic recovery is on track.

"If you get beyond August without an announcement, the markets will begin to get nervous," said Camden Fine, the president of the Independent Community Bankers of America.

Taking history as a guide, a public announcement could be delayed until late October. That is when former President George W. Bush announced his replacement for Alan Greenspan in 2005. Obama is considering putting his own stamp on a Fed that has seen its reputation dented in the wake of the financial meltdown of the past two years.

MARKET SUPPORT

Financial markets have given Bernanke high marks on the job and rate his chances for reappointment at about 80 percent.

Investors care about who runs the Fed because a new figure, likely a Democrat, might focus on lowering unemployment while tolerating higher-than-desirable inflation.

Such an assumption might lead markets to recalibrate their bets about longer-term securities, sending longer-term interest rates higher.

In addition, while Bernanke has mapped out his exit strategy to pull the economy back from exceptionally low interest rates and extricate the Fed from a flood of loans to financial markets without sparking unwanted inflation, other candidates might chart a different course.

For the president, however, the calculus may be complicated by the economy&&9;s slow path to recovery and a public backlash against financial bailouts for big business at a time when ordinary Americans are suffering rising joblessness and lost personal wealth.

Critics also say Bernanke was part of a Fed that failed to spot a ballooning housing bubble and stood idly by as risky lending proliferated, leading to the credit crisis.

Obama has publicly praised Bernanke&&9;s handling of the crisis, but stopped short of saying he wanted him to stay on.

The president&&9;s advisors will evaluate the merits of extending Bernanke&&9;s term in the light of their own political fortunes, which will be tested in a mid-term election in November 2010 that could be a referendum on Obama&&9;s first two years bad credit payday loans.

Many lawmakers have been scathing in their criticism of the Federal Reserve. Obama and his advisors will have to decide how much of the attacks are politically opportunistic and how much of the anger reflects broader misgivings about Bernanke and the Fed amid rising joblessness and tumbling home values.

The Senate must confirm the president&&9;s choice for Fed chairman, and while Obama&&9;s Democrats control the legislature, significant opposition to Bernanke could derail his renomination.

ECONOMY&&9;S PATH

Clear evidence the economy is on track for recovery would bolster Bernanke&&9;s candidacy and would justify Obama&&9;s own decision to fight the crisis with aggressive public spending.

"If the economy fell off the cliff, there would of course be a different view," said Eugene Ludwig, chief executive of Promontory Financial Group.

Bernanke has taken the unprecedented step of arguing his case to the broader public in prime-time television interviews and "town-hall" meetings. He has defended the Fed&&9;s bailouts of banks as a necessary evil while citing his humble upbringing as proof he is in touch with the aspirations and economic challenges of ordinary Americans.

Partisan considerations may affect how the president views Bernanke, who was Bush&&9;s choice to replace Greenspan.

Obama could be the first Democratic president to pick a new Fed chairman since Jimmy Carter tapped Paul Volcker in 1979.

With strong candidates in the wings -- White House aide and former Treasury Secretary Lawrence Summers, San Francisco Fed President Janet Yellen, and former Fed vice-chairmen Roger Ferguson and Alan Blinder -- Obama may be tempted to claim one of the most important jobs in Washington for his own party.

The president could aim to make history by naming Yellen as the first woman, or Ferguson, as the first African American, to run the central bank.

"It&&9;s also a question of who does Barack Obama want on his team," said Charles Liegeman, chief investment officer for Advisors Capital Management. "Bernanke was someone he inherited, not someone he chose."

(Reporting by Mark Felsenthal)

Obama likely in no rush to nod on Bernanke's fate

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