Retail Tricks That Make You Overspend

by The Motley Fool

Feelings and finances are as inextricable as the smell of popcorn and the craving for a salty snack. Over the years, we’ve interviewed psychologists, economists, CEOs, and investment analysts about the mood-money connection. Here are a few tricks the brain plays on our basic math skills, and a few examples of how marketers pull our heartstrings to loosen our purse strings. As the old saying goes, buyer beware.

You owe me one
When marketers tap into our natural propensity to return a favor, the money flows. That’s how Tupperware-party participants (plied with friendly chitchat and free crudites) get swept up in a buying frenzy.

Bob Cialdini, professor of psychology and author of Influence: Science and Practice, calls this strategy “reciprocity,” and he illustrates how powerful it can be in practice. When the American Disabled Veterans organization sent out its standard solicitation, it got an 18% donation-response rate. When customized address labels were added to the packet, the contribution rate jumped to 35%. “They become benefactors before they make a request,” he says. “I’ve gotten this gift with my name on it. As soon as I begin to use it, I feel obligated to say ‘yes’ to their request in return.”

Buy now or regret later
Flea-market shoppers must make split-second buying decisions. Savvy mass marketers also play on shoppers’ limited-time-only emotions to encourage unplanned purchases.

Costco CEO Jim Sinegal revealed how the warehouse chain takes advantage of that mindset. “We refer to it as a treasure hunt. We carry about 4,000 stock-keeping units, and about 1,000 of them are constantly in that changing mode. In the past, you may see that we have some Coach handbags. The next time you come in, the Coach handbags aren’t there, but perhaps there are some Fila jackets. The attitude is that if you see it, you have got to buy it, because it may not be there next time.” (Guilty!)

Tears cloud your cash decisions
A study in the mid-1990s found that disgust (triggered by showing a gross scene from the movie Trainspotting) made test subjects lower their valuation of a commodity, while sadness (brought on by a weeper clip from The Champ) increased people’s value assessments.

Jennifer Lerner, Ph.D., assistant professor of social and decision sciences and co-author of the study, explained that when people are disgusted, they want to get rid of things and avoid acquiring new things. Sadness, however, drives us to change our circumstances. “It’s out with the old, in with the new,” she says. But in pursuit of “the new,” our unhappiness dulls our ability to assign an accurate value, and we are more likely to pay a premium for replacement items. In other words, don’t shop on an empty stomach, or after watching Terms of Endearment.

More is better, and cheaper … right?
Ah yes, the 24-pack of tuna and 280-ounce bag of gummy bears — tempting, indeed. We haul home so much industrial-sized stuff that we should be charging it rent. Just remember, too much of a good thing can actually be a bad thing. The next time you see a supposed “deal” on something that is not an immediate need, ask yourself:

• Is it really a deal? Meaning, do you know the prices on similar products elsewhere, and recognize when the price you’re seeing on the item really is a rare bargain? Pay particular attention to higher-dollar items like cleaning products, Brita water-pitcher filters, dog food, or whatever it is that tends to comprise the bulk of your grocery bill. You’ll drive yourself crazy trying to sweat all the small stuff, so concentrate instead on big-ticket savings.

• Do I really need it — now or later? It’s easy to convince yourself that you absolutely cannot get by without the shredded Swiffer thingie that looks like an old-fashioned duster. (Somehow I’ve managed to make do without it for this long.) However, particularly while warehouse shopping, you’re likely to run across items you know will come in handy a month or two down the road. In that case, stockpiling is fine, so long as you don’t forget about those three tubs of peanut butter already in your pantry the next time you’re at the grocery store.

Now you know how to spot retailers’ mind games. And the next time feelings start invading black-and-white money matters, you’ll be better prepared to decide what’s ultimately best for you and your bottom line.

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25 People Who Will Affect Your Finances in 2009

Kirk Shinkle

A month into the new year, and the American economy is reeling from the ongoing banking crisis, battered retirement accounts, and mounting unemployment. Who are the folks who might make things better, or even worse? Who are the people who will move markets this year, up or down? To help you keep track of these "market movers," U.S. News & World Report compiled a list of key CEOs, politicos, and even media stars to watch in 2009. So if things do improve, you'll know whom to credit. And if they don't, you'll know whom to blame.

1) Barack Obama. Tackling the economic mess is job one for the new president, and then it's on to challenges in healthcare, climate change, and financial re-regulation. It's a daunting list for the new commander-in-chief who famously said "the challenges we face are real ... [and] they will be met."

2) Ben Bernanke. Now that the Federal Reserve chairman has slashed interest rates to almost zero and lent billions to the ailing banking sector, what comes next? He'll need to stay nimble this year, as the central bank keeps trying to figure out how to deal with all those bad mortgage assets while supporting a Fed balance sheet that's ballooned to $2 trillion.

3) Lawrence Summers. He's a brilliant economist and a former Clinton-era treasury secretary. Now, as head of the National Economic Council, he's a major force in sizing up the Obama Administration's stimulus package.

4) Timothy Geithner. The youthful Treasury Secretary (he's 47) will be tasked with figuring out a plan to heal the banking sector. His time in the trenches during the collapse of Bear Stearns and Lehman Bros. give him credibility in the finance world, even after it came to light that the country's most visible financial enforcer forgot to pay some of his own taxes.

5) Jean-Claude Trichet. The president of the European Central Bank caught flack for hiking interest rates in mid-2008, but reversed course in response to the global downturn later in the year. Since then, he's proved surprisingly creative in dealing with the global spread of the banking crisis. Still, as lenders worldwide (and Europe in particular) face mounting losses, his job is far from done.

6. Warren Buffett. The legendary investor took full advantage of market turmoil last fall, decrying the rise of "financial weapons of mass destruction" while making billion-dollar investments in beaten-down American companies including Goldman Sachs and General Electric. Buffett's investments didn't escape the market's decline in late 2008, but if there's any environment where a value-investing guru can prosper, it's this one.

7) Bill Gross. No other bond investor carries as much weight as Bill Gross, co-founder of the $800 billion Newport Beach, Calif.-based bond giant Pacific Investment Management Co., or PIMCO. Risky bets placed on Fannie Mae, Freddie Mac, and other finance and mortgage-related securities late last year showed some daring. They'll play out in 2009. His latest advice for fixing the economy: "[T]he remedy for this deflationary delevering and mini-depression is simple and almost axiomatic: stop the decline in asset prices."

8) Lou Jiwei. As chairman of China Investment Corp., the $200 billion state-run foreign investing arm, Jiwei suffered through bad bets on investments in American financial firms like Blackstone and Morgan Stanley. Now, the technocrat is shying away from the U.S. banking sector, and raising stakes in institutions at home.

9) Barney Frank. As the chairman of the House Financial Services Committee, the colorful and whip-smart Massachusetts Democrat will play a key role in the new Congress's efforts to resolve the worst financial crisis since the Great Depression. He's also addressing the regulatory shortcomings that helped create it.

10) Sheila Bair. By arguing that the federal government should do more to modify troubled loans--and then introducing a program that would do so--Bair, who heads the Federal Deposit Insurance Corp., has emerged as a leading figure in the high-profile battle against foreclosures.

11) Kenneth Lewis. For now, Bank of America CEO Kenneth Lewis remains in charge of the consumer-banking giant. After losing face following unexpected losses from the $21 billion emergency acquisition of Merrill Lynch, he's fighting to restore the bank's profitability--and his reputation.

12) Jamie Dimon. The J.P. Morgan Chase head is either the smartest guy on Wall Street, or just the luckiest. He got the deal of the century by picking up Bear Stearns and Washington Mutual, deals which makes Morgan, by some measures, America's biggest bank. Now all he has to do is rebuild destroyed shareholder value at a time when a slow economy and tighter regulation could make banking a far less profit-friendly business.

13) Vikram Pandit. Citigroup's beleaguered CEO has a tough year ahead (if he manages to keep his job). The looming questions: What's to be done with a $306 billion portfolio of troubled mortgages and other assets? And will the bank weather mounting credit card losses and consumer defaults?

14) Jim Cramer. Love him or hate him, the former hedge-fund manager turned "Mad Money" host on CNBC still has a voice that out-booms all others when it comes to stock picking. Lately, his manic antics have included scathing attacks on asleep-at-the-switch regulators and tossing his hat into the ring for the job of chairman of the Securities and Exchange Commission.

15) Prince Alwaleed bin Talal. The billionaire Saudi investor has had a rocky go since his firm, Kingdom Holding Co., went public on the Saudi stock exchange in 2007. A huge stake in Citigroup went south last year, sending Kingdom shares down 62 percent. Alwaleed's personal net worth slumped to an estimated $17 billion, down from $21 billion in 2007.

16) Eric Schmidt. The Google CEO is forging ahead despite a wavering stock price on the strength of a 60 percent-plus market share in Internet searches and the accompanying highly profitable ads. He's also behind new moves into coming battles in the browser and smart-phone wars.

17) Meredith Whitney. Oppenheimer's outspoken banking analyst has become the closest thing to a household name in the research world, thanks to gutsy but accurate forecasts of financial trauma. Her bearish calls made her one of the most prescient figures on Wall Street and influential enough to make blue-chips tank and CEOs tremble.

18) Steve Jobs. It's hard to think of any company more tied to the personality of its leader than Apple. It's not surprising, given Jobs' role as the architect behind runaway successes including the iPod, iTunes, and iPhone. A swooning share price amid rumors regarding his future at the company shows Wall Street still believes Apple's fate rests on the man who made Mac.

19) Austan Goolsbee. The young star from the University of Chicago Graduate School of Business is the cheerful face of centrist, market-friendly policies in the Obama Administration. He's won over conservative critics including George Will despite his own criticisms of supply-side conservative policies. His role as chief economist for the President's Economic Recovery Advisory Board will include helping to fix the financial crisis while keeping up the administrations' pro-market, pro-trade credibility.

20) Rupert Murdoch. He won the battle to buy the Wall Street Journal, and the billionaire News Corp. head continues to oversee a sprawling global empire of media properties. How he'll fare during one of the worst advertising markets in history remains to be seen.

21) Nouriel Roubini. They call him "Dr. Doom." The New York University economist has the right to wear the title as a badge of honor. After correctly predicting the severity of the housing and credit crisis, he's a continually popular source for the latest version of what could still go very wrong in the economy.

22) Maria Bartiromo. Anchor of CNBC's "Closing Bell with Maria Bartiromo" and host and managing editor of the nationally syndicated "Wall Street Journal Report with Maria Bartiromo," she's become the first face of financial news during one of the worst downturns in history.

23) Neil Cavuto. Fox's irascible Neil Cavuto has seen his profile rise as the financial crisis rages and the economy swoons. A familiar face on both the Fox News Channel and Fox Business Network, he's the network's unapologetic free-market voice at a time when defending capitalism has become a tougher sell.

24) Lawrence Kudlow. If Barack Obama makes the case for higher taxes on the rich, you can bet CNBC host Lawrence Kudlow will be taking the other side of that trade as a long-time banner-carrier for the tenets of Reagan's supply-side revolution.

25) Paul Krugman. Arguably America's best-known living economist, Krugman won the 2008 Nobel Prize in economics for his work in international trade. In his more public role as one of the staunchest critics of the Bush Administration, the New York Times columnist and author remains both an unapologetic partisan and a helpful demystifier of complex economics.

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Toyota sees first annual net loss since 1950

Yuri Kageyama, AP Business Writer

TOKYO (AP) -- Toyota forecast its first annual net loss since 1950 on Friday as plunging demand for cars, especially in the U.S., and the strong yen pummeled earnings at the world's No. 1 automaker.

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Toyota Motor Corp. reported a 164.7 billion yen ($1.8 billion) loss for the October-December quarter, down sharply from the 458.6 billion yen profit for the same period the previous year. Quarterly sales plunged 28.4 percent to 4.8 trillion yen.

Joining a string of Japanese companies that are now expecting to slide into the red for the year, Toyota said it expects a net loss of 350 billion yen ($3.85 billion) for the fiscal year through March -- a stunning reversal from the record 1.72 trillion yen profit it posted the previous year.

In December, Toyota, maker of the Prius hybrid and Camry sedan, thought it would eke out a small annual net profit, but the outlook has darkened since then, particularly as the U.S. auto market has collapsed.

"Toyota is having serious problems responding," said Yasuaki Iwamoto, analyst with Okasan Securities Co. in Tokyo. "It boasts a full and global lineup of products. But the world's auto demand changed in a flash."

Since the company can't count on global sales picking up next fiscal year, at best it can aim to cut costs to minimize the damage, Iwamoto said.

The last time Toyota had the equivalent of a net loss was in 1950, when it reported just parent results under different accounting standards than it uses now. It has not had a quarterly net loss since it began reporting quarterly numbers in 2002.

Toyota, which last year overtook General Motors Corp. to become the world's best-selling auto company, is shutting down production at its 11 plants in Japan for 14 days during the first three months of this year, and further such suspensions may be needed.

The company announced no further job cuts Friday. It has said it plans to reduce the number of contract workers -- who lack most of the benefits given to regular salaried workers, as well as the tacit guarantee of lifetime employment -- from 8,800 in June last year to 3,000 in March.

The rapid rise of the yen against the dollar, euro and other currencies, which reduces the value of overseas earnings, also hurt results.

Executive Vice President Mitsuo Kinoshita promised Toyota will turn itself around through cost cuts and new products. He said Toyota continues to be committed to developing gas-electric hybrids as a pillar of its growth strategy.

"By taking these measures, we will overcome the current crisis and evolve into a company with a higher level of efficiency and resilience," Kinoshita said.

Last month, the company tapped as incoming president a member of the founding family, Akio Toyoda, an executive vice president who at 52 is considered young by Japanese standards for heading a major corporation.

Toyota officials and analysts say he can help bring employee ranks, group companies and dealerships together during hard times because he has the special charm of a Toyoda.

Just a few hours before the earnings were released, Moody's Investors Service lowered its top credit rating of "Aaa" on Toyota by one notch to "Aa1," citing fears about its profitability.

Toyota's global vehicle sales for the October-December quarter shrank by 443,000 from the same period a year earlier to 1.84 million as sales dropped throughout the world, including North America, Europe, Japan and other Asian nations, it said.

The dramatic contraction in the American vehicle market has been particularly painful. In January, Toyota's U.S. sales dropped 32 percent amid a 37 percent contraction in the overall U.S. market.

Toyota lowered its global vehicle sales forecast for the fiscal year by 220,000 from its December forecast to 7.32 million. It now expects 21 trillion yen in annual sales, down from a record 26.3 trillion yen the previous year.

The company also said its yearly operating loss will balloon to 450 billion yen, worse than its earlier forecast of a 150 billion yen loss. That would be the company's first operating loss in 70 years. Operating income excludes taxes and other items included in net profit, and often gives a picture of a company's core business.

Until the U.S. financial crisis erupted last year, Toyota had been on a roll, boosting profits each year for seven straight years, riding on the success of its fuel-efficient models.

Other big Japanese exporters are suffering, too. Electronics makers Sony Corp. and Panasonic Corp. are both forecasting losses for the fiscal year through March.

Honda Motor Co., Japan's second-biggest automaker, expects to stay in the black for the year through March with a 80 billion yen profit, although that's down 87 percent from a record 600 billion yen the previous year.

Nissan Motor Co., the nation's No. 3 automaker, reports earnings Monday. Smaller automakers Mitsubishi Motors Corp. and Mazda Motor Corp. have already projected losses for the fiscal year.

Toyota shares rose 1.6 percent to 3,050 yen. Toyota announced earnings after trading ended in Tokyo.

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Europe's 'Asian crisis' will run till 2010

"It's grim out East," as Lex says in the FT. After a six-year boom in 2002-2007, central and eastern Europe (CEE) has hit the skids amid the global downturn and credit squeeze. In Lithuania, Romania and Ukraine stocks fell by 75% in 2008 and elsewhere lost around half of their value. This year, Russian equities have slid by another fifth. Currencies have dived too, with Hungary's forint at a record low against the euro this week. The International Monetary Fund (IMF) now expects the region to slide into recession, shrinking by 0.4% in 2009.

Investors are wary of all markets just now, says Nigel Rendell of RBC Capital Markets. But CEE is "suffering the most". That's partly down to the global downturn, especially the eurozone recession. As Capital Economics points out, exports to the single currency area account for 40% of GDP in the Czech Republic and Hungary; in Bulgaria, Poland and Romania, they comprise 15%-22%. The resulting slump in industrial output, on course to fall by more than 10% in most countries this year, is raising unemployment and denting consumer confidence.

But the main reason investors are jittery is that, unlike Asia or Latin America, CEE is overleveraged. It went on a foreign borrowing spree, leading to "unsustainably high current-account deficits" (Latvia's and Bulgaria's are 16% and 18% of GDP) and sharply rising foreign debt payments, says David Oakley in the FT. And external financing is drying up. Private capital flows into the region are set to slump to $30bn this year, down from $254bn in 2008, according to the Institute of International Finance.

Bank borrowing from abroad funded "a large chunk" of the region's current-account deficits, says Capital Economics. And not only are most banking systems highly dependent on wholesale funding, but they lent out money in foreign currencies too. In Latvia and Hungary, foreign-denominated loans make up 90% and 60% of all loans respectively. With local currencies plummeting against the Swiss franc and the euro, this will give the rise in bad loans as the recession bites additional impetus.

With global credit markets essentially closed, Ukraine, Latvia and Hungary have already had to turn to the IMF to prop up their banking systems and economies, and more IMF deals with the region look likely. An IMF package comes with stringent conditions that tend to exacerbate downturns. Meanwhile, investors are becoming increasingly concerned that Ukraine, set to shrink by up to 10% this year, will default on its sovereign debt, despite recent IMF assistance. It has to pay 26% on its foreign debt (which stands at $100bn between the government and corporate sector), says Bloomberg.com, and needs to roll over $30bn this year. Political turmoil is creating further uncertainty.

CEE is comparable to Asia in 1997; it has large external imbalances and is suffering a sudden funding shock, says Lars Christensen of Danske Bank. In view of what happened to Asian currencies back then, CEE currencies probably still have "significant weakness" ahead. A co-ordinated EU-wide response, hitherto lacking, would boost overall investor confidence, reckons Christensen, while Simeon Djankov and Facundo Martin on Crisistalk.worldbank.org note that emerging-market stocks tend to recover six months before economic activity (represented by industrial production) bottoms out. The upshot? Don't expect a significant recovery in CEE equities before mid-2010.

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Top 10 Investment Mistakes

This weekend I’ve been asked to share some thoughts on personal finances in a forum setting. They’ve asked me to share about investing and giving. I’ve shared a bit on my blog about giving so I thought I’d highlight some of my hard lessons about investing. I think overall, I’ve done pretty well, but not great. If I had to do it all over again, I’d definitely do some things differently. So, here are my top 10 investment mistakes from experience:

1) Paying high expenses for financial advice or active management. The thing that just drives me nuts are the high expense ratios you see in mutual funds and high expense fees charged by financial advisers. Are you kidding me?! It’s a total sham, they have to beat the market in order to justify their higher fees and to be honest not everyone can beat the market, right? There is an average return, your adviser generally is not smarter than the collective whole of the market unless you are Warren Buffett, and in that case, why don’t you just buy shares of Berkshire? If you’re really lazy, just buy ETFs and call it a day. You don’t have to do your homework and you can just get average returns without the high fees. Buying mutual funds with high expense ratios is just plain dumb.

2) Timing the market. Ok, I’ve done this a few times and have gotten skewered for it. What did Benjamin Graham say? The market is a voting booth day to day, but it’s a weighing machine in the long-term. If you’re investing in a fundamentally sound company with growth prospects allow it to have the daily swings as long as it’s a fundamentally sound company and in the long run you’ll be fine. When I try to time it by guessing where the public winds might land, I get totally skewered and at its base level - it’s gambling.

3) Not setting goals. What are you investing for? Why are you investing? If you don’t know the answers to those questions, you won’t like the outcome. When I was investing during grad school and literally day trading during class breaks, I never set a goal, it was 1999 and every trade seemed to be profitable. It was crazy. I thought I was a smart dude since my trades were profitable and I really had no goals, I thought it would go on forever. Had I set a goal of paying off grad school, or buying a house, or saving XX amount for retirement - I may have been able to get out of the game and not sustain the losses I took in 2000 and 2001. Set your limits or your goals.

4) Leveraging your investments, generally. Borrowing money to invest in the stock market is generally not a great idea. Borrowing money for education, primary home (sometimes) may be a better idea. I made the mistake of going on margin, playing with options to drive higher returns. It’s plain stupid, most people will lose money investing this way. Have you heard of Gambler’s Ruin? The theory is that the person with the least amount of money will always hit ruin eventually. You can’t beat the market with excess returns without taking excess risk. One excess bet can lead to total destruction of your capital. Don’t be greedy, fat pigs get slaughtered.

5) Buying stocks based on casual conversations. Ask yourself, how many times have I made money following tips from friends? I have a rule now, if I hear a tip, I start doing the opposite. It’s scary, I’d be sipping martinis on the beach right now if I always did the opposite of what my friends told me was a hot tip. Here’s the thing, if your friend had the hot tip and it was known by the public, it would be priced into the stock which would be a fair price, if it wasn’t known by the public, then it’s unethical and you can go to jail. If it’s a gut thing or a great story, then run the other way.

6) Putting your money to work at all times. This is absolutely the worst advice I’ve ever heard. If you had just sat on the sidelines last year and put your money in treasuries, you would have kicked butt. Don’t be in a rush to put money to work, be patient. Cash is the new asset (at this time), tomorrow your cash will buy more real estate, more stocks, etc. Be patient. Every time I dipped my toes in to buy, I’ve been hurt. Wait a little, be patient, and be ready - I’m not advocating market timing to try to find the bottom, just relax and take your time.

7) Getting rich quick. I am a very skeptical guy when it comes to investment pitches, but every once in a while even I get snagged to think about an opportunity with excess returns. If there is anything I can shout to you now, THERE IS NO FREE LUNCH! Excess returns generally require excess risk. Excess risk means you usually lose money. I’ve invested in some ridiculous gold scheme once and never again. You’ll probably get taken at least once, but don’t ever let it happen to you twice. One more time - there is no such thing as excess returns without excess risk!

8 ) Thinking that paper gains is the same as cash. As we all know now, those home values can disappear very quickly. Never run your “personal business” thinking that you have more cash than you actually have. Run conservatively and don’t spend more cash than you have. All common sense. A common side effect if you think paper gains are cash is that you easily get too attached to the paper value and easily get bummed out when it starts dropping in value. It’s valueless until you sell it. Either sell it and move on, or stop thinking about it. Man, I’m still struggling with this one… Ugh.

9) Watching CNBC.

10) Not maximizing your tax advantaged investments. If you can contribute to your Roth IRA, are you maximizing that? Does your company match 401K, if so are you maximizing it? It’s a free lunch. Do you keep your higher return/higher risk investments in your Roth and 401K and lower risk in your taxable portfolio? I can’t mention how many times I’ve missed these opportunities.

Full Disclosure - I’m currently about 2% in equities. I’m terribly bearish about the market and am pretty happy staying on the sidelines. We’re in for a long winter. This post as with all my posts are my opinion only and not intended as financial recommendations or advice. Make your own decisions and live with the outcome. Be smart.

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Consumers blindsided by Experian on credit score

Lita Epstein

At a time when it's so important for consumers to monitor their credit scores, Experian, one of the three credit reporting agencies, has decided consumers are not entitled to see their FICO scores based on their Experian credit file. I did call Experian's press office for a comment, but have not yet received a call back.

Federal law only requires that the credit reporting agencies make your credit file available, there is no law stating that you must have access to your credit score before applying for a loan.

Beginning on February 13, you will only be able to get Equifax and TransUnion credit scores on myFICO.com. When you go to myFICO you'll see a banner headline about the cutoff by Experian. According to the notice on myFICO's discussion boards, Fair Isaac says, "It is important to understand the majority of lenders will continue to use FICO scores based on Experian data to make creditworthiness decisions, but those FICO scores based on Experian data will not be available via www.myFICO.com, nor any other public venue."

Fair Isaac, goes on to tell lenders, "Fair Issac is dedicated to offering FICO Scores to financial institutions via all three of our bureau partners to provide the most independent and fair representation of a consumer's credit picture. . .To meet consumers' credit empowerment demands, Fair Isaac will continue to offer both Equifax and TransUnion credit management services through our myFICO.com website."

Given that Experian advertises the most on TV pushing their website FreeCreditReport.com with the singer whose credit score got ruined, it's ironic that they would close off access to this important piece of information. You can see comments about the change on the forums at myFICO.com. Here's one excellent comment from that board: "The conspiracy theorist/paranoid side of me wants to think that this is EX giving into pressure from their lender customers, who, without an informed public with any real visibility into their own credit scoring, can approve, reject and set rates with little or no explanation to the applicant other than the standard "due to information in your credit report" bit."
That comment describes exactly what did happen when consumers could not see their credit score. Without full disclosure of credit scores lenders can play games with the credit offers they give you. Right now you're only cut off from Experian's credit scores, but if they get away with it, I'm sure the other credit reporting agencies will follow Experian's lead.

If you want to protest write your Congressional representatives. Congress needs to make it a consumer's right to see the credit scores used to make lending decisions. Right now a lender must give you your score when you apply for credit, but that score is given to you after you have gotten a credit decision. Consumers need to see that information before they start applying for a loan.

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Famous names pepper Madoff client list

• Graeme Wearden and Nick Mathiason
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  Among the 13,567 individuals, trusts and private bank accounts is the name John G Malkovich, although there is no confirmation that this is indeed the famous actor. Photograph: Lori Ann Cook/AP

  A list of the many thousands of people who invested with Bernard Madoff has been released, including several prominent British society figures and a number of well-known Americans from politics, sport and Hollywood.

  The 162-page roll call of victims of Madoff's alleged $50bn (£34.3bn) fraud was filed with the New York bankruptcy court and made public late on Wednesday night. Among the 13,567 individuals, trusts and private bank accounts is the name John G Malkovich, although there is no confirmation that this is indeed the famous actor.

  The highest-profile British name is Lady Victoria de Rothschild. De Rothschild, formerly married to Sir Evelyn, was embroiled last year in a Tory donor row. Also on the list of high society financiers, actors and sports stars is Lady Evelyn Jacobs, wife of the Liberal Democrat-supporting life peer who had an estimated fortune of £128m last year.

  

  Other names include family trusts belonging to the Kissinger family, and the American actor Barbara Bach, the wife of ex-Beatles drummer Ringo Starr – although again there is no confirmation that this is the former Bond girl.

  The list also includes John Denver Concerts and John Denver Enterprises, Sandy Koufax – a former star pitcher with the Los Angeles Dodgers – and Frank Lautenberg, senator for New Jersey. Fred Wilpon, owner of the New York Mets baseball team, is one of many names to appear several times.

  The list is peppered with members of Madoff family. As well as Bernard himself, his brother Peter, sons Andrew and Mark, daughter-in-law Deborah, and the wife of his late nephew, Jennifer, all appear.

  Victims of Madoff's bankrupt fund range from Hollywood movie directors to hedge funds, Jewish charities and banks around the world. The film producer Steven Spielberg, actor Kevin Bacon and a foundation run by Holocaust survivor Elie Wiesel have all lost money. Austria's Bank Medici, one of the biggest financial losers from the affair, denied a report that its chairman, Sonja Kohn, had gone into hiding to avoid furious Russian clients.

  In a reminder of the tragedy that the Madoff case has already generated, the list also includes Access International Advisers. In December, René-Thierry Magon de la Villehuchet, the co-founder of AIA, was found dead after it emerged that his company may have lost $1.5bn.

  Madoff's own lawyer, Ira Lee Sorkin, appears on the list, as do several financial firms such as Santander, Bank of New York, Bank of America and Citigroup. Santander has offered to compensate the many small investors who have lost money in the alleged fraud.

  The list appeared as fund manager Tremont, which lost $213m, filed a lawsuit against auditors KPMG. The suit alleges that auditors should have spotted something wrong with Madoff's consistent investment returns. His fund reported investment returns of 10-15% every year for about 20 years in diverse market conditions, which is highly unusual.

  The Madoff scandal broke in mid-December, when the 70-year-old veteran investor apparently told his family that his empire was "all one big lie".

  The case has raised new questions over the regulation of the US financial system. Harry Markopolos, an analyst who raised fears about Madoff in 2000, has heavily criticised the securities and exchange commission for failing to act. He told a House of Representatives committee in Washington that the SEC needed to employ fewer lawyers and more people with understanding of the securities industry.

  He said it had taken him five minutes to suspect fraud from Madoff's marketing material and four hours to develop mathematical models to prove it. Regulators ignored his warnings.

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Facebook turns 5 -- but can it survive?

By Simon Hooper

(CNN) -- A Web site started by a student as a way of staying in touch with friends celebrated its fifth birthday Wednesday as a billion-dollar business and a global phenomenon.

Around 15 million users update their statuses on Facebook daily.

Mark Zuckerberg was 19 when he launched Facebook from a Harvard dorm in 2004. Within 24 hours, more than 1,000 of his Harvard classmates had signed up for the social-networking site and one month later half of those on campus had a profile.

Five years on, the Web site claims more than 150 million users worldwide while Zuckerberg, now 24, was named the youngest billionaire on the planet -- with an estimated fortune of $1.5 billion -- last year by Forbes magazine.

Writing in Time on Zuckerberg's inclusion in the magazine's 2008 list of the most influential 100 people in the world, Craig Newmark, founder of Craigslist, said Zuckerberg had created "a social network that not only reflects your life but maybe expands it."

Along with sites such as MySpace and Bebo, Facebook has also been credited with bringing social networking into the mainstream, with politicians, businesses and celebrities jumping on the bandwagon.

According to Facebook figures, around 15 million users update their statuses daily. More than 850 million photos are added to the site each month while the average user has 120 friends.

Meanwhile, Web sites such as Facebook were widely credited with helping Barack Obama secure victory in last year's U.S. presidential election by helping him connect via the Internet with younger, previously disengaged voters.

In a blog published Wednesday to mark Facebook's birthday, Zuckerberg said the site offered a way of making the world more open and giving people a voice to "express ideas and initiate change."

"The culture of the Internet has also changed pretty dramatically over the past five years. Before, most people wouldn't consider sharing their real identities online," Zuckerberg said. "But Facebook has offered a safe and trusted environment for people to interact online, which has made millions of people comfortable expressing more about themselves."

In a new Facebook first, the Web site featured at last week's World Economic Forum in Davos with users contributing to live discussions and polls that were flashed onto big screens during sessions with world leaders.

Speaking to CNN, Randi Zuckerberg, Mark Zuckerberg's sister, said politicians and businesses were looking to Facebook as "a place for insight and to get a real time pulse."

Yet questions still remain about the finances behind Facebook's remarkable expansion. The company has attracted more than $200 million in investment from venture capitalists while in 2006 it rejected a reputed $1 billion bid from Yahoo!

In 2007 Microsoft paid $250 million for a 1.6 percent share, a figure that gave Facebook a total projected value of some $15 billion.

But with the global financial crisis hitting Web advertising -- Facebook's core revenue stream -- those sort of figures now appear to belong to a bygone age.

"What Facebook isn't yet is a slam-dunk success," said Adam Lashinsky of Fortune magazine last month. "It is selling advertising, it is bringing in revenue but it's not wildly profitable even if it is profitable at all.

"There is no question that it has entered the zeitgeist but that doesn't mean that it has progressed beyond the stage of being cool or viral or exciting to being a mega-business success the way that Google, Microsoft or even its arch-competitor MySpace is."

Yet in an industry prone to short term fads and rapid evolution, Mark Zuckerberg said Wednesday he remained committed to making sure that Facebook remained as relevant in the future.

"Building and moving quickly for five years hasn't been easy, and we aren't finished," he said. "The challenge motivates us to keep innovating and pushing technical boundaries to produce better ways to share information."

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SEC pummeled as Madoff tipster testifies

By Rachelle Younglai and Karey Wutkowski

WASHINGTON (Reuters) - Harry Markopolos, a former investment manager who tried to warn U.S. regulators about Bernard Madoff, joined lawmakers in blasting the Securities and Exchange Commission but said he was forwarding more tips to the agency.

Markopolos told a congressional hearing on Wednesday that SEC staff were neither willing nor able to uncover Madoff, arrested in December and charged with a record-shattering $50-billion fraud.

Calling SEC staff "too slow, too young and too undereducated," Markopolos said the regulator was hindered by lawyers, did not understand red flags, could not do the math and was captive to the financial industry.

"They looked at the size of Madoff and he's a big firm and we don't attack big firms," said Markopolos, who became aware of Madoff when the firm he worked for tried to pursue the same kind of strategy Madoff did but never got the same steady, strong returns.

Members of the House Financial Services subcommittee hailed Markopolos but excoriated five SEC officials who declined to answer specific questions about the Madoff case, citing ongoing investigations.

"You couldn't find your backside with two hands if the lights were on... You have totally and thoroughly failed in your mission," said New York Democratic Rep. Gary Ackerman.

SEC Chairman Mary Schapiro, who did not testify, later sent a letter to the senior members of the subcommittee, offering to meet to explore ways to get the panel information without impeding the civil and criminal investigations of Madoff.

Markopolos said he knows the names of a dozen so-called feeder funds that helped Madoff raise money from pension funds and wealthy investors and that he would turn these over to regulators this week.

Markopolos, now a fraud investigator, said Madoff could not have acted alone, citing accountants and people helping convey money to his scheme. Madoff was arrested after his sons went to authorities saying their father had confessed to them.

LOW POINT FOR THE SEC

Madoff, a former chairman of the Nasdaq stock market, has been accused of running a massive Ponzi scheme in which he paid off earlier investors with money from later investors.

Asked if there were other Madoffs waiting to be discovered, Markopolos said he was forwarding information to the SEC about a Ponzi scheme of around $1 billion.

For the SEC, Wednesday's testimony marked what some insiders called the worst day in the agency's history, further tarnishing its reputation and sending morale to a new low.

Lawmakers angrily questioned the SEC's head of enforcement, Linda Chatman Thomsen; the agency's top examiner Lori Richards; Erik Sirri, the SEC's trading and markets chief; Andrew Donohue, who is in charge of investment management and the SEC's acting general counsel, Andrew Vollmer.

Capital markets subcommittee chairman, Paul Kanjorski, a Democrat from Pennsylvania, threatened to reform the SEC out of existence.

And Ackerman, who personally escorted Markopolos out of the hearing room, told the SEC officials: "We thought the enemy was Mr. Madoff, I think it was you. You were the shield."

Schapiro's letter to Kanjorski and Rep. Scott Garrett of New Jersey, the subcommittee's ranking Republican, said Wednesday's hearing "cannot have been satisfactory for you."

"There needs to be a full accounting, both of Mr. Madoff's activities and why we did not detect the fraud, which we truly regret," wrote Schapiro, sworn in last week as SEC chairman.

GIFT-WRAPPED TIP

Markopolos described his failed efforts to get regulators to probe Madoff from 2000 on. "I gift-wrapped and delivered the largest Ponzi scheme to them," he told the lawmakers.

Markopolos became suspicious of Madoff's ways in 1996 after he and a friend pored over mathematical models that might recreate Madoff's returns only to determine that there was no way Madoff could consistently outperform the markets.

Harsh words were lobbed at former SEC employees including Meaghan Cheung, the agency's New York branch chief whom Markopolos contacted in 2005. Cheung, Markopolos said, was arrogant, never grasped the concepts in his report or asked him any questions. Cheung left the SEC in fall of 2008.

The SEC division heads told the panel that the agency was considering a number of changes in light of the Madoff case, including how frequently investment advisers are examined.

Thomsen, who appeared visibly shaken during the hearing, responded to charges that her enforcement division had too many lawyers. "Within enforcement we have lots of accountants, lots of market specialists and investigators."

Republican Rep. Spencer Bachus, of Alabama, was the only lawmaker who praised the agency. "We don't mean to convey that there hasn't been good work by the SEC," he said.

Kanjorski said he was going to introduce legislation that would give the Public Company Accounting Oversight Board, the authority to examine the auditors of broker-dealers.

Madoff's auditor was a small, unknown firm that was not registered with the PCAOB.

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Goldman Sachs CFO seeks to repay TARP funds

By Elinor Comlay

NEW YORK (Reuters) – Goldman Sachs Group Inc (GS.N) Chief Financial Officer David Viniar said the bank is keen to avoid restrictions it agreed to after receiving funds from the U.S. government late last year and it is looking to pay the money back as soon as possible.

The investment bank, which received a $10 billion capital injection from the U.S. Treasury's Troubled Asset Relief Program in October, is not happy with the strings that came attached to the money.

Compensation restrictions and certain capital requirements were part of the original injection, and extra limitations may be in store after U.S. President Barack Obama imposed tough new rules limiting pay for companies receiving government aid.

"We would like to get out from under that," Viniar said, adding that the bank aims to pay back the $10 billion this year.

Viniar said Goldman Sachs is also cautious about buying a bank, a move many have urged upon the investment bank to ensure its access to stable deposit funding.

Banks have come under heavy fire for paying executives too much after receiving more than $300 billion of capital from the government and trillions of dollars of additional U.S. support. A report last week said that banks paid out $18.4 billion of bonuses, a fact that Obama called "shameful."

But Goldman can potentially pay back its $10 billion, and avoid salary caps, by issuing preferred stock rather than common stock, Viniar said.

Shares of Goldman Sachs were up $6.13 or 7.4 percent at $88.94 on the New York Stock Exchange on Wednesday afternoon, amid a broader rally in shares of financial companies.

Obama said on Wednesday that compensation at TARP recipients would be limited to $500,000 a year, adding that lower compensation is a crucial element of restoring taxpayer trust.

NO BANK ACQUISITIONS

Investors have pressed Goldman to buy a bank to boost its deposit funding, which is seen as a more reliable way for the investment bank to finance itself amid the credit crunch.

But Viniar, speaking at a Credit Suisse Financial Services conference on Wednesday, said Goldman is in no rush to acquire another institution, and will look for other ways to boost its deposits.

"Don't pick up The Wall Street Journal looking for a Goldman Sachs acquisition because I think you will be largely disappointed," he said.

There is a long history of financial services acquisitions that have failed due to the difficulty of integrating different companies' cultures, he said, and this makes Goldman wary of such an acquisition.

"I don't expect our form to change," he said, adding, "I expect us to be largely a wholesale company." Wholesale finance companies fund themselves in bond markets.

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Panasonic to cut 15,000 jobs

By Kiyoshi Takenaka and Nathan Layne

TOKYO (Reuters) – Japan's Panasonic Corp (6752.T), the world's No.1 plasma TV maker, warned it would post an annual loss of $4.2 billion and said it would cut about 15,000 jobs as it grapples with a stronger yen and slowing demand.

The maker of Viera flat TVs and Lumix digital cameras joins a growing list of electronics makers stepping up restructuring in the face of a global slump that is shaping up to be nastier than the last major downturn in 2001 after the IT bubble.

Sony Corp (6758.T), Toshiba Corp (6502.T) and Hitachi Ltd (6501.T) are all facing multibillion dollar losses, crippled by the double whammy of falling sales and a strong Japanese currency that eats into overseas profits when repatriated.

The yen's surge to a 13-year high against the dollar has also made Japanese electronics less competitive than goods from South Korean rivals such as Samsung Electronics (005930.KS), which are benefiting from a softer won.

"The market had high hopes for the flat TV business, but it now has no competitive edge overseas due to the strong yen and is contributing in a big way to the slump," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

Panasonic, which ranks ahead of Samsung and LG Electronics Inc (066570.KS) in the plasma TV market, cut its forecast for the year ending March 31 to a net loss of 380 billion yen ($4.2 billion) from previous guidance for a 30 billion yen profit.

The new forecast, which is slightly bigger than media reports earlier this week predicting a loss of 350 billion yen, reflects 345 billion yen in restructuring charges and a 9 percent cut in its sales estimate to 7.75 trillion yen.

Panasonic cut its annual dividend forecast by one-third to 30 yen per share.

JOB CUTS

The company, formerly known as Matsushita Electric, posted a net loss of 63.1 billion yen for the October-December quarter versus a year-earlier profit of 115.2 billion yen.

Quarterly operating profit tumbled 84 percent to 26.4 billion yen. For a graphic on Panasonic's historical quarterly operating profit, click https://customers.reuters.com/d/graphics/JP_PNSNCQ0209.gif

"Sales fell in all our business segments in the third quarter. We expect sharper sales declines in this quarter, and profits are likely to shrink in every segment," Panasonic director Makoto Uenoyama told a news conference.

Panasonic said it would close 27 manufacturing sites in the current year to March, and carry out another round of plant closures of a similar scale in the next business year.

It also plans to cut around 15,000 jobs, including both full-time regular employees and contract workers. Half the cuts will be in Japan and half overseas. It has a global workforce of about 300,000 regular workers.

On top of dwindling sales of consumer gadgets, Panasonic's factory automation equipment operations have come under pressure as companies worldwide cut production and spending on manufacturing tools.

The company also said it would delay the start-up of its new LCD panel plant in western Japan by six months, to July 2010.

Although Panasonic dominates the global plasma TV market, it lags far behind Samsung, Sony and Sharp Corp (6753.T) in LCD TVs.

Sharp, set to unveil quarterly results and update its annual outlook on Friday, is likely to post its first-ever operating loss for the year to March due to slow sales and steep price falls, the Nikkei business daily said.

Before the announcement, shares of Panasonic closed up 1 percent at 1,092 yen, underperforming the electrical machinery subindex (.IELEC.T), which rose 3.5 percent.

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GM, Chrysler offer new retirement, buyout packages

By TOM KRISHER

The Associated Press
The company logo shines off the top of a grille on an unsold 2008 300 sedan at a Chrysler-Jeep dealership in Golden, Colo., on Sunday, Feb. 1, 2009. A union official says Chrysler LLC is offering another round of buyout and early retirement packages to hourly workers in an effort to replace them with new hires who would earn less money. (AP Photo/David Zalubowski) (David Zalubowski - AP)

DETROIT -- General Motors Corp. and Chrysler LLC are offering blue-collar employees another round of buyout and early retirement offers as the automakers try to cut their work forces and reduce expenses, union officials said.

GM detailed its offers in an e-mail message to local union officials Monday, according to a union official who spoke on condition of anonymity because workers have yet to be notified of the packages.

Chrysler made its offers Friday to all hourly workers represented by the United Auto Workers except those at the company's Kenosha, Wis., engine plant, according to a memo detailing the offers that was obtained by The Associated Press.

Chrysler spokeswoman Shawn Morgan confirmed in a written statement that the company is making the offers. She said they would have been presented to employees in December, but they had to be delayed because production was suspended at Chrysler's factories for much of December and January.

Both GM and Chrysler have seen sales decline with the overall U.S. auto market and have been forced to take government loans in order to survive.

According to the memo from UAW Vice President General Holiefield to local presidents and other officials, the union negotiated for another round of offers at Chrysler because of conditions the federal government imposed on the company in exchange for granting the loans.

The conditions require the Chrysler and GM to make changes to their UAW contracts, including elimination of the jobs bank, in which workers get most of their pay even when they are laid off. Chrysler, GM and the union said last month that the jobs banks had been eliminated.

"Many of you raised concerns that more of our members may have accepted special packages or explored other options if they had knowledge of the changes in the CBA (collective bargaining agreement) that may impact their current situation, i.e., elimination of the jobs bank, etc.," Holiefield wrote.

The new round of offers may be more appealing to workers who are on indefinite layoff due to the U.S. auto sales slump. The companies can leave the jobs vacant for now, then later fill the jobs as needed with new workers who can be paid about half what current employees make.

Chrysler's roughly 26,800 production workers represented by the UAW make about $29 per hour, while GM's 62,000 UAW-represented workers make around $28. Under a contract reached last year, the company can pay some replacement workers around $14 per hour and give them less-costly health care and retirement benefits.

Workers at both companies have until Feb. 25 to accept the offers.

Chrysler's early retirement package includes $50,000 cash and a $25,000 voucher to buy a car, while the Auburn Hills-based company's buyouts include $75,000 cash and a $25,000 car voucher, according to the union memo. The buyout offer is more lucrative, with $115,000 plus a $25,000 car voucher for workers with 10 or more years of seniority at closed plants in St. Louis and Newark, Del., according to the memo.

News of Chrysler's offers was reported earlier Monday by the trade publication Automotive News.

GM's offers, to nearly all its UAW employees, are less lucrative. The Detroit company is offering $20,000 in cash and a $25,000 car voucher for workers who retire early and those who simply leave the company, according to the union official.

GM spokesman Tony Sapienza and UAW spokeswoman Christine Moroski declined to comment on the offers.

Chrysler and GM were each forced to obtain government loans to stay in business. Chrysler received $4 billion and expects to get another $3 billion after it shows the government its plan to become viable Feb. 17. GM has received $9.4 billion and expects to get $4 billion more when it files its plan.

Ford Motor Co., which says it has enough borrowed cash to make it through 2009 and doesn't expect to use government loans, expects to get the same concessions from the UAW that GM and Chrysler get as part of their government loan agreements.

But Ford spokeswoman Marcey Evans said the company has "no plans at this time to offer buyouts to hourly workers." The Dearborn-based automaker offered 10 early retirement and buyout packages to all hourly workers during the first quarter of 2008 and offered packages at selected factories in the third quarter. About 7,100 employees left the company as a result, she said.

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363 U.S. cities find unemployment rising

Unemployment rose in 363 out of 369 U.S. cities in 2008, the Labor Department announced Wednesday.

As the recession sunk its teeth into the labor market, 40 cities reported jobless rates above 10 percent. Two reported rates under 3 percent, the report said.

In December, the nation's unemployment rate hit 7.1 percent, compared with December 2007, when it was 4.8 percent.

In one year, Elkhart-Goshen, Ind., beset by manufacturing sector layoffs, found its unemployment rate jump 10.6 percentage points, the largest leap in the country. The second highest jump was recorded in Dalton, Ga., where the unemployment rate grew by 6.2 percentage points.

In total, 27 cities saw their unemployment rate jump by 4 percentage points or more, the report said.

Among larger cities in December, the greater Detroit area recorded the highest jobless rate with unemployment reaching 10.6 percent, the Labor Department said.

The lowest unemployment rates among cities with a population of 1 million or more in the 2000 census was in Oklahoma City, Okla. -- at 4.6 percent in December.

The highest rate in December among all cities was in El Centro, Calif. at 22.6 percent; the lowest was in Morgantown, W. Va. -- 2.7 percent.

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Bailed-out Wells Fargo plans lavish corporate getaway to Vegas.»

Wells Fargo, “once among the nation’s top writers of subprime mortgages,” has received approximately $25 billion in taxpayer money from the federal bailout. While other bailed-out firms — such as AIG — have canceled expensive junkets, the AP reports that Wells Fargo is sticking with them:

Wells Fargo…has booked 12 nights at the Wynn Las Vegas and its sister hotel, the Encore Las Vegas beginning Friday, said Wynn spokeswoman Michelle Loosbrock. The hotels will host the annual conference for company’s top mortgage officers.

The conference is a Wells Fargo tradition. Previous years have included all-expense-paid helicopter rides, wine tasting, horseback riding in Puerto Rico and a private Jimmy Buffett concert in the Bahamas for more than 1,000 employees and guests. […]

“Recognition events are still part of our culture,” spokeswoman Melissa Murray said. “It’s really important that our team members are still valued and recognized.”

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CIA warns Barack Obama that British terrorists are the biggest threat to the US

By Tim Shipman in Washington

The CIA has told President Barack Obama that British terrorists are the biggest threat to the US

American spy chiefs have told the President that the CIA has launched a vast spying operation in the UK to prevent a repeat of the 9/11 attacks being launched from Britain.

They believe that a British-born Pakistani extremist entering the US under the visa waiver programme is the most likely source of another terrorist spectacular on American soil.

Intelligence briefings for Mr Obama have detailed a dramatic escalation in American espionage in Britain, where the CIA has recruited record numbers of informants in the Pakistani community to monitor the 2,000 terrorist suspects identified by MI5, the British security service.

A British intelligence source revealed that a staggering four out of 10 CIA operations designed to thwart direct attacks on the US are now conducted against targets in Britain.

And a former CIA officer who has advised Mr Obama told The Sunday Telegraph that the CIA has stepped up its efforts in the last month after the Mumbai massacre laid bare the threat from Lashkar-e-Taiba, the militant group behind the attacks, which has an extensive web of supporters in the UK.

The CIA has already spent 18 months developing a network of agents in Britain to combat al-Qaeda, unprecedented in size within the borders of such a close ally, according to intelligence sources in both London and Washington.

Bruce Riedel, a former CIA officer who has advised Mr Obama, told The Sunday Telegraph: "The British Pakistani community is recognised as probably al-Qaeda's best mechanism for launching an attack against North America.

"The American security establishment believes that danger continues and there's very intimate cooperation between our security services to monitor that." Mr Riedel, who served three presidents as a Middle East expert on the White House National Security Council, added: "President Obama's national security team are well aware that this is a serious threat."

The British official said: "The Americans run their own assets in the Pakistani community; they get their own intelligence. There's close cooperation with MI5 but they don't tell us the names of all their sources.

"Around 40 per cent of CIA activity on homeland threats is now in the UK. This is quite unprecedented."

Explaining the increase in CIA activity over the past month, Mr Riedel added: "In the aftermath of the Mumbai attack the US and the UK intelligence services now have to regard Lashkar-e-Taiba as just as serious a threat to both of our countries as al-Qaeda. They have a much more extensive base among Pakistani Diaspora communities in the UK than al–Qaeda."

Information gleaned by CIA spies in Britain has already helped thwart several terrorist attacks in the UK and was instrumental in locating Rashid Rauf, a British-born al-Qaeda operative implicated in a plot to explode airliners over the Atlantic, who was tracked down and killed in a US missile strike in November.

But some US intelligence officers are irritated that valuable manpower and resources have been diverted to the UK. One former intelligence officer who does contract work for the CIA dismissed Britain as a "swamp" of jihadis.

Jonathan Evans, the director general of MI5, admitted in January that the Security Service alone does not have the resources to maintain surveillance on all its targets. "We don't have anything approaching comprehensive coverage," he said.

The dramatic escalation in CIA activity in the UK followed the exposure in August 2006 of Operation Overt, the alleged airline bomb plot.

The British intelligence official revealed that CIA chiefs sent more resources to the UK because they were not prepared to see American citizens die as a result of MI5's inability to keep tabs on all suspects, even though the Security Service successfully uncovered the plot.

MI5 manpower will have doubled to 4,100 by 2011 but many in the US intelligence community do not think that is enough.

For their part, some British officials are queasy that information obtained by the CIA from British Pakistanis was used to help target Mr Rauf, a British citizen, whom they would have preferred to capture and bring to trial.

Sensitivities over the intelligence arrangement formed a key part of briefings given to Mr Obama, since they are central to what is often called "the most special part of the special relationship" and could complicate his dealings with Gordon Brown.

Tensions in transatlantic intelligence relations which were laid bare last week during the High Court battle over Binyam Mohamed, the British resident held in Guanatanamo Bay. British judges wanted to publish details of the torture administered to Mr Mohamed, an Ethiopian national, in US custody. But key paragraphs were blacked out after American officials threatened it could damage intelligence sharing between the two countries.

Intelligence experts said that a trusting intelligence relationship, in which one country does not publish intelligence data obtained by the other, is vital to both countries' national security.

Patrick Mercer, chairman of the House of Commons counter-terrorism sub-committee, said: "The special relationship is a huge benefit to us. It clearly works to our advantage and helps keep the people of the UK and the US safe.

"There is no doubt that a great deal of valuable intelligence vital to British national security is procured by American agents from British sources."

Mr Riedel added: "The partnership between the two intelligence communities is dynamic; it is one of great intimacy. We overuse the term special relationship, but this is an extraordinarily special relationship.

"Since September 11 the philosophy on both sides has been to err on the side of telling each other more rather than less. It is in everyone's interests that that continues."

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Whiff of change in US medical marijuana policy

By Devlin Barrett

WASHINGTON—The White House won't say it explicitly. Neither will the Drug Enforcement Administration. Yet there is a whiff in the air that U.S. policy is about to change when it comes to medical marijuana.

The message is clear, said UCLA professor Mark Kleiman, a former Justice Department official and an expert on crime and drug policy.

"It is no longer federal policy to beat up on hippies," said Kleiman.

Tell that to the DEA.

In California this past week, agents raided four dispensaries in Los Angeles and seized 500 pounds of pot.

"It's a little bit surprising, because I think current DEA management didn't get the message," said Kleiman. "The message is, this is no longer drug warrior time. We are not on a cultural crusade against pot-smoking."

California law permits the sale of marijuana for medical purposes, though it is still against federal law.

Thirteen states have laws permitting medicinal use of marijuana. California is unique among them for the presence of dispensaries, businesses that sell marijuana and even advertise their services. Legal under California law, such dispensaries are still illegal under federal law.

"Anyone possessing, distributing or cultivating marijuana for any reason is in violation of federal law," Sarah Pullen, a DEA spokeswoman in Los Angeles, said Thursday.

That may be the law, but it contradicts the medical marijuana position of the new president.

"The president believes that federal resources should not be used to circumvent state laws, and as he continues to appoint senior leadership to fill out the ranks of the federal government, he expects them to review their policies with that in mind," said White House spokesman Nick Shapiro, repeating past statements.

So on Friday, DEA officials in Washington declined to comment at all on the subject.

As a presidential candidate, Obama repeatedly promised a change in federal drug policy in situations where state laws allow use of medical marijuana.

"I think the basic concept of using medical marijuana for the same purposes and with the same controls as other drugs prescribed by doctors, I think that's entirely appropriate," Obama told the Mail Tribune of Medford, Ore., in March.

A year earlier at a campaign stop in New Hampshire, Obama said: "I would not have the Justice Department prosecuting and raiding medical marijuana users."

At age 47, Obama is part of a generation that had plenty of exposure to pot.

In his memoir, "Dreams from My Father," he described time spent as a youth struggling with questions about his race and identity, and turning to drugs -- including marijuana and cocaine -- to "push questions of who I was out of my mind."

The new president is unlikely to make any official change in policy before he has a new DEA chief and drug czar in place.

Yet experts believe it is already clear the Obama administration will change the strategy, if not the law, on medical marijuana.

Philip Heymann, a former deputy attorney general in the Clinton administration who is now a Harvard professor, said it's time for the agency to put more effort into fighting drugs more dangerous than marijuana.

"I do expect him to appoint an administrator who takes marijuana less seriously than is traditional for the DEA, as I think most Americans do," said Heymann.

Heymann said he expects the Obama administration will eventually instruct the DEA to emphatically scale back raids on dispensaries, and conduct such raids only in instances where investigators believe a business is abusing the dispensary system as a cover for other criminal behavior.

So last week's raids in California may be the last of their kind.

"The DEA's not likely to want to confront a new president," said Heymann. "It may simply be that they're behaving as they have traditionally, and they haven't anticipated the change Obama and his spokesman are signaling."

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Navy takes off fuel, people to lighten ship

Marco Garcia / AP The USS Port Royal sits grounded atop a reef Friday about a half-mile south of Honolulu's airport. HONOLULU - The Navy offloaded fuel, water and personnel from a grounded, $1 billion guided missile cruiser so tugboats and a salvage ship can try again early Sunday morning to free it from a rock and sand shoal. The USS Port Royal ran aground on Thursday evening, about a half-mile south of the Honolulu airport where it was visible from several vantage points on Oahu. No one was injured and no oil or other contaminants have leaked, said representatives of the Navy and Coast Guard, as well as state officials. At a press conference, Rear Admiral Joseph Walsh, deputy commander of the U.S. Pacific Fleet, said the ship is structurally sound. But he added that a thick, underwater rubber encasement that surrounds sonar equipment at the bow has taken on seawater. A barge received fuel and fresh water from the Port Royal on Saturday, which Walsh said should make the grounded vessel approximately 200 tons lighter. The 9,600-ton warship will also be an additional 15 tons lighter because half the crew of 360 is on shore. Another reason for moving half the crew was that the ship’s air conditioning was not functioning because the vent through which seawater is drawn to cool the system is blocked as the ship sits on the shoal, Walsh said. A lighter Port Royal, combined with a peak high tide and the pulling power of an oceangoing tug, some smaller harbor tugs and the salvage ship Salvor, should do the trick when a third effort is made to free the ship around 3:25 a.m. on Sunday, Walsh said. “The issue becomes one of how much weight is on the ship versus our ability to pull that weight off of the reef,” Walsh said. Four-month routine Two previous efforts on Friday and Saturday mornings using harbor tugs that tried to pull the ship backward and away from the shoal were unsuccessful. The 15-year-old Port Royal had just ended a four-month routine maintenance visit to Pearl Harbor Naval Shipyard and was finishing the first day of sea trials when it ran aground at 8:30 p.m. on Thursday. “The ship was maneuvering to off-load some of the sailors and some of the contractors and shipyard personnel, and she was in her normal spot for doing those types of small-boat transfers,” Walsh said. He added later that the shoal was known to the Navy. “Clearly, the ship is not where the ship should have been. The investigation will determine exactly why the ship got to the point where she was in shoal water,” Walsh said. The Port Royal is sitting in about 22 feet of water, aground along the length of her port side on a bed of sand and rock of the type that was used to construct one of the nearby airport’s runways, Walsh said. Copyright 2009 The Associated Press. Original here

Octuplet fertility doctor under investigation

By SHAYA TAYEFE MOHAJER, Associated Press Writer

LOS ANGELES – The spotlight on the mother of octuplets is turning to the fertility doctor who helped her give birth not once but 14 times by implanting Nadya Suleman with fertilized embryos.

The Medical Board of California investigating the doctor — whom it did not name — to see if there was a "violation of the standard of care," board spokeswoman Candis Cohen said Friday.

She did not elaborate.

Suleman, 33, of Whittier, already had six children when she gave birth Jan. 26 to octuplets. The births to an unemployed, divorced single mother prompted angry questions about how she plans to provide for her children.

But the backlash seems to have extended as well to Suleman's doctor.

In a portion of an NBC interview, broadcast Friday, Suleman said she had six embryos implanted for each of her in vitro pregnancies, using the same sperm donor and fertility specialist.

In the case of the octuplets, the procedure resulted in six boys and two girls, including two sets of twins.

"The revelation about one center treating her makes the treatment even harder to understand," said Arthur Caplan, bioethics chairman at the University of Pennsylvania. "They went ahead when she had six kids, knowing that she was a single mom ... and put embryos into her anyway."

In the United States, there is no law dictating the number of embryos that can be placed in a mother's womb. Multiple embroys can be implanted to improve the odds that one will take.

However, there are national guidelines which put the norm at two to three embryos for a woman of Suleman's age, in order to lessen the health risks to the mother and the chances of multiple births.

When asked why so many embryos were implanted, Suleman told NBC: "Those are my children, and that's what was available and I used them. So, I took a risk. It's a gamble. It always is."

She said her life's goal was to be a mother and she had struggled for seven years before finally giving birth to her first child in 2001.

"All I wanted was children. I wanted to be a mom. That's all I ever wanted in my life," Suleman said in the portion of the interview that aired Friday. "I love my children."

According to state documents, Suleman told a doctor she had three miscarriages. Another doctor disputed that number, saying she had two ectopic pregnancies, a dangerous condition in which a fertilized egg implants somewhere other than in the uterus.

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