In the wake of the terrorism attempt Friday on a Northwest Airlines flight, federal officials on Saturday imposed a new layer of restrictions on travelers that could lengthen lines at airports and limit the ability of international passengers to move about an airplane.

Among other steps being imposed, passengers on international flights coming to the United States will apparently have to remain in their seats for the last hour of a flight without any personal items on their laps. Overseas passengers will be restricted to only one carry-on item aboard the plane, and domestic passengers will probably face longer security lines.

The restrictions will again change the routine of air travel, which has undergone an upheaval since the terrorist attacks in New York and Washington in September 2001 and three attempts at air terrorism since then.

Just a day after the attempt on Friday, travelers at airports around the world began experiencing heightened screening in security lines. On one flight, from Newark Airport, flight attendants kept cabin lights on for the entire trip instead of dimming them for takeoff and landing.

The limits, which brought to mind some of the most stringent policies after the 2001 attacks, come at a difficult time for the airline industry.

Travel has declined about 20 percent since 2008 because of the economy, and airlines have been dealing with numerous delays the past week because of snowstorms on the East Coast and in the Midwest.

Airline industry executives said the new steps would complicate travel as vacationers return home from Christmas trips, and could also cause travelers to cancel plans for flights in 2010.

But the Homeland Security secretary, Janet Napolitano, said in a statement Saturday that passengers should proceed with their holiday plans and &S220;as always, be observant and aware of their surroundings and report any suspicious behavior or activity to law enforcement officials.&S221;

The Transportation Security Administration, which governs security at airports and on airplanes in the United States, had no immediate comment on the steps.

The T.S.A. planned to add more security resources as needed on a daily basis, a person with knowledge of the agency&S217;s plans said. The person said travelers would not experience the same thing at every airport, and that the system would be unpredictable by design.

Two foreign airlines, Air Canada and British Airways, disclosed the steps in notices on their Web sites. The airlines said the rules had been implemented by government security agencies including the T.S.A.

&S220;Among other things,&S221; the statement in Air Canada&S217;s Web site read, &S220;during the final hour of flight customers must remain seated, will not be allowed to access carry-on baggage, or have personal belongings or other items on their laps bad credit payday loans.&S221;

The suspect in the Friday attempt, identified as Umar Farouk Abdulmutallab, 23, tried to ignite his incendiary device in the final hour of the flight while the plane was descending into Detroit.

On its Web site, American Airlines said the T.S.A. had ordered new measures for flights departing from foreign locations to the United States, including mandatory screening of all passengers at airport gates during the boarding process. All carry-on items would be screened at security checkpoints and again at boarding, the airline said. It urged passengers to leave extra time for screening and boarding.

In effect, the restrictions mean that passengers on flights of 90 minutes or less would most likely not be able to leave their seats at all, since airlines do not allow passengers to walk around the cabin while a plane is climbing to its cruising altitude.

The new restrictions began to be instituted Saturday on flights from Canada and Europe to the United States. Air Canada said it was waiving fees for the first checked bag, and it told passengers to be prepared for delays, cancellations and missed connections because of the new limits.

At airport terminals Saturday, travelers recounted the immediate differences they experienced. Though passengers arriving from Frankfurt passed speedily through United States customs at Kennedy Airport in New York, they said that in Germany the security was intensified.

&S220;I really was surprised,&S221; Eva Clesle said about the level of scrutiny in Frankfurt, adding that officials had inspected backpacks by opening &S220;every single zip.&S221;

In Rochester, one passenger waiting in a security line said she saw other passengers removed for additional screening.

The security administration, created in the wake of the September 2001 terrorist attacks, has emergency power to impose restrictions on air travel without consulting the airlines. Its steps have undergone modification in the past, however.

After the 2001 attacks, passengers bound for or leaving Reagan National Airport in Washington were not allowed to leave their seats for the first and last 30 minutes of a flight. The restriction was lifted in 2005.

Passengers still have to remove their shoes before entering screening machines, however, a step instituted at many airports and subsequently made mandatory after Richard C. Reid, the so-called shoe bomber, tried to blow up an American Airlines flight from Paris to Miami in December 2001 by igniting explosives in his shoes.

Sarah Maslin Nir contributed reporting.

Additional Layer of Restrictions Is Imposed on Airline Passengers

LONDON, Dec. 19 (Xinhua) -- More than 2,000 people were trapped for hours inside the Channel Tunnel after four Eurostar trains broke down due to cold weather, according local news reports on Saturday.

The trains failed as they left the cold air in northern France and entered the warmer tunnel. The trains were coming from Brussels and Paris, and Eurostar said the change in the atmospheric conditions caused a problem with their electrics.

Eurostar said the four trains had been moved from the tunnel and passengers were being transferred to England.

"Four Eurostars broken down at one time -- it's absolutely unprecedented," said a spokesman from Eurotunnel, the operator of the Channel Tunnel.

"There's never actually been an evacuation of a Eurostar train in the 15 years that the tunnel has been opened and last night we evacuated two whole trains to get people off," he said.

Eurostar services have been cancelled until noon Saturday and will be severely disrupted at the weekend easy to get unsecured personal loans.

Heavy snowfall caused travel chaos, forced schools to close and cut off power supplies in parts of Britain on Friday. Meanwhile, more snow and freezing temperatures are expected for parts of Scotland and southeastern and eastern England.

Stranded passengers wait at St Pancras Station in London, capital of Britain, Dec. 19, 2009. More than 2,000 people were trapped for hours inside the Channel Tunnel after four Eurostar trains broke down due to cold weather, according to local news reports on Saturday. Eurostar services have been cancelled until noon Saturday and will be severely disrupted at the weekend. Eurostar said the four trains had been moved from the tunnel and passengers were being transferred to England. (Xinhua/Guo Rui)
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Cold snap traps four trains in Channel Tunnel

ULAN BATOR

A pungent odor like turpentine wafts over the hillsides north of the Mongolian capital. It comes from the sharilj, a wild plant that has taken over the scalloped landscape, a telltale sign of overgrazing since the plant is inedible for sheep and goats.

Sukhtseren Sharav has a herd of 150 goats and 100 sheep, and as they chew their way through everything else, and the sharilj spreads, he must shepherd them ever higher into the mountains to find fresh grazing land.

The lack of foraging terrain is not Mr. Sharav&S217;s only worry. The price for cashmere, the wool made from the fleece of his goats, has plunged 50 percent from last year. The price of flour, his most essential food staple, has more doubled.

These are hard times for Mongolia&S217;s cashmere industry, which provides jobs and income for a third of the country&S217;s population of 2.6 million and supplies about 20 percent of the world&S217;s market for the fluffy, feather-light fiber, prized for its warmth, delicate feel and long wear.

To compensate for low prices, herders have been increasing supply by breeding more goats &S212; a classic vicious circle. Mongolia&S217;s goat population is now approaching 20 million, the highest ever recorded.

Environmentalists and social scientists say this is destroying biodiversity and pastureland, and undermining herding livelihoods. But goats are hardier than other livestock, breed faster and can survive on sparser resources: so, the more the land is degraded, the more herders are driven to switch from cows, camels or other less destructive herds &S212; another vicious circle.

Mixed into the problem is climate change. According to Erdene-Ochir Badarch, environment officer of the World Bank, rainfall on the Mongolian steppe has become increasingly erratic, resulting in the disappearance of 600 Mongolian rivers and 700 lakes. This too may be a chicken-and-egg problem. Increasing aridity and loss of plant species may itself be contributing to the dwindling rains.

In a study funded by the World Bank, Dennis Sheehy, a rancher from Oregon with a doctorate in range management, last year measured two of Mongolia&S217;s four major ecological zones &S212; desert and forest steppe &S212; to determine changes in the composition of species compared with an earlier study made in 1997.

Mr. Sheehy found a 34 percent loss in plant species in the Gobi Desert and about a 30 percent loss in Mongolia&S217;s forest steppe.

&S220;Two conditions have created the loss in species: the proportion of goats in the herd in the last 10 to 12 years, and the areas are becoming increasingly arid,&S221; Mr. Sheehy said. &S220;The plant species that had disappeared were most palatable to all livestock, but especially to goats,&S221; he added. &S220;There are too many of them.&S221;

The problem with goats is not only what they eat. In arid regions, their sharp hooves have been accused by environmentalists of piercing the soil surface, known technically as the cryptobiotic crust, a tangle of gray-brown material composed of fungi, mosses, lichens and bacteria which helps to retain moisture. Once the crust is torn, strong northwesterly winds carry away the sand underneath in dust storms that are contributing to the spread of the desert, according to a 2003 World Bank report.

Still, large parts of Mongolia remain in good shape, notably in the eastern parts of the country, and some researchers, including Andrei Marin, a doctoral student preparing a thesis on climate-change adaptation at the Institute of Geography, part of the University of Bergen in Norway, caution against jumping to conclusions about cause and effect low fee payday loans.

Mr. Marin says the 10-year timetable for Mr. Sheehy&S217;s comparative study may be too short to measure environmental shifts, and a 25-year span would be more meaningful.

The reasons goats are proliferating are as much about nurture as nature, Mr. Marin said by telephone from Bergen. When the country shifted from a planned socialist economy to a market economy and a parliamentary democracy, it largely retreated from supporting the livestock industry, leading herders to increase the size of the goat herd to finance rising expenses, he said.

&S220;Government subsidies for transportation, boarding schools and a hay reserve have disappeared to a large extent,&S221; he said.

Adding some complexity to the debate, land degradation, as a term, lacks a precise and widely accepted definition, and environmentalists urge a note of caution when discussing it.

&S220;There are seven different ways to measure desertification in Mongolia,&S221; said Tony Whitten, a biodiversity specialist with the World Bank in East Asia and the Pacific.

Yet another layer of the problem is the dysfunctionality of Mongolia&S217;s cashmere marketing.

China is the largest buyer of Mongolia&S217;s raw and washed cashmere by far, taking an estimated two-thirds of all exports &S212; one-third legally and one-third smuggled to avoid export taxes.

Facing such a dominant buyer, Mongolian traders tend to get the short end of the bargain even in good times, accepting prices far below market value for high-quality fleeces and passing on the pain to the producers; and in the past year, times have not been good. As the global economic crisis shrank Chinese clothing exports, Chinese cashmere purchases effectively ground to a halt, just as another rain failure was pushing the herders into longer and more expensive migrations in search of grazing land.

&S220;Climate change and globalization interacted to severely curtail the adaptive capacity of the herders,&S221; Mr. Marin said.

Whatever the exact mix of causes, Mr. Sheehy says, the result is the same: a situation that poses a major risk to sustainability, with too many goats, and too much livestock in general.

The total Mongolian livestock herd numbers about 44 million animals, but Mongolia is haunted by the decimation of its herds when four successive years of summer drought, from 1999 to 2002, were followed by cold and snowy winters, killing off 9 million animals &S212; a disaster from which many smaller herders have still not recovered.

&S220;We&S217;re predicting that with any significant drought, the whole livestock pastoral system will crash,&S221; he said. &S220;Especially in central Mongolia, where there is not much resilience &S212; it is on the verge of a breakdown.&S221;

But the solution is easier envisaged than done: reduce livestock numbers, when herders are hard up for cash, and introduce modern market management to a country that has never known it.

&S220;Everyone thinks there are too many goats. But no one does anything about it,&S221; Mr. Sheehy said.

An earlier version of this article said that a study last year of Mongolian ecosystems was funded by Sony. In fact, the study was funded by the World Bank.

Special Report: Business of Green: Pastoralism Unraveling in Mongolia

LONDON (MarketWatch) -- Mining firms weighed on the broader London market on Thursday, as the sector pulled back from early gains to trade lower.

Miners under pressure in midday action in London included Anglo American , down 1.2%, Rio Tinto , down 1.6%, and Xstrata , down 3.2%.

Anglo-Swiss mining giant Xstrata said Thursday that it will increase capital expenditure to $6.8 billion, up from previous guidance of $3.6 billion.

Xstrata said that it has a substantial pipeline of more that $40 billion of organic growth projects. That includes over $8 billion of projects currently in construction and a further $8 billion due for approval within the next twelve months.

It also said that it expects to continue with its growth strategy, in part through making major acquisitions.

Xstrata has made a string of acquisitions since 2001 and most recently tried to buy Anglo American but was rebuffed.

The earlier gains in the sector followed another record for gold futures as the decline in the value of the U.S. dollar continued to attract investors into the precious-metals market. Read more on gold.

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• Asia Markets | Europe Markets | LatAm Markets • Canadian Markets | Israel Stocks | London • U online pay day loans.S.: Market Snapshot | After Hours • Latin American/Canadian indexes • European indexes | Asian indexes • Bond Report | Oil News | Earnings Watch • Currencies | U.S. Economic Calendar

Overall, the U.K. FTSE 100 index declined 0.1% to 5,324.03.

Other European shares were mildly higher and U.S. stock futures were pointing to gains on Wall Street.

Late Wednesday, Bank of America Corp. said that it will repay $45 billion it got from the government after raising $18.8 billion selling new common securities, setting the giant lender on course to wean itself from taxpayer support.

Amid that sign that banking-sector health is improving, European lenders advanced, with Barclays shares up 3.6%, Lloyds Banking Group shares up 3.8% and Royal Bank of Scotland shares up 2.6%.

Elsewhere, airline British Airways shares rose 3%. The airline reports traffic figures later Thursday.

London Markets: Mining-sector decline weighs on British shares

Bowing to government pressure, Japan&S217;s central bank said Tuesday it would pump short-term funds into the country&S217;s banking system in a renewed bid to kick-start lending and breathe life into the moribund economy.

But the Bank of Japan refused to increase its purchases of government bonds and engage in full-blown &S220;quantitative easing,&S221; as called for by government officials. The measured response raised questions about whether the central bank, reluctant to take orders from politicians on monetary policy, was merely maneuvering to get government officials off its back.

Prime Minister Yukio Hatoyama has repeatedly warned that the return of deflation and a surging currency threaten to wipe out the economic recovery Japan has seen in the last two quarters. The yen climbed to a 14-year high against the dollar last week, dealing a blow to Japan&S217;s many exporters, because a strong yen makes Japanese goods more expensive abroad.

Meanwhile, prices and wages have slumped, raising fears of a prolonged and painful bout of deflation that could drag Japan&S217;s economic growth back into negative territory. The country is still reeling from its deepest recession in decades, brought on by the collapse in world trade that came in the wake of the global economic crisis.

At a hastily called emergency meeting on Tuesday, the Bank of Japan&S217;s board voted to provide &<65;10 trillion, or $115 billion, in short-term loans to commercial banks to bolster liquidity. The loans will carry a fixed interest rate of 0.1 percent and the bank said it would accept commercial paper as well as government and corporate bonds as collateral. The bank kept its key short-term interest rate unchanged at 0.1 percent.

&S220;While Japan&S217;s economy is picking up, there is not yet sufficient momentum to support self-sustaining recovery,&S221; the central bank said in a statement. &S220;The bank has judged that, in supporting the economic recovery from the financial side, it is most effective at present to further spread the strong effects of monetary easing.&S221;

While some analysts questioned how much effect the bank&S217;s move would have on the economy, Mr. Hatoyama said he was satisfied, for now.

&S220;I applaud their efforts to show their resolve to stop deflation and spur the economy,&S221; he told reporters.

The Bank of Japan&S217;s move bucks a nascent trend among monetary authorities around the globe to start scaling back emergency measures like rock-bottom interest rates. The central bank&S217;s moves also show how precarious the recovery of the world&S217;s second-largest economy seems to be.

Australia, whose economy has rebounded rapidly this year, on Tuesday raised interest rates by a quarter of a percentage point for a third straight month. And the U.S. Federal Reserve said Monday it would begin testing a strategy to shrink its trillion-dollar portfolio of mortgage-backed securities and eventually wind down its program to prop up financial markets online cash advance.

Still, Dubai&S217;s announcement last week that its investment arm would delay payments for some of its billions of dollars in debt has led to renewed jitters among some global investors.

Concerns over the financial health of the formerly cash-rich emirate have also sparked a flight to currencies that are considered safe havens, including the yen.

The yen, which declined in early trading Thursday on expectations the central bank would take bold policy steps to counteract the currency&S217;s appreciation, crept up to near 14-year highs after the announcement. Earlier, the Nikkei stock index rallied 2.4 percent on hopes that a respite from the strong yen would help exporters&S217; shares.

The Bank of Japan had initially expressed doubts over the need to inject further liquidity into the economy, pointing to stabilizing consumer prices and falling unemployment as signs of recovery.

But as exporters&S217; stock prices tanked recently, demands from government ministers for action by the central bank reached a fever pitch.

With interest rates already near zero, however, the bank has few options.

By providing a new lending facility, the central bank hopes to pump more money into the nation&S217;s banks to encourage them to increase lending to the troubled corporate sector.

The central bank is eager &S220;to show that any policy change is taken with the initiative of the Bank of Japan, not by political pressure,&S221; Masaaki Kanno, economist at JPMorgan Securities Japan, wrote in a note Tuesday.

Demands by officials for more action from the central bank reflect the government's own lack of options. Saddled with a crippling public debt approaching twice the size of its gross domestic product, Japan has limited room for stimulus.

This week, Mr. Hatoyama is set to announce an extra budget that will greatly exceed an initial estimate given by officials of &<65;2.7 trillion. But much of the package will be a mere reshuffling of programs promised by the previous government, and its effect on the economy is likely to be small, analysts say.

Moreover, Mr. Hatoyama, whose Democratic Party won a landslide victory in elections in August, has promised to slash wasteful public spending. While such a move is popular with the public, cutting public works with the economy so fragile could deal a blow to recovery.

The government is therefore leaning increasingly on the central bank.

&S220;We cannot resolve all our economic woes, especially those in our financial system with short-term fiscal spending,&S221; said Naoto Kan, deputy prime minister and state minister for national strategy. &S220;These two pillars must more closely integrate their actions.&S221;

Japan’s Central Bank Takes New Steps to Lift Economy

Hot News: Manufacturing Improved in November

The cost of unwinding Bernard L. Madoff&S217;s estate for the benefit of his victims is climbing, with a total of almost $25 million in new fee requests filed on Monday with the federal bankruptcy court in Manhattan.

If the new bills are approved and added to those approved last summer, the legal tab for the first 10 months of the liquidation will rise to almost $40 million.

All the approved bills will be paid by the Securities Investors Protection Corporation, an industry-financed agency that oversees brokerage firm bankruptcies.

&S220;Contrary to what has mistakenly been reported by the news media and on blogs,&S221; none of these expenses will be paid with money that would otherwise go to reimburse victims, the primary fee application emphasized.

Therefore, it continued, the expenses will have &S220;absolutely no impact&S221; on the amount victims ultimately receive.

The fee applications were from Irving H. Picard, the court-appointed trustee for the Madoff estate; Baker &&8; Hostetler, his lawyers; AlixPartners, the consultant handling claims; a law firm handling Mr. Madoff&S217;s personal bankruptcy; and eight foreign law firms tracking assets overseas. The consultant and law firms also applied for $400,000 in out-of-pocket expenses.

Mr. Picard also submitted his second interim report to the court on his work as trustee, a 79-page review of developments in the case since Mr us fast cash. Madoff&S217;s arrest on Dec. 11, 2008.

In that report, Mr. Picard briefed the court on the status of 14 lawsuits he has filed to recover assets taken from Madoff accounts before the fraud collapsed. He also &S220;anticipates filing extensive additional litigation based on investigation conducted by the trustee&S217;s counsel and consultants,&S221; he said.

The new fee applications will be reviewed on Dec. 17 at a hearing before Judge Burton R. Lifland, who has already approved just less than $15 million in fees and expenses in the complex case.

All of the firms submitting fee applications to the court have agreed to a 10 percent discount from their usual rates, except for a firm in Gibraltar, which has discounted its rate by 20 percent. In addition, 20 percent of the approved payments will be held back until the conclusion of the liquidation, unless the court decides otherwise.

As of Oct. 31, SIPC had spent $557.6 million on the Madoff liquidation, $94. 2 million of which was for administrative expenses. That is more than the agency spent on all the other 321 liquidations it has handled since its creation in 1970.

Rising Bill in Unwinding of Madoff’s Assets

Already facing a spate of private lawsuits, the legal troubles of the country&S217;s largest credit rating agencies deepened on Friday when the attorney general of Ohio sued Moody&S217;s Investors Service, Standard &&8; Poor&S217;s and Fitch, claiming that they had cost state retirement and pension funds some $457 million by approving high-risk Wall Street securities that went bust in the financial collapse.

The case could test whether the agencies&S217; ratings are constitutionally protected as a form of free speech.

The lawsuit asserts that Moody&S217;s, Standard &&8; Poor&S217;s and Fitch were in league with the banks and other issuers, helping to create an assortment of exotic financial instruments that led to a disastrous bubble in the housing market.

&S220;We believe that the credit rating agencies, in exchange for fees, departed from their objective, neutral role as arbiters,&S221; the attorney general, Richard Cordray, said at a news conference. &S220;At minimum, they were aiding and abetting misconduct by issuers.&S221;

He accused the companies of selling their integrity to the highest bidder.

Steven Weiss, a spokesman for McGraw-Hill, which owns S.&&8; P., said that the lawsuit had no merit and that the company would vigorously defend itself.

&S220;A recent Securities and Exchange Commission examination of our business practices found no evidence that decisions about rating methodologies or models were based on attracting market share,&S221; he said.

Michael Adler, a spokesman for Moody&S217;s, also disputed the claims. &S220;It is unfortunate that the state attorney general, rather than engaging in an objective review and constructive dialogue regarding credit ratings, instead appears to be seeking new scapegoats for investment losses incurred during an unprecedented global market disruption,&S221; he said.

A spokesman for Fitch said the company would not comment because it had not seen the lawsuit.

The litigation adds to a growing stack of lawsuits against the three largest credit rating agencies, which together command an 85 percent share of the market. Since the credit crisis began last year, dozens of investors have sought to recover billions of dollars from worthless or nearly worthless bonds on which the rating agencies had conferred their highest grades.

One of those groups is largest pension fund in the country, the California Public Employees Retirement System, which filed a lawsuit in state court in California in July, claiming that &S220;wildly inaccurate ratings&S221; had led to roughly $1 billion in losses.

And more litigation is likely. As part of a broader financial reform, Congress is considering provisions that make it easier for plaintiffs to sue rating agencies. And the Ohio attorney general&S217;s action raises the possibility of similar filings from other states. California&S217;s attorney general, Jerry Brown, said in September that his office was investigating the rating agencies, with an eye toward determining &S220;how these agencies could get it so wrong and whether they violated California law in the process.&S221;

As a group, the attorneys general have proved formidable opponents, most notably in the landmark litigation and multibillion-dollar settlement against tobacco makers in 1998 faxless payday loan.

To date, however, the rating agencies are undefeated in court, and aside from one modest settlement in a case 10 years ago, no one has forced them to hand over any money. Moody&S217;s, S.&&8; P. and Fitch have successfully argued that their ratings are essentially opinions about the future, and therefore subject to First Amendment protections identical to those of journalists.

But that was before billions of dollars in triple-A rated bonds went bad in the financial crisis that started last year, and before Congress extracted a number of internal e-mail messages from the companies, suggesting that employees were aware they were giving their blessing to bonds that were all but doomed. In one of those messages, an S.&&8; P. analyst said that a deal &S220;could be structured by cows and we&S217;d rate it.&S221;

Recent cases, like the suit filed Friday, are founded on the premise that the companies were aware that investments they said were sturdy were dangerously unsafe. And if analysts knew that they were overstating the quality of the products they rated, and did so because it was a path to profits, the ratings could forfeit First Amendment protections, legal experts say.

&S220;If they hold themselves out to the marketplace as objective when in fact they are influenced by the fees they are receiving, then they are perpetrating a falsehood on the marketplace,&S221; said Rodney A. Smolla, dean of the Washington and Lee University School of Law. &S220;The First Amendment doesn&S217;t extend to the deliberate manipulation of financial markets.&S221;

The 73-page complaint, filed on behalf of Ohio Police and Fire Pension Fund, the Ohio Public Employees Retirement System and other groups, claims that in recent years the rating agencies abandoned their role as impartial referees as they began binging on fees from deals involving mortgage-backed securities.

At the root of the problem, according to the complaint, is the business model of rating agencies, which are paid by the issuers of the securities they are paid to appraise. The lawsuit, and many critics of the companies, have described that arrangement as a glaring conflict of interest.

&S220;Given that the rating agencies did not receive their full fees for a deal unless the deal was completed and the requested rating was provided,&S221; the attorney general&S217;s suit maintains, &S220;they had an acute financial incentive to relax their stated standards of &S216;integrity&S217; and &S216;objectivity&S217; to placate their clients.&S221;

To complicate problems in the system of incentives, the lawsuit states, the methodologies used by the rating agencies were outdated and flawed. By the time those flaws were obvious, nearly half a billion dollars in pension and retirement funds had evaporated in Ohio, revealing the bonds to be &S220;high-risk securities that both issuers and rating agencies knew to be little more than a house of cards,&S221; the complaint states.

Ohio Sues Rating Firms for Losses in Funds

WASHINGTON – The Securities and Exchange Commission must tighten its process for deciding which investment advisers to inspect if it is to avoid colossal breakdowns like the one that allowed Bernard Madoff's multibillion-dollar fraud to go undetected for 16 years, the agency's inspector general says.

A report released Thursday by the office of Inspector General David Kotz proposes new requirements that the SEC's inspections office examine databases and documents related to investment advisers that may be inspected.

The Office of Compliance Inspections and Examinations and the SEC's enforcement division should also establish procedures for sharing tips, complaints, disciplinary history and violations regarding investment advisers, Kotz recommends.

The IG's review found that the inspections office never undertook an exam of Madoff's investment business — which was separate from his brokerage operation — even after he was forced by the SEC in August 2006 to finally register the investment business.

The inspector general found that "failures to communicate" within the SEC led to the agency's OCIE never inspecting Madoff's investment business.

It was Kotz's second set of proposals for the OCIE in less than two months easy payday loans. In late September, he recommended that the office establish a specific process for identifying red flags and potential violations of securities laws.

Kotz has detailed how the SEC bungled five investigations of Madoff's brokerage business between June 1992 and last December, when the financier confessed to his sons that he was operating a fraudulent scheme. Top SEC officials have pledged to fix the problems and say they already have made major changes.

Madoff pleaded guilty in March to charges that his secretive investment operation was a multibillion-dollar Ponzi scheme that destroyed thousands of people's life savings and wrecked charities. He is serving a 150-year sentence in federal prison in North Carolina.

Kotz asked OCIE, the enforcement division and the division that oversees investment companies to submit a corrective action plan within 45 days to address the recommendations. The three entities, plus the office of SEC Chairman Mary Schapiro, told Kotz that they agree with his recommendations.

SEC told to improve ways it chooses probe targets

BEIJING, Nov. 15 (Xinhua) -- China should enhance supervision and management of the country's insurance investment, said Li Kemu, vice chairman of the China Insurance Regulatory Commission (CIRC),on Sunday.

"With insurance funds were extended into disparate fields, other than bank deposit, demand for a better supervision and risk control enhanced, said Li at the International Finance Forum held in Beijing.

By the end of September, 3.4 trillion yuan (497.8 billion U.S. dollars) of insurance funds were invested in bonds, mutual funds, and stocks markets. Bonds investment alone accounted for 50.6 percent of the total.

Jiang Dingzhi, China Banking Regulatory Commission (CBRC) Vice Chairman also highlighted the importance of establishing a "all-coverage" financial supervision system guaranteed online payday loans.

He suggested the country broaden the financial supervision and management system, which would put the mutual funds, hedge funds, and credit risks appraisal agencies under control.

The new system requires financial institutions to share information, and also cooperate to fill the supervision blanks between different financial markets, he said.

Chinese insurance regulator stresses supervision on insurance investment

WASHINGTON (Reuters) – Bank regulators closed Gateway Bank of St. Louis, in St. Louis, Missouri, and Prosperan Bank, of Oakdale, Minnesota, on Friday, the 118th and 119th U.S. bank to fail this year.

The Federal Deposit Insurance Corp said Gateway Bank of St Louis had &&6;27.7 million in assets and &&6;27.9 million in deposits. The bank&&9;s sole office will reopen on Saturday as a branch of Central Bank of Kansas City, Missouri, which assumed Gateway&&9;s assets bad credit payday advance.

The FDIC entered into an agreement with Alerus Financial NA, of Grand Forks, North Dakota, to assume all of Prosperan&&9;s &&6;175.6 million in deposits and about &&6;173.9 million of its &&6;199.5 million in assets.

(Reporting by Charles Abbott; editing by Carol Bishopric)

U.S. regulators close Gateway Bank, Prosperan Bank

WASHINGTON – The bankruptcy of a key lender that helps retailers stock their shelves is adding to the industry's worries ahead of the critical holiday shopping season.

CIT Group Inc. filed for Chapter 11 bankruptcy protection Sunday in New York after months of struggling to avoid collapse. The company provides badly needed credit to thousands of small and mid-sized businesses, and is a critical part of the flow of capital in the retail sector.

CIT stressed that its lending operations will continue to operate as it proceeds through bankruptcy with the hope of shedding $10 billion in debt. Chairman and CEO Jeffrey M. Peek said the company's prepackaged reorganization plan "will allow CIT to continue to provide funding to our small business and middle market customers, two sectors that remain vitally important to the U.S. economy."

But retail groups and analysts warn that the case will likely add to the instability in the retail sector. CIT is an important source of capital, working with 2,000 vendors that supply merchandise to more than 300,000 stores. About 60 percent of the apparel industry depends on CIT for financing.

In the last few weeks, the nation's stores have begun filling their floors with holiday merchandise, but they still need a reliable source of lending to prevent shipping disruptions and to restock after the holidays. Even one day that vendors are cut off from much-needed financing could create a bottleneck, resulting in shipments of merchandise left on docks or in vendors' warehouses.

CIT expects to emerge from bankruptcy by the end of the year, but a dragged-out case or any glitches could further disrupt the already tight credit markets for retailers, said Joe Alouf, a partner with Eaglepoint Advisors, a crisis management company that is partly owned by Kurt Salmon Associates.

"CIT is the 600-pound gorilla in the industry," Alouf said.

Craig Sherman, vice president of government affairs at the National Retail Federation, thinks the industry "dodged a bullet on the holiday season" for the most part, because most merchandise is in stores' distribution centers. However, he said CIT's woes could throw a wrench in ordering for the important 2010 spring season. NRF officials say that as stores prepare for a rebound in consumer spending next year, access to credit is very important.

Harold Reichwald, co-chair of law firm Manatt, Phelps & Phillips' banking group, said that CIT's case will likely force the company's customers to look elsewhere for financing.

"If I was a small businessman, I would say to myself, 'I have to find alternatives,'" Reichwald said. "In this marketplace, there isn't a lot of alternatives."

CIT's Chapter 11 filing is one of the biggest in U.S. corporate history, following Lehman Brothers, Washington Mutual, WorldCom and General Motors payday advance loan. The bankruptcy filing shows $71 billion in finance and leasing assets against total debt of $64.9 billion. The move wipes out current holders of its common and preferred stock, meaning the U.S. government will likely lose the $2.3 billion in taxpayer funds it sunk into CIT last year to prop up the company.

The government could have lost billions more, however, had it not declined to hand over more aid to the company earlier this year. Treasury Department spokesman Andrew Williams said Sunday that the government will be closely monitoring the bankruptcy proceedings, but acknowledged that "recovery to preferred and common equityholders will be minimal."

CIT had been trying to fend off disaster for several months and narrowly avoided collapse in July. It had struggled to find funding as sources it previously relied on, such as short-term debt, evaporated during the credit crisis. The company pulled back sharply on lending to businesses as it tried to preserve cash. According to its most recent quarterly earnings report, the company originated just $4.4 billion worth of new business during the first six months of 2009, compared with $11.3 billion in the first half of 2008.

The company received $4.5 billion in credit from its own lenders and bondholders last week, reportedly made a deal with Goldman Sachs to lower debt payments and negotiated a $1 billion line of credit from billionaire investor and bondholder Carl Icahn. But the company failed to persuade bondholders to support a debt-exchange offer, a step that would have trimmed at least $5.7 billion from its debt burden and given CIT more time to pay off what it owes.

Ever since CIT's troubles flared up last summer, the retail industry has carefully monitored the lender, with many vendors scrambling to find alternative financing at rivals like Rosenthal & Rosenthal. But finding a replacement hasn't been easy because competitors can only take on so many more clients. Moreover, while large publicly traded companies with sales of more than $2 billion have found the credit market loosening up in recent months, small and medium-based companies have largely found themselves shut out, Alouf said.

The big question is how long CIT will remain under court protection. A prepackaged bankruptcy, which has the support of major bondholders, speeds up the process of restructuring CIT's debt and could help it exit court protection in a matter of months. A swift exit by the holidays could alleviate some retailers' worries.

___

D'Innocenzio reported from New York.

Retail faces uncertainty as CIT enters bankruptcy

WASHINGTON (Reuters) – The U.S. Treasury Department is in talks with GMAC Financial Services Inc about a possible additional cash infusion to the company, an Obama administration official confirmed on Tuesday night.

The official declined to say how much additional money was under discussion for GMAC, which already has received &&6;12.5 billion of taxpayer funds high risk personal loans.

GMAC is the traditional lender to General Motors Co and is taking over the auto loan business of Chrysler.

(Reporting by Glenn Somerville; Editing by Eric Walsh and Carol Bishopric)

Treasury talks to GMAC about more cash

ACCESS to a fast Internet connection has become more than a convenience. It&S217;s being enshrined in some countries as a legal right of all citizens. Finland, for example, announced last week that it was moving up its timetable to next year from 2015 for guaranteeing broadband access to all, according to YLE, the Finnish broadcasting company.

Congress is clearly irritated that the United States has not done well in the international broadband Olympics. Other countries have national plans to accelerate the diffusion of broadband; America does not. So Congress has given the Federal Communications Commission a mandate to produce a plan with specific recommendations by next February.

We shouldn&S217;t get caught up, however, in a space-race panic. We&S217;ve actually done surprisingly well making a broadband connection accessible to a vast majority of American households. No less than 96 percent of households either subscribe to or have access to broadband service, according to an F.C.C. task force, which presented a status report to the commission last month.

The report does not play up the fact that almost all homes have, or could have, broadband service.

Nor does it highlight the actual median speed of 3 megabits a second among households that now have broadband, (which is based on data that probably understates the speeds substantially). The authors seem happily caught up in the thrill of playing an international game of catch-up.

The most interesting question here is the one that the F.C.C. can&S217;t answer: Why have 33 percent of American households that have access to broadband elected not to subscribe? The reasons &S220;are not well understood,&S221; the report says. A survey focusing on the nonadopters is under way.

We do know that adoption levels vary by age, income, education and race. Perhaps the F.C.C.&S217;s survey of nonadopters will show that low income is the main barrier to access. In that case, means-tested subsidies could remove that obstacle.

But age is clearly another factor. Survey data supplied by the Pew Internet and American Life Project show that just 30 percent of Americans who are 65 or older use broadband, compared with 77 percent of the 18-to-29 age group. (Which raises an interesting question itself: only 77 percent?)

The F.C.C.&S217;s own survey of nonadopters is likely to confirm that many older people are simply not as comfortable with newer technology. But it may also reveal that there is an irreducible core of people, spanning ages and income levels, who simply do not want to use the Internet.

And maybe that won&S217;t change, no matter how many social workers knock at their doors, and no matter how many years pass after Internet service has come to be accepted by their neighbors as a utility as essential as water and electricity. South Korea&S217;s experience as a broadband pioneer is suggestive. The task force looked at 22 countries with broadband plans, seeking best practices that were well suited to the United States, and South Korea&S217;s broadband initiative was of particular interest fast payday loan no faxing.

In 1999, South Korea began to help low-income and elderly households get PCs and become connected, and the outcome could be described as quite successful: &S220;Today, 83 percent of households in Korea have adopted broadband access,&S221; the report says. But one can also look at the remaining 17 percent and wonder what has prevented those households from getting online, despite the strenuous efforts of a government that has been a world leader in the broadband race.

The F.C.C. has invited comments and suggestions for its broadband initiative and has received about 41,000 pages in response, from individuals and businesses. Google proposes that every American have access by 2012 to a connections of 5 megabits a second (Mbps) &<51; in both directions. It also suggests that several cities be selected to test the installation in every household of 1-gigabit-a-second connections &<51; or more than a thousand times faster than the speed that the F.C.C. uses to define downstream &S220;broadband.&S221;

What exactly one could do with such a gloriously fast connection is not detailed. Then again, even the recent F.C.C. report, which does its best to list exciting possibilities that come into view with each increment of broadband speed, struggles to come up with many examples beyond 5 Mbps. Streamed classroom lectures, for example, require 1 to 5 Mbps; with 10 Mbps, the lectures come in high definition.

The estimated costs for universally upgrading the minimum speed of the nation&S217;s broadband connections to 3 Mbps would be about $20 billion, according to the report. Getting to 10 Mbps would be $50 billion. To play in the same league as Finland, with its 100 Mbps service promised to every citizen by 2015, would require $350 billion.

FINLAND occupies a compact 130,558 square miles, versus more than 3.5 million for the United States. The economics of broadband deployment are greatly affected by physical distances. With some understatement, the F.C.C. report says, &S220;the economics of providing broadband to the rural U.S. are challenging.&S221;

In a news release introducing the task force report, the F.C.C. calls broadband &S220;the infrastructure challenge of our time,&S221; which seems a wee bit overstated, given the decrepit state of our bridges, highways, railroads and schools. It also blithely overlooks the fact that the infrastructure is already in place to provide speeds of 3 to 10 Mbps to 94 percent of American households.

We&S217;ve built it, but not all have come. Some may never come.

Let&S217;s not assume that their and their nation&S217;s future will be hopelessly blighted if they don&S217;t.

Randall Stross is an author based in Silicon Valley and a professor of business at San Jose State University. E-mail: stross@nytimes.com.

Digital Domain: Broadband Now! So Why Don’t Some Use It?

(Reuters) – Stock index futures pointed to a lower open on Wall Street on Monday, with futures for the S&P 500 down 0.63 percent, Dow Jones futures down 0.7 percent and Nasdaq 100 futures down 0.7 percent.

Sprint Nextel (S.N) will be in the spotlight after The Sunday Telegraph reported that German group Deutsche Telekom (DTEGn.DE) was considering a bid for the U.S. company, sending Nextel&&9;s shares traded in Frankfurt (S.F) jumping 20 percent in early trade.

Also on the mergers and acquisitions front, British confectioner Cadbury (CBRY.L) turned up the heat in its defense against a takeover bid from Kraft (KFT.N) on Saturday as its Chairman Roger Carr said it was an "unappealing prospect" being absorbed into Kraft&&9;s low growth conglomerate business model.

The dollar rose broadly on Monday with the Australian and New Zealand dollars down sharply as speculators covered short positions that had pushed the greenback to one-year lows.

Oil fell more than a dollar toward &&6;68 a barrel on Monday as a rebound in the beaten-down U.S. dollar and nagging concerns that prices may have run ahead of market fundamentals extended last week&&9;s late sell-off.

*Morgan Stanley has raised its forecast of U.S. crude oil price to &&6;105 a barrel in 2012 from &&6;95 due to tightening spare capacity, the U.S. bank said in a research note seen on Monday. It expected global spare production capacity to stay ample through end-2010, before declining in 2011 and reaching 2007/08-like tightness by 2012.

President Barack Obama will try on Monday to revive a stalled push for stricter oversight of Wall Street, using the anniversary of Lehman Brothers&&9; collapse to argue for sweeping regulatory changes.

Chinese media and officials have heaped scorn on a U.S. decision to impose special duties on Chinese-made tires, extending Beijing&&9;s warnings that the move may fuel trade friction as global growth struggles to revive. U.S. President Barack Obama announced the safeguard duties on tire imports from China on Friday, a decision the White House said was meant to stifle disruption from cheap Chinese imports.

China&&9;s sovereign wealth fund is in talks to take a minority stake in power company AES Corp (AES no fax cash advances.N), the Wall Street Journal said, citing people familiar with the matter.

Chevron Corp (CVX.N) and its partners gave a formal green light to building the Gorgon liquefied natural gas project in Australia, the world&&9;s biggest new development, at a lower than estimated cost of &&6;37 billion.

Bank of New York Mellon (BK.N) may lend &&6;4 billion to Russia as a part of an out-of-court settlement of a &&6;22.5 billion lawsuit against the bank, Kommersant business daily reported on Monday.

Japan&&9;s Nikkei stock average fell more than 2 percent in moderate trade on Monday, with Toyota Motor Corp (7203.T) and other exporters battered as the dollar hit a 7-month low against the yen. Shares in Japan Airlines (9205.T) jumped 8 percent on Monday on news American Airlines and Delta Airlines (DAL.N) are considering rival investments in the struggling carrier to secure partnership ties and boost revenue from Asia.

European shares retreated in early trade on Monday, breaking a six-session winning streak and pulling back from 11-month highs, with banks and resource-related shares such as Banco Santander (SAN.MC) and Total (TOTF.PA) leading the fallers.

U.S. stocks broke a five-day winning streak on Friday on a drop in crude oil prices and while data showing a stronger-than-expected rise in consumer sentiment and a bright outlook from shipper FedEx (FDX.N) were not enough to motivate buyers in an equities market recently saturated with good news.

The Dow Jones industrial average (.DJI) lost 22.07 points, or 0.23 percent, at 9,605.41. The Standard & Poor&&9;s 500 Index (.SPX) shed 1.41 points, or 0.14 percent, at 1,042.73. The Nasdaq Composite Index (.IXIC) fell 3.12 points, or 0.15 percent, at 2,080.90. For the week, the Dow was up 1.7 percent, the S&P was up 2.6 percent, and the Nasdaq was up 3.1 percent.

(Reporting by Blaise Robinson; Editing by David Cowell)

Stock futures signal dip; Nextel in focus

Cheers echoed through Morgan Stanley when John J. Mack returned to save the soul of the bank, the bluest of Wall Street&S217;s blue-bloods, in the summer of 2005.

Four years on, Mr. Mack &<51; his bank and reputation smarting from the financial crisis &<51; is bequeathing Morgan Stanley to a relative newcomer: James P. Gorman, the quiet power behind a new push to lure ordinary investors to the bank&S217;s blossoming brokerage business.

The appointment, announced on Thursday, ends months of speculation over who will succeed Mr. Mack as head of what was, until recently, one of the most prestigious and successful banks on Wall Street. Unanswered are the many questions still swirling over Mr. Mack&S217;s legacy &<51; and, now, over Mr. Gorman, his handpicked successor.

Mr. Gorman, 51, will become chief executive on Jan. 1; Mr. Mack, 64, will remain chairman. The handoff is far smoother than the one that occurred when Mr. Mack returned in triumph after a shocking boardroom coup.

But the bitter, internal feud that opened the door for Mr. Mack was nothing compared to the turmoil that followed. Mr. Mack presided over an era of unprecedented profits &<51; and then record losses. Only a year ago, Morgan Stanley nearly foundered like Lehman Brothers. It was saved, like so much of Wall Street, by a multibillion-dollar bailout and other government aid.

Wall Street has rendered a harsh judgment on Mr. Mack&S217;s stewardship. On his watch, Morgan Stanley&S217;s share price lost nearly a third of its value, while the stock of its archrival, Goldman Sachs, has gained. After skating so close to the edge, Mr. Mack retreated from the high-risk businesses that almost cost him his bank. To many, Morgan Stanley seemed to lose its old swagger.

To Morgan Stanley insiders, the diminished role for Mr. Mack, who spent all but a few years of his career at the bank, is not only a changing of the guard but the end of an era. He and Mr. Gorman will hold a town hall-style meeting at Morgan Stanley&S217;s Manhattan headquarters on Friday.

&S220;It will be emotional,&S221; said one senior executive.

Mr. Gorman will come to the job with a far different pedigree than Mr. Mack. A lanky, cerebral Australian-born executive who dislikes being called Jim, Mr. Gorman is currently co-president in charge of Morgan Stanley&S217;s global wealth management. He joined Morgan Stanley less than four years ago, from Merrill Lynch, where he ran the global private client business. Before that he was a senior partner at McKinsey &&8; Company.

For much of the last year, Mr. Gorman and another executive, Walid A. Chammah, who runs the investment banking and capital markets operations, had been vying for the top job. Mr. Mack seemed to have favored Mr. Gorman, whom he had hired and promoted through the ranks.

Mr. Chammah, a flamboyant man with a penchant for smart suits and monogrammed shirts, also ruled himself out by insisting on staying in London, where he lives in South Kensington Payday Loan for Bad Credit. He will become chairman of Morgan Stanley International.

After a dismal second quarter because of problems in Mr. Chammah&S217;s half of the bank, the scale tipped decisively in Mr. Gorman&S217;s favor. While questions remained over Mr. Mack&S217;s charismatic but sometimes unstructured management style, the board had been impressed by Mr. Gorman&S217;s ability to switch quickly between jobs and learn fast, important in a vast conglomerate like Morgan, and especially appreciated his presentations to the board on the long-term future of the firm.

For Mr. Gorman, the good news came Monday evening, over dinner and drinks with Mr. Mack at Ilili, an upscale Lebanese restaurant in the Flatiron district in Manhattan (Mr. Mack is of Lebanese descent). After a 10 a.m. conference call on Thursday with board members, the deal was done. The vote for Mr. Gorman was unanimous.

In an interview on Thursday, Mr. Mack characterized the succession as orderly. He said the process of finding a successor had been under way for about 18 months when he first told the board he wanted to step down when his contract ended next year and before he turned 65. He will turn 65 in November. The bank hired a recruiter to draw up a list of outside candidates, but none of them were interviewed.

Still, Mr. Mack and other executives said he had faced resistance to his decision to step down, describing a conversation with S. Parker Gilbert, former chairman and a man who represents old school Morgan Stanley. He had been one of the so-called Group of Eight who had agitated to oust Mr. Mack&S217;s predecessor, Philip J. Purcell, and brought Mr. Mack back to the firm.

&S220;I want you to stay longer,&S221; Mr. Parker said. &S220;I am confident you can enjoy the fruits of your work.&S221; But Mr. Mack answered: &S220;Parker, after getting through the financial crisis and the way this firm was pushed around financially and the fear&S221; of going under, he said he had decided he wanted to go.

Mr. Mack will most likely remain a force behind Mr. Gorman. The two men will still have offices next to each other. Mr. Gorman, for his part, said Mr. Mack&S217;s legacy was secure. &S220;John came back and stabilized the company and brought back the pride,&S221; he said. &S220;He made the right calls at the right time in an incredibly stressful situation,&S221; he said.

While Mr. Gorman lacks Mr. Mack&S217;s flash and is far less known in financial circles, people who know him said he was up to the job.

R. Glenn Hubbard, dean of Columbia Business School, who has known Mr. Gorman since his days at Merrill Lynch, said he was a &S220;strategic thinker&S221; and his qualities made him &S220;a good recipe for success.&S221; He described Mr. Gorman as a &S220;terrific pick.&S221; Mr. Gorman sits on the school&S217;s board.

Morgan Stanley Announces New Chief