Brad Pitt has quit smoking after being caught out by two of his children.
The 'Moneyball' star has reportedly been guilt-tripped into giving up the habit after he was spotted by daughters Zahara, six, and five-year-old Shiloh having a quick cigarette at the bottom of his garden in his rented home in Budapest.
A source told The Sun newspaper: 'They followed him outside and caught him puffing away. They couldn't believe it as he's always said smoking's bad for you.'
Brad - who also raises Maddox, 10, Pax, seven, and three-year-old twins Knox and Vivienne with partner Angelina Jolie - has been undergoing hypnotherapy sessions and taking nicotine lollipops and mints to try to fight the craving.
The actor recently admitted he always puts his children and family life first. Even though his kids can be 'unruly' at times.
He said: 'We're a normal family, a mother and father, and the kids get unruly! The kids are fantastic and say the funniest things I've ever heard.
'But the most important thing for us is to make sure we carve out time for them, that we get group time and one on one time because it's our responsibility to show them around and help shape them. So I guess the only thing I can say is that it's fatherhood first, family first, and then I slip in the work.'
NYTimes circulation up as it restricts Web access
Circulation at The New York Times soared in the latest six-month reporting period because the Times now charges for access to its website and people who sign up are counted as subscribers.
The Times had print and digital circulation of 1.2 million on average from Monday through Friday. The figures released Tuesday by the Audit Bureau of Circulations cover the six months that ended Sept. 30.
The latest figures represent a gain of 25 percent from the October-March period, when average circulation was at about 917,000. However, the comparison does not factor in seasonal fluctuations.
Circulation figures affect advertising rates at newspapers, which count print ads as their main source of revenue. Print ad revenue has declined in recent years as readers and advertisers shift to the Internet. The economic downturn has worsened the decline. Some newspapers have seen growth in the digital ad revenue they derive from their websites and mobile apps, but it hasn't been enough to offset losses in print advertising. The New York Times' digital subscription model is being closely watched as a possible solution to the industry's revenue shortfalls.
The Times is the third-largest U.S. newspaper on weekdays. The Wall Street Journal is No. 1 with average weekday circulation of 2.1 million, and Gannett Co.'s USA Today ranks second with 1.8 million.
The Times had the highest Sunday circulation with 1.6 million. Neither the Journal nor USA Today publishes on Sunday.
The Times' circulation grew after it started charging fees to readers of its digital content. That began just before the start of the latest circulation reporting period. Digital subscriptions are included in the circulation totals. Newspapers aren't allowed to count visitors to free websites as circulation.
The Times' circulation might have fallen were it not for the digital subscriptions. The Times had about 771,000 print subscribers in the latest period, compared with about 816,000 in the October-March period. Still, the Times said Sunday home delivery subscriptions grew slightly from last year; many people bought or kept a print subscription because it comes with free digital access.
The Audit Bureau of Circulations did not release industry-wide totals that could be compared with last year because of major rule changes in how circulation is counted.
In recent years, circulation has been declining at newspapers in part because readers are shifting from printed editions to free news sources on the Web and on mobile devices. For most newspapers, digital subscriptions have not caught on. The exceptions are primarily publications with national clout.
During the April-September period, the Times had average weekday digital circulation of 380,003 and Sunday circulation of 371,933. News Corp.'s Journal also offers digital subscriptions and had a weekday average of 537,469.
Outsell Inc. media analyst Ken Doctor said that if the Times continues to persuade people to buy digital subscriptions, it could bring in $50 million to $75 million per year in additional circulation revenue. That will be important, he said, as print advertising revenue keeps falling.
Citigroup analyst Leo Kulp believes the Times won't collect enough from digital subscriptions to offset a decline in print ads. As a result, he downgraded the Times Co.'s stock last week.
The Times had print and digital circulation of 1.2 million on average from Monday through Friday. The figures released Tuesday by the Audit Bureau of Circulations cover the six months that ended Sept. 30.
The latest figures represent a gain of 25 percent from the October-March period, when average circulation was at about 917,000. However, the comparison does not factor in seasonal fluctuations.
Circulation figures affect advertising rates at newspapers, which count print ads as their main source of revenue. Print ad revenue has declined in recent years as readers and advertisers shift to the Internet. The economic downturn has worsened the decline. Some newspapers have seen growth in the digital ad revenue they derive from their websites and mobile apps, but it hasn't been enough to offset losses in print advertising. The New York Times' digital subscription model is being closely watched as a possible solution to the industry's revenue shortfalls.
The Times is the third-largest U.S. newspaper on weekdays. The Wall Street Journal is No. 1 with average weekday circulation of 2.1 million, and Gannett Co.'s USA Today ranks second with 1.8 million.
The Times had the highest Sunday circulation with 1.6 million. Neither the Journal nor USA Today publishes on Sunday.
The Times' circulation grew after it started charging fees to readers of its digital content. That began just before the start of the latest circulation reporting period. Digital subscriptions are included in the circulation totals. Newspapers aren't allowed to count visitors to free websites as circulation.
The Times' circulation might have fallen were it not for the digital subscriptions. The Times had about 771,000 print subscribers in the latest period, compared with about 816,000 in the October-March period. Still, the Times said Sunday home delivery subscriptions grew slightly from last year; many people bought or kept a print subscription because it comes with free digital access.
The Audit Bureau of Circulations did not release industry-wide totals that could be compared with last year because of major rule changes in how circulation is counted.
In recent years, circulation has been declining at newspapers in part because readers are shifting from printed editions to free news sources on the Web and on mobile devices. For most newspapers, digital subscriptions have not caught on. The exceptions are primarily publications with national clout.
During the April-September period, the Times had average weekday digital circulation of 380,003 and Sunday circulation of 371,933. News Corp.'s Journal also offers digital subscriptions and had a weekday average of 537,469.
Outsell Inc. media analyst Ken Doctor said that if the Times continues to persuade people to buy digital subscriptions, it could bring in $50 million to $75 million per year in additional circulation revenue. That will be important, he said, as print advertising revenue keeps falling.
Citigroup analyst Leo Kulp believes the Times won't collect enough from digital subscriptions to offset a decline in print ads. As a result, he downgraded the Times Co.'s stock last week.
Greece's Papandreou toughs out referendum pledge
Greece's prime minister held firm early Wednesday to his shock decision to call for a referendum on a hard-fought European debt deal, despite anger from abroad, market turmoil across the world and dissent from within his own party.
George Papandreou's government still faced a battle for survival, with a vote of confidence scheduled for Friday and a grilling from frustrated European leaders expected later in the day ahead of the Group of 20 summit in the French Riviera.
After a grueling seven-hour Cabinet meeting that finished after 3 a.m. (0100GMT), government spokesman Ilias Mossialos said Papandreou's ministers expressed "total support for the initiatives taken by the prime minister." He said the referendum would be held "as soon as possible."
However, government officials said two ministers still had strong reservations with the idea of a referendum, which will be the first in Greece since the country voted to abolish the monarchy in 1974. The officials spoke on condition of anonymity to reveal details of the Cabinet meeting.
Papandreou told his ministers that putting the issue to the Greek people was the only way to safeguard the European deal.
"We will not implement any program by force, but only with the consent of the Greek people," he said. "This is our democratic tradition and we demand that it is also respected abroad."
A referendum, he said, "will be a clear mandate, and a clear message within and outside of Greece, about our European course and our participation in the euro," he said, according to a text of his speech to the meeting issued by his office.
"The dilemma is not 'this government or another one', the dilemma is 'yes or no to the agreement', 'yes or no to Europe', 'yes or no to the euro,'" he said.
World markets were hammered after Papandreou's surprise Monday night announcement amid fears the vote could unravel a deal which took European leaders months of complex negotiations among themselves and with banks to reach.
Greece's general price index plunged to close down 6.92 percent, while in Germany the Dax index, the major stock market average, lost 5 percent -- the equivalent of about 600 points on the Dow. The French stock market closed down 5.4 percent, the Italian 6.7 percent and London 2.2 percent. The Dow Jones industrial average finished down nearly 300 points, or 2.5 percent.
European leaders made no secret of their displeasure.
"This announcement surprised all of Europe," said a clearly annoyed French President Nicolas Sarkozy, who has been scrambling to save face for Europe before he hosts leaders of the G20 major world economies beginning Thursday.
"Giving the people a say is always legitimate, but the solidarity of all countries of the eurozone cannot work unless each one consents to the necessary efforts," he said.
Sarkozy and German Chancellor Angela Merkel, who have been at the forefront of Europe's efforts to contain the debt crisis, talked by phone and agreed to convene emergency talks Wednesday in Cannes, France, to which Papandreou was also summoned to discuss implementation of the bailout. The working dinner will also be attended by Jean-Claude Juncker, who chairs eurozone ministerial meetings, International Monetary Fund chief Christine Lagarde, top EU officials Herman Van Rompuy and Jose Manuel Barroso, and new European Central Bank chief Mario Draghi.
French lawmaker Christian Estrosi was even more direct, saying on France-Info radio that the move was "totally irresponsible."
"I want to tell the Greek government that when you are in a situation of crisis, and others want to help you, it is insulting to try to save your skin instead of assuming your responsibilities," Estrosi said.
Papandreou's decision could upend the Oct. 27 deal that was the product of months of work by European leaders who were trying, sometimes opposed by their own people, to agree on the details of a second bailout for Greece and shore up their own economies in the name of saving the euro.
The deal would require banks holding Greek government bonds to accept 50 percent losses and provide Greece with about $140 billion in rescue loans from European nations and the IMF.
Greece has been relying since May 2010 on a first multibillion dollar bailout by other eurozone countries and the International Monetary Fund. Juncker said the referendum was a dangerous decision that could endanger Greece's next installment of bailout loans -- without which the country will run out of money in mid-November.
Dutch Prime Minister Mark Rutte, meanwhile, said he would try to prevent the referendum plan, saying he would "attempt to see that it doesn't happen." But he conceded it was up to Greece how it approves or rejects the European deal.
Papandreou's decision had left his government teetering on the verge of collapse Tuesday as his own deputies rebelled and his Socialist party saw its parliamentary majority whittled down to just two seats in the 300-member legislature with the defection of lawmaker Milena Apostolaki. Others called for the prime minister's resignation and the creation of a national unity government.
"Yesterday's surprise and irrational announcement of the referendum has led me to doubt something that I considered certain until yesterday: That I am a member of a group that is striving to save our country from bankruptcy," Socialist deputy Hara Kefalidou said.
"I cannot back a referendum which is a subterfuge by a government that appears unwilling to govern."
Apostolaki's departure "shows clearly that the government itself is losing gradually its cohesion," said George Tzogopoulos, a political analyst from the Hellenic Foundation for European and Foreign Policy.
Under a recently amended law, a referendum can be called on issues of grave national concern, but needs approval by an absolute majority in the parliament.
Papandreou's decision was such a surprise that even the finance minister, Evangelos Venizelos, apparently did not know about it ahead of time. He was unable to make the ministers' meeting Tuesday after being hospitalized with stomach pains. He remained in the clinic overnight.
Nicholas Paphitis and Theodora Tongas in Athens, Angela Charlton in Paris, Raf Casert in Brussels and Toby Sterling in Amsterdam contributed.
George Papandreou's government still faced a battle for survival, with a vote of confidence scheduled for Friday and a grilling from frustrated European leaders expected later in the day ahead of the Group of 20 summit in the French Riviera.
After a grueling seven-hour Cabinet meeting that finished after 3 a.m. (0100GMT), government spokesman Ilias Mossialos said Papandreou's ministers expressed "total support for the initiatives taken by the prime minister." He said the referendum would be held "as soon as possible."
However, government officials said two ministers still had strong reservations with the idea of a referendum, which will be the first in Greece since the country voted to abolish the monarchy in 1974. The officials spoke on condition of anonymity to reveal details of the Cabinet meeting.
Papandreou told his ministers that putting the issue to the Greek people was the only way to safeguard the European deal.
"We will not implement any program by force, but only with the consent of the Greek people," he said. "This is our democratic tradition and we demand that it is also respected abroad."
A referendum, he said, "will be a clear mandate, and a clear message within and outside of Greece, about our European course and our participation in the euro," he said, according to a text of his speech to the meeting issued by his office.
"The dilemma is not 'this government or another one', the dilemma is 'yes or no to the agreement', 'yes or no to Europe', 'yes or no to the euro,'" he said.
World markets were hammered after Papandreou's surprise Monday night announcement amid fears the vote could unravel a deal which took European leaders months of complex negotiations among themselves and with banks to reach.
Greece's general price index plunged to close down 6.92 percent, while in Germany the Dax index, the major stock market average, lost 5 percent -- the equivalent of about 600 points on the Dow. The French stock market closed down 5.4 percent, the Italian 6.7 percent and London 2.2 percent. The Dow Jones industrial average finished down nearly 300 points, or 2.5 percent.
European leaders made no secret of their displeasure.
"This announcement surprised all of Europe," said a clearly annoyed French President Nicolas Sarkozy, who has been scrambling to save face for Europe before he hosts leaders of the G20 major world economies beginning Thursday.
"Giving the people a say is always legitimate, but the solidarity of all countries of the eurozone cannot work unless each one consents to the necessary efforts," he said.
Sarkozy and German Chancellor Angela Merkel, who have been at the forefront of Europe's efforts to contain the debt crisis, talked by phone and agreed to convene emergency talks Wednesday in Cannes, France, to which Papandreou was also summoned to discuss implementation of the bailout. The working dinner will also be attended by Jean-Claude Juncker, who chairs eurozone ministerial meetings, International Monetary Fund chief Christine Lagarde, top EU officials Herman Van Rompuy and Jose Manuel Barroso, and new European Central Bank chief Mario Draghi.
French lawmaker Christian Estrosi was even more direct, saying on France-Info radio that the move was "totally irresponsible."
"I want to tell the Greek government that when you are in a situation of crisis, and others want to help you, it is insulting to try to save your skin instead of assuming your responsibilities," Estrosi said.
Papandreou's decision could upend the Oct. 27 deal that was the product of months of work by European leaders who were trying, sometimes opposed by their own people, to agree on the details of a second bailout for Greece and shore up their own economies in the name of saving the euro.
The deal would require banks holding Greek government bonds to accept 50 percent losses and provide Greece with about $140 billion in rescue loans from European nations and the IMF.
Greece has been relying since May 2010 on a first multibillion dollar bailout by other eurozone countries and the International Monetary Fund. Juncker said the referendum was a dangerous decision that could endanger Greece's next installment of bailout loans -- without which the country will run out of money in mid-November.
Dutch Prime Minister Mark Rutte, meanwhile, said he would try to prevent the referendum plan, saying he would "attempt to see that it doesn't happen." But he conceded it was up to Greece how it approves or rejects the European deal.
Papandreou's decision had left his government teetering on the verge of collapse Tuesday as his own deputies rebelled and his Socialist party saw its parliamentary majority whittled down to just two seats in the 300-member legislature with the defection of lawmaker Milena Apostolaki. Others called for the prime minister's resignation and the creation of a national unity government.
"Yesterday's surprise and irrational announcement of the referendum has led me to doubt something that I considered certain until yesterday: That I am a member of a group that is striving to save our country from bankruptcy," Socialist deputy Hara Kefalidou said.
"I cannot back a referendum which is a subterfuge by a government that appears unwilling to govern."
Apostolaki's departure "shows clearly that the government itself is losing gradually its cohesion," said George Tzogopoulos, a political analyst from the Hellenic Foundation for European and Foreign Policy.
Under a recently amended law, a referendum can be called on issues of grave national concern, but needs approval by an absolute majority in the parliament.
Papandreou's decision was such a surprise that even the finance minister, Evangelos Venizelos, apparently did not know about it ahead of time. He was unable to make the ministers' meeting Tuesday after being hospitalized with stomach pains. He remained in the clinic overnight.
Nicholas Paphitis and Theodora Tongas in Athens, Angela Charlton in Paris, Raf Casert in Brussels and Toby Sterling in Amsterdam contributed.
Oil near $91 as traders eye Greek debt plan vote
Oil prices fell to near $91 a barrel Wednesday in Asia amid investor concern Greek voters may reject a plan to contain the country's debt crisis that was brokered by European leaders last week.
Benchmark crude for December delivery was down 70 cents at $91.49 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell $1 to settle at $92.19 in New York on Tuesday.
Brent crude was down 51 cents at $109.03 a barrel on the ICE Futures Exchange in London.
Greek prime minister George Papandreou said earlier this week that he would call a referendum vote on the agreement to cut Greece's debt level, provide the country's fresh rescue loans and require bondholders to accept 50 percent losses.
Greek labor unions have protested fiscal austerity measures, and if voters reject the debt plan, it could spark a chaotic debt default and a financial crisis.
Papandreou also faces a vote of confidence in parliament Friday.
"The euro zone sovereign debt issue that provided a large burst of risk appetite last week has flipped to a major bearish factor this week as the Greek debt situation is suddenly again looking precarious," energy consultant Ritterbusch and Associates said in a report.
Trading volumes of oil futures have been undermined this week by the bankruptcy of MF Global, a U.S. securities firm run by former Goldman Sachs chief Jon Corzine.
"When there is a lack of activity, attrition is normal," energy trader and consultant Blue Ocean Brokerage said in a report. "We could continue to erase gains with little volume willing to support until the market is ready to trade again."
In other Nymex trading, heating oil fell 2.2 cents to $3.02 per gallon and gasoline futures slid 0.8 cent at $2.62 per gallon. Natural gas dropped 0.9 cent at $3.77 per 1,000 cubic feet.
Benchmark crude for December delivery was down 70 cents at $91.49 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell $1 to settle at $92.19 in New York on Tuesday.
Brent crude was down 51 cents at $109.03 a barrel on the ICE Futures Exchange in London.
Greek prime minister George Papandreou said earlier this week that he would call a referendum vote on the agreement to cut Greece's debt level, provide the country's fresh rescue loans and require bondholders to accept 50 percent losses.
Greek labor unions have protested fiscal austerity measures, and if voters reject the debt plan, it could spark a chaotic debt default and a financial crisis.
Papandreou also faces a vote of confidence in parliament Friday.
"The euro zone sovereign debt issue that provided a large burst of risk appetite last week has flipped to a major bearish factor this week as the Greek debt situation is suddenly again looking precarious," energy consultant Ritterbusch and Associates said in a report.
Trading volumes of oil futures have been undermined this week by the bankruptcy of MF Global, a U.S. securities firm run by former Goldman Sachs chief Jon Corzine.
"When there is a lack of activity, attrition is normal," energy trader and consultant Blue Ocean Brokerage said in a report. "We could continue to erase gains with little volume willing to support until the market is ready to trade again."
In other Nymex trading, heating oil fell 2.2 cents to $3.02 per gallon and gasoline futures slid 0.8 cent at $2.62 per gallon. Natural gas dropped 0.9 cent at $3.77 per 1,000 cubic feet.
FBI to probe MF Global's use of client money
MF Global, the securities firm led by Jon Corzine, admitted using clients' money as its financial troubles mounted, a federal official says. The FBI is expected to investigate whether the firm's actions violated criminal laws, according to two people familiar with the situation.
An MF Global executive told regulators early Monday that the company had diverted client money, according to an official familiar with a separate probe by regulators. It isn't clear where the money ended up or what it might have been used for, the official said.
All three people spoke on condition of anonymity because they weren't authorized to discuss the matter publicly.
MF Global filed for bankruptcy protection Monday, after a big bet on European debt threatened to topple it. It became the first big Wall Street casualty of the European debt crisis.
And it's the latest public embarrassment for Corzine.
He was ousted as chairman of Goldman Sachs Group Inc. in 1999 by executives including Henry Paulson, who later became Treasury secretary. Later, he lost his bid for a second term as New Jersey governor after sinking millions of his own money into the campaign. Frustrated voters had hoped his banking experience would help him clean up the state's finances.
MF Global was seen as Corzine's shot at redemption on Wall Street. He hoped to turn it into a major investment bank and restore his stature in the financial world.
After taking over MF Global last year, Corzine led MF Global to make more trades for the company's own profits, a practice known as proprietary trading. Proprietary trading helped turn Goldman into a trading powerhouse in recent years.
Under Corzine's leadership, MF Global bet $6.3 billion on debt issued by Italy, Spain and other European nations with troubled economies. Those bonds have lost value in recent weeks as fears have intensified that some European countries might default.
Regulators said in September that MF Global was overvaluing some of its European debt investments. It required the company to raise more cash, according to court papers filed on Monday.
MF Global reported its biggest ever quarterly loss last week, mainly because of losses on proprietary trading. Credit rating agencies downgraded the company's bonds to junk status. And business partners demanded that it put up more cash to guarantee its trades. The result was a cash crunch that forced MF Global into bankruptcy court.
The European debt crisis has roiled financial markets for months. Greece can't afford to pay its debts without outside help. European leaders have been wrangling over the details of bailouts for Greece, Ireland and Portugal.
Europe's debt problems threaten the financial system because European banks hold billions in debt issued by Greece and other troubled countries. Losses on those bonds could topple the biggest European banks. MF Global's failure highlights that threat on a smaller scale.
The regulators' investigation of MF Global Holdings Ltd. is preliminary. A formal investigation by the company's main regulator, the Commodity Futures Trading Commission, requires a vote by its five commissioners.
At a first-day hearing on MF Global's bankruptcy, a lawyer for the company denied that executives were aware of any money missing from client accounts.
"To the best knowledge of the management, there are no shortfalls. All funds can be accounted for," said Ken Ziman, a lawyer with Skadden, Arps, Slate, Meagher & Flom LLP. Ziman said some funds have not yet been cleared by trading partners and exchanges.
Earlier Tuesday, the head of the Chicago Mercantile Exchange said that MF Global had violated rules requiring it to keep clients' money in separate accounts.
Securities firms are required to keep clients' money and company money in separate accounts. That makes it easier to repay clients if a broker fails.
Craig Donohue, CEO of CME Group Inc., which operates exchanges where derivatives are traded, said MF Global was "not in compliance" with requirements set by CME and the CFTC. He said they are still trying to "determine the precise scope of the firm's violation at this time."
Derivatives are investments whose value is based on the value of some underlying asset. MF Global was one of the biggest players in the derivatives market.
CME Group is involved in the investigation because it regulates companies that trade on its exchanges. Government regulators empower companies that run exchanges to enforce trading rules. When serious violations are alleged, these companies and regulators both investigate.
MF Global and Corzine did not respond to requests for comment. Interactive Brokers, which was considering buying MF Global until the problems came to light, declined to comment. The FBI also declined to comment.
The Securities and Exchange Commission and the CFTC have said they and other regulators were monitoring MF Global's situation for days "in anticipation of a transaction that would include the transfer of customer accounts to another firm."
The regulators said MF Global had reported "possible deficiencies" in client accounts, but they did not reveal that the company had diverted client money.
The proposed sale through after regulators and the potential buyer, Interactive Brokers, couldn't make the numbers add up. The discrepancies led to MF Global's admission at 2 a.m. Monday, the official said.
Trading of MF Global shares was permanently suspended on the New York Stock Exchange Tuesday afternoon.
Hays reported from New York. Associated Press writer Larry Neumeister and AP Business Writer Pallavi Gogoi in New York contributed to this report.
An MF Global executive told regulators early Monday that the company had diverted client money, according to an official familiar with a separate probe by regulators. It isn't clear where the money ended up or what it might have been used for, the official said.
All three people spoke on condition of anonymity because they weren't authorized to discuss the matter publicly.
MF Global filed for bankruptcy protection Monday, after a big bet on European debt threatened to topple it. It became the first big Wall Street casualty of the European debt crisis.
And it's the latest public embarrassment for Corzine.
He was ousted as chairman of Goldman Sachs Group Inc. in 1999 by executives including Henry Paulson, who later became Treasury secretary. Later, he lost his bid for a second term as New Jersey governor after sinking millions of his own money into the campaign. Frustrated voters had hoped his banking experience would help him clean up the state's finances.
MF Global was seen as Corzine's shot at redemption on Wall Street. He hoped to turn it into a major investment bank and restore his stature in the financial world.
After taking over MF Global last year, Corzine led MF Global to make more trades for the company's own profits, a practice known as proprietary trading. Proprietary trading helped turn Goldman into a trading powerhouse in recent years.
Under Corzine's leadership, MF Global bet $6.3 billion on debt issued by Italy, Spain and other European nations with troubled economies. Those bonds have lost value in recent weeks as fears have intensified that some European countries might default.
Regulators said in September that MF Global was overvaluing some of its European debt investments. It required the company to raise more cash, according to court papers filed on Monday.
MF Global reported its biggest ever quarterly loss last week, mainly because of losses on proprietary trading. Credit rating agencies downgraded the company's bonds to junk status. And business partners demanded that it put up more cash to guarantee its trades. The result was a cash crunch that forced MF Global into bankruptcy court.
The European debt crisis has roiled financial markets for months. Greece can't afford to pay its debts without outside help. European leaders have been wrangling over the details of bailouts for Greece, Ireland and Portugal.
Europe's debt problems threaten the financial system because European banks hold billions in debt issued by Greece and other troubled countries. Losses on those bonds could topple the biggest European banks. MF Global's failure highlights that threat on a smaller scale.
The regulators' investigation of MF Global Holdings Ltd. is preliminary. A formal investigation by the company's main regulator, the Commodity Futures Trading Commission, requires a vote by its five commissioners.
At a first-day hearing on MF Global's bankruptcy, a lawyer for the company denied that executives were aware of any money missing from client accounts.
"To the best knowledge of the management, there are no shortfalls. All funds can be accounted for," said Ken Ziman, a lawyer with Skadden, Arps, Slate, Meagher & Flom LLP. Ziman said some funds have not yet been cleared by trading partners and exchanges.
Earlier Tuesday, the head of the Chicago Mercantile Exchange said that MF Global had violated rules requiring it to keep clients' money in separate accounts.
Securities firms are required to keep clients' money and company money in separate accounts. That makes it easier to repay clients if a broker fails.
Craig Donohue, CEO of CME Group Inc., which operates exchanges where derivatives are traded, said MF Global was "not in compliance" with requirements set by CME and the CFTC. He said they are still trying to "determine the precise scope of the firm's violation at this time."
Derivatives are investments whose value is based on the value of some underlying asset. MF Global was one of the biggest players in the derivatives market.
CME Group is involved in the investigation because it regulates companies that trade on its exchanges. Government regulators empower companies that run exchanges to enforce trading rules. When serious violations are alleged, these companies and regulators both investigate.
MF Global and Corzine did not respond to requests for comment. Interactive Brokers, which was considering buying MF Global until the problems came to light, declined to comment. The FBI also declined to comment.
The Securities and Exchange Commission and the CFTC have said they and other regulators were monitoring MF Global's situation for days "in anticipation of a transaction that would include the transfer of customer accounts to another firm."
The regulators said MF Global had reported "possible deficiencies" in client accounts, but they did not reveal that the company had diverted client money.
The proposed sale through after regulators and the potential buyer, Interactive Brokers, couldn't make the numbers add up. The discrepancies led to MF Global's admission at 2 a.m. Monday, the official said.
Trading of MF Global shares was permanently suspended on the New York Stock Exchange Tuesday afternoon.
Hays reported from New York. Associated Press writer Larry Neumeister and AP Business Writer Pallavi Gogoi in New York contributed to this report.
Mike Mayo's new book blasts Wall Street
Mayo is the Wall Street analyst who has been a thorn in the side of banks for years. Outspoken, blunt, volatile and prickly, the 48-year old has been ridiculed by his peers, shut out of industry conferences, and slighted by CEOs. In 2000 Mayo was fired from Credit Suisse months after he wrote a negative report that exhorted investors to sell all bank stocks.
Today, Mayo is a bank analyst at Credit Agricole Securities who sympathizes with the Occupy Wall Street movement. He says he's as outraged as the protesters over the excessive pay Wall Street banks lavish on executives, even when they perform poorly. "That's not capitalism, that's entitlement," says Mayo.
He's poured his outrage into a book that chronicles his two decades in the financial industry: "Exile on Wall Street: One Analyst's Fight to Save the Big Banks From Themselves," published by John Wiley & Sons, which was released Tuesday.
It would be easy to dismiss Mayo as a disgruntled outcast if not for the fact that he is one of Wall Street's most respected bank analysts. He still carries around the two dozen rejection letters he received over 25 years ago from elite Wall Street banks like Goldman Sachs. He believes his lack of an Ivy League pedigree may have held him back from entering the inner echelons of Wall Street.
Investors who took Mayo's advice fared well over the years. He wrote a 1,000-page report in May 1999 in which he told investors to sell the stocks of 47 banks, even though most of his peers were urging investors to buy. One rival analyst mocked the report as "Mayonnaise." Some traders who lost money started using Mayo's photo as a dartboard. A month after his report came out, bank stocks started to fall. One of his negative calls was Bank One, which lost a quarter of its value in three months. Its CEO left four months later. His prescience led one magazine to call him the Oracle of Delphi.
Though he was right many times, Mayo was criticized for missing one big call. He told investors to buy Lehman Brothers in 2007 and didn't change his recommendation until the stock lost 70 percent of its value. Soon thereafter Lehman filed for bankruptcy. That led to a freeze in global lending and brought on the worst phase of the 2008 financial crisis.
Mayo visited with The Associated Press in New York recently to talk about his book. In the conversation he lashed out at Citigroup Inc., SunTrust Banks Inc. and KeyCorp for their compensation practices. Below are edited excerpts.
Q: Why did you write the book?
A: I've worked at 6 Wall Street firms. I analyzed Wall Street. I was fired from one and muzzled by another. I've written about the problems at banks. I've testified in Congress about the problems and conflicts on Wall Street, twice. My perspective is unique.
At a time when there's so much anger about the problems on Wall Street, this book is very relevant.
Q: So does that put you on the side of the Occupy Wall Street protesters?
A: I'm as outraged as them. I've been on the inside protesting for 20 years.
When I started out on Wall Street I did exactly the way I was taught in business school and my analyst accreditation. But when my analysis was negative, like when I said KeyCorp was not a good investment, the firm cut back on business with my bank. I was penalized. Simply put, the rules of the game as I learnt in school are not the rules that are played on Wall Street.
I made a controversial call to sell bank stocks in 1999 and even though I was proven correct, I got fired.
In 2002, I testified to Congressional committees about the conflicts of interest on Wall Street, I took the message to the media and nothing changed.
The key difference between me and the protesters is that I believe in capitalism -- a capitalism that works.
Q: What's your view of compensation on Wall Street, which is at the core of the anger on Main Street today?
A: Citi is a prime example. Just look at the last decade. The bank has paid out one of the highest CEO compensation of any bank and had the worst stock price performance. And here they go again with what we view as another rigged compensation scheme. The current CEO Vikram Pandit has made a big deal about taking a token $1 as salary after the financial crisis. But that's disingenuous. Before that, Citi had already awarded him about $38 million in 2008, along with another $165 million from the sale of his hedge fund in 2007. Citi stock is down 90 percent during his tenure.
The CEOs of two other banks, SunTrust and KeyCorp, each made more than $20 million after the financial crisis in 2008 through 2010 even while their companies lost hundreds of millions of dollars.
That's not capitalism, that's entitlement.
Q: What's your view of capitalism?
A: Capitalism works when rules are put in place and strictly enforced. Not when government looks the other way when rules are broken and then steps in to protect banks that cannot deal with the consequences of their bad decisions.
Capitalism works when executives are rewarded for performance, not when the rules are written so that they walk away with fat paychecks even when things go wrong.
The bad actors on Wall Street have done a lot of damage to capitalism. Those who speak up are sometimes exiled. The watch guards need to be allowed to see and act. They are the checks and balances that make capitalism work.
Q: Your employers wanted you to write positive reports about banks that your investment banker colleagues were courting for business. So they enticed you with lavish experiences. You write about having lunch in Credit Suisse's private dining room with delicacies prepared by celebrated chef David Bouley.
A: Yes. Here is the menu I saved from that day. (Mayo takes out a laminated copy of the gold vellum paper menu of the meal 12 years ago. It lists Chatham lobster, foie gras in poppy seed Armagnac sauce, and a dessert called tophenstreusel cloud with wild berries. In the book, Mayo says: "As I wiped the tophenstreusel crumbs from my mouth after events like this, I was increasingly conflicted, because I knew the source of these perks.")
That was the best meal of my life.
Q: You say in the book that the former chairman of the Federal Reserve Paul Volcker is your hero. Why?
A: Paul Volcker was a harsh disciplinarian of the U.S. government when he made the incredibly difficult move of raising rates to kill inflation in the early 1980s. He didn't back down to political pressure at that time because he wanted to defend his ultimate goal. It was pain in the short term for a better end. Today, no one has that kind of guts.
We need a Tiger Mom in charge of our economy. Paul Volcker was a Tiger Mom.
Today, Mayo is a bank analyst at Credit Agricole Securities who sympathizes with the Occupy Wall Street movement. He says he's as outraged as the protesters over the excessive pay Wall Street banks lavish on executives, even when they perform poorly. "That's not capitalism, that's entitlement," says Mayo.
He's poured his outrage into a book that chronicles his two decades in the financial industry: "Exile on Wall Street: One Analyst's Fight to Save the Big Banks From Themselves," published by John Wiley & Sons, which was released Tuesday.
It would be easy to dismiss Mayo as a disgruntled outcast if not for the fact that he is one of Wall Street's most respected bank analysts. He still carries around the two dozen rejection letters he received over 25 years ago from elite Wall Street banks like Goldman Sachs. He believes his lack of an Ivy League pedigree may have held him back from entering the inner echelons of Wall Street.
Investors who took Mayo's advice fared well over the years. He wrote a 1,000-page report in May 1999 in which he told investors to sell the stocks of 47 banks, even though most of his peers were urging investors to buy. One rival analyst mocked the report as "Mayonnaise." Some traders who lost money started using Mayo's photo as a dartboard. A month after his report came out, bank stocks started to fall. One of his negative calls was Bank One, which lost a quarter of its value in three months. Its CEO left four months later. His prescience led one magazine to call him the Oracle of Delphi.
Though he was right many times, Mayo was criticized for missing one big call. He told investors to buy Lehman Brothers in 2007 and didn't change his recommendation until the stock lost 70 percent of its value. Soon thereafter Lehman filed for bankruptcy. That led to a freeze in global lending and brought on the worst phase of the 2008 financial crisis.
Mayo visited with The Associated Press in New York recently to talk about his book. In the conversation he lashed out at Citigroup Inc., SunTrust Banks Inc. and KeyCorp for their compensation practices. Below are edited excerpts.
Q: Why did you write the book?
A: I've worked at 6 Wall Street firms. I analyzed Wall Street. I was fired from one and muzzled by another. I've written about the problems at banks. I've testified in Congress about the problems and conflicts on Wall Street, twice. My perspective is unique.
At a time when there's so much anger about the problems on Wall Street, this book is very relevant.
Q: So does that put you on the side of the Occupy Wall Street protesters?
A: I'm as outraged as them. I've been on the inside protesting for 20 years.
When I started out on Wall Street I did exactly the way I was taught in business school and my analyst accreditation. But when my analysis was negative, like when I said KeyCorp was not a good investment, the firm cut back on business with my bank. I was penalized. Simply put, the rules of the game as I learnt in school are not the rules that are played on Wall Street.
I made a controversial call to sell bank stocks in 1999 and even though I was proven correct, I got fired.
In 2002, I testified to Congressional committees about the conflicts of interest on Wall Street, I took the message to the media and nothing changed.
The key difference between me and the protesters is that I believe in capitalism -- a capitalism that works.
Q: What's your view of compensation on Wall Street, which is at the core of the anger on Main Street today?
A: Citi is a prime example. Just look at the last decade. The bank has paid out one of the highest CEO compensation of any bank and had the worst stock price performance. And here they go again with what we view as another rigged compensation scheme. The current CEO Vikram Pandit has made a big deal about taking a token $1 as salary after the financial crisis. But that's disingenuous. Before that, Citi had already awarded him about $38 million in 2008, along with another $165 million from the sale of his hedge fund in 2007. Citi stock is down 90 percent during his tenure.
The CEOs of two other banks, SunTrust and KeyCorp, each made more than $20 million after the financial crisis in 2008 through 2010 even while their companies lost hundreds of millions of dollars.
That's not capitalism, that's entitlement.
Q: What's your view of capitalism?
A: Capitalism works when rules are put in place and strictly enforced. Not when government looks the other way when rules are broken and then steps in to protect banks that cannot deal with the consequences of their bad decisions.
Capitalism works when executives are rewarded for performance, not when the rules are written so that they walk away with fat paychecks even when things go wrong.
The bad actors on Wall Street have done a lot of damage to capitalism. Those who speak up are sometimes exiled. The watch guards need to be allowed to see and act. They are the checks and balances that make capitalism work.
Q: Your employers wanted you to write positive reports about banks that your investment banker colleagues were courting for business. So they enticed you with lavish experiences. You write about having lunch in Credit Suisse's private dining room with delicacies prepared by celebrated chef David Bouley.
A: Yes. Here is the menu I saved from that day. (Mayo takes out a laminated copy of the gold vellum paper menu of the meal 12 years ago. It lists Chatham lobster, foie gras in poppy seed Armagnac sauce, and a dessert called tophenstreusel cloud with wild berries. In the book, Mayo says: "As I wiped the tophenstreusel crumbs from my mouth after events like this, I was increasingly conflicted, because I knew the source of these perks.")
That was the best meal of my life.
Q: You say in the book that the former chairman of the Federal Reserve Paul Volcker is your hero. Why?
A: Paul Volcker was a harsh disciplinarian of the U.S. government when he made the incredibly difficult move of raising rates to kill inflation in the early 1980s. He didn't back down to political pressure at that time because he wanted to defend his ultimate goal. It was pain in the short term for a better end. Today, no one has that kind of guts.
We need a Tiger Mom in charge of our economy. Paul Volcker was a Tiger Mom.
Trucks, SUVs power strong auto sales in October
Fans of SUVs and trucks shoved car buyers aside last month, helping the auto industry to its best October in four years.
The shift was a boon for Detroit's automakers, who posted sizeable increases in sales of pickups like the Ram and Chevy Silverado, big SUVs like the Ford Explorer and compact models like the Ford Escape.
While car sales have lost momentum from earlier in the year, some companies, including Hyundai and Volkswagen, continue to post impressive numbers and steal away their share of small car sales. Toyota and Honda, for years the category leaders, continue to struggle with shortages related to the March earthquake and tsunami in Japan.
U.S. car and truck sales rose 8 percent from last October to 1.02 million, making this the best October since 2007, before the recession hit. Sales are now tracking at a pace similar to the start of this year, before the earthquake and tsunami cut off supplies, according to Autodata Corp. Analysts expect them to stay at that pace through the rest of this year and into 2012.
"The economy isn't expected to pick up significantly, and I think that's going to hold us in this pattern of slow growth, stability to slow growth," said Jeff Schuster, senior vice president of forecasting for LMC Automotive.
Pent-up demand helped October sales. Inventories of Japanese cars are getting close to normal, so car shoppers who spent the summer waiting for them to reappear on dealer lots could finally buy them in October.
Honda Motor Co. sales were flat compared to last October, while Toyota Motor Corp. sales fell 8 percent. That still beat the double-digit drops the companies saw over the summer. Sales of the Accord sedan, Honda's best seller, were up 5 percent from a year ago. Toyota said sales of its subcompact Yaris more than doubled.
Bob Carter, Toyota's U.S. sales chief, said the company still expects to post year-over-year sales gains before the end of this year. He said dealers lost sales in October because of low supplies of Corolla sedans, but more Corollas from Toyota's new plant in Mississippi are now on their way to dealers.
Japanese carmakers still face issues in Thailand, where flooding shut down some of their suppliers. Honda has already cut North American production through Nov. 10 because of flooding-related parts shortages. The strong yen is also hurting profits, compounding their problems.
Also cutting into profits are the deals Japanese automakers are offering to get buyers back into showrooms. Auto information site TrueCar.com said Honda raised its incentives by 18 percent to an average of $2,380 per vehicle, while Nissan Motor Co.'s incentives were up 15 percent to $2,917. The average incentive for the industry was $2,669 per vehicle.
"This is the time of the year when consumers are more dialed in to the deals," said Jesse Toprak, TrueCar's vice president of industry trends and insights.
Toyota said Tuesday that it will kick off its annual year-end sales event early. Although the marketing surrounding the "Toyotathon" and Lexus "December to Remember" sales events won't start until closer to Thanksgiving, the deals will be available to shoppers immediately, Carter said.
Detroit automakers barely increased their incentive spending in October, but they did shift their marketing to trucks, a typical move during football season.
Truck buyers paid attention. Ford Motor Co. said sales of its Explorer SUV more than tripled from a year ago, while F-Series truck sales were up 7 percent. Ford's overall sales were up 6 percent from a year ago, even though its car sales fell 8 percent.
Chrysler's sales rose 27 percent. Ram pickup truck sales jumped 21 percent. Sales of the new Dodge Durango also were strong.
General Motors Co.'s sales were up 2 percent. Sales of the Chevrolet Silverado pickup rose 11 percent. And the compact Chevrolet Cruze continues to post big gains a year after its introduction, with October sales nearly tripling.
Still, GM's tepid increase surprised analysts, and investors hammered the stock. GM shares fell 10 percent to close at $23.33. Ford shares fell 5 percent to $11.08, while Toyota's U.S. shares fell 2 percent to $65.26.
Toprak said snowy weather on the East Coast may have pulled ahead truck and SUV sales from later in the year. Car sales typically fall as buyers gear up for the winter.
But Ken Czubay, Ford's vice president for U.S. sales, said car buyers also are increasingly shifting back to small SUVs and wagons, since gas prices are holding steady. Gas now averages $3.44 per gallon across the country, down from a peak near $4 in May, but still up 64 cents from a year earlier.
Other automakers reporting results Tuesday:
-- Nissan said sales were up 18 percent, thanks to big increases for the Altima sedan and Rogue crossover.
-- Hyundai Motor Co. said sales rose 23 percent to 545,316, besting its full-year sales record from 2010. Sales of the new Elantra small car were up 37 percent.
-- Volkswagen AG said sales rose 40 percent, led by a 52 percent increase for the new Jetta sedan.
The shift was a boon for Detroit's automakers, who posted sizeable increases in sales of pickups like the Ram and Chevy Silverado, big SUVs like the Ford Explorer and compact models like the Ford Escape.
While car sales have lost momentum from earlier in the year, some companies, including Hyundai and Volkswagen, continue to post impressive numbers and steal away their share of small car sales. Toyota and Honda, for years the category leaders, continue to struggle with shortages related to the March earthquake and tsunami in Japan.
U.S. car and truck sales rose 8 percent from last October to 1.02 million, making this the best October since 2007, before the recession hit. Sales are now tracking at a pace similar to the start of this year, before the earthquake and tsunami cut off supplies, according to Autodata Corp. Analysts expect them to stay at that pace through the rest of this year and into 2012.
"The economy isn't expected to pick up significantly, and I think that's going to hold us in this pattern of slow growth, stability to slow growth," said Jeff Schuster, senior vice president of forecasting for LMC Automotive.
Pent-up demand helped October sales. Inventories of Japanese cars are getting close to normal, so car shoppers who spent the summer waiting for them to reappear on dealer lots could finally buy them in October.
Honda Motor Co. sales were flat compared to last October, while Toyota Motor Corp. sales fell 8 percent. That still beat the double-digit drops the companies saw over the summer. Sales of the Accord sedan, Honda's best seller, were up 5 percent from a year ago. Toyota said sales of its subcompact Yaris more than doubled.
Bob Carter, Toyota's U.S. sales chief, said the company still expects to post year-over-year sales gains before the end of this year. He said dealers lost sales in October because of low supplies of Corolla sedans, but more Corollas from Toyota's new plant in Mississippi are now on their way to dealers.
Japanese carmakers still face issues in Thailand, where flooding shut down some of their suppliers. Honda has already cut North American production through Nov. 10 because of flooding-related parts shortages. The strong yen is also hurting profits, compounding their problems.
Also cutting into profits are the deals Japanese automakers are offering to get buyers back into showrooms. Auto information site TrueCar.com said Honda raised its incentives by 18 percent to an average of $2,380 per vehicle, while Nissan Motor Co.'s incentives were up 15 percent to $2,917. The average incentive for the industry was $2,669 per vehicle.
"This is the time of the year when consumers are more dialed in to the deals," said Jesse Toprak, TrueCar's vice president of industry trends and insights.
Toyota said Tuesday that it will kick off its annual year-end sales event early. Although the marketing surrounding the "Toyotathon" and Lexus "December to Remember" sales events won't start until closer to Thanksgiving, the deals will be available to shoppers immediately, Carter said.
Detroit automakers barely increased their incentive spending in October, but they did shift their marketing to trucks, a typical move during football season.
Truck buyers paid attention. Ford Motor Co. said sales of its Explorer SUV more than tripled from a year ago, while F-Series truck sales were up 7 percent. Ford's overall sales were up 6 percent from a year ago, even though its car sales fell 8 percent.
Chrysler's sales rose 27 percent. Ram pickup truck sales jumped 21 percent. Sales of the new Dodge Durango also were strong.
General Motors Co.'s sales were up 2 percent. Sales of the Chevrolet Silverado pickup rose 11 percent. And the compact Chevrolet Cruze continues to post big gains a year after its introduction, with October sales nearly tripling.
Still, GM's tepid increase surprised analysts, and investors hammered the stock. GM shares fell 10 percent to close at $23.33. Ford shares fell 5 percent to $11.08, while Toyota's U.S. shares fell 2 percent to $65.26.
Toprak said snowy weather on the East Coast may have pulled ahead truck and SUV sales from later in the year. Car sales typically fall as buyers gear up for the winter.
But Ken Czubay, Ford's vice president for U.S. sales, said car buyers also are increasingly shifting back to small SUVs and wagons, since gas prices are holding steady. Gas now averages $3.44 per gallon across the country, down from a peak near $4 in May, but still up 64 cents from a year earlier.
Other automakers reporting results Tuesday:
-- Nissan said sales were up 18 percent, thanks to big increases for the Altima sedan and Rogue crossover.
-- Hyundai Motor Co. said sales rose 23 percent to 545,316, besting its full-year sales record from 2010. Sales of the new Elantra small car were up 37 percent.
-- Volkswagen AG said sales rose 40 percent, led by a 52 percent increase for the new Jetta sedan.
Federal Reserve wraps up policy meeting
The Federal Reserve, after employing a dwindling set of policy options at its last two meetings, may hit the pause button in hopes that the faint signs of the economy's rebound will grow stronger.
By taking a wait-and-see approach, the Fed would be buying time to assess whether its actions in August and September are having the desired effect of lowering long-term interest rates enough to jump-start growth.
The Fed's decision will be announced around mid-day Wednesday following two days of closed-door discussions.
The central bank will also release an updated economic forecast and Federal Reserve Chairman Ben Bernanke will hold a news conference to discuss the Fed's new forecast.
It will be Bernanke's third news conference after a Fed meeting and will continue a practice he began last April in an effort to give the public a better understanding of the Fed's decision-making.
Most economists believe the Fed will leave policy unchanged, although it will be a close call.
"It is about 50-50 on whether they will do anything. There is evidence the economy is continuing to grow, but we still have a fundamentally weak economy," said Brian Bethune, economics professor at Amherst College.
Financial markets in the United States and around the world were jolted Tuesday after Greece's prime minister made the surprise decision to call a referendum on the country's latest rescue package. The move sparked fears that the entire debt deal could unravel, that Greece could default on its debt and that the crisis could ripple through the global financial system.
Economists said Europe was sure to be a major discussion topic during the Fed meeting.
"They will talk about Europe, but I don't expect any action," said David Jones, head of DMJ Advisors, a Denver-based consulting group. "The Fed will not respond to the problems in Europe until it is clear they are causing a significant weakening in economic activity in the United States."
David Wyss, former chief economist at Standard & Poor's, said one reason for the Fed's reluctance to do more is that they don't have many policy options left.
"They know they are running out of tools so they don't want to employ another one unless they have to," he said.
The economy nearly stalled out during the first six months of the year, with growth slowing to an anemic 0.9 percent, the slowest pace since the recession ended in June 2009.
However, the government reported last week that growth rebounded modestly in the summer with the economy expanding at an annual rate of 2.5 percent in the July-September period, the best quarterly performance in a year.
While the economy would have to nearly double from the 2.5 percent rate to make a significant dent in high unemployment, the faster growth at least eases fears of a new recession.
At its Aug. 9 meeting, the central bank approved changing its guidance on future policy to say it hoped to keep a key interest rate, which has been near zero since December 2008, at a record low through at least mid-2013, as long as inflation does not become a threat.
The belief was that such an assurance would give investors more confidence that rates would not begin rising any time soon and help to push long-term rates down farther.
At the next meeting on Sept. 20-21, the Fed voted to shift $400 billion of its holdings from short-term to long-term Treasury securities in another effort to push already low long-term rates down further. These rates are critical for consumers borrowing to buy homes and cars and for businesses borrowing to make investments to expand their operations.
Both the August and September moves were approved on 7-3 votes with three regional bank presidents -- Richard Fisher of Dallas, Charles Plosser of Philadelphia and Narayana Kocherlakota of Minneapolis -- voting no because of concerns the actions raise the threat of future inflation.
That was the largest number of dissents in nearly 20 years from an action by the Federal Open Market Committee, the panel of Fed governors and central bank presidents who meet eight times a year to set interest-rate policies.
On the other side are at least four Fed officials, Vice Chair Janet Yellen, Governor Daniell Tarullo, Chicago Fed President Charles Evans and New York Fed President William Dudley who have expressed concerns that the economy is still at risk and may need more support.
If the Fed does move again, many believe it will not occur until either the December meeting or early next year. Some economists believe the likely next change would be a further tweaking of the Fed's communication efforts.
By taking a wait-and-see approach, the Fed would be buying time to assess whether its actions in August and September are having the desired effect of lowering long-term interest rates enough to jump-start growth.
The Fed's decision will be announced around mid-day Wednesday following two days of closed-door discussions.
The central bank will also release an updated economic forecast and Federal Reserve Chairman Ben Bernanke will hold a news conference to discuss the Fed's new forecast.
It will be Bernanke's third news conference after a Fed meeting and will continue a practice he began last April in an effort to give the public a better understanding of the Fed's decision-making.
Most economists believe the Fed will leave policy unchanged, although it will be a close call.
"It is about 50-50 on whether they will do anything. There is evidence the economy is continuing to grow, but we still have a fundamentally weak economy," said Brian Bethune, economics professor at Amherst College.
Financial markets in the United States and around the world were jolted Tuesday after Greece's prime minister made the surprise decision to call a referendum on the country's latest rescue package. The move sparked fears that the entire debt deal could unravel, that Greece could default on its debt and that the crisis could ripple through the global financial system.
Economists said Europe was sure to be a major discussion topic during the Fed meeting.
"They will talk about Europe, but I don't expect any action," said David Jones, head of DMJ Advisors, a Denver-based consulting group. "The Fed will not respond to the problems in Europe until it is clear they are causing a significant weakening in economic activity in the United States."
David Wyss, former chief economist at Standard & Poor's, said one reason for the Fed's reluctance to do more is that they don't have many policy options left.
"They know they are running out of tools so they don't want to employ another one unless they have to," he said.
The economy nearly stalled out during the first six months of the year, with growth slowing to an anemic 0.9 percent, the slowest pace since the recession ended in June 2009.
However, the government reported last week that growth rebounded modestly in the summer with the economy expanding at an annual rate of 2.5 percent in the July-September period, the best quarterly performance in a year.
While the economy would have to nearly double from the 2.5 percent rate to make a significant dent in high unemployment, the faster growth at least eases fears of a new recession.
At its Aug. 9 meeting, the central bank approved changing its guidance on future policy to say it hoped to keep a key interest rate, which has been near zero since December 2008, at a record low through at least mid-2013, as long as inflation does not become a threat.
The belief was that such an assurance would give investors more confidence that rates would not begin rising any time soon and help to push long-term rates down farther.
At the next meeting on Sept. 20-21, the Fed voted to shift $400 billion of its holdings from short-term to long-term Treasury securities in another effort to push already low long-term rates down further. These rates are critical for consumers borrowing to buy homes and cars and for businesses borrowing to make investments to expand their operations.
Both the August and September moves were approved on 7-3 votes with three regional bank presidents -- Richard Fisher of Dallas, Charles Plosser of Philadelphia and Narayana Kocherlakota of Minneapolis -- voting no because of concerns the actions raise the threat of future inflation.
That was the largest number of dissents in nearly 20 years from an action by the Federal Open Market Committee, the panel of Fed governors and central bank presidents who meet eight times a year to set interest-rate policies.
On the other side are at least four Fed officials, Vice Chair Janet Yellen, Governor Daniell Tarullo, Chicago Fed President Charles Evans and New York Fed President William Dudley who have expressed concerns that the economy is still at risk and may need more support.
If the Fed does move again, many believe it will not occur until either the December meeting or early next year. Some economists believe the likely next change would be a further tweaking of the Fed's communication efforts.
Bank of America backs down on $5 debit card fee
Bank of America Corp. is scrapping its plan to charge a $5 monthly fee for debit card purchases after outraged customers threatened an exodus.
The about-face comes as customers across the country petitioned the bank and mobilized to close their accounts in favor of credit unions and community banks. The outcry prompted other major banks, including JPMorgan Chase & Co. and Wells Fargo & Co., to cancel trial tests of their own debit card fees.
Bank of America, the nation's second largest bank, said it reversed course after listening to customers. Anne Pace, a spokeswoman for Bank of America, declined to say whether there was a spike in account closures following the September announcement that it would start charging the fee early next year.
Higher fees have become a fact of life for bank customers in recent years. But this one touched a nerve because it hit so close to home; many Americans have come to rely on debit cards to manage essential expenses such as groceries and gas.
At the same time, there's still lingering resentment over the role that banks played in the 2008 financial meltdown and the ongoing home foreclosure crisis. That anger has come to surface in recent weeks with the Occupy Wall Street movement.
The banks have countered by saying that efforts in the past two years to regulate the industry have forced them to raise or introduce new fees to stay profitable. That made the march to higher fees seem almost inevitable -- and makes the rare victory by consumers in this case even more remarkable.
"When I heard about the fee, it was the last straw for me," said Molly Katchpole, a 22-year-old nanny whose online petition urging Bank of America to drop the debit fee captured more than 300,000 signatures. "I'm living paycheck to paycheck and one more fee was just too much."
Katchpole said she already closed her account and moved her money to a community bank in Washington, D.C. For her, the damage has been done. She said Bank of America's decision won't win her back.
It's still too early to say whether the bank's gross miscalculation of consumer sentiment will have a lasting impact. But Bank of America is also dealing with a host of other troubles, including the potential for large mortgage-related settlements to drain its capital and plans to cut 30,000 jobs to reduce expenses. Last quarter, the company lost its standing as the nation's largest bank by deposits to Chase.
The news of the debit card fee meanwhile drew criticism from even President Barack Obama and sparked a movement called "Bank Transfer Day" that urged customers to close their accounts by this Saturday.
"This is Bank of America's Netflix moment," said Mark Schwanhausser, a banking analyst with Javelin Strategy & Research. "It misjudged what consumers would bear. It was the wrong fee at the wrong time." The bank's actions echo the reversal of Netflix to split its DVD-by-mail and streaming video services after vehement consumer complaints.
The uproar over a potential debit card fee was particularly strong because it's fundamentally a fee for customers to access their own cash at a time when consumers are trying to cut back on borrowing, he said.
Diane Abela, a 38-year-old Manhattan resident, said she had been waiting to see if Bank of America would back down on its plan before closing her account.
"I'm unemployed and $5 makes a big difference," said Abela, who learned of the bank's reversal just before heading into a job interview. "When you're working on a budget every week, it's the last thing you need."
Unlike Chase and Wells Fargo, Bank of America's announcement that it would start charging customers a monthly debit card fee came without any testing in the marketplace.
Pace, Bank of America's spokeswoman, said the decision to roll out the fee was instead based on internal customer surveys. She declined to detail the nature of those surveys but said that in the past couple of weeks "customer sentiment changed.
The high-profile retreat could signal that the specter of a debit card fee has been extinguished for the time being. But it doesn't mean customers won't continue to see higher fees elsewhere.
This past spring, for example, Bank of America raised the monthly fee on its basic checking account to $12, from $8.95. The Charlotte, N.C.-based bank is also testing a new menu of checking accounts with monthly fees ranging from $6 to $25 in select states. Pace said the pilot program is getting good results and that the bank plans to move ahead with its rollout sometime next year.
Other, smaller fees may be nicking away at customer accounts as well. In September, the bank instituted a $5 fee to replace debit cards, with overnight rush delivery costing $20. Both services had previously been free.
Chase and Citi also hiked fees on their basic checking accounts this year, to $12 and $10, respectively. Chase said it will end a test in Georgia of a basic checking account that charged an even higher $15 monthly fee, however.
And like many other banks, Wells Fargo ended its debit rewards program earlier this year.
In rolling out such unwelcome changes, banks have largely blamed a new federal regulation championed by Senator Dick Durbin of Illinois. The law, which went into effect last month, caps the amount banks can charge merchants whenever customers swipe their debit cards.
JPMorgan has said it would lose $300 million each quarter as a result of the regulation; Wells Fargo said it would lose $250 million a quarter.
For now, Bank of America said it doesn't have any new fee hikes in the works to make up the lost revenue. "We will continue to initiate moves that mitigate loss revenue," Pace said. She added that the bank will also introduce products that "bring us more business from customers and reward them for doing so."
The about-face comes as customers across the country petitioned the bank and mobilized to close their accounts in favor of credit unions and community banks. The outcry prompted other major banks, including JPMorgan Chase & Co. and Wells Fargo & Co., to cancel trial tests of their own debit card fees.
Bank of America, the nation's second largest bank, said it reversed course after listening to customers. Anne Pace, a spokeswoman for Bank of America, declined to say whether there was a spike in account closures following the September announcement that it would start charging the fee early next year.
Higher fees have become a fact of life for bank customers in recent years. But this one touched a nerve because it hit so close to home; many Americans have come to rely on debit cards to manage essential expenses such as groceries and gas.
At the same time, there's still lingering resentment over the role that banks played in the 2008 financial meltdown and the ongoing home foreclosure crisis. That anger has come to surface in recent weeks with the Occupy Wall Street movement.
The banks have countered by saying that efforts in the past two years to regulate the industry have forced them to raise or introduce new fees to stay profitable. That made the march to higher fees seem almost inevitable -- and makes the rare victory by consumers in this case even more remarkable.
"When I heard about the fee, it was the last straw for me," said Molly Katchpole, a 22-year-old nanny whose online petition urging Bank of America to drop the debit fee captured more than 300,000 signatures. "I'm living paycheck to paycheck and one more fee was just too much."
Katchpole said she already closed her account and moved her money to a community bank in Washington, D.C. For her, the damage has been done. She said Bank of America's decision won't win her back.
It's still too early to say whether the bank's gross miscalculation of consumer sentiment will have a lasting impact. But Bank of America is also dealing with a host of other troubles, including the potential for large mortgage-related settlements to drain its capital and plans to cut 30,000 jobs to reduce expenses. Last quarter, the company lost its standing as the nation's largest bank by deposits to Chase.
The news of the debit card fee meanwhile drew criticism from even President Barack Obama and sparked a movement called "Bank Transfer Day" that urged customers to close their accounts by this Saturday.
"This is Bank of America's Netflix moment," said Mark Schwanhausser, a banking analyst with Javelin Strategy & Research. "It misjudged what consumers would bear. It was the wrong fee at the wrong time." The bank's actions echo the reversal of Netflix to split its DVD-by-mail and streaming video services after vehement consumer complaints.
The uproar over a potential debit card fee was particularly strong because it's fundamentally a fee for customers to access their own cash at a time when consumers are trying to cut back on borrowing, he said.
Diane Abela, a 38-year-old Manhattan resident, said she had been waiting to see if Bank of America would back down on its plan before closing her account.
"I'm unemployed and $5 makes a big difference," said Abela, who learned of the bank's reversal just before heading into a job interview. "When you're working on a budget every week, it's the last thing you need."
Unlike Chase and Wells Fargo, Bank of America's announcement that it would start charging customers a monthly debit card fee came without any testing in the marketplace.
Pace, Bank of America's spokeswoman, said the decision to roll out the fee was instead based on internal customer surveys. She declined to detail the nature of those surveys but said that in the past couple of weeks "customer sentiment changed.
The high-profile retreat could signal that the specter of a debit card fee has been extinguished for the time being. But it doesn't mean customers won't continue to see higher fees elsewhere.
This past spring, for example, Bank of America raised the monthly fee on its basic checking account to $12, from $8.95. The Charlotte, N.C.-based bank is also testing a new menu of checking accounts with monthly fees ranging from $6 to $25 in select states. Pace said the pilot program is getting good results and that the bank plans to move ahead with its rollout sometime next year.
Other, smaller fees may be nicking away at customer accounts as well. In September, the bank instituted a $5 fee to replace debit cards, with overnight rush delivery costing $20. Both services had previously been free.
Chase and Citi also hiked fees on their basic checking accounts this year, to $12 and $10, respectively. Chase said it will end a test in Georgia of a basic checking account that charged an even higher $15 monthly fee, however.
And like many other banks, Wells Fargo ended its debit rewards program earlier this year.
In rolling out such unwelcome changes, banks have largely blamed a new federal regulation championed by Senator Dick Durbin of Illinois. The law, which went into effect last month, caps the amount banks can charge merchants whenever customers swipe their debit cards.
JPMorgan has said it would lose $300 million each quarter as a result of the regulation; Wells Fargo said it would lose $250 million a quarter.
For now, Bank of America said it doesn't have any new fee hikes in the works to make up the lost revenue. "We will continue to initiate moves that mitigate loss revenue," Pace said. She added that the bank will also introduce products that "bring us more business from customers and reward them for doing so."
Greek turmoil sends US and world markets lower
A wave of selling swept across Wall Street and stock markets around the world Tuesday after Greece's prime minister said he would call a national vote on an unpopular European plan to rescue that nation's economy.
The Dow Jones industrial average finished down nearly 300 points. It swung in 100 point bursts throughout the day as investors reacted to sometimes conflicting headlines about the next steps in Greece's long-running debt crisis. Treasurys and other assets considered safe surged. The stocks of major banks, including Citigroup and JPMorgan Chase, were hit hard.
Intense selling roiled markets in Europe. Italy's main stock index dropped 6.8 percent. France's fell 5.4 percent and Germany's fell 5 percent.
The value of the dollar rose, and bond prices jumped so dramatically that analysts said they were stunned. Analysts said the bond action reflected fears that the turmoil in Greece would tear at the fabric of Europe's financial system and create a crisis that could engulf the entire European Union, which together forms the world's largest economy.
"This brings all of the concerns about Europe back to the front burner," said Scott Brown, chief economist at Raymond James. "If this ends up turning into a financial catastrophe in Europe, then no one will escape it."
The prime minister of Greece said unexpectedly Monday that he would put the European rescue plan to a popular vote, the first referendum to be held in Greece since 1974.
The plan requires banks that hold Greek national bonds to accept 50 percent losses to help keep the Greek economy afloat. It also beefs up a European bailout fund and requires banks to strengthen their financial cushions.
There were also late reports that Greek lawmakers dissented from the plan, raising the possibility that Greece's government would not last until a confidence vote on Friday.
International creditors have demanded that Greece enact painful tax increases and drastic cuts in public welfare programs, and Greeks have shown their hostility to those measures in violent protests and strikes.
If the European rescue falls through and Greece defaults on its debt, the ripple effect would be global. Europe could fall into recession, hurting a major market for American exports, and banks could severely restrict lending.
It was only last Thursday that European leaders announced a deal that they believed would be a turning point in the two-year debt crisis. Banks agreed to take bigger losses on Greek debt and to boost their levels of cash, while the European Union increased the size of its bailout fund. Global stock markets surged after the plan was unveiled. Now, those gains seem to be fleeting.
"The stock market is expressing disgust with Greek politics and a lack of confidence that Italy and Spain will generate the growth needed to pay down their debt," said Peter Boockvar, equity strategist at Miller Tabak & Co.
The Dow fell 297.05 points, or 2.5 percent, to close at 11,657.96. It was the biggest drop since Sept. 22. The Dow has lost 573 points, or 4.7 percent, in the last two days.
The S&P 500 lost 35.02, or 2.8 percent, to 1,218.28. Some analysts took comfort that the S&P closed above 1,215. A drop below that level would erase nearly all of the market's gains in October. The Nasdaq composite dropped 77.45, or 2.9 percent, to 2,606.96.
Pfizer Inc. was the only company in the Dow stock to rise. It gained 0.4 percent after its income and revenue beat Wall Street's estimates. General Motors Co. sank 9.8 percent after its October sales came in lower than Wall Street analysts were expecting.
Financial companies in the S&P 500 dropped 4.7 percent, the biggest loss among the 10 company groups that make up the index.
Bank of America Corp lost 6.3 percent. JP Morgan Chase & Co. dropped 5.9 percent, and Citigroup shed 7.7 percent.
Tuesday's sell-off came after an almost uninterrupted rally in October that was largely due to higher confidence in Europe's latest financial rescue plan for Greece and signs that the U.S. economy was not falling into another recession.
The S&P 500 rose from 1,099 on Oct. 3 to 1,285 Friday, or 17 percent. The last two days, it's given up one-third of that gain.
"The market is being held hostage by a random event that is overshadowing everything else," said John Canally, an economist at LPL Financial. Canally noted that the U.S. economy continues to expand. Retail sales came in better than expected in September and auto sales increased in October.
In the United States, the market sank Monday before the surprise Greek announcement. MF Global Holdings, a securities firm led by former New Jersey Gov. Jon Corzine, was driven into bankruptcy in part because of its holdings of European debt. The selling accelerated after the Greek announcement, and the U.S. market opened with a drop of almost 300 points.
In the bond market, the yield on the 10-year Treasury note sank to 1.96 percent from 2.16 percent late Monday, a steep drop. Bond yields fall when their prices rise as investors buy assets that are considered to better hold their value during a slowing economy. The dollar rose to $1.36 for every euro.
The yield on the 30-year Treasury bond sank from 3.38 percent Friday to 2.96 percent Tuesday.
"That's the biggest change that I've seen in my career," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott. "It's obscene."
The yields of Italian debt spiked to their highest level this year, another sign that investors are concerned that the debt crisis could spread to the larger economies of Europe. The yield on 1-year Italian government bonds soared 48 percent to 5.17 percent.
The yield on the 10-year German bund plunged to 1.78 percent, a 23.5 percent fall from the day before. The German economy is seen as the strongest in Europe and the most likely to repay its debt.
The Dow Jones industrial average finished down nearly 300 points. It swung in 100 point bursts throughout the day as investors reacted to sometimes conflicting headlines about the next steps in Greece's long-running debt crisis. Treasurys and other assets considered safe surged. The stocks of major banks, including Citigroup and JPMorgan Chase, were hit hard.
Intense selling roiled markets in Europe. Italy's main stock index dropped 6.8 percent. France's fell 5.4 percent and Germany's fell 5 percent.
The value of the dollar rose, and bond prices jumped so dramatically that analysts said they were stunned. Analysts said the bond action reflected fears that the turmoil in Greece would tear at the fabric of Europe's financial system and create a crisis that could engulf the entire European Union, which together forms the world's largest economy.
"This brings all of the concerns about Europe back to the front burner," said Scott Brown, chief economist at Raymond James. "If this ends up turning into a financial catastrophe in Europe, then no one will escape it."
The prime minister of Greece said unexpectedly Monday that he would put the European rescue plan to a popular vote, the first referendum to be held in Greece since 1974.
The plan requires banks that hold Greek national bonds to accept 50 percent losses to help keep the Greek economy afloat. It also beefs up a European bailout fund and requires banks to strengthen their financial cushions.
There were also late reports that Greek lawmakers dissented from the plan, raising the possibility that Greece's government would not last until a confidence vote on Friday.
International creditors have demanded that Greece enact painful tax increases and drastic cuts in public welfare programs, and Greeks have shown their hostility to those measures in violent protests and strikes.
If the European rescue falls through and Greece defaults on its debt, the ripple effect would be global. Europe could fall into recession, hurting a major market for American exports, and banks could severely restrict lending.
It was only last Thursday that European leaders announced a deal that they believed would be a turning point in the two-year debt crisis. Banks agreed to take bigger losses on Greek debt and to boost their levels of cash, while the European Union increased the size of its bailout fund. Global stock markets surged after the plan was unveiled. Now, those gains seem to be fleeting.
"The stock market is expressing disgust with Greek politics and a lack of confidence that Italy and Spain will generate the growth needed to pay down their debt," said Peter Boockvar, equity strategist at Miller Tabak & Co.
The Dow fell 297.05 points, or 2.5 percent, to close at 11,657.96. It was the biggest drop since Sept. 22. The Dow has lost 573 points, or 4.7 percent, in the last two days.
The S&P 500 lost 35.02, or 2.8 percent, to 1,218.28. Some analysts took comfort that the S&P closed above 1,215. A drop below that level would erase nearly all of the market's gains in October. The Nasdaq composite dropped 77.45, or 2.9 percent, to 2,606.96.
Pfizer Inc. was the only company in the Dow stock to rise. It gained 0.4 percent after its income and revenue beat Wall Street's estimates. General Motors Co. sank 9.8 percent after its October sales came in lower than Wall Street analysts were expecting.
Financial companies in the S&P 500 dropped 4.7 percent, the biggest loss among the 10 company groups that make up the index.
Bank of America Corp lost 6.3 percent. JP Morgan Chase & Co. dropped 5.9 percent, and Citigroup shed 7.7 percent.
Tuesday's sell-off came after an almost uninterrupted rally in October that was largely due to higher confidence in Europe's latest financial rescue plan for Greece and signs that the U.S. economy was not falling into another recession.
The S&P 500 rose from 1,099 on Oct. 3 to 1,285 Friday, or 17 percent. The last two days, it's given up one-third of that gain.
"The market is being held hostage by a random event that is overshadowing everything else," said John Canally, an economist at LPL Financial. Canally noted that the U.S. economy continues to expand. Retail sales came in better than expected in September and auto sales increased in October.
In the United States, the market sank Monday before the surprise Greek announcement. MF Global Holdings, a securities firm led by former New Jersey Gov. Jon Corzine, was driven into bankruptcy in part because of its holdings of European debt. The selling accelerated after the Greek announcement, and the U.S. market opened with a drop of almost 300 points.
In the bond market, the yield on the 10-year Treasury note sank to 1.96 percent from 2.16 percent late Monday, a steep drop. Bond yields fall when their prices rise as investors buy assets that are considered to better hold their value during a slowing economy. The dollar rose to $1.36 for every euro.
The yield on the 30-year Treasury bond sank from 3.38 percent Friday to 2.96 percent Tuesday.
"That's the biggest change that I've seen in my career," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott. "It's obscene."
The yields of Italian debt spiked to their highest level this year, another sign that investors are concerned that the debt crisis could spread to the larger economies of Europe. The yield on 1-year Italian government bonds soared 48 percent to 5.17 percent.
The yield on the 10-year German bund plunged to 1.78 percent, a 23.5 percent fall from the day before. The German economy is seen as the strongest in Europe and the most likely to repay its debt.
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