Dubai's $10B bailout by Abu Dhabi calms fears

DUBAI, United Arab Emirates – Oil-rich Abu Dhabi pumped $10 billion into its indebted neighbor Monday, sending stocks soaring while sparing Dubai and the rest of the Emirates federation the humiliation of an imminent default by one of the struggling Arab boomtown's star companies.

The bailout was about more than petrodollar transfers from one United Arab Emirates sheikdom to the other. Dubai officials seized on the news to try to repair damage done by weeks of uncertainty stemming from their unwillingness to fully stand behind Dubai World as the conglomerate looked to restructure some of its $60 billion in debts.

Investors cheered Monday's news. Dubai's main index shot up 10.4 percent at the close and markets elsewhere rose modestly.

Prior to the crisis, most investors had assumed the Dubai government itself, possibly with Abu Dhabi's help, would guarantee debts amassed by its chief growth engine.

Dubai authorities are scrambling to reshape the business hub's battered image, vowing that the city-state is committed to "transparency, good governance and market principles." Officials outlined a new legal framework that promised to increase openness and protect creditors in future dealings with the conglomerate, offering lenders succor in a country where formal bankruptcy proceedings are largely untested.

"We are here today to reassure investors, financial and trade creditors, employees and our citizens that our government will act at all times in accordance with market principles and internationally accepted business practices," Sheik Ahmed bin Saeed Al Maktoum, chairman of the Dubai supreme fiscal committee, said in a statement.

Some $4.1 billion of the funds released Monday will go toward meeting a deadline to repay Islamic bonds issued by Dubai World's Nakheel property arm. The conglomerate, whose sprawling holdings range from the oceanliner Queen Elizabeth 2 to luxury retailer Barney's New York, will use the rest.

The move, however, carries broader implications as UAE officials have looked to assure the market the country's economy was on solid ground. Their assurances gave voice to a silent concern that the whole country would be hit by the same investor mistrust that Dubai now faces.

The bailout bought Dubai, itself saddled with more than $80 billion in debts including Dubai World's, time it desperately needs.

"This is a very significant development," said Marios Maratheftis, head of regional research at Standard Chartered Bank. "It shows once again there is a one-country approach in dealing with the crisis, which is positive."

But it was unclear if the news — assurances and funding alike — would prove to be more than a temporary salve.

Standard & Poor's, which along with other credit rating agencies has aggressively cut its outlook on Dubai state-run companies, called Monday's move "a step towards rebuilding confidence." But it warned that the government's ability to bail out other firms remains uncertain.

Fitch Ratings, another credit agency, also urged caution, saying Abu Dhabi's bailout was "tactical in nature as opposed to a reversal of recent rhetoric regarding state support."

Abu Dhabi, which controls the UAE's presidency, has directly and indirectly provided Dubai with $25 billion over the past year, mostly by buying Dubai bonds. In all, Dubai's known debts are roughly equal to its total economic output last year. The full extent of its liabilities is uncertain, however, with some analysts putting the total at $100 billion or more.

The aid package is key for Dubai, which despite its international celebrity has little of the oil wealth held by Abu Dhabi. Dubai's ruler is the UAE's vice president and prime minister.

Dubai created Dubai World — which has interests in seaports, real estate, tourism and retail — to diversify its economy and boost its international clout. Much of the growth was fueled by easy credit. As the bills came due, the emirate struggled to repay as its economy was battered by the global economic downturn.

Nakheel, a property developer and hotel operator best known for building manmade islands in the shape of palm trees and a map of the world off Dubai's coast, was among those Dubai World companies that relied heavily on that easy money.

Plenty of questions remain, especially as Dubai works to salvage its reputation and the conglomerate tries to deal with the rest of its debts.

Dubai World, while welcoming the financial support, said it was nonetheless pushing ahead with talks to convince lenders to agree to a "standstill" — effectively a delay — on repaying part of its debt.

"This announcement constitutes a specific bailout of Nakheel, suggesting that as an entity (it) was deemed to be 'too big to fail,'" said Fahd Iqbal, a Dubai-based analyst at Middle East investment bank EFG-Hermes. "It does not, however, constitute a bailout of Dubai Inc. or Dubai World as a whole and this is important to highlight."

Officials introduced a reorganization law that could be used in case Dubai World is "unable to achieve an acceptable restructuring of its remaining obligations."

A person close to the Dubai government said the new law provided a legal framework for addressing corporate debt, though it did not mean a bankruptcy filing by state-owned companies was certain.

"The current bankruptcy law is untested," the person said, insisting on anonymity as a condition for briefing reporters on a conference call. "Dubai World needed a legal process to go through. The government was very focused on creating something that would be fair and transparent to everybody."

It was not immediately clear what, if anything, Abu Dhabi would expect in exchange for Monday's funding. Analysts had said an Abu Dhabi bailout could result in it exerting greater influence on its high profile neighbor going forward.

But the individual close to the Dubai government said the money came with no strings attached.

"Let me be clear: Dubai has not given anything up. There have been no conditions on the funding," he said

Obama urges banks to find ways to increase lending

WASHINGTON – President Barack Obama challenged top bankers Monday to explore "every responsible way" to increase lending, saying they were obliged to help after being rescued by taxpayers. He asked them to "take a third and fourth look" at their small-business lending.

US Bancorp CEO Richard Davis told the group meeting at the White House that his bank would be willing to take a second look at every loan it rejects. And he said he would present the idea to other members of the Financial Services Roundtable — a group representing the largest financial companies, according to the Roundtable. Davis is its incoming chairman.

Obama, in a statement after more than an hourlong meeting with the executives, said he reminded them that much of the financial crisis that took the U.S. banking system to the brink of collapse had been "of their own making." He also exhorted the executives — both in private and in public — to drop their opposition to an overhaul of the nation's financial industry.

"If they wish to fight commonsense consumer protections, that's a fight I'm more than willing to have," Obama told reporters in the Diplomatic Reception Room of the executive mansion.

He also urged lenders to find creative ways to free up lending. Obama said banks have benefited from bailouts and should use that strength to lend more money to consumer and businesses.

"But given the difficulty business people are having as lending has declined and given the exceptional assistance banks received to get them through a difficult time," he said, "we expect them to explore every responsible way to help get our economy moving again."

Delay, he said, was not an option he was willing to consider as his administration has focused on digging out an economy that has left more than 15 million Americans out-of-work. An economy with double-digit unemployment next year threatens political fortunes for Obama's fellow Democrats in the 2010 midterm elections — and presumably even Obama himself in a 2012 re-election bid.

The president has sought to bolster Americans' confidence, talking often about accomplishments from the $787 billion economic stimulus package he sought early in his office and a potential follow-up jobs program to jump-start the economy.

"And so I urged these institutions here today to go back and take a third and fourth look about how they are operating when it comes to small business and medium-sized business lending," he said.

Bank of America CEO Kenneth Lewis pledged to Obama that his bank would lend $5 billion more to small- and mid-sized businesses in 2010 than it did in 2009, the bank said. It said the move is part of the bank's broader effort to support an economic recovery.

JPMorgan said last month that it would boost such lending by $4 billion.

Obama's stern lecture came hours after Citigroup Inc. said that it was repaying $20 billion in bailout money it received from the Treasury Department, in an effort to reduce government influence over the banking giant. The government will also sell its stake in the company.

The New York-based bank was among the hardest hit by the credit crisis and rising loan defaults and got one of the largest bailouts of any banks during the financial crisis. The government gave it $45 billion in loans and agreed to protect losses on nearly $300 billion in risky investments. Wells Fargo & Co. remains the last national bank that has yet to pay back its bailout money.

Despite Obama's pointed words, the bankers have said that lending is limited by factors beyond their control: The sluggish economy and tighter oversight by regulators. The slow economy has businesses reluctant to expand — and makes banks more grim about their prospects. Loan applications are down.

Meanwhile, regulators are telling banks to be more skeptical about potential borrowers. They are forcing banks to keep larger cushions of capital to protect against future losses. That means there's less money available to lend.

The meeting came amid Obama's fierce criticism of Wall Street. In an interview that aired on Sunday, Obama rebuked executive paychecks at firms that only last year required tax dollars to keep their doors open.

"I did not run for office to be helping out a bunch of fat cat bankers on Wall Street," Obama told CBS's "60 Minutes."

Bankers brushed off Obama's harsh rhetoric.

Davis, of US Bancorp, denied that there was any rancor after Obama's "fat cats" comment.

"It was an opportunity for the president to make clear how important some of these issues are," he told reporters in the White House driveway. "We haven't done as good a job as we can in the future to align the interests of our constituents with those of the American public."

After House passage of a regulatory overhaul Friday, the work now shifts to the Senate, which has been preoccupied with health care legislation.

Obama said rhetoric and reality on financial overhaul don't align.

"The problem is, there's a big gap between what I'm hearing here in the White House and the activities of lobbyists on behalf of these institutions or associations of which they're a member up on Capitol Hill," Obama said.

"I urged them to close that gap, and they assured me that they would make every effort to do so."

Davis said Obama talked about the difference between bankers' broad support of the financial overhaul and the strident objections raised by their industry groups and lobbyists.

"We think there was probably a disconnect as well," Davis said. "We're going to do a better job, beginning with the CEOs, to work with the lobbyists directly and be the voice with those administration leaders to come to a conclusion that we haven't before."

Banks, industry groups and the U.S. Chamber of Commerce have uniformly rejected the administration's proposal to create a new Consumer Financial Protection Agency. Some have proposed alternatives that consumer groups believe would defang the proposed agency.

Monday's remarks were the first to suggest that the opposition did not reflect the bankers' positions.

"I think that the disagreement over (the consumer agency) has sort of colored much of the debate and overshadowed" industry's support for other parts of Obama's financial overhaul, said Kenneth Bentsen, who heads the Washington office of the Securities Industry and Financial Markets Association.

There has been no shortage of contact between the bankers and the groups that have campaigned against parts of the administrations financial overhaul. The Financial Services Roundtable is in conversation with the CEOs it represents multiple times a week, its leaders have said. The board of SIFMA meets at least once a week and includes top executives from Goldman Sachs and other big banks

K-12 Schools: No snow days yet

As of Tuesday afternoon, local school administrators for the Wausau area have not yet called off classes for Wednesday.

Some school districts, such as Wausau and D.C. Everest, might make a decision on school closing tonight if conditions worsen.

Local school administrators ask families to watch weather forecasts and media reports for the latest on any school closings or delays.

Coffee, Exercise Fight Prostate Cancer

TUESDAY, Dec. 8 (HealthDay News) -- Having a few more cups of coffee and running that extra mile each day can reduce a man's risk of dying of prostate cancer, two studies indicate.

The case for coffee and physical activity as prostate cancer preventatives is far from proven, according to the research reported Tuesday at an American Association for Cancer Research meeting in Houston. But data from the Health Professionals Follow-Up Study show a clear association with both daily activities.

"I wouldn't recommend that people change their coffee-drinking habits based on this study," said Kathryn M. Wilson, a research fellow in epidemiology at the Harvard School of Public Health, and lead author of one report. "But if you like coffee, there is no compelling reason to cut back at this point."

Her data on the nearly 50,000 men in the study showed how common a diagnosis of prostate cancer has become since widespread screening began. In the 20 years from 1986 to 2006, 4,975 cases of prostate cancer were diagnosed, affecting just about 10 percent of the men in the study.

But only 846 of those cancers were life-threatening, because they had spread beyond the prostate gland or were growing aggressively, Wilson said. And while the study found just a weak relationship between consumption of six or more cups of coffee a day and a reduced risk of all forms of prostate cancer (down about 19 percent), the reduction for the aggressive form was much more marked -- 41 percent.

And there was a clear relationship between the amount of coffee consumed and prostate cancer risk, Wilson said: "The more coffee you drank, the more effect we saw."

The caffeine in coffee doesn't seem to be the link, since the same reduction was seen for consumption of decaffeinated coffee, she said. Instead, "it has something to do with insulin and glucose metabolism," Wilson said. "A number of studies have found that coffee is associated with a reduced risk of diabetes."

This study is just a starting point for establishing a relationship between coffee and prostate cancer, Wilson stressed. "At this point, we would just like to confirm whether it exists in different populations," she said. "We hope that this study drives more research so that we really know what is going on."

The other study, by Stacey A. Kenfield, a research associate at the Harvard School of Public Health, looked at the levels of physical activity among 2,686 men in the study who were diagnosed with prostate cancer. It found, as many other studies have, that exercise is good for overall health, with a 35 percent lower death rate for men who reported three or more hours a week of vigorous physical activity, such as jogging, biking, swimming or playing tennis.

And the death rate from prostate cancer for men who exercised vigorously was 12 percent lower than for those who didn't -- a figure that did not quite reach the level of statistical significance because the numbers were small, Kenfield explained.

Nevertheless, "this is the first study to show an effect of physical activity not only on overall survival, but on prostate cancer survival," she said.

It's already well known how physical activity reduces overall mortality, Kenfield said. "It affects immune function and reduces inflammation, among the major processes involved. But it's not clear yet how it is related to prostate cancer and survival."

US Air Force confirms 'Beast of Kandahar' drone

WASHINGTON (AFP) – The US Air Force on Tuesday confirmed for the first time that it is flying a stealth unmanned aircraft known as the "Beast of Kandahar," a drone spotted in photos and shrouded in secrecy.

The RQ-170 Sentinel is being developed by Lockheed Martin and is designed "to provide reconnaissance and surveillance support to forward deployed combat forces," the air force said in a brief statement.

The "RQ" prefix for the aircraft indicates an unarmed drone, unlike the "MQ" designation used for Predator and Reaper aircraft equipped with missiles and precision-guided bombs.

Aviation experts dubbed the drone the "Beast of Kandahar" after photographs emerged earlier this year showing the mysterious aircraft in southern Afghanistan in 2007.

The image suggested a drone with a radar-evading stealth-like design, resembling a smaller version of a B-2 bomber.

A blog in the French newspaper Liberation published another photo this week, feeding speculation among aviation watchers about the classified drone.

The air force said the aircraft came out of Lockheed Martin's "Skunk Works," also known as Advanced Development Programs, in California -- the home of sophisticated and often secret defense projects including the U-2 spy plane, the F-22 fighter jet and the F-117 Nighthawk.

The photo of the drone in Afghanistan has raised questions about why the United States would be operating a stealth unmanned aircraft in a country where insurgents have no radar systems, prompting speculation Washington was using the drones for possible spying missions in neighboring Iran or Pakistan.

The Sentinel was believed to have a flying wing design with no tail and with sensors built into the top side of each wing, according to published photos.

The RQ-170 is in line with Defense Secretary Robert Gates' request for more intelligence and surveillance resources and with the Air Force chief of staff's plans to expand the fleet of unmanned aircraft, the air force said.

The new drone is flown by the 30th Reconnaissance Squadron out of Tonopah Test Range in Nevada, which is under Air Combat Command's 432nd Wing at Creech Air Base, also in Nevada.

The United States has carried out an extensive bombing campaign against Al-Qaeda figures in Pakistan using the Predator and larger Reaper drones.

Robots or "unmanned systems" in the air and on the ground are now deployed by the thousands in Iraq and Afghanistan, spying from the sky for hours on end, searching for booby-traps and firing lethal missiles without putting US soldiers at risk.

Obama using grab-bag approach to fight recession

WASHINGTON – Franklin Roosevelt, confronted with the worst economic crisis in the nation's history, wrote the book on government jobs programs. Since FDR, presidents have been less ambitious because the economic challenges they faced were less severe.

President Barack Obama, battling the worst downturn since FDR's time, has put together a grab-bag program that borrows a little from Roosevelt but much more closely resembles the approach taken by recent presidents of both parties, who have leaned heavily on tax cuts to spur job creation.

Obama's New Deal-lite approach represents a compromise between putting more resources into getting the country out of a recession and the limitations he faces with budget deficits that have already soared past the $1 trillion mark, raising concerns among the foreign investors who buy America's debt.

Given those soaring deficits, Obama is not trying to push jobs programs of the scale that FDR used to fight the 1930s Depression, when he created an alphabet-soup collection of government agencies to put people back to work, from the Civilian Conservation Corps to the Works Progress Administration.

Instead, Obama is emphasizing further increases in infrastructure spending beyond what is already in the pipeline from the $787 billion economic stimulus bill.

Taking a page from past Republican and Democratic administrations, Obama also is proposing tax credits targeted to small businesses to help them hire new workers and give them a tax break for buying new equipment to expand and modernize their operations.

He also is proposing extending a number of programs already included in his February stimulus measure, including extra support to state and local governments to keep them from having to lay off workers.

"Obama is trying an eclectic approach to jump-starting employment growth and that is not surprising given that the labor market today is the worst it has been since the Great Depression," said Mark Zandi, chief economist at Moody's Economy.com.

Obama's efforts are sizable compared with the stimulus measures offered by recent administrations — also not surprising, given that the recession that began in December 2007 is the longest and deepest since the 1930s.

President George W. Bush offered immediate tax rebates when he was trying to get the country out of the brief and mild downturn that hit during his first year in office.

Like Obama, Ronald Reagan also faced unemployment above 10 percent during his first term, but his answer to the 1981-82 recession was to emphasize a major tax cut that reduced the top tax rates. Reagan's jobs program was a sizable military buildup that increased troop strength and bolstered employment among defense contractors.

Presidents Jimmy Carter and Gerald Ford also battled serious recessions in the 1970s, but their government stimulus efforts had to take into account soaring inflation from a series of oil shocks that gave the country a new economic worry: stagflation, a toxic mix of inflation and economic stagnation.

Just as Obama sought to highlight his efforts to bolster the economy with a jobs summit last week, a number of presidents have held high-level economic gatherings at the White House to showcase their concerns about various economic maladies.

Not all of those sessions have ended well. The Ford administration was ridiculed for its WIN buttons, standing for "Whip Inflation Now," which proved as ineffective as Ford's other ideas for curbing inflation.

Obama's new proposals come with a price tag to be determined later. Obama said the government could afford the new efforts because the administration had just trimmed the ultimate cost of the unpopular Troubled Asset Relief Program by $200 billion. But his effort to capture bank bailout funds for further economic stimulus is already running into stiff opposition from Republicans.

Obama is seeking to split the difference between his worries over how a weak economy will affect Democrats' chances in the 2010 elections and his concerns about soaring budget deficits. Republicans say all the TARP funds should go to reduce a budget deficit that soared to $1.42 trillion last year and is projected by the administration to remain above $1 trillion annually for the next two years.

Private economists said the program is likely to hit $200 billion or more after Democrats, who control Congress, get through massaging the plan. That would come on top of the $787 billion stimulus program passed in February.

Economists normally are skeptical of government jobs programs, arguing that by the time Congress manages to pass the program, the recession is usually over and the economy is generating jobs on its own. But as in the 1930s, the current downturn is viewed as severe enough to warrant government help.

In the Great Depression, unemployment hit 25 percent in 1933, the year that FDR took office. The unemployment rate this time around is expected to be nowhere near that level, but it could still surpass the post-World War II record of 10.8 percent set in 1982 before a sustained recovery takes hold next summer. The jobless rate is currently at 10 percent.

"Roosevelt's efforts in the Great Depression gave a sense of hope to people who had lost hope," said Nariman Behravesh, chief economist at IHS Global Insight. "In the current situation, Obama's program is aimed at giving companies enough confidence to start hiring a little sooner than they otherwise would."

Orlando Magic (16-4) at Los Angeles Clippers (9-11), 10:30 p.m.

The red-hot Orlando Magic shoot for their sixth straight win Tuesday when they resume a four-game western road swing in Hollywood against the Los Angeles Clippers.

The Magic will also be attempting to earn a franchise record with their eighth straight road win in a season and match the 1995-96 Orlando team that opened up that season 17-4. The Magic did win nine straight as the visitor before but that spanned two seasons, the final two road games of 2006-07 and the first seven in the following season.

Orlando won the opener of the trek up the coast in Oakland on Saturday when Vince Carter went 12-of-12 from the foul line on his way to 27 points while dishing out seven assists and grabbing five rebounds, as Orlando used a late run to take down the Golden State Warriors, 126-118.

Former Warrior Mickael Pietrus drained 4-of-8 shots from beyond the arc on his way to 22 points for the Magic, who have won 10 of 11 overall. Rashard Lewis chipped in 20 points while Dwight Howard ended with 17 points and eight rebounds for Orlando.

"We continued to push when we needed, and we were able to get to the free throw line at the end of the game that preserved the win," Carter said.

The Magic, who are an impressive 9-2 on the road and lead the Southeast Division by two games over Atlanta, will finish their trip with visits to Utah and Phoenix.

The Clippers, meanwhile, improved to 2-1 on a long, six-game homestand Saturday when Marcus Camby had a solid all-around performance with 12 points, 17 rebounds, six assists and three blocks, carrying Los Angeles to an 88-72 win over Indiana.

Al Thornton contributed 19 points and seven boards for the Clippers, who won for the third time in four games overall. Chris Kaman added 16 points and 11 rebounds, while Baron Davis and Eric Gordon scored 12 and 10, respectively.

"Defensively, we were pretty good, especially on the boards with 19 offensive rebounds," said Clippers coach Mike Dunleavy. "We were able to limit their shooters to tough shots and our second group gave us a lift."

Orlando has won five straight over the Clips, last losing on Dec. 3, 2006 in LA