Japan approves biggest budget to thwart crisis

apan's government approved its biggest-ever budget on Wednesday to try to revive an economy hurt by the global financial crisis and U.S. data was expected to give further evidence of the worsening recession.

Governments across the world have tried to boost spending to ease a recession ushered in by a credit crisis in the United States when a housing market boom turned sour.

"Japan cannot avoid the tsunami of the world recession, but it can try to find a way out," Japanese Prime Minister Taro Aso told a news conference, in which he illustrated the government's stimulus plan with a diagram of a three-stage rocket.

"The world economy is in a once-in-a-hundred-years recession. We need extraordinary measures to deal with an extraordinary situation."

Japan's cabinet approved a record 88.5 trillion yen ($980.6 billion) budget for the next fiscal year starting in April.

The plan boosts overall spending, excluding debt servicing costs, by 9 percent compared with this year's initial budget and aims to accommodate part of 12 trillion yen in extra spending on government stimulus packages.

But the budget could be held up in a divided parliament because of Aso's sinking public support and weakening control over the Liberal Democratic Party.

Germany is also increasing spending. But Europe's biggest economy plans to limit to 25 billion euros ($34.97 billion) a second package of stimulus measures, a regional political said.

The program's scope is less than the 40 billion euros previously reported for new projects.

Chancellor Angela Merkel is under pressure to do more to boost Germany's economy, already in recession, and politicians and economists have attacked the 31 billion euros-worth of measures already pushed through as insufficient.

DEVALUED

Further east, countries have also sought to interest rate cuts and spending plans to try to stave off the downturn.

Poland's central bank said it was likely to cut rates further in 2009 because economic growth could be more than halved.

In neighboring Russia, a central bank source confirmed the ruble had been devalued for the seventh time in a month and a deputy interior minister said the country faced an increasing number of unrest due to crisis measures.

"The situation may be exacerbated by a growth in protests, arising from the frustration of workers over the non-payment of wages or those threatened with dismissal," RIA news agency quoted Deputy Minister Mikhail Sukhodolsky as saying.

European Central Bank chief Jean-Claude Trichet said markets were failing to value the measures taken to ward off what he called a situation unprecedented since World War Two.

"There is an underestimation in the financial sphere of the very great importance of the decisions that were taken," Trichet told said in a speech at a Paris think-tank on Tuesday.

He called on governments in the euro zone to be wary of piling on debt to fund stimulus packages, saying it would do little to boost confidence in the economy or the markets.

ECB Governing Council member and Austrian central bank head Ewald Nowotny told television that further interest rate cuts at the European bank could not be ruled out.

In the United States, home to the credit crisis, further evidence of how deep it has fallen into recession is expected with the release of weekly jobless claims, November durable goods and November personal income and consumption.

Consumption is likely to have fallen 0.7 percent, while durable goods orders probably dropped 3.0 percent versus a 6.9 percent decline in October, according to Reuters surveys.

Economists forecast 560,000 new filings for jobless benefits in the week to December 20, compared with 554,000 in the prior week.

With the housing-led economic slump on track to be the longest and deepest in about 60 years, more companies are expected to cut jobs to battle a sharp fall in demand and tight access to credit.

Across the United States almost 2 million workers have lost jobs this year, driving the unemployment rate to 6.7 percent.

On Tuesday, U.S. data pointed to a record drop in existing home sales and prices last month, pushing Wall Street lower. Shares in Europe also weakened, with a weaker crude price hitting energy companies.

YRC cancels debt tender, announces leaseback deal

YRC Worldwide Inc (YRCW.O) said on Wednesday it canceled a debt tender because its union workers have not yet ratified a wage reduction. The U.S. trucking company also announced a $150.4 million contract to sell and lease back some of its facilities.

The company is also holding talks with its banking group on modifying some terms of its credit agreement, the company said in a filing with the U.S. Securities and Exchange Commission.

YRC said in late November it would spend up to $100 million on buying up to $230 million in debt at a discount. But in Wednesday's filing, the Overland Park, Kansas company said it canceled the tender because the union had not agreed to a wage reduction by the time the tender expired on Dec 23.

Under the lease back deal with NATMI Truck Terminals LLC, YRC will pay $21.1 million to lease the facilities, with increases subject to changes in inflation.

YRC, the No. 1 U.S. trucking company, also said that up to Nov 30, its fourth quarter daily tonnage at its national and regional businesses fell 11.8 percent and 11 percent, respectively.

Like the rest of the U.S. trucking sector, YRC's sales have been hit hard by the slowing U.S. economy, pushing down freight volumes and forcing trucking companies to cut prices to get business.

Markets point to flat open after economic data

Stocks headed for a flat open on Wednesday, with futures little changed ahead of an abbreviated holiday session, as investors digested a mixed bag of data to gauge the extent of deterioration in the economy.

A government report showed U.S. consumers cut spending for the fifth straight month in November and their incomes shrank, pointing to deeper recessionary pressures. Spending fell by 0.6 percent and income slipped by 0.2 percent where Wall Street analysts surveyed by Reuters had expected a spending drop of 0.7 percent and forecast flat incomes.

Durable goods orders fell 1 percent for November, less than the 3 percent decline forecast by analysts surveyed by Reuters. Another government report measuring initial applications for unemployment benefits showed a 30,000 jump last week to a 26-year high of 586,000 versus the 556,000 in the prior week.

"I don't think we are going to have any major reassessment of the U.S. economic situation based on today's data," said Daniel Katzive, Director of Global Foreign Exchange at Credit Suisse in New York. "We had a slightly better-than-expected durables report but higher weekly (jobless) claims. All in all, the scenario remains pretty weak."

S&P 500 futures rose 2.5 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures gained 19 points, and Nasdaq 100 rose 0.5 point.

In corporate news, Wal-Mart Stores Inc (WMT.N) said late Tuesday that it had settled 63 class action lawsuits that accused the world's largest retailer of wage violations for a minimum of $352 million but no more than $640 million.

Insurer American International Group (AIG.N) said it would halt the merger between its two Japanese life insurers, AIG Star Life Insurance and AIG Edison Life Insurance as it plans to sell shares in the companies under its global restructuring.

February crude futures slid 4.1 percent on Wednesday, ahead of data expected to show an increase in oil stocks.

European shares edged lower in early trade on Wednesday, tracking losses on Wall Street after grim U.S. economic data in the previous session, but volumes were expected to remain thin in the shortened session ahead of the Christmas break. Asian shares finished lower, relinquishing earlier gains that analysts attributed more to picking up of sold-off shares than solid conviction.

U.S. stocks fell in thin trading on Tuesday on data showing further deterioration in the housing market, while worry over weak consumer spending weighed on retailers in the final stretch of the key Christmas shopping season. The S&P and Dow closed at their lowest levels in nearly three weeks.

Volume was expected to be light throughout the week shortened by the Christmas holiday and markets will close early on Wednesday.

With just five trading days remaining in the year, the broad S&P 500 is down more than 41 percent for the year. The annual decline is surpassed only by the 47.1 percent fall in 1931 during the Great Depression.

November personal spending falls 0.6 percent

Consumer spending fell for a fifth straight month in November, the longest weak stretch in a half-century, while incomes declined under the weight of massive job layoffs.

The Commerce Department reported Wednesday that consumer spending fell by 0.6 percent last month, slightly smaller than the 0.7 percent drop that economists had expected.

Americans' incomes fell by a worse-than-expected 0.2 percent. It was the first decline since July and reflected in part the fact that more than a half-million jobs were cut in November as the recession deepened.

The 0.6 percent drop in consumer spending followed an even larger 1 percent fall in October. However, the steep plunge in gasoline prices, which is actually good news for consumers, made the declines look worse. Excluding price changes, consumer spending would have dropped by 0.5 percent in October and actually risen by 0.6 percent in November. The November increase excluding inflation was the best showing in more than three years.

Still, economists think the overall trend for consumer spending is down, given the problems facing the economy including the longest recession in a quarter century, a severe financial crisis that has cut off access to credit for millions of borrowers and a massive wave of job layoffs.

All of those troubles have left retailers braced for what could be their worst holiday shopping season in decades.

Economists don't think the hard times will end any time soon. The government reported Thursday that the overall economy, as measured by gross domestic product, was declining at an annual rate of 0.5 percent in the July-September quarter and analysts believe the contraction will accelerated in the current quarter. Some are forecasting that GDP will plunge at an annual rate of 6 percent, which would be the worst showing in 26 years.

Many analysts say GDP will also fall in the first and second quarters next year before beginning a modest rebound in the summer. If that forecast turns out to be accurate, it would make the current recession, which began in December 2007, the longest in the post World War II period.

The economic weakness is helping to keep inflation under control. A price gauge tied to consumer spending fell by a record 1.1 percent in November, the second monthly decline. Excluding the cost of energy and food, the price index was unchanged last month.

Over the past 12 months, consumer prices are up 1.4 percent, the smallest 12-month change since August 2002.

Economists closely watch consumer spending because it accounts for two-thirds of total economic growth. For the July-September quarter, the government reported Tuesday that spending had fallen by 3.8 percent, the biggest quarterly setback in 28 years.

Analysts say the fourth quarter could turn in an even worse performance, given that the recession has intensified. The economic problems facing households have translated into weak holiday shopping for retailers.

Michael P. Niemira, chief economist for the International Council of Shopping Centers, is forecasting that sales at established stores in November and December will be down 1.5 percent to 2 percent — making this the weakest holiday season since at least 1969.

Retailing giant Wal-Mart Stores Inc. is one of the few bright spots in the current environment. Some merchants including AnnTaylor Loft were already sending out e-mails to customers promoting after-Christmas discounts that can be enjoyed now.

BCE hires broker to buy back up to $40M of shares

BCE Inc., Canada's largest telecommunications company and parent of Bell Canada, said Wednesday it will use a broker to repurchase its stock in a previously announced buyback of up to 40 million shares.

BCE, based in Montreal, said the "automatic share purchase plan" will allow the broker to buy shares at any time, even when the company itself would be barred by law from doing so.

The 40 million shares represent about 5 percent of the company's outstanding stock as of Dec. 5. The buyback plan began Tuesday and will close Dec. 22, 2009, the company said.

In premarket trading, BCE shares fell 45 cents, or 2.4 percent, to $18.32.

New jobless claims jump more than expected

New claims for unemployment benefits rose more than expected last week, the government said Wednesday, as layoffs spread throughout the economy, more evidence the labor market is weakening as the recession deepens.

The Labor Department reported that initial requests for jobless benefits rose to a seasonally adjusted 586,000 in the week ending Dec. 20, from an upwardly revised figure of 556,000 the previous week. That's much more than the 560,000 economists had expected.

That's also the highest level of claims since November 1982, though the work force has grown by about half since then.

Separately, consumers cut spending for the fifth straight month in November, a report by the Commerce Department showed. The 0.6 percent drop in consumer spending last month followed an even larger 1 percent fall in October. the steep plunge in gasoline prices, which is good news for consumers, made the declines look worse.

Excluding price changes, consumer spending would have dropped by 0.5 percent in October and actually risen by 0.6 percent in November. The November increase excluding inflation was the best showing in more than three years.

Still, economists think the overall trend for consumer spending is down, given the problems facing the economy. They include a severe recession, a financial crisis that has cut off access to credit for millions of borrowers and a massive wave of job layoffs.

The government reported Tuesday that the overall economy, as measured by gross domestic product, was declining at an annual rate of 0.5 percent in the July-September quarter. Analysts believe the contraction will accelerate in the current quarter. Some are forecasting that GDP will plunge at an annual rate of 6 percent, which would be the worst showing since 1982.

The Commerce Department said Wednesday that orders for large manufactured goods dropped by 1 percent, less than the 3 percent economists had expected. The decline was led by a huge drop in orders for aircraft and a decrease in the automotive sector.

A Labor Department analyst, meanwhile, said auto-related layoffs were a factor behind the rise in jobless claims. The four-week average of initial claims, which smooths out fluctuations, rose to 558,000. That's the highest since December 1982, when the economy was emerging from a steep recession.

There was some improvement in the number of Americans continuing to seek unemployment benefits, which dropped slightly to 4.37 million from 4.39 million the previous week. Wall Street economists had expected the number to increase to 4.4 million.

Economists consider jobless claims a timely, if volatile, indicator of the health of the labor markets and broader economy. A year ago, initial claims stood at 353,000.

The elevated level of new jobless applications is just one of several signs that the labor market has deteriorated rapidly in recent months.

The Labor Department said earlier this month that employers cut a net total of 533,000 jobs in November, sending the unemployment rate to 6.7 percent, the highest in 15 years.

Mass layoffs are taking place in a wide range of industries. Industrial conglomerate Textron Inc. on Tuesday said it has cut 2,200 jobs, while technology services provider Unisys Corp. said Monday it will eliminate 1,300 jobs. Sovereign Bancorp Inc.'s bank unit said last week it is laying off 1,000 employees.

Bush pardons former Nevada gambling executive

A former Nevada gambling company executive who pleaded guilty 13 years ago in a case involving a Louisiana video poker scandal and organized crime investigation has been granted a pardon by President Bush.

Alan Stephen Maiss, former president of Bally Gaming Inc., was among 19 people pardoned by Bush on Tuesday.

Maiss, in a deal with prosecutors, pleaded guilty in U.S. District Court in New Orleans on Dec. 20, 1995, to two counts of misprision of a felony, or failure to report a crime.

He was sentenced to one year of probation and fined $5,000.

Maiss did not immediately return a phone message left by The Associated Press at his Reno home seeking comment on his pardon.

The charges stemmed from Bally Gaming's involvement in the 1990s with two video poker distributors, Worldwide Gaming of Louisiana and Louisiana Route Operators. Federal prosecutors claimed the companies were fronts for mob figures seeking to gain a foothold in Louisiana's video poker industry.

Maiss' pleas surrounded his alleged knowledge that Worldwide Gaming was being operated illegally by Christopher Tanfield, who did not have a Louisiana gambling license.

In all, 25 people were convicted in the case, including Tanfield.

Prosecutors never charged Maiss with knowingly dealing with or causing Bally to deal with organized crime. Bally was later acquired by another company.

At Maiss' sentencing, court documents show the judge noted "the government has recognized the defendant's substantial assistance in the prosecution of other defendants."

Maiss appealed his case five years later and sought to withdraw his guilty pleas, saying the convictions "severely restricted" his ability to work as an investment broker or adviser.

A three-judge panel from the 5th U.S. Circuit Court of Appeals denied his appeal in 2002.

Lear adopts shareholder-rights plan

Lear Corp.'s board approved a plan to reduce future tax liability and restrict ownership changes at the auto-parts supplier.

The plan preserves the value of certain tax assets linked to net operating loss carryforwards that allow companies to apply current operating losses to future years' profit to reduce tax liability, Lear said Tuesday.

The board acted to limit shareholders' purchases because Lear's ability to use the carryforwards would be restricted based on certain ownership changes, the Southfield, Mich., company said.

The plan would dilute voting power for shareholders who increase their stakes more than 4.9 percent of outstanding shares. For shareholders who already own more than 4.9 percent of the shares, the trigger that would dilute voting power if they increase their stakes in the company by half of 1 percent or more.

The plan is scheduled to expire in December 2018.

Other companies have recently adopted similar shareholder-rights plans. Homebuilder Ryland Group Inc. said Tuesday its board approved a plan aimed at reducing future tax liability and restricting future ownership changes of the company.

In connection with its shareholder plan, Lear declared a dividend of one preferred share purchase right for each outstanding common share, payable to holders of record as of Jan. 2.

On Dec. 12, Lear withdrew its 2008 earnings outlook after the Senate failed to pass an emergency $14 billion rescue of the U.S. auto industry. Days later, the Bush administration approved a package.

In addition, Moody's Investors Service cut its ratings on Lear, citing vehicle-production cuts by the Detroit automakers. The ratings agency reduced Lear's corporate family and probability of default ratings to "B3" from "B2." It also cut the company's senior secured term loan to "B2" from "B1."

The ratings agency affirmed Lear's senior unsecured notes at "B3." All the ratings are non-investment grade.

Last month, Lear announced it will close its Newark, Del., factory and lay off all 136 workers.

House's Auto Bill Comes Under Republican Fire

WASHINGTON -- The House-approved rescue of the nation's auto makers came under fire from top Republicans in the Senate on Thursday, adding to uncertainty about the proposal's fate.

Rescue efforts suffered a major blow when the Senate's top Republican vowed to oppose the bill. "This proposal isn't nearly tough enough," said Senate Minority Leader Mitch McConnell (R., Ky.).

Mitch McConnell

Calling for stronger provisions to ensure reforms at the auto companies, Mr. McConnell also said he opposed the bill on ideological grounds. "A government big enough to give us everything we want is a government big enough to take everything we have," he said.

But Senate Democrats pushed ahead with plans for a vote on the $14 billion aid package as soon as Thursday afternoon. "We have danced this tune long enough," Senate Majority Leader Harry Reid (D., Nev.) told colleagues in the morning.

During a press conference announcing key members of his health-care team, President-elect Barack Obama appealed to lawmakers for passage of a rescue bill for the auto industry. The package now under consideration in Congress is a "step forward," he said.

Mr. Obama insisted that the government can't just stand by and watch the industry collapse. which would have a "devastating ripple effect" throughout the economy. He also told reporters in Chicago that he understands the "anger and frustration" over the situation in which the auto companies find themselves.

Early debate on the Senate floor indicated serious obstacles remain before supporters of the auto aid proposal can marshal the 60 votes needed to ensure passage. The package passed the House on a 237 to 170 vote Wednesday night, with Democrats providing most of the support.

Some Republicans assailed the bill for giving too much authority to a presidential designee known as an "auto czar" to oversee the industry's restructuring. The House bill is "based on a concept that the bureaucracy can run the free-enterprise system better than the free-enterprise system can, and it doesn't work," Sen. James Inhofe (R., Okla.) said on the Senate floor.

Sen. John Ensign (R., Nev.) said the auto czar would inevitably be influenced by politics. "A bailout would invite all sorts of meddling by lawmakers to have the companies carry out their own sort of pet policies," adding that a bankruptcy judge would be the appropriate authority to oversee the Big Three's restructuring.

Others said the bill's language was too vague to ensure fundamental reforms at General Motors Corp., Ford Motor Co. and Chrysler LLC.

Sen. David Vitter (R., La.) renewed his pledge to use "every tool" available to block the proposal "because so much is at stake, because we need to get it right." The bill "doesn't demand the fundamental core restructuring that is absolutely necessary for these companies to survive," he said.

He voiced support for alternative proposals such as one put forth by Sen. Robert Corker (R., Tenn.).

Sen. Corker said his proposal would provide immediate assistance to Chrysler and GM under the condition that the manufacturers work with creditors to reduce their debt by two-thirds by March 15. If that deadline weren't met, the companies would be required to file for bankruptcy protection. He said that union leaders and auto executives have expressed openness to those conditions.

The House bill was forged over five days of negotiations among top presidential aides and the Democratic congressional leadership. But congressional Republicans have complained they were left out of the process and expressed serious opposition.

Auto allies suggest they may need 12 to 15 Republican votes in the Senate to overcome procedural objections that would endanger the proposal.

—The Associated Press contributed to this story.

Ohio governor presents dire budget cut scenario

COLUMBUS, Ohio (AP) - Ohio would close state parks and prisons, raise tuition at public colleges by $2,000 and leave local school districts without money to meet payroll under the governor's worst-case budget scenario released Thursday.

In a plea for federal aid, Gov. Ted Strickland said he created the scenario to show how bad things could be without help from Washington. Governors from around the U.S. are seeking tens of billions of dollars to help with day-to-day operating costs, in addition to requests for Medicaid and infrastructure projects.

Ohio faces a $7.3 billion deficit in the next two years based on current tax revenue projections, which are heading downward as all major economics indicators have plummeted.

Without Washington's help, state agencies would need to cut 25 percent off their current funding levels if the state wants to preserve Medicaid, a tax reduction and continue making debt payments, Strickland said.

The dire picture foreshadows what is sure to be one of the most challenging budget-crafting environments lawmakers have faced in recent Ohio history.

A Republican-controlled Senate, a Democratic-controlled House and a Democratic governor will have to decide what to cut, what to spare and whether they need to do anything to increase revenue.

Policy debates are likely to ensue, especially in the area of how the state handles its inmate population, which increasingly consists of offenders only in prison for a brief time.

Strickland has said a tax increase would further harm an already damaged economic environment, but has stopped short of completely ruling out the option.

Some Republicans say it's unrealistic to maintain Medicaid funding levels when the state-federal health care program for low-income individuals makes up about 40 percent of the state budget.

Strickland's worst-case budget projections would:

_ Reduce the amount the state spends per student on college education by $1,987 to its lowest level in recent history. Ohio already ranks poorly among states in affordable cost to attend state colleges and universities.

_ Eliminate 5,237 positions at the state prisons department, including corrections and parole officers. Ohio also would close six institutions at a time when prisons are already crowded.

_ Cut job creating programs at the Department of Development just when the state needs it the most. The department might also close a number of its foreign trade offices, which help open countries to exports from Ohio companies. Exports are the one bright spot for the hard-hit manufacturing industry, which has been able to take advantage of the weak U.S. dollar.

Sweden unveils $3.4 billion aid package for autos

STOCKHOLM, Sweden (AP) - The Swedish government on Thursday unveiled a 28 billion kronor ($3.4 billion) support package for the nation's ailing auto industry, but insisted it won't buy Volvo or Saab from their U.S. owners.

The plan offers credit guarantees, emergency loans and research funds to boost companies in the "Swedish automotive cluster," the center-right government said.

It was announced just hours after the U.S. House of Representatives approved a bill to get $14 billion in emergency loans to the struggling U.S. auto industry.

Democrats and the White House hoped the bill could be enacted by week's end, but it is jeopardized by opposition from Republicans in the Senate.

Car makers Volvo and Saab have appealed to the Swedish government for support because of the financial woes of their U.S. owners, Ford Motor Co. and General Motors Corp., which are focusing on saving their American brands.

Powerful labor unions have also pressured the government to save Sweden's auto industry, which since June has shed about 10,000 jobs, or 7 percent of its work force.

The government said its support package was needed to safeguard "the continued success of the Swedish automotive industry," even if the industry's crisis deepens. It also called for quicker development of green technology.

The plan, which needs approval by lawmakers, includes a maximum of 20 billion kronor in credit guarantees to automotive companies, and up to 5 billion kronor in rescue loans to bail out companies in crisis. The government said it would also earmark 3 billion kronor for research and development in the automotive sector.

Asked at a news conference whether the government could guarantee the survival of Volvo and Saab, Finance Minister Anders Borg said that was not its responsibility.

"The owners are responsible for the survival," Borg said. "We lay the foundations so that the Swedish automotive cluster has very good conditions to develop."

Ford has said it intends to offload Volvo, by either selling the Swedish automaker or spinning it off into a separate company, while GM said it "expedited and strategic review" of Saab.

The Swedish government reiterated it was not interested buying the two brands, and that the measures were based on discussions with the "U.S. automotive industry and conclusions drawn by current or any new owners."

The plan was welcomed by corporate and union leaders.

"We've talked all autumn about how important the vehicle industry is for Sweden, and so we have to see this as a victory," said Michael Blohm, a union representative at Volvo Cars in Goteborg.

Volvo Cars spokeswoman Maria Bohlin said the move showed Swedish politicians were willing to fight to save Swedish jobs.

The government said the plan was in line with the proposals in the European Commission's economic recovery plan under which companies can raise loans in the European Investment Bank. The EIB has promised to lend Europe's automotive industry a total of euro16 billion ($21 billion) for the development of greener solutions and production.

Seahawks-Rams game on Fox gets local TV blackout

ST. LOUIS (AP) - Fox's broadcast of the St. Louis Rams' game against the Seattle Seahawks this weekend will not be televised locally after failing to sell out 72 hours before kickoff. It's the fifth time in the last three seasons the franchise failed to sell out.

The Rams sold out their first 100 games after moving to St. Louis in 1995. The streak was broken on Dec. 24, 2006, against the Washington Redskins. Three games were blacked out last season, although the first six home games this year were sold out.

A team spokesman said Thursday a few thousand tickets remained unsold for Sunday's game.

The game matches 2-11 teams. The Rams have lost seven in a row and the Seahawks have dropped six straight.

Fox is a unit of News Corp.

Stanley Works cutting 2,000 jobs, closing 3 plants

NEW YORK (AP) - Tool maker Stanley Works said Thursday it will cut 2,000 jobs and close three manufacturing facilities, citing weakness in its construction and industrial segments and the effect of a stronger dollar. The company also cuts its 2008 earnings forecast.

Stanley said the job cuts amount to 10 percent of its total work force and will also involve elimination of layers of management. A spokesman said the company has not yet disclosed which of its 45 plants it will close.

Its stock fell nearly 3 percent in afternoon trading.

Stanley said the depth of decline in its construction and industrial segments has been worse than in previous recessions. This implies its markets are facing an "exceptionally severe" contraction, the company said.

"While these actions are difficult and affect valued Stanley employees, we feel it is imperative to move decisively to manage through the steep global economic decline we are currently experiencing," Chief Executive John F. Lundgren said in a statement.

Stanley is the latest tool and industrial products maker to feel the effects of the economic downturn. On Monday, Illinois Tool Works Inc., based in Glenview, Ill., cut its full-year and fourth-quarter profit forecast, citing the weak economy, the rising dollar and restructuring costs.

Stanley announced the cuts as the government issued a series of gloomy reports on the broader economy. The Labor Department said Thursday that jobless claims surged to their highest level in 26 years last week.

New Britain, Conn.-based Stanley said most of cuts and plant closures will take place in December and will result a pretax charge of about $80 million, or 70 cents per share, in the fourth quarter.

The company hopes the cuts and closures will save $115 million in 2009.

Stanley Works also cut its 2008 earnings outlook, citing the difficult economy. The company said it now expects earnings between $3.30 per share and $3.40 per share, excluding the fourth-quarter charges. Previously, the company said it expected to earn $3.75 per share for the year.

Analysts polled by Thomson Reuters expect a full-year profit of $3.72 per share, on average. Such estimates typically exclude one-time charges.

The cuts come two months after Stanley reported a third-quarter profit that rose 80 percent from the previous year. The company said then it had raised prices on its products to offset economic weakness and a soft housing market.

Stanley Works shares fell 92 cents, or 2.7 percent, to $33.40 in afternoon trading. The stock has traded in a 52-week range of $24.19 to $52.18.

Florida justices reject product liability appeal

TALLAHASSEE, Fla. (AP) - The Florida Supreme Court has dismissed the appeal of a $545,000 award in a tobacco case that also may affect liability claims for other "inherently dangerous" products.

The ruling Thursday let stand the verdict against Liggett Group Inc.

A jury found the Chesterfield cigarettes a Broward County woman smoked before she contracted lung cancer had a flawed design.

Liggett manufactures the brand. The company argued the verdict should be reversed because the woman wasn't required to prove Liggett could have made a safer cigarette.

Several business groups sided with Liggett in court papers. They are worried the case will affect other products such as motorcycles, knives, gasoline and personal watercraft.

Humane Society sues retailers, designers over fur

WASHINGTON (AP) - The Humane Society of the United States filed a lawsuit Monday against six major retailers and fashion designers alleging they falsely advertise and label fur garments.

The suit claims that Dillard's, Lord & Taylor, Macy's, Neiman Marcus, Saks Fifth Avenue and designer Andrew Marc misrepresent fur products by labeling and marketing them as "faux fur," when they are not; or by advertising and labeling products as common raccoon, fox or rabbit fur, when they are really made from raccoon dog, a canine species from Asia.

The complaint also alleges that the retailers are in violation of the federal Fur Products Labeling Act and Federal Trade Commission Act, which prohibit mislabeling of fur products.

Rebecca Judd, senior attorney with the Humane Society, said the group is seeking a court order to halt to what she called deceptive business practices by retailers.

"We filed this after we tried now for several years to have the fur industry stop their widespread false advertising and labeling," Judd said.

She added the group wants to alert consumers, especially those concerned about animal welfare, that fur garments are "best left out of the shopping bag."

Representatives from Macy's and Neiman Marcus said they don't comment on pending litigation. Dillard's, Lord & Taylor and Andrew Marc did not return telephone calls for comment. A representative from Saks could not be immediately reached by The Associated Press after calls seeking comment.

Judd said the suit was filed in D.C. under its Consumer Protection Procedures Act because the Humane Society focused much of its investigation in the Washington region. All the retailers named in the suit have stores in the area. Andrew Marc sells his brands online and in retail stores around Washington.

Since it began investigating in 2005, Judd said the Humane Society has sent dozens of letters to retailers — including those named in Monday's suit — informing them of their findings.

Some companies, including Calvin Klein and Tommy Hilfiger stopped selling fur products, Judd said. Others, such as rap artist Sean "Diddy" Combs, quit producing coats from his Sean John line that had raccoon dog fur; and rapper Jay-Z pulled coats with raccoon dog from his Rocawear label.

Raccoon dogs resemble oversized, fluffy raccoons and aren't kept as pets. According to the suit, more than 1.5 million of them are being raised for their fur in China, and have been documented to be skinned alive. Importing raccoon dog fur isn't illegal.

The Humane Society never received a "written commitment to stop selling mislabeled fur" from the six defendants after alerting them to the group's findings, Judd said.

The defendants are also among more than 20 companies named in two legal petitions the Humane Society filed earlier this year and in 2007 with the Federal Trade Commission, which enforces the federal fur labeling act.

In the petitions, the animal rights group ask the commission to fine the high-end retailers and designers of clothing that contains mislabeled fur. The group also would like inventories seized and, possibly, charges filed.

In 2007, Charles Jayson, chief executive of Andrew Marc, disputed the Humane Society and insisted in a statement that all fur on his coats labeled as raccoon contains "only farm-bred raccoon fur from Finland, and our items labeled 'faux fur' are a 100 percent synthetic fabric."

Mislabeling fur is a misdemeanor punishable by up to a $5,000 fine or a year in prison. Fur valued at less than $150 doesn't have to be labeled.

The petitions are still pending.

The Humane Society said it began investigating mislabeled fur claims after the society got a tip from someone who bought a coat with trim labeled as faux fur that felt real. At the time, teams bought coats from popular retailers and then had the coats tested by mass spectrometry, which measures the mass and sequence of proteins.

The society said most of the fur came from China.

Charity convicted in terrorism financing trial

DALLAS (AP) - A Muslim charity and five of its former leaders were convicted Monday of funneling millions of dollars to the Palestinian militant group Hamas, finally handing the government a signature victory in its fight against terrorism funding.

U.S. District Judge Jorge A. Solis announced the guilty verdicts on all 108 counts on the eighth day of deliberations in the retrial of the Holy Land Foundation for Relief and Development, once the nation's largest Muslim charity. It was the biggest terrorism financing case since the attacks of Sept. 11.

"Money is the lifeblood of terrorists, plain and simple," U.S. Attorney Richard Roper said. "The jury's decision attacks terrorism at its core."

The convictions follow the collapse of Holy Land's first trial last year and defeats in other cases the government tried to build. President George W. Bush had personally announced the freezing of Holy Land's assets in 2001, calling the action "another step in the war on terrorism."

After Monday's verdict, family members showed little visible reaction until the jury left. Several women sobbed loudly.

"My dad's not a criminal!" one nearly inconsolable woman said loudly. Court personnel told the family to calm her down, and as family members rushed her out of the courtroom, she said, "They treated him like an animal."

Ghassan Elashi, Holy Land's former chairman, and Shukri Abu-Baker, the chief executive, were convicted of a combined 69 counts, including supporting a specially designated terrorist, money laundering and tax fraud.

Mufid Abdulqader and Abdulrahman Odeh were convicted of three counts of conspiracy, and Mohammed El-Mezain was convicted of one count of conspiracy to support a terrorist organization. Holy Land itself was convicted of all 32 counts.

"I feel heartbroken that a group of my fellow Americans fell for the prosecution's fear-mongering theory," Elashi's daughter, Noor, said outside the courthouse late Monday. "This is truly a low point for the United States of America, but this is not over."

She said that she was proud of her father and that he was "paying the price" for saving lives.

"My dad was persecuted for his political beliefs," she said. "It's as pure and simple as that."

Attorneys for the defendants said an appeal is planned.

A sentencing date hasn't been scheduled, but the punishments could be steep. Supporting a terrorist organization carries a maximum 15-year sentence on each count; money laundering carries a maximum 20 years on each conviction.

Solis ordered the Holy Land leaders detained, citing the long prison terms they may face and their ties to the Middle East.

Holy Land was accused of giving more than $12 million to support Hamas. The seven-week retrial ran about as long as the original, which ended in October 2007 when a judge declared a mistrial on most charges.

Holy Land wasn't accused of violence. Rather, the government said the Richardson, Texas-based charity financed schools, hospitals and social welfare programs controlled by Hamas in areas ravaged by the Israeli-Palestinian conflict.

The U.S. designated Hamas a terrorist organization in 1995 and again in 1997, making contributions to the group illegal. Government officials raided Holy Land's headquarters in December 2001 and shut it down.

Prosecutors labeled Holy Land's benefactors — called zakat committees — as terrorist recruiting pools. The charities, the government argued, spread Hamas' violent ideology and generated loyalty and support among Palestinians.

It was a "womb to the tomb" cycle, prosecutor Barry Jonas told jurors during closing arguments last week.

Holy Land supporters told a different story. They accused the government of politicizing the case as part of its war on terrorism, while attorneys for the foundation said Holy Land's mission was philanthropy and providing much-needed aid to the Middle East.

They reminded jurors that none of the zakat committees are designated by the U.S. as terrorist fronts, and that Holy Land also donated to causes elsewhere, including helping victims of the Oklahoma City bombing in 1995.

"No one here is engaging in acts of terrorism," Theresa Duncan, attorney for Baker, said during closing arguments.

A chaotic courtroom scene ended last year's original trial, which lasted nearly two months and kept jurors deliberating for 19 days. But they deadlocked on many counts, and when a judge polled the panel about other verdicts, some disavowed their vote.

The confusing finish led U.S. District Judge A. Joe Fish to declare a mistrial, and leaders of the defunct charity rushed outside to celebrate.

Observers last year panned the government for presenting a bloated case too complicated for jurors to follow. Prosecutors responded this year by dropping nearly 60 charges in the trial and tightening their narrative to jurors, even offering a kind of road map to help the panel follow the money.

But nearly 15 boxes of evidence wheeled into court on a flatbed still impressed the size of the case, as did the more than one hour that Solis needed to read aloud the indictment.

Two other high-profile terror-financing trials in Chicago and Florida ended without convictions on the major counts.

Wal-Mart to cut $3 off overcharged items in Calif.

SAN DIEGO (AP) - Wal-Mart Stores Inc. will knock $3 off the price of any item when a California customer is overcharged because of a problem with its price-scanners, authorities said Monday.

California Attorney General Jerry Brown announced the move in a settlement with the retailer after authorities found pricing errors throughout the state.

Investigators found 164 stores in 30 counties made scanning errors, the attorney general's office said. On average, customers who were overcharged paid an extra $8.40 at the checkout.

Examples included customers who overpaid $1 for sports bras and Kellogg's Special K cereal, $2 for woven shirts and $5.16 for a Journey compact disc, the attorney general's office said.

The investigation began in December 2005 amid allegations that Wal-Mart stores in California were charging prices higher than those advertised on store shelves and signs.

Greg Rossiter, a spokesman for Bentonville, Ark.-based Wal-Mart, said the company strives for 100 percent accuracy.

"If we find price discrepancies, we are committed to making things right for our customers," he said.

To settle the lawsuit filed in San Diego Superior Court, Wal-Mart agreed that when an employee becomes aware that a customer is charged above the currently listed price for an item, Wal-Mart will give the customer a $3 price-cut on the item, the attorney general's office said. If the item is less than $3.00, the customer will get it for free.

Wal-Mart also agreed to pay $1.4 million in restitution, civil penalties and reimbursement for investigative costs.

Jury gets case of woman accused of MySpace hoax

LOS ANGELES (AP) - A federal jury was given the case Monday of a Missouri mother accused of conspiring with her daughter and an assistant to harass a 13-year-old girl on the Internet, allegedly precipitating the teen's suicide.

"Lori Drew decided to humiliate a child," U.S. Attorney Thomas O'Brien said. "The only way she could harm this pretty little girl was with a computer. She chose to use a computer to hurt a little girl, and for four weeks she enjoyed it."

Drew, 49, listened to the argument impassively. Her lawyer, Dean Steward, said jurors must remember she is not charged with homicide in the death of Megan Meier, who hanged herself after receiving a message that the world would be better off without her.

"If you hadn't heard the indictment read to you, you'd think this was a homicide case," he said. "And it's not a homicide case. This, ladies and gentlemen, is a computer case, and that's what you need to decide."

The defense attorney insisted the only question is whether Drew violated the terms-of-service agreement of the MySpace social networking site. He said that Drew, her young daughter Sarah and assistant Ashley Grills never read the seven-page agreement.

"Nobody reads these things, nobody," he said. "... How can you violate something when you haven't even read it? End of case. The case is over."

Drew has pleaded not guilty to conspiracy and accessing computers without authorization. She could be sentenced to as many as 20 years in prison if convicted of all counts. The jury was scheduled to begin deliberations Tuesday.

Assistant U.S. Attorney Mark Krause, in closing arguments, said Drew was responsible for devising the plan to invent an imaginary boy called Josh Evans who would communicate online with Megan, the daughter of a neighbor and once Sarah's best friend. Prosecutors say Drew wanted to find out whether Megan was spreading rumors about Sarah.

The prosecution showed the jury the photo that was used on the fake MySpace profile — a bare-chested boy with tousled brown hair.

Krause said Drew told her daughter and the then-18-year-old Grills what to write, to make the messages "flirty."

In so doing, he said, she violated the MySpace rules.

"The rules are fairly simple," he said. "You don't lie. You don't pretend to be someone else. You don't use the site to harass others. They harassed Megan Meier."

Krause also said Drew was warned by others that what she was doing was wrong, and Grills herself told Drew it might be illegal.

"She knew she was violating the rules and yet she told these two kids to keep doing it," he said.

Both prosecutors made references to testimony that Megan had been under treatment for depression, and Sarah, in testimony before final arguments, said she was aware Megan had been taking medication and seeing a psychiatrist.

"The defendant knew that she was dealing with a troubled little girl who was extremely fragile, and yet she did it anyway," Krause said.

"It went beyond a simple prank," said Krause, "to get her so hooked on this young man that she would be crushed when she found out he didn't exist."

Steward, in his response, said Drew had little to do with the content of the messages and was actually out of her home on the day of the final message, which was sent just before the suicide. He also said the message, which was quoted through out the trial, has never been found but was actually sent via AOL, not the MySpace site.

"My client, Lori Drew, was not home when all the electronic nastiness was going on," he said.

Steward also attacked Grills, the prosecution's star witness, as untrustworthy because she testified under a grant of immunity.

"Grills, bless her heart, is pathetic," he said. "Grills is a sad character who carries a lot of guilt."

He also blamed Megan's mother, Tina Meier, for allowing her daughter to continue the MySpace conversation with the invented Josh Evans after she learned it was going on. He faulted her for allowing Megan to register on MySpace and for not watching closely enough.

O'Brien reminded jurors how the tragedy began. He said Grills received a message from Megan suggesting Drew's daughter was ugly and a lesbian, leading Drew to concoct the plan.

"She could have walked four doors down and told Megan's mother to knock it off," he said.

Obama's tax hike for the rich may be delayed

WASHINGTON (AP) - An economic crisis, rising joblessness and a credit squeeze can make a president-elect refine his words. Today's word is "repeal." During his presidential campaign, Barack Obama promised to repeal President George W. Bush's tax cuts for the wealthy ahead of their scheduled expiration in 2011.

It was part of how Obama would pay for an overall net tax cut aimed at low- and middle-income taxpayers, and an effort to bring what he called "fairness" to the tax system.

No one is talking tax hikes now.

Over the weekend, Obama said he has charged his new economic team with devising a plan that would create or preserve 2.5 million jobs over two years. He said the plan would include broad spending plans as well as the middle- and low-income tax cuts he described during the campaign.

Aides later said the plan would not include any of the tax increases Obama, as a candidate, had said he would impose on taxpayers who make more than $250,000.

Asked Monday when those hikes might go into effect, Obama said, "Whether that's done through repeal, or whether that's done because the Bush tax cuts are not renewed, is something that my economic team will be providing me a recommendation on."

If repealed early, Obama's tax increase on the rich would have generated significant revenue, but not enough to compensate for the cost of his tax cuts. An analysis by the Tax Policy Center, based on January 2008 income projections, estimated that the increases would result in about $43 billion in revenue in 2009 and $45 billion in 2010. Those numbers would be smaller now, as the economy has lowered expected incomes.

Obama's economic advisers say he will not propose any tax increases in the economic plan he unveils in January. It is to be focused entirely on job creation and economic recovery.

Colombia to help irate pyramid scheme investors

BOGOTA, Colombia (AP) - Colombia's government readied emergency measures Sunday to appease irate investors who lost tens of millions of dollars in the collapse of pyramid schemes that caused riots, scores of arrests and two deaths.

President Alvaro Uribe vowed to help poor investors regain their savings, but said Saturday that wealthier clients should have known better and will "have to take some blows to the chest."

He said the government could also boost prison time for people who collect deposits without authorization, now punishable with six years in jail.

Thousands of Colombians, many of them poor people who do not have accounts at formal banks, had invested with unlicensed companies that offered monthly returns as high as 150 percent.

One outlet, known as Proyecciones DRFE, collapsed Wednesday on news that its owner, Carlos Alfredo Suarez, had left the country and wouldn't repay clients.

The company was thought to have lost 600 billion pesos ($270 million), having collected 400 billion pesos ($181 million) in the first nine months of the year alone in just four cities, Colombia's banking regulator said.

Furious investors stormed and looted local branches in rioting that left 13 towns under police curfew and two men dead: a security guard and a bystander who tried to calm the crowds.

The owner's whereabouts are unknown, but a man who identified himself as Suarez spoke by telephone to Bogota's RCN radio Sunday, denying the company had any links to drug traffickers, paramilitaries or guerrillas in southwestern Colombia, where it was based.

The company had counted 6 million depositors, including high-ranking political and military officials and entertainers, he said without disclosing any names.

The man declined to say how the company could offer monthly interest payments of 70 to 150 percent, but observers called the operation a pyramid scheme, which uses later investors' cash to pay off those who invest first. Such schemes collapse when the incoming cash flow can no longer cover payments to a growing pool of investors.

The man said the company's acronym stood for "Direct, Fast, Easy and Effective" in Spanish. Government officials earlier said it was "Easy Money Fast Cash."

Police have seized 92.4 billion pesos ($42 million) in cash from 68 of its offices and arrested 52 employees, according to deputy national police chief Gen. Rafael Parra. The government may use the seized cash to reimburse poor investors, Uribe said.

Authorities have been criticized for failing to stamp out mushrooming pyramid schemes that offered suspiciously high interest rates in at least 240 offices. They say they tried to act against some companies, but were slowed by weak laws and legal maneuvering.

Colombia's top banking regulator Cesar Prado resigned Friday and Uribe on Saturday said he regretted that authorities had not acted sooner.

Uribe urged operators of other pyramid schemes to immediately return investors' cash or face charges, and he asked governors and mayors to report similar businesses in their regions.

Savings held in Colombia's 425 formal financial institutions are safe and unaffected by the scams, Prado told Bogota's El Tiempo newspaper in an interview published Sunday.

Experts: Supplier woes put auto industry in danger

NEW YORK (AP) - The financial woes of U.S. automakers have grabbed Washington's attention, but similar problems at auto suppliers have the potential to set off a cataclysmic chain of events in the industry if key parts makers run out of cash and fail.

As with the automakers, auto suppliers' sales have tumbled this year because of the steep drop in demand for new vehicles.

That has forced suppliers to burn through their cash reserves and slash their costs to stay in business, said Craig Fitzgerald, an automotive analyst with Southfield, Mich.-based Plante & Moran PLLP, which advises about 400 small and midsize auto suppliers.

Meanwhile, banks and other credit providers have become dead-set against lending to any company in the faltering automotive industry, making it difficult and expensive for suppliers to get needed financing.

But if the companies at the bottom of the supply chain don't find a way to recapitalize, Fitzgerald warned, numerous bankruptcies and liquidations among the small companies will set off a string of parts shortages that could reach all the way to the vehicle assembly line.

The resulting disruptions could negate any help the government might give General Motors Corp., Ford Motor Co. and Chrysler LLC.

"Either they deal with the liquidity issues at the lower tier, or these problems have the potential to just devastate the Detroit OEMs and the other automakers," Fitzgerald said, referring to so-called original equipment manufacturers GM, Ford and Chrysler. "It's an issue equal to what's going on at the Big Three, they just don't have the heft, so it doesn't get quite the play."

In most cases, auto suppliers have their own suppliers, who in turn receive their parts from other companies, meaning that many automotive components pass through a chain of several companies before they're sold to an automaker.

"The fragility of the whole thing is very much like a house of cards," said Bob Viswanathan, an assistant professor of operations management at the University at Buffalo School of Management. "Everybody knows that the finance markets are so interconnected, but the auto industry is worse."

Tom Wiethorn, co-owner of Craig Assembly, said orders for his St. Clair, Mich., company's hose connectors — used in radiators that end up in GM and Ford vehicles — have fallen significantly in recent months.

As a result the company, which has $12 million in annual sales, has cut its work force by 20 percent to about 60 people and is worried that it could end up violating its debt agreements.

"This is very serious," said Wiethorn, who also serves as a manufacturing representative setting up contracts for other auto suppliers. "Some of the suppliers I know are teetering on bankruptcy."

The Motor & Equipment Manufacturers Association is hoping to win a piece of a proposed rescue package that would use $25 billion of the $700 billion financial industry bailout to help GM, Ford and Chrysler.

"We are all connected by some very thin threads and if any piece of the chain from the manufacturers to the small suppliers fails, the whole thing could fail," said Ann Wilson, the association's vice president of government affairs.

Top Republicans, however, have said the Wall Street money should not be used for the auto industry and would only postpone its demise. Sen. Richard Shelby of Alabama on Sunday called the industry "a dinosaur."

Yet even foreign automakers that build cars and trucks in the United States could be affected. Companies like Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co., with plants scattered throughout the South and Midwest, get their parts from the vast, multilayered network of U.S. suppliers that employs about 800,000 people.

Dave Andrea, vice president of industry analysis and economics for the Original Equipment Suppliers Association, a division of the Motor & Equipment Manufacturers Association, said that's why lawmakers need to be looking at the U.S. auto industry as a whole.

"We need to be talking about this at the U.S. level, not talking about the Detroit Three and then putting the other automakers in another bucket," he said. "If we have major failures of suppliers, the foreign automakers are going to be affected as well."

Automakers generally only have a one- to two-shift supply of some key parts, Andrea said, making them very susceptible to supply chain disruptions.

The nearly 3-month-long strike at American Axle and Manufacturing Holdings Inc. this spring crippled truck production at GM, showing how fast a parts shortage can shut down assembly lines.

GM's production cuts led to millions in lost sales at other suppliers such as Lear Corp., Superior Industries International Inc. and Magna International Inc.

Andrea noted that automakers have contingency plans for sourcing their parts should one of their suppliers shut down. But those plans can come with hefty hidden costs, such as the expense of importing parts from overseas, he said.

"It's really the logistics part you don't see," Andrea said. "And those are the kinds of costs the industry can't bear in these troubled times."

Iceland agrees to guarantee some deposits

REYKJAVIK, Iceland (AP) - Iceland's prime minister has offered government guarantees on Icesave savings deposits in Iceland and Holland of nearly 21,000 euros ($26,600) on each account.

Prime Minister Geir H. Haarde said Sunday the next step will be for Iceland to hold talks with the United Kingdom and other EU countries on how the payments will be made.

It was not immediately clear how the deposits would be covered. The total amount is estimated to be about 600 billion Icelandic kronar, or about 3.5 billion euros. Haarde said he hoped other countries would help cover the costs, and that additional funds could be raised by selling off the bank's assets.

Relations between London and Reykjavik plummeted last month after Britain used anti-terrorist legislation to freeze the assets of collapsing Icelandic banks in a bid to protect British savers' deposits.

The savings of about 230,000 British depositors' money vanished when Icesave's parent bank, Landsbanki went into receivership in October.

No bonus this year for Goldman Sachs CEO Blankfein

NEW YORK (AP) - Goldman Sachs Group Inc. CEO Lloyd Blankfein and six other top executives at the bank will not be receiving cash or stock bonuses for 2008, a spokesman said Sunday.

The decision was made by the seven executives themselves, said spokesman Lucas Van Praag, and approved Sunday by the Wall Street firm's compensation committee. The executives made the decision "because they think it's the right thing to do," Van Praag said.

The seven executives include Blankfein; Presidents and Co-Chief Operating Officers Jon Winkelried and Gary Cohn; Vice Chairmen John Weinberg, J. Michael Evans and Michael Sherwood; and Chief Financial Officer David Viniar.

They will receive no cash bonuses, no stock, and no options for 2008 — just their salaries, the spokesman said. Companies typically release compensation figures for top executives in the spring as part of their annual proxy statements.

Last year, Blankfein received total compensation of $54.0 million, according to calculations by The Associated Press — making him the 6th highest paid CEO at a Standard & Poor's 500 company in 2007. His salary that year was $600,000.

Goldman Sachs, like other financial institutions, has been struggling this year with the soaring mortgage defaults and the seize-up of the credit markets.

Goldman and Morgan Stanley were the only major U.S. investment banks left standing after the buyout of Bear Stearns Cos. by JPMorgan Chase & Co., the bankruptcy of Lehman Brothers Holdings Inc. and Merrill Lynch & Co.'s sale to Bank of America Corp.

Shortly after Lehman's collapse, Goldman and Morgan Stanley became bank holding companies — a move that subjects them to more oversight from the Federal Reserve, but that also gives them permanent and wider access to the central bank's lending programs.

Goldman's shares closed Friday at $66.73, down $3.26, and are down 69 percent since the start of the year. The firm is in the midst of cutting about 3,200 employees, or about 10 percent, of its staff worldwide.

Japan slides into recession, 1st time since 2001

TOKYO (AP) - Japan's economy slid into a recession for the first time since 2001, the government said Monday, as companies sharply cut back on spending in the third quarter amid the unfolding global financial crisis.

The world's second-largest economy contracted at an annual pace of 0.4 percent in the July-September period after a declining an annualized 3.7 percent in the second quarter. That means Japan, along with the 15-nation euro-zone, is now technically in a recession, defined as two straight quarters of contraction.

The result was worse than expected. Economists surveyed by Kyodo News agency had predicted an annualized 0.1 percent rise in the third quarter.

Japan's Economy Minister Kaoru Yosano said following the data's release that "the economy is in a recessionary phase," according to Kyodo.

But the worst may be yet to come in the wake of the global financial crisis, especially with dramatic declines in demand from consumers overseas for Japan's autos and electronics gadgets. Hurt also by a strengthening yen, a growing number of exporters big and small are slashing their profit, sales and spending projections for the full fiscal year through March.

Toyota Motor Corp., for example, has cut net profit full-year profit forecast to 550 billion yen ($5.5 billion) — about a third of last year's earnings.

Compared to the previous quarter, gross domestic product shrank 0.1 percent, the Cabinet Office said. Business investment — a main driver of Japan's six-year economic recovery since 2002 — dropped 1.7 percent from the previous quarter.

"As the global economy is expected to slow down for the time being, downward movements (in Japan) are expected to continue," Yosano said, according to Kyodo.

Since taking office in late September, Japanese Prime Minister Taro Aso has unveiled two economic stimulus packages in an effort to cushion the blow. His latest 27 trillion-yen ($275.7 billion) proposal includes expanded credits for small businesses and a total 2 trillion yen ($20.4 billion) in cash disbursements to households.

At its last meeting, the Bank of Japan cut its key interest rate for the first time in more than seven years, lowering it to 0.3 percent, joining central banks around the world in trimming borrowing costs.

In its semiannual outlook report, the central bank slashed its projection for economic growth to just 0.1 percent for the year through March, compared with a 1.2 percent gain it projected in July. It said both exports and domestic private demand have weakened.

The deteriorating conditions also recently led Masamichi Adachi, senior economist at JPMorgan Securities in Tokyo, to downgrade his outlook on the Japanese economy.

"We are now looking for a severe recession, similar to that during Japan's own financial market crisis in 1997 to 1998, and to the current US recession, in terms of depth of real GDP contraction," he said in a report.

Monday's data showed that net exports sapped 0.2 percentage point from growth, as the high cost of importing fuel eclipsed a slight increase in outbound shipments. Imports rose 1.9 percent, while exports grew 0.7 percent.

Private consumption, which accounts for more than half of inflation-adjusted GDP, increased 0.3 percent from the previous quarter. However, the rebound in consumer demand is unlikely to last, economists say.

Financial overhaul added to Obama's to-do list

WASHINGTON (AP) - Barack Obama isn't president yet, but his must-do list just got longer.

The newest addition to the lengthy list of tasks after taking office: helping oversee the overhaul of the world's financial regulatory system. That is one of the assignments to the president-elect from current global leaders after their weekend summit, where they pledged action to avoid a repeat of the financial mess that has caused worldwide economic chaos.

"Obama has a tall order," said Morris Goldstein, a senior fellow at the Peterson Institute for International Economics who spent years working at the International Monetary Fund, the world's financial firefighter.

"He has a lot of things he has to do quickly in a number of areas and doesn't have a lot of time to think about them," Goldstein said in an interview Sunday.

That will put a lot of pressure on Obama. He did not participate in the emergency two-day summit that concluded Saturday, instead sending representatives to meet with leaders on the sidelines.

After taking the oath of office Jan. 20, Obama will have to figure out in short order how far his administration is willing to go in revamping oversight of financial companies and products, in the United States and abroad, and nailing down the crucial details.

"Obama has an incredible mountain to climb in the way of the economic and financial situation," said Richard Yamarone, economist at Argus Research.

President George W. Bush hosted the summit, where nearly two dozen foreign leaders endorsed broad goals to fend off any future calamities and to revive the global economy.

It will be up to finance ministers to flesh out the details to put such changes in place by the end of March. Leaders plan to hold the next summit by April 30 — just months into Obama's term.

"I think this puts Obama and a new administration in a very difficult position," said Steven Schrage, a former Bush administration trade official now at the Center for Strategic and International Studies.

"It's really going to be up to the next administration to figure, do they breathe life into this? Does this go forward? Do they take it in a different direction?"

All the while, the new president will be under immense pressure to bring relief to millions of Americans who have watched jobs disappear, nest eggs shrink, home values plunge, foreclosures zoom upward and banks — along with storied Wall Street firms — laid low by the financial and economic crises.

"Make no mistake: This is the greatest economic challenge of our times," Obama said Saturday in the weekly Democratic radio address. "And while the road ahead will be long and the work will be hard, I know that we can steer ourselves out of this crisis."

The president-elect himself did not weigh in after the summit about whether he agreed with the thrust of the leaders' broad goals. But he indicated the global gathering was a good idea because "our global economic crisis requires a coordinated global response," he said Saturday.

Translating the leaders' sweeping principles into specific actions will be difficult. "That's the rub. That's where you really see the differences across countries in what you want to do," Goldstein said. "In the coming months, we'll see to what extent Obama's agenda will conflict with the Europeans."

Leaders pledged to make the global financial system more accountable to investors and less vulnerable to risky investing. But there are sure to be differences of opinion on exactly how to accomplish that, which could impede progress at the next summit in the spring.

To provide relief from the current woes, the leaders supported the benefits of enacting government spending plans to stimulate their economies. But they stopped short of a commitment for all to act at the same time, as some Europeans had favored.

The Bush administration has reacted coolly to the idea of a second U.S. stimulus plan.

For Wall Street, the leaders' talk about ways to provide relief probably will be of more importance than efforts to prevent another financial fiasco, experts said. Even without new concrete commitments for government spending, tax cuts or interest rate reductions, the fact that leaders came together to address the crisis and did not let it become a blame game should help bolster some confidence on Wall Street, according to Goldstein, Yamarone and others.

Commerce Secretary Carlos Gutierrez, appearing on CNN's "Late Edition" on Sunday, warned against the making any new financial rules of the road too restrictive.

"There is an inclination, when you get into problems like this to go to an extreme, to over-regulate, to think that we're going to have a worldwide compensation system. How is that going to be done? I think we have to be careful, we have to find a balance and we can't over regulate so that five years from now we're trying to claw our way back because we overdid it," he said.

And former Sen. Phil Gramm, R-Texas, who championed deregulation during his years on Capitol Hill, said in an interview published Sunday: "There is this idea afloat that if you had more regulation you would have fewer mistakes. I don't see any evidence in our history or anybody else's to substantiate it."

Gramm told The New York Times, "The markets have worked better than you might have thought."

Democrats want Bush to help ailing automakers

WASHINGTON (AP) - Democratic leaders in Congress asked the Bush administration on Saturday to provide more aid to the struggling auto industry, which is bleeding cash and jobs as sales have dropped to their lowest level in a quarter-century.

House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid said in a letter to Treasury Secretary Henry Paulson that the administration should consider expanding the $700 billion bailout to include car companies.

"A healthy automobile manufacturing sector is essential to the restoration of financial market stability, the overall health of our economy, and the livelihood of the automobile sector's work force," they wrote. "The economic downturn and the crisis in our financial markets further imperiled our domestic automobile industry and its work force."

There was no immediate comment from the Bush administration about the request to broaden the $700 billion financial industry bailout so automakers could get a share.

Automakers already want an additional $50 billion in loans from Congress to help them survive tough economic conditions and pay for health care obligations for retirees. The companies are seeking the loans as part of an economic aid plan that is now more likely to come together early next year rather than in a postelection session of Congress this month.

Top executives of General Motors, Ford, Chrysler LLC and the president of the United Auto Workers met with congressional leaders Thursday to discuss the loans. The money would be on top of the $25 billion in loans that Congress passed in September to help retool auto plants to build more fuel-efficient vehicles.

"We left the meetings convinced that our nation's automobile industry — the heart of our manufacturing sector — and the jobs of tens of thousands of American workers are at risk," Pelosi, D-Calif., and Reid, D-Nev., said in their letter to Paulson.

Automakers want the new loans included in an economic aid plan that is now more likely to come together early next year rather than in a postelection session of Congress this month. If Congress approved more loans, it would come with strings attached. Potential protections include limits on executive compensation, awarding the government preferred stock in the companies and a suspension of dividend payments to investors.

GM, the nation's largest automaker, warned Friday that it may run out of money by the end of the year after piling up billions in third-quarter losses and burning through cash at an alarming rate. GM's chairman and chief executive, Rick Wagoner, said the company will take every action possible to avoid bankruptcy. GM has planned more job cuts, including another 5,500 salaried and factory workers, but company officials warn that those measures alone would not be enough and that federal aid was essential.

Ford, which recently announced it would slash more than 2,000 white collar jobs, also has seen a rapid decline in its cash supply. But it is in better shape because the company borrowed billions of dollars in 2007 by mortgaging its factories. The company said it had enough cash to make it through 2009.

"We must safeguard the interests of American taxpayers, protect the hundreds of thousands of automobile workers and retirees, stop the erosion of our manufacturing base, and bolster our economy," the Democratic leaders in Congress wrote.

President-elect Obama said Friday his transition team would explore policy options to help the auto industry. Obama's economic transition team includes two allies of the U.S. auto industry — Michigan Gov. Jennifer Granholm and former Rep. David Bonior, D-Mich.

Latvian government takes over major bank

RIGA, Latvia (AP) - Latvia's government has decided to take over the nation's No. 2 financial institution after the bank ran into a liquidity crisis, an official said Sunday.

The government decided late Saturday to take a 51 percent stake in Parex Bank, the Baltic state's second largest bank by total assets, based on data that indicated the bank was headed toward insolvency, said Krists Leiskalns, press adviser to Prime Minister Ivars Godmanis.

On Saturday, Godmanis explained that Parex was functional but in need of liquidity. He also said the government had faced a choice of either taking control of the bank or allowing it to enter bankruptcy.

"It is important to act now before the situation became too bad," said Leiskalns, adding that Parex was too big to allow it to fail.

He said it wasn't necessary to rescue any of Latvia's other 25 banks at the moment, but he didn't exclude the possibility in the future.

The government bought the majority stake in Parex for 2 lats ($3.70). Another 34 percent stake in the bank will be held as collateral by the state-owned Hipoteku Bank.

News of the nationalization was another blow to Latvia's deteriorating economy. On Friday, the country's statistics office announced that gross domestic fell 4.2 percent year-on-year in the third quarter. By contrast, third-quarter annual growth in 2007 was 10.9 percent.

Latvia's economy has entered a period of deep recession after three years of stellar growth, when it led all EU members in gross domestic product growth.

Parex Bank was unique in both Latvia and the Baltic states in that it was homegrown. Founders Valery Kargin and Viktor Krasovitsky established the bank in 1992, one year after Latvia split from the Soviet Union and achieved independence.

A majority of the banking industry in the Baltic states of Estonia, Latvia and Lithuania are owned by Scandinavian financial institutions.

INSIDE WASHINGTON: Auditors go easy on contractors

WASHINGTON (AP) - Instead of seeing red, Pentagon audit managers saw business as usual after being told that a major military contractor failed to open all its books for review.

At a meeting of Defense Contract Audit Agency staff in California last May, auditor Acacia Rodriguez used a 24-page PowerPoint briefing to describe how she and her co-workers struggled with the Bechtel Group's "chronic failure" to provide the financial records required to prove tax dollars were being spent properly.

"Mtn View, we have a problem!!!" said one of Rodriguez's briefing charts, a shorthand reference to the audit agency's branch office in Mountain View, outside San Francisco.

If her bosses were upset over the contractor's foot-dragging, they didn't show it, according to an auditor who attended the meeting, which included Christopher Andrezze, director of the agency's Western region.

Five days later, the agency issued a report rating Bechtel's internal accounting procedures as "adequate," a passing grade that meant defense auditors could ease up on the company. The report made no mention of the records delays.

DCAA is the first line of defense for the public in policing billions of dollars in defense contracts awarded by the government's top-spending department. In theory, the audit agency has extensive powers, including withholding payments and issuing subpoenas, to force contractors to provide the necessary information.

The reality is quite different.

The Bechtel episode illustrates how tolerant the agency can be when defense contractors slow the government's access to paper records and databases. There is no way to know how often DCAA withholds payments because it does not keep track. And it has not used its subpoena power in 20 years.

"We have been basically on the trust system for years," said the auditor who attended the May meeting. "It did not work on Wall Street and it is not working for federal contracts," said the two-decade veteran of the agency who spoke on condition of anonymity because DCAA employees are not allowed to publicly discuss their work.

Negotiation, not confrontation, is the usual method for prying hard-to-get data loose from companies that make weapons or support troops in Iraq and Afghanistan. But the numbers show that approach is too cozy when the need for tough oversight is greater than ever.

In 2007 alone, DCAA performed nearly 34,000 audits covering $391 billion in contractor costs. Of that total, auditors challenged $4.6 billion, or 1.2 percent, as lacking necessary documentation. The question is, how much more could they have caught?

"I start salivating thinking about how much money is involved and the savings that are potentially there," Sen. Claire McCaskill, D-Mo., said at a congressional hearing in September.

Compared with other federal oversight organizations, such as the Government Accountability Office, DCAA's return on investment is weak. For every dollar GAO spends, it saves taxpayers $94. At DCAA, the ratio is $5 saved for every one spent.

DCAA officials declined to be interviewed for this story. In an e-mailed response to questions, Pentagon spokesman Darryn James said contractor delays and refusals to provide records are not extensive problems.

He acknowledged there are times when contractors have to be reminded to provide information. Records disputes are handled at the lowest possible level by the nearly 3,500 defense auditors in the U.S. and overseas, James said. Officials at the agency's headquarters at Fort Belvoir, Va., have had to step in just four times since 2003, he said. All four disagreements were settled without going to court.

"It should be considered a success that DCAA has been able to get the information it needs without having to resort to subpoena authority," James said.

James described the Bechtel situation as an unusual case that was resolved after the agency and the company worked out a way to answer auditor requests for records more promptly.

But an e-mail exchange between DCAA employees in early 2006 indicates the problems with Bechtel were long-standing. "This is the slowest responding (contractor) that I've been at," reads the message from early 2006, provided to The Associated Press on the condition that the employees not be named. "You would be unnerved to know that some of my data request (sic) here have been outstanding for more than six months!!!"

Based in San Francisco, Bechtel is an engineering and construction company that has won just under $10 billion in Defense Department work since 2000, according to FedSpending.org, a Web site created by the public-interest group OMB Watch to track government contracts.

Bechtel spokesman Francis Canavan said the company has a "long record" of working with DCAA. He said there have been occasional delays in locating older records. "We're not aware of any findings that these delays adversely impacted the audits," Canavan said.

Bechtel is not the only trouble spot, according to internal agency documents.

_In September, two auditors traded e-mail complaints about Raytheon, one of the largest U.S. manufacturers of military weapons. "It is not possible to do quality audits under such an environment," one message said. "It is an endless battle," a second said. Raytheon did not respond to a request for comment from the AP.

_Northrop Grumman, which did more than $20 billion in business with the Pentagon in 2007, has refused to give DCAA access to minutes from meetings of the audit committee that reports to the company's board of directors, according to an internal DCAA memo dated Oct. 29. Randy Belote, a Northrop Grumman spokesman, declined comment, saying the issue "is part of an ongoing legal review within the company."

DCAA, formed in 1965, has long been viewed as a bulwark against waste and fraud. Its reputation took a hit this summer after an investigation by the GAO found that supervisors improperly influenced audits to favor contractors. Auditors also were pressured to close audits early in order to meet productivity goals, the GAO report said.

The report mentioned records access problems only in passing. Boeing, a defense giant, did not give auditors the necessary detail to trace costs on a $1 billion space-launch contract, it said. Boeing spokesman Joe Tedino said the company did nothing improper.

"In the end, contractors are getting away with murder" because they know auditors are pushed to complete audits quickly, Diem Thi Le, a senior auditor at DCAA, said at a Sept. 10 congressional hearing on the GAO report. In November 2005, Le reported allegations of misconduct by managers. Her complaints led to the GAO inquiry.

DCAA Director April Stephenson told lawmakers the agency is taking the report seriously and addressing the shortcomings.

The fault isn't all DCAA's, procurement experts say. The agency doesn't always press contractors hard because its actions may not be backed up at the top levels of the Defense Department.

That's especially true for high-profile contracts supporting operations in Iraq and Afghanistan. In one example, department officials overruled auditors who objected to nearly $1 billion in payments to KBR, the Houston-based contractor that supplies U.S. troops with food and housing.

"DCAA finds few friends," said Richard C. Loeb, an adjunct professor of government contract law at the University of Baltimore Law School. "Their work is not appreciated the way it should be."

China announces $586 billion stimulus plan

BEIJING (AP) - China announced a $586 billion stimulus package Sunday in its biggest move to stop the global financial crisis from hitting the world's fourth-largest economy.

A statement on the government's Web site said China's Cabinet had approved a plan to invest the amount in infrastructure and social welfare by the end of 2010.

Some of the money will come from the private sector. The statement did not say how much of the spending is on new projects and how much is for ventures already in the pipeline that will be speeded up.

China's export-driven economy is starting to feel the impact of the economic slowdown in the United States and Europe, and the government has already cut key interest rates three times in less than two months in a bid to spur economic expansion.

Economic growth slowed to 9 percent in the third quarter, the lowest level in five years and a sharp decline from last year's 11.9 percent. That is considered dangerously slow for a government that needs to create jobs for millions of new workers who enter the economy every year and to satisfy a public that has come to expect steadily rising incomes.

Exports have been growing at an annual rate of more than 20 percent but analysts expect that may fall as low as zero in coming months as global demand weakens.

The statement said the Cabinet, at a meeting chaired by Premier Wen Jiabao, had "decided to adopt active fiscal policy and moderately easy monetary policies." It did not give details.

The statement said the spending would focus on 10 areas. They included picking up the pace of spending on low-cost housing — an urgent need in many parts of the country — as well as increased spending on rural infrastructure.

Money will also be poured into new railways, roads and airports. Spending on health and education will be increased, as well as on environmental protection and high technology.

Spending on rebuilding disaster areas, such as Sichuan province where 70,000 people were killed and millions left homeless by a massive earthquake in May, will also be sped up. That includes $2.93 billion planned for next year that will be moved up to the fourth quarter of this year.

The statement, without giving details, said rural and urban incomes would be increased.

Credit limits for commercial banks will also be removed to channel more lending to priority projects and rural development, it said.

As well, reform of the value-added tax system will cut taxes by $17.5 billion for enterprises, the statement said.

The plan was announced before President Hu Jintao goes to Washington to push Western leaders to give poorer countries a bigger role in global financial institutions at a Nov. 15 summit of the Group of 20 major economies on the financial crisis.

Callidus Software to Present at AeA Classic Financial Conference

Callidus Software Inc. (NASDAQ: CALD), the leader in Sales Performance Management (SPM), today announced that Leslie Stretch, president and CEO, and Ron Fior, senior vice president of finance and operations and CFO, will present at the AeA Classic Financial Conference at the Manchester Grand Hyatt Hotel in San Diego, CA.

The four-day conference takes place November 2-5, 2008. Callidus Software is scheduled for four presentations of 45 minutes on Tuesday, November 4, between 2:00 p.m. and 6:00 p.m. PT. On Wednesday, November 5, Callidus Software is scheduled for five presentations of 45 minutes between 8:00 a.m. and 1:00 p.m. PT. Callidus Software's executives will be available for one-on-one meetings throughout both days. Interested attendees can visit Callidus Software's executives at the assigned breakout room without prior sign-up.

The presentation is intended to provide analysts and institutional investors with an overview of the company's business strategies and value proposition.

About Callidus Software®

Callidus Software (www.callidussoftware.com) (NASDAQ: CALD) is the market and technology leader in Sales Performance Management (SPM). Performance-based compensation is one of the largest investments for all companies. Callidus' customers gain a competitive advantage by maximizing the return on this strategic asset. Our award-winning Software-as-a-Service (SaaS) applications set the standard for pervasive performance management across the enterprise. Over 1.9 million employees and channel partners have their performance managed by Callidus Software.

© 1998-2008 Callidus Software Inc. All rights reserved. Callidus Software, the Callidus Software logo, Callidus TrueAnalytics, TrueComp, TrueComp Grid, TrueComp Manager, TrueConnection, TrueFoundation, TrueInformation, TruePerformance, TruePerformance Index, TruePerformance Indicator, TrueMBO, TrueAllocation, TrueProducer, TrueQuota, TrueReferral, TrueResolution, TrueTarget and TrueService+ are trademarks, servicemarks, or registered trademarks of Callidus Software Inc. in the United States and other countries. All other brand, service or product names are trademarks or registered trademarks of their respective companies or owners.

GM, Chrysler request $10 billion in aid: sources

General Motors Corp and Cerberus Capital Management have asked the U.S. government for roughly $10 billion in an unprecedented rescue package to support a merger between GM and Chrysler LLC, two sources with direct knowledge of the talks said on Monday.

The government funding would include roughly $3 billion in exchange for preferred stock in the merged automaker, according to one of the sources, who was not authorized to discuss the matter publicly.

The U.S. Treasury Department is considering a request for direct aid to facilitate the merger and a decision could come this week, sources familiar with the still-developing government response said earlier on Monday.

An injection of $3 billion in equity to support a GM acquisition of Chrysler would be roughly equivalent to the current, depressed value of the top U.S. automaker.

It would also give U.S. taxpayers a large stake in the turnaround of a struggling auto industry that employs over 350,000 American workers and is credited with supporting employment for another 4.5 million in related fields.

Analysts see GM, Chrysler and rival Ford Motor Co having been driven to the brink of failure by a combination of management missteps, slowing global growth and problems in credit markets.

In addition to its equity stake, the U.S. government is also being asked to provide support for the GM-Chrysler merger by taking over some $3 billion in pension obligations under the terms of a proposal now before the government for review, the first source said.

The final component of the proposed support package would be a credit line that could include U.S. government purchases of commercial paper issued by GM to relieve short-term pressure on liquidity, the person said.

A combined GM-Chrysler would control roughly a third of the U.S. auto market by sales and would face immediate pressure to cut costs stemming from excess capacity in almost every facet of its business. Those would include a stable of 11 brands, roughly 10,000 dealers and some 97,000 union-represented factory workers, analysts have said.

But one of the conditions of the merger would be that GM-Chrysler would spare as many jobs as possible in order to win broad political support for the government funding needed to complete the deal, people familiar with the merger discussions said.

GM could not be immediately reached for comment. Cerberus and Chrysler had no comment.

The roughly $10 billion to support the GM merger with Chrysler would be in addition to whatever funds would be allocated to the automaker under an already approved $25 billion program to provide low-interest loans to the industry for retooling to make more fuel-efficient cars.

Wal-Mart removes brand of eggs from China stores

BEIJING (AP) - Wal-Mart said Tuesday it had stopped selling a brand of eggs in its Chinese stores after food safety regulators in Hong Kong found excessive levels of the industrial chemical melamine in eggs sold under the brand.

The world's largest retailer said it has removed a brand of eggs produced by China's Dalian Hanwei Enterprise Group from all of its stores in China.

"We just want to make sure the products on our shelves are safe. We will work closely with suppliers and the government and other related organizations to make further steps," Mu Mingming, a spokeswoman for Wal-Mart, told The Associated Press by telephone from Shenzhen.

Hanwei apologized to consumers in Hong Kong on Tuesday after testers in the Chinese territory on Saturday found its eggs contained melamine, the chemical at the heart of a tainted milk scandal that has sickened tens of thousands of Chinese children.

Hong Kong television station TVB reported Tuesday that the company's director Han Wei said the firm bore responsibility for the contamination.

"There are no consumers asking about protein levels in our eggs and so there is no need for us to add melamine to our eggs in the process of selling our products," Han said in the report. "We truly regret this. We too have an undeniable responsibility."

Calls to Hanwei, based in the northeastern port city Dalian, went unanswered Tuesday, but an official with the city government said Hanwei had started a nationwide recall of eggs deemed "problematic." The official, who refused to give her name as is common among Chinese officials, said she had no further details.

Han did not explain how the chemical made its way into eggs sold by the company. But the Chinese Agriculture Ministry's animal husbandry department head, Wang Zhicai, was quoted by the Beijing News newspaper Tuesday as saying it was highly likely that melamine had been added to the feed given to the chickens that laid the eggs.

Melamine, a chemical used in plastics and fertilizer, is not an animal feed additive and is banned from being mixed in, Wang said.

The report said the ministry has been inspecting feed for the chemical since last year, after a Chinese-made pet food ingredient containing melamine that was linked to the deaths of dozens of dogs and cats in the United States and touched off a massive pet food recall.

Last week, the death of 1,500 raccoon dogs in China was blamed on feed tainted with melamine.

It was not immediately clear why the chemical would be added into animal feed. But a food industry expert pointed to the same motivation cited in the current milk scandal and last year's pet food recall: Melamine boosts nitrogen levels, making products seem higher in protein when tested.

Jason Yan, the U.S. Grains Council's technical director in Beijing, said the chemical could have been added by suppliers of animal feed ingredients trying to pass off a normal grade protein ingredient as a higher grade product.

"The price gap between the two grades is high," about several hundred yuan (tens of dollars) per ton (metric ton), Yan said Tuesday. "Some traders may be willing to take the risk by adding melamine to make a lot more profit."

Wang was quoted as saying that there was little available research on the human effects of eating eggs tainted with melamine. Milk formula contaminated with the chemical has given Chinese babies painful kidney stones.

More than 3,600 children remain sick from tainted milk, with three in serious condition, the Ministry of Health said last week. The deaths of four babies were also linked to compromised dairy products.

Hong Kong testers found melamine in the eggs at nearly two times the territory's legal limit for the chemical in foodstuffs. The egg contamination has prompted Hong Kong officials to expand food testing to Chinese meat imports.

US official says America open to Gulf investors

DUBAI, United Arab Emirates (AP) - A high-level Bush administration official says the battered U.S. economy is open to more investment by Middle Eastern government-owned funds and other wealthy investors.

Speaking to officials and reporters at the Dubai Financial Center during a five-country Gulf tour, Deputy U.S. Treasury Secretary Robert Kimmitt says he is meeting with sovereign wealth funds, companies and other financial institutions in the region.

The aim, he said Tuesday, is to emphasize "we're open to investment."

Kimmitt said many potential investors he has met in the region have been looking at possible deals in the U.S. over the past month.

The question now is just when they might invest, he added.

Oil rises near $64 on world stock market rebound

LONDON (AP) - Oil prices rose to nearly $64 a barrel Tuesday as a rebound in world stock markets bolstered investor confidence that had been weakened by fears of a world economic slowdown.

Light, sweet crude for December delivery rose 67 cents to $63.89 a barrel in electronic trading on the New York Mercantile Exchange by noon in Europe. The contract fell 93 cents to close at $63.22 overnight, the lowest settlement since May 29, 2007.

Key Asian stock markets rebounded sharply Tuesday, including Japan's Nikkei 225 index, up 6.4 percent and Hong Kong's Hang Seng index, jumping 14.4 percent — its biggest gain in 11 years.

"It was crude reacting to the Nikkei," said Jonathan Kornafel, Asia director for market maker Hudson Capital Energy in Singapore. "It began with a turnaround in Asian markets."

European stock markets also opened higher, with Germany's DAX up 7.34 percent and Britain's FTSE 100 rising 2.28 percent.

Oil investors have been taking a cue from a plunge in global stock markets that suggests major economies are headed for a significant recession over the next 12 months. Oil prices have fallen 58 percent since reaching a record $147.27 on July 11.

The Dow Jones industrial average fell 2.4 percent Monday after credit ratings agency Moody's Investors Service downgraded General Motors Corp.'s credit rating further into "junk" status, citing a sharp contraction of the U.S. auto market. The Standard & Poor's 500 index fell 3.2 percent.

"It's quite a severe slowdown that's been priced in already," Kornafel said. "If the credit market remains tight and the recession worsens, we could certainly go into the $50s and even below $50, but that would be an overshoot to the downside."

"Further support for the bears" is likely to come from Wednesday's U.S. inventory data which is expected to show a fifth consecutive increase in crude oil stocks, by 1.2 million barrels a day, according to analysts at JBC Energy in Vienna, Austria.

Prices have fallen despite a production quota cut of 1.5 million barrels a day by the Organization of Petroleum Exporting Countries last week. OPEC officials have said the group, which controls about 40 percent of global crude oil production, may cut output again at a meeting in December.

"It doesn't matter what OPEC does or other supply news, people are just so focused on demand and getting their money out of trades that no longer make money," Kornafel said. "There's no real attention being paid to fundamentals in the short-term. It's still the panic."

In other Nymex trading, gasoline futures rose 0.91 cent to $1.49 a gallon and heating oil gained 2.25 cents to $1.94 a gallon. Natural gas for November delivery fell 1.6 cents to $6.11 per 1,000 cubic feet.

In London, December Brent crude rose 48 cents to $61.89 a barrel on the ICE Futures exchange.