Obama, Lee pitch trade deal in Michigan (AP)

ORION TOWNSHIP, Mich. – President Barack Obama and South Korea's President Lee Myung-bak are promoting a new trade deal by visiting an auto plant in Michigan, a state battered by Asian car imports, in a rare joint appearance outside of Washington by a U.S. president and a visiting head of state.

In choosing General Motors Co.'s Orion assembly plant for a post-state dinner tour Friday, the two leaders will draw attention to an aspect of a U.S.-South Korea trade agreement that had been among the most difficult to negotiate. Congress approved the deal Wednesday after negotiators overcame U.S. auto industry complaints that previous efforts at a deal failed to do enough to lift South Korea's barriers to U.S.-made cars.

Obama is taking Lee to the heart of the region that has been hardest hit by foreign car competition, especially the influx of vehicles like South Korea's Hyundai.

Aides contend Obama drove a hard bargain -- insisting the deal give U.S. automakers a much better shot at selling in South Korea.

"He was willing to walk away from the (deal) because he didn't think it was good enough, strong enough, or provided enough protection for American workers and American businesses," press secretary Jay Carney told reporters as Obama flew to Michigan.

But for Obama, the trip is also an opportunity to highlight the auto industry's resurgence after he engineered an $80 billion government bailout for GM and Chrysler in 2009. The Orion plant, about 30 miles north of Detroit, had been shuttered before the federal government stepped in and helped usher the two carmakers through bankruptcy protection. The plant now is producing the subcompact Chevrolet Sonic and will start production of the compact Buick Verano soon.

The Sonic, the only subcompact sold in the U.S. that is assembled in the U.S., is being built with Korean parts. GM began building the Sonic last year following an agreement with the United Autoworkers that allowed the company to pay some workers lower wages that are more competitive with those in GM's foreign plants. The Sonic's predecessor, the Chevrolet Aveo, was built in South Korea.

All in all, Obama could profit from calling attention to policies aimed at benefitting Michigan, a state that has the third highest unemployment rate in the country at 11.2 percent and which represents an important battleground in his bid for re-election. Obama won the state by a 57-41 margin in 2008, but could face difficulties in the state, especially if his general election opponent is Mitt Romney, whose father was Michigan governor.

The trip also serves as an opportunity to illustrate his special relationship with the South Korean leader. Inviting Lee to the U.S. heartland is an unusual addition to the itinerary of a high-profile state visit. The two men were expected to fly separately to Michigan; once at the plant, both men planned to make remarks.

Lee's is the fifth state visit during Obama's presidency, but the first that has included added travel beyond Washington D.C.

President George W. Bush was more predisposed to travel outside the capital Beltway with foreign leaders. In 2006, he invited Japanese Prime Minister Junichiro Koizumi, an unabashed Elvis Presley fan, to Graceland. In 2001, Bush took Mexican President Vicente Fox to Toledo, Ohio, where the two addressed Hispanic voters the day after their state visit at the White House. The following year, then-Polish President Aleksander Kwasniewski accompanied Bush to a Polish cultural center in the Detroit suburbs.

In addition to the South Korea agreement, Congress approved free trade deals Wednesday with Colombia and Panama. The South Korea deal, which would be the largest since the North American Free Trade Agreement with Canada and Mexico, still must be approved by South Korea's National Assembly_ a vote that Lee said he was confident would succeed.

The South Korea deal alone could expand U.S. exports by $11 billion and support 70,000 jobs, according to the White House. The agreements would lower or eliminate tariffs that American exporters face in the three countries. They also take steps to better protect intellectual property and improve access for American investors in those countries. The last free trade agreement completed was with Peru in 2007.

Many labor groups opposed the deals, but the agreements won wide bipartisan support in part because their passage was linked to legislation to extend aid to workers displaced by foreign competition. Obama had demanded that the worker aid bill be part of the trade package.

Standing with Lee at his side during a press conference Thursday, Obama declared the trade deal "a win for both our countries," adding that he was "very pleased that it'll help level the playing field for American automakers."

Still, five of the six House Democrats from Michigan voted against the trade deal, including Rep. Gary Peters, whose district includes GM's Orion plant. Peters said Obama had helped make the deal fairer to U.S. carmakers, but said he believed the deal would cost jobs in Michigan.

The trade agreement comes as South Korea's Hyundai Motor Co. and Kia Motors Corp. are on track to set U.S. sales records this year. Both companies build car and light truck models in the United States, but also export vehicles to the U.S. market.

Last year, the Ford Motor Co. ran an aggressive ad campaign to improve the trade deal by pointing out that for every 52 cars South Korea exported to the U.S., the U.S. only exported one to South Korea. "We believe in free trade, and this isn't it," Ford said in ads that ran in newspapers across the country.

On Friday, Ford President and CEO Alan Mulally praised the deal, saying it would "open new opportunities for Ford to reach even more Korean customers."

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Why China 'trade war' bill is tying House Republicans in knots (The Christian Science Monitor)

Washington – The bill to punish China for manipulating its currency – and allegedly stealing American jobs – is setting off a clash within Republican ranks on Capitol Hill.

The bill, which would impose tariffs on Chinese goods, has already passed the Senate with bipartisan support and would likely pass the House if brought to the floor. But so far, House Speaker John Boehner refused to do so.

With multinational corporations and conservative antitax groups – key Republican constituencies – opposed to the bill, Mr. Boehner has been loath to let it see the light of day, given that it could be vetoed by President Obama anyway.

How much do you know about China? Take our quiz.

But pressure on Boehner is mounting. Lawmakers representing states hardest hit by the rise of Chinese manufacturing want to go on the record supporting the bill, and GOP presidential hopeful Mitt Romney has taken a stand on China currency even more aggressive than the Senate bill.

Boehner has called the measure “very dangerous.” His concern is that raising tariffs on Chinese goods could spark a damaging trade war at a time when the economy is ill-suited to absorb another blow.

“I have made my position pretty clear that I’ve got grave concerns about this bill,” he added at a briefing on Wednesday. For Congress to act now “poses a very severe risk of a trade war and unintended consequences that could come as a result.”

RECOMMENDED: How much does US-China trade hurt American workers? Slowly, a clearer picture.

Boehner is asking the president to stick his neck out and clarify whether he would veto the bill. a€?Ita€?s time for the president to lead,a€

China's manipulation of its currency has long angered Washington. But the current jobs crisis has given the issue added impetus. Backers of the bill say that, by keeping the value of its currency artificially low, China gives its goods as much as a 30 percent price edge in US markets and a comparable disadvantage for American goods in China. The Senate bill would authorize economic sanctions if a trading partner is found to be maintaining its currency at an artificially low level to gain a trade advantage.

China has already signaled its displeasure. It let the value of its currency sink for the second day in a row on Thursday – a move analysts interpret as a rebuff of the Senate vote.

For their part, major US corporations are also worried.

“The American companies who have become invested in China don’t want change,” says Peter Morici, former chief economist at the US International Trade Commission and a professor at the University of Maryland.

“American companies like GE and Caterpillar, who have outsourced American jobs and corporate functions to China and are now clients of Beijing’s protectionism, have convinced President Obama the China currency bill is protectionist and would start a trade war,” he adds.

Technically, the bill has already come to the House floor for a vote. But Democrats brought it up via a highly partisan legislative procedure that would have also forced Republicans to vote against a popular trade bill with Colombia, so the motion failed. But GOP senators are pushing House Republicans to take up the bill themselves.

“You’re miscalculating where the country is on this issue,” said Sen. Lindsey Graham (R) of South Carolina, in remarks addressing House Republicans at a briefing on Wednesday. South Carolina has lost some 41,800 jobs due to trade with China since 2001, according to a recent report by the Economic Policy Institute.

A critical mass of House Republicans are on record supporting the aims of the Senate bill. A similar House measure attracted 63 Republican sponsors, despite opposition from House GOP leaders. Overall, the bill has 225 sponsors – enough to pass the bill.

In 2010, when the House was in Democratic hands, 99 Republicans voted to back a similar bill, which passed, 348 to 79, but was never taken up by the Senate.

Supporters say that if a currency vote is to occur in the House this time, it’s going to require action on the presidential level – or a stronger push from public opinion. If Obama commits to signing the bill, it puts renewed pressure on House GOP leaders.

At the same time, should former Massachusetts Governor Romney pick up momentum in the GOP primary, his outspoken stands on China trade could also have more sway with House Republicans.

In his economic plan, released Sept. 5, Romney called for confronting China on trade abuses. He pledges on Day 1 to issue an executive order listing China as a currency manipulator and directing the Department of Commerce to assess countervailing duties on Chinese imports, if China does not quickly move to float its currency.

“I'm afraid that people who've looked at this in the past have been played like a fiddle by the Chinese,” said Romney at a presidential debate in Hanover, N.H., on Tuesday. “And the Chinese are smiling all the way to the bank, taking our currency and taking our jobs and taking a lot of our future. And I'm not willing to let that happen.”

“Governor Romney last night couldn’t have been clearer,” said Sen. Jeff Sessions (R) of Alabama, a Senate sponsor of the China currency bill. “I was very pleased with what he said.”

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Stalled free trade deals now on a fast track, White House says (The Christian Science Monitor)

Washington – By the time South Korea’s President Lee Myung-bak arrives at the White House for a state dinner honoring him next Thursday, President Obama will be able to present him with a ratified US-Korea free trade agreement.

That’s the prediction of White House Chief of Staff William Daley, who confidently told a Washington audience of business leaders and diplomats Wednesday night that Congress will approve a package of three free-trade deals and domestic trade-impact legislation by the middle of next week.

Mr. Daley told guests at the National Foreign Trade Council’s annual black-tie dinner that the four-part trade package – free trade deals with South Korea, Colombia, and Panama, plus legislation that renews funding for retraining workers who lose jobs to foreign competition – will move “across the finish line” next Wednesday.

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If he’s right, it will be uncharacteristically quick work for Washington, and will constitute a striking turnaround for trade deals that have languished for years.

One incentive for the Obama administration to get quick passage of the trade package is President Lee’s state visit. The Korea deal is the largest US trade pact since the landmark NAFTA (the North American Free Trade Agreement) accord with Canada and Mexico. It is expected to generate about $11 billion of the total $13 billion in new US exports the administration says the three free-trade agreements (FTAs) will deliver. Obama, who fine-tuned the South Korea trade deal originally negotiated under President George W. Bush, did not want to greet his White House guest empty-handed.

Another incentive is that Obama made implementation of the three FTAs part of his jobs bill now before Congress. Daley called the four-part trade package an “essential part of the president’s jobs agenda,” and predicted that the Korea deal alone will “support” 70,000 US jobs and open up markets to allow for creating thousands of new jobs.

Outside of government, business and labor organizations disagree on the jobs impact of the three pending FTAs. The US Chamber of Commerce predicts the deals will prevent hundreds of thousands of job losses by keeping exporting companies humming, while the AFL-CIO says the pacts spell doom for more than 150,000 jobs.

Daley, who helped the Clinton administration usher NAFTA through Congress in 1993, described Obama as coming down in the middle of the polar views on tradea€?s impact. On one hand, the president believes that trade agreements create jobs, but on the other he realizes that a€?there are people who are negatively hurt by trade,a€

He said that explains Obamaa€?s insistence that renewed funding for Trade Adjustment Assistance, the program that enables worker retraining, accompany the three trade deals.

Going a step further, Daley also warned his audience of mostly pro-trade business representatives that this kind of “balanced” approach to trade will be necessary if the American public is to be convinced that more trade liberalization is in the national interest. For example, the administration is currently pursuing a huge Pacifc-region trade agreement.

“We’ve got to reach out to people who are negatively affected, especially at this crisis time,” Daley said. “If we don’t continue to build a consensus, these [trade] fights will get more and more difficult.”

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Obama hits China on trade; cautious on currency bill (Reuters)

WASHINGTON (Reuters) – President Barack Obama accused China on Thursday of "gaming" international trade by keeping its currency weak, but was cautious about a bill before the U.S. Senate aimed at pressing Beijing to revalue the yuan.

Obama stopped short of explicitly backing legislation that calls for U.S. tariffs on imports from countries with deliberately undervalued currencies, and he restated concerns that any measure must comply with global trade rules.

Still, in his toughest language on China to date, the president echoed sponsors of the bill, which is heading toward a final Senate vote that could come later on Thursday. The measure, which has drawn warnings from Beijing that it could trigger a trade war, is widely expected to pass.

"China has been very aggressive in gaming the trading system to its advantage and to the disadvantage of other countries, particularly the United States," Obama told a news conference focused on his bid to revive a weak U.S. economy.

"Currency manipulation is one example of it," he said.

Obama, who faces a tough bid for re-election next year, did not say whether he would sign or veto the legislation if it reached his desk. Both the Senate and the House would have to approve the measure first.

"My main concern ... is whatever tools we put in place, let's make sure that these are tools that can actually work, that they're consistent with our international treaties and obligations," Obama said.

"I don't want a situation where we're just passing laws that are symbolic knowing that they're probably not going to be upheld by the World Trade Organization," he said.

The authors of the bipartisan Currency Exchange Rate Oversight Reform Act insist the bill complies with WTO rules.

BOEHNER CALLS BILL "WRONG" AND "DANGEROUS"

Many economists say China holds down the value of its yuan currency to give its exporters an edge in global markets. China says it is committed to gradual currency reform and notes that the yuan has risen 30 percent against the dollar since 2005.

The Senate voted 62-38 on Thursday to curtail debate and send the bill toward a final vote in that chamber.

Supporters say that decision, which required a super-majority of 60, virtually guarantees Senate approval, but the bill faces stronger opposition in the House of Representatives and may never be brought to a vote.

"For the Congress of the United States to pass legislation to force the Chinese to do what is arguably very difficult to do I think is wrong, it's dangerous," House Speaker John Boehner said on Thursday.

"You could start a trade war," he warned.

Boehner has the power to block the bill in his chamber, even though backers of the legislation say it has 225 House co-sponsors, including 61 Republicans -- enough for passage if it came to a vote.

Top House Democrats lost no time in stepping up pressure on Boehner.

"Now is the time for the House Republican leadership to stand with American workers by allowing the House to pass the bipartisan China currency bill, and put more Americans back to work," House Democratic leader Nancy Pelosi said in a statement.

Obama touted his administration's record on pursuing trade cases before the World Trade Organization with the Chinese and others as "more aggressive than any in recent years." But he also noted he had taken great pains to stabilize ties with China that have been dogged by disputes over trade, human rights and U.S. arms sales to Taiwan.

VOTES VS. DIPLOMACY DILEMMA

If the House were to pass the bill, Obama would face a dilemma. Many Americans blame China's $260 billion trade surplus as one reason the U.S. unemployment rate is stuck above 9 percent.

The bill could hit Obama's desk just weeks before he hosts Chinese President Hu Jintao at a regional economic forum in Hawaii and meets Hu again at an Asian summit in Indonesia.

But vetoing the bill ahead of those November summits will not play well in industrial heartland states like Ohio and Michigan, which Obama likely needs to win a second term. A leading Republican candidate, Mitt Romney, has vowed to crack down on China over currency.

"I think Obama would prefer not to take a position, but if he wants to be consistent with his past policies and statements, he will sign the bill," said Scott Paul, executive director of the Alliance for American Manufacturing, a bill supporter.

"I don't think Obama wants to be outflanked on this," he said.

Obama said he believed "a win-win trading relationship with China" was possible.

But he said competing with the world's second-biggest economy requires Washington to "make sure that we're aggressive in looking out for the interests of American workers and American businesses and that everybody is playing by the same rules and that we're not getting cheated in the process."

Underscoring that stance, U.S. Trade Representative Ron Kirk on Thursday accused China of flouting WTO rules by failing to notify the world trade body of nearly 200 Chinese government subsidy programs.

"The situation was simply intolerable," Kirk said in a statement, which also scolded India for being delinquent with the subsidy reports.

(Additional reporting by Jason Lange, Andy Sullivan and Donna Smith; Writing by Paul Eckert; Editing by Philip Barbara

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UBS raises rogue equity trade losses to $2.3 billion (Reuters)

ZURICH (Reuters) – Swiss bank UBS increased the amount it said it had lost on rogue equity trades to $2.3 billion on Sunday and Chief Executive Oswald Gruebel said the alleged fraud would have consequences for strategy and possibly also for himself.

"It is obvious that these incidents will have an influence on the strategy of the investment bank," a visibly chastened Gruebel told Swiss television, adding that the firm would present a new strategy for its investment bank soon.

"I will bear all the consequences of the incident. They will be announced as soon as we put them in practice," he said.

UBS stunned markets on Thursday when it announced unauthorised trades had lost it some $2 billion. London trader Kweku Adoboli was charged on Friday with fraud and false accounting dating back to 2008.

UBS said in a statement on Sunday the trader concealed "unauthorised speculative trading in various S&P 500, DAX, and EuroStoxx index futures over the last three months" by creating fictitious hedging positions in internal systems.

"The loss arising from this matter is $2.3 billion. As previously stated, no client positions were affected," it said.

Global stock markets have been extremely volatile in recent months, plunging on concerns over euro zone and U.S. debt crises and then rebounding on hopes for their resolution.

BUCK STOPS WITH GRUEBEL?

The loss is a disaster for the reputation of Switzerland's biggest bank, which had just started to recover after it almost collapsed during the financial crisis and faced a damaging U.S. investigation into aiding wealthy Americans to dodge taxes.

"Loss even more. Reads like they're making excuses," Helvea analyst Peter Thorne said of the UBS statement in an e-mail.

The new scandal has prompted calls for UBS's top managers to step down and for its investment bank to be split into a separate unit from its core wealth management business.

Chris Wheeler, bank analyst at Mediobanca, said there would be pressure on UBS to address the investment bank fast.

"That had been planned anyway for the investor day on November 17 and there may be pressure on them to accelerate that."

Gruebel, who was brought out of retirement in 2009 to turn the bank around, was quoted in a newspaper on Sunday as saying he was not considering quitting over the crisis, but said it was up to the board to decide.

In a memo to staff on Sunday, he said: "Ultimately, the buck stops with me. I and the rest of senior management are responsible for dealing with wrongdoing."

Swiss newspapers quoted unnamed insiders as saying the UBS board and important shareholders such as the Singapore sovereign wealth fund still backed Gruebel, with immediate changes the last thing the bank needs and an obvious successor lacking.

CONFIDENCE, SECURITY, DISCRETION?

The bank, whose three keys logo symbolise "confidence, security, discretion," has for now pulled its "We will not rest" global advertising campaign that was designed by advertising agency Publicis to try to rebuild its image.

Meanwhile, UBS client advisers have been writing to customers to reassure them of the underlying financial strength of the bank despite the trading loss, a spokesman said.

"That we now suffer this setback at this point in our efforts to improve our reputation is very disappointing. This incident also sets us back somewhat in our capital-building efforts," Gruebel said in his memo to staff.

"However, I wish to remind you that our fundamental strengths as a firm remain intact... we remain one of the best-capitalised banks in the industry.

UBS said its board of directors had set up a committee chaired by independent director David Sidwell, former chief financial officer at Morgan Stanley, to conduct an independent investigation into the trades and the bank's control systems.

A source close to the bank said the trades involved positions with a notional value of about $10 billion.

The bank said it had covered the risk resulting from the unauthorised trades, and its equities business was again operating normally within previously defined risk limits.

It said the trader had allegedly concealed the fact his trades violated UBS risk limits by executing fake exchange-traded fund (ETFs) positions.

"Following inquiries directed to him by UBS control functions that were reviewing his positions, the trader revealed his unauthorised activity," the bank said.

ETFs are index funds listed on an exchange and can be traded just like regular stocks. They try to replicate index performances and offer lower costs than actively managed funds, but regulators have warned about risks from some complex ETFs.

The instruments involved in the UBS case are similar to those that Jerome Kerviel, the rogue trader at Societe Generale, traded when he racked up a $6.7 billion loss in unauthorised deals in 2008.

Christoph Blocher, vice-president of the right-wing Swiss People's Party (SVP) -- the country's biggest -- renewed his calls for a splitting off of the investment bank.

"One has to seriously examine a ban on investment banking for commercial banks," he told the SonntagsZeitung newspaper, adding his party might team up with the center-left Social Democrats to push for such a move.

(Reporting by Emma Thomasson and Silke Koltrowitz; Additional reporting by Steve Slater in London; Editing by David Hulmes and Peter Graff)

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UBS $2 billion rogue trade suspect held in London (Reuters)

LONDON/ZURICH (Reuters) – Swiss bank UBS said a trader who had lost it around $2 billion in unauthorized deals had been arrested in London, where police were holding 31-year-old Kweku Adoboli.

Adoboli -- working as a director of exchange traded funds and Delta 1 trading, according to his profile on networking site LinkedIn -- was arrested during the night at UBS's London office on suspicion of fraud, sources close to the situation told Reuters.

UBS said it discovered the problem on Wednesday afternoon, and police said they had launched an investigation.

"The man was taken to a City of London police station for questioning and he remains in custody while officers are continuing to investigate this matter," City of London police Commander Ian Dyson told reporters.

The University of Nottingham computer science and management graduate was described by a former landlord as a good tenant of a 1,000 pound ($1,600) per week apartment close to UBS in London's East End, where he lived until recently.

"I can confirm that an employee of the bank was arrested in London in connection with the statement," a UBS spokesman said, after the bank had revealed the loss.

UBS shares closed down 10.8 percent after it said it might post a third-quarter loss following the rogue trades, a huge blow as it struggles to rebuild its credibility after years of crises.

The loss effectively cancels out the 2 billion Swiss franc ($2.3 billion) saving the bank had hoped to make in a cost-cutting program announced last month in which it will axe 3,500 jobs.

It also threatens the future of UBS's investment bank, which is being reviewed by chief executive Oswald Gruebel as part of a wide-ranging restructuring following heavy losses in the credit crisis and a damaging scandal over bankers helping rich U.S. clients dodge taxes.

UBS, which said no client positions were affected, is scheduled to hold an investor day on November 17 at which it was expected to announce major restructuring of the investment bank.

"The matter is still being investigated, but UBS's current estimate of the loss on the trades is in the range of $2 billion," the bank said in a statement.

UBS employed almost 18,000 people in its investment bank at the end of June, most of them outside Switzerland, particularly in London and the United States.

"(This) is a staggering demonstration that all the clever systems that the banks now have, especially after the financial crisis, still cannot stop a determined individual getting round them if they want to," said Chris Roebuck, Visiting Professor at Cass Business School in London.

"It will yet again confirm to the majority of shareholders who are Swiss that investment banking is not 'proper' banking, as private banking is."

UBS had started to see client confidence return this year after it had to be rescued by the Swiss state in 2008 following massive losses on toxic assets held by its investment bank. The bank has had a history of major risk management glitches followed by repeated pledges to fix risk systems.

KERVIEL

Any losses in UBS's investment bank risk scaring rich clients and prompting a further flight from its huge private bank, the core of its business that used to be the world's biggest wealth manager but has slipped to third place.

"This loss has the scope to have a material impact on the perception of UBS's private bank, impacting its future operating trends," Goldman Sachs analysts Jernei Omahen and Peter Skoog said in a note.

"Today's announcement therefore adds to the long list of arguments (and pressure) for a substantially smaller investment bank."

UBS's news caused disbelief among market operators.

The last similar case was when Jerome Kerviel, then a trader at Societe Generale, racked up a $6.7 billion loss in unauthorized deals revealed in 2008. Kerviel was sentenced to three years in prison in October 2010.

Both Kerviel and Adoboli were the same age when the scandal broke and both worked with so-called Delta 1 products, derivatives which closely track the underlying securities and give the holder an easy way to gain exposure to several asset classes. Examples include equity swaps, forwards, futures and exchange-traded funds.

"It is amazing that this is still possible," said ZKB trading analyst Claude Zehnder. "They obviously have a problem with risk management. Even when the amount isn't so high, it is once more a loss of confidence that casts UBS in a poor light."

"With this they are losing a lot of credit that they had regained with effort," he added.

Switzerland's financial markets regulator FINMA said it had been informed of the case and was in close contact with UBS.

HEADS TO ROLL?

The bank has in the past two years tried to rebuild the investment bank that nearly felled it during the financial crisis. It needed a state bailout after heavy losses on U.S. subprime mortgage-related securities.

Under Gruebel and investment bank boss Carsten Kengeter -- themselves both once traders -- it hired hundreds of traders in a bid to boost its bond business.

Several analysts said the incident made it more likely Kengeter would be in the firing line, while Gruebel could step down sooner rather than later.

"Gruebel saved the bank from destruction, so his main job is done. It is only a matter of time before he steps down. If it means he leaves a little sooner, it does not change a lot. But the investment bank is a bit of a disaster, and the knives will be out for Kengeter," said Peter Thorne, analyst at Helvea.

Another analyst who declined to be named said: "Some important heads are going to have to roll, and some are saying that after a series of missteps with the IB, Kengeter himself will have to go."

Former Bundesbank head Axel Weber is due to join the UBS board in May and take over as chairman in 2013.

The weak performance of the investment bank and tough capital rules in Switzerland had already attracted intense scrutiny over how UBS will cope, with analysts calling for a retrenchment of the investment bank.

The rogue trader scandal came as Swiss politicians were debating tough new capital rules designed to make sure big banks can weather future crises without having to be bailed out by the state.

"It shows that investment banking is a risky business and that it is important that systemically relevant functions are clearly separated from the rest of the banking business," Caspar Baader, parliamentary leader of the right-wing Swiss People's Party, told Swiss television.

($1 = 0.870 Swiss franc)

(Additional reporting by Andrew Thompson in Zurich, and Sarah White, Steve Slater, Keith Weir, Stefano Ambrogi and Douwe Miedema in London; Writing by Sophie Walker and Alexander Smith; Editing by Dan Lalor and Will Waterman)

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Poll: OK to trade some freedoms to fight terrorism (AP)

By NANCY BENAC and JENNIFER AGIESTA, Associated Press Nancy Benac And Jennifer Agiesta, Associated Press – 1?hr?10?mins?ago

WASHINGTON – Surveillance cameras in public places? Sure. Body scans at airports? Maybe. Snooping in personal email? Not so fast.

The same Americans who are increasingly splashing their personal lives across Facebook and Twitter trace a meandering path when asked where the government should draw the line between protecting civil liberties and pursuing terrorism.

Ten years after the 9/11 attacks led to amped-up government surveillance efforts, two-thirds of Americans say it's fitting to sacrifice some privacy and freedoms in the fight against terrorism, according to a poll by The Associated Press-NORC Center for Public Affairs Research.

A slim majority — 54 percent — say that if they had to choose between preserving their rights and freedoms and protecting people from terrorists, they'd come down on the side of civil liberties. The public is particularly protective of the privacy of U.S. citizens, voicing sharp opposition to government surveillance of Americans' emails and phone calls.

For some Americans, their reluctance to give up any freedoms is a reflection of their belief that the terrorists eventually will succeed no matter what.

"If somebody wants to do something, they'll find a way," says David Barker, a retired high school teacher from Wynne, Ark., who says he's not ready to sacrifice any freedoms in return for more security.

Others worry that giving up one freedom will lead to the loss of others.

"It's like opening a crack in the door, and then the door is opened wide," says Keri Jean, a homemaker from Elk Ridge, Utah.

The poll asked people to grapple with some of same quandaries that the government and the courts have been wrestling with over the past decade, and even before the 2001 terrorist attacks. And it turns out that policymakers, too, have drawn a zigzag line as they make tradeoffs between aggressively pursuing potential terrorists and preserving privacy and civil liberties.

Two-thirds of those surveyed believe the resulting policies are a mish-mash created in reaction to events as they occur rather than clearly planned.

Consider the rules on government interception of email: Sometimes that's legal and sometimes it's not. It depends on how old the email is, whether it's already been opened by the recipient, whether the sender and recipient are within the U.S., and which federal appellate court considers the question. Sometimes investigators need a warrant and sometimes no court approval is necessary.

The AP-NORC poll found that about half of those surveyed felt that they have indeed lost some of their own personal freedoms to fight terrorism. Was it worth it? Close to half of those who thought they'd lost freedoms doubted it was necessary.

Overall, six in 10 say the government is doing enough to protect Americans' rights and freedoms as it fights terrorism. But people may not even be aware of what they've given up. The extent of government eavesdropping and surveillance is something of a mystery.

There have been recent efforts in Congress — unsuccessful so far — to require the Justice Department to estimate how many people in the U.S. have had their calls and email monitored under a 2008 law that gave the government more surveillance authority. And a recent AP investigation revealed the existence of a secret police unit in New York that monitored daily life inside Muslim communities.

Transportation Security Administration chief John Pistole, in a speech Tuesday at the Center for Strategic & International Studies, took note of the challenge of providing security without trampling on civil liberties, saying: "We have to make sure we're doing everything we can, while respecting privacy and civil liberties — there's a lot of debate about that — as to ensuring that another 9/11 doesn't happen."

For all of their concern about protecting personal rights, Americans — just like policymakers and the courts — show far more willingness to allow intrusions into the lives of foreigners than into their own.

While 47 percent of Americans support allowing the government to read emails sent between people outside the United States without a warrant, just 30 percent supported similar monitoring of emails sent between people inside the country, for example. And while nearly half supported government eavesdropping on phone calls between people outside the country without a warrant, only a quarter favored such surveillance of calls inside the U.S.

"Countries have become bound with political correctness and I think need to be a little more strict," says Jean, despite her warnings about surrendering more freedoms. "Stop being afraid to offend others."

The government can listen in on telephone calls made by foreigners outside the United States without a warrant, but government investigators are generally required to obtain orders signed by judges to eavesdrop on domestic phone calls and other electronic communications within the U.S. The rules are more complex for cross-border communication between foreigners and Americans.

Marc Rotenberg, executive director of the Electronic Privacy Information Center, which focuses on privacy and civil liberties, says Americans were surprisingly willing to accept new surveillance techniques in the years after the 9/11 attacks, but the pendulum now appears to be swinging somewhat in the other direction.

"People are just not quite willing to accept these tradeoffs, particularly when they are ineffective," he says.

The U.S. effort to combat terrorism receives mixed reviews: Just 36 percent say it's been extremely or very effective, 49 percent say moderately so.

About a third of Americans are concerned that they or their family will be victims of a terrorist attack, and 37 percent believe the area where they live is at least at moderate risk of being attacked.

Susan Davis, a medical transcriptionist from Springfield, Mo., answers for many Americans when asked whether sacrificing some freedom is warranted in order for the government to provide more security.

"Yeah," she says, "as long as they don't go too far with it."

But everyone has their own definition of what's too far.

The poll found that Americans have different comfort levels with various scenarios in pursuing potential terrorist activity. For example:

_71 percent favor surveillance cameras in public places to watch for suspicious activity.

_58 percent favor random searches involving full-body scans or pat-downs of airplane passengers.

_55 percent favor government analysis of financial transactions processed by U.S. banks without a warrant.

_47 percent favor requiring all people in the U.S. to carry a national ID card and provide it to authorities upon demand.

_35 percent favor racial or ethnic profiling to decide who should get tougher screening at airports.

The first three scenarios already are legal; the latter two are not.

The poll turned up sharp divisions among Americans on whether torture — banned by the government — should have any place in combating terrorism.

Fifty-two percent said torture can be justified at least sometimes to obtain information about terrorist activity. Forty-six percent said it can never or only rarely be justified.

The AP-NORC poll was conducted July 28 to Aug. 15. It involved landline and cell phone interviews with 1,087 adults nationwide, and has a margin of sampling error of plus or minus 4.1 percentage points.

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Associated Press writer Stacy Anderson, Polling Director Trevor Tompson and News Survey Specialist Dennis Junius contributed to this report.

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Online:

www.apnorc.org

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Benac can be reached at http://twitter.com/nbenac. Agiesta can be reached at http://twitter.com/JennAgiesta.

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Fresh credit warnings as US lawmakers trade blame (AFP)

WASHINGTON (AFP) – Standard & Poor's warned Sunday that there was a one in three chance of a further US credit downgrade, as lawmakers traded blame for the failure to rein in the country's massive debt.

The ratings agency docked the United States from a sterling AAA to a AA+ rating on Friday largely because of the failure of bitterly divided US leaders to reach a consensus on containing the country's spiraling debt.

"If the fiscal position of the United States deteriorates further, or if the political gridlock becomes more entrenched, then that could lead to (another) downgrade," S&P ratings head John Chambers told ABC television.

"The outlook indicates at least a one in three chance of a downgrade" over the next six to 24 months, he said on the network's political talk show "This Week."

He added that in the past it has taken countries nine to 18 years to regain a AAA rating, and warned that "it would take, I think, more ability to reach consensus in Washington than what we're observing now."

But despite early signs that Friday's downgrade could roil world markets and warnings of a new recession by a former top White House economist, senior Democratic and Republican lawmakers continued to trade blame.

Senator John Kerry, a moderate Democrat, called Friday's move a "Tea Party downgrade," referring to the ultra-conservative anti-tax movement, and said a debt deal reached last week after weeks of heated negotiations fell short because some Republicans "were willing to shoot the hostage."

"What we need is a Washington that stops this bickering," Kerry told NBC's "Meet the Press."

The deal to cut some $2.5 trillion over 10 years in exchange for raising the congressionally-set debt ceiling fell short of the S&P's call for the United States to cut $4 trillion over the same period.

Senator John McCain, a moderate Republican also appearing on Meet the Press, blamed President Barack Obama, saying he had failed to put forth a specific plan for reining in debts and deficits.

"I agree that there is dysfunction in our system, but a lot of it has to do with the failure of the president to lead," he said.

He then echoed Kerry's call for civility, saying: "Lately the Democrats have been calling us terrorists, so we need to lower that level of rhetoric."

Obama's former top economic advisor Larry Summers, appearing on CNN's "State of the Union," meanwhile warned of a new recession and attacked the S&P downgrade as an unwarranted piling on atop an already weak economy.

Summers insisted the country could pay its bills and repeated allegations from administration officials that S&P's decision to downgrade was linked to a $2 trillion accounting error and its use of a faulty baseline.

McCain, however, defended the S&P, saying: "Don't shoot the messenger."

"Is there anybody that believes that S&P is wrong in their assessment of the fiscal situation of this country?" he asked.

Washington has been deeply divided over how to reduce its more than $14 trillion debt without further hobbling the sluggish economic recovery, and even the limited debt deal came after a bruising partisan battle.

Obama and his Democratic Party have called for a "balanced approach" in which the government would raise taxes on the rich and major corporations while making some cuts in entitlement programs.

The Republicans, particularly those close to the Tea Party, have adamantly ruled out any new tax revenues, which they say would slow the recovery and stifle job creation.

The S&P has declined to take sides on the debate over tax revenues and spending cuts, saying it is more important that Washington reach a durable consensus that would reassure world markets.

Markets had closed by the time the downgrade was announced on Friday, but there were early indications that the S&P move, along with spreading eurozone debt contagion, could make for a rough Monday opening.

The Israeli market fell some six percent Sunday and Gulf markets tumbled on opening, although they later trimmed some losses.

Fears of a global meltdown, which some analysts see as potentially worse than the 2008 collapse, sent vacationing world leaders scrambling in a flurry of phone calls from London to Paris to Washington to try to stem the tide.

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Big teams, big names coming up at trade deadline (AP)

The Major League Baseball trade deadline is fast approaching, and plenty of big names already are on the move.

Carlos Beltran is headed to San Francisco, bolstering the reigning world champions for another run at the title and Colby Rasmus is out of Tony La Russa's dog house in St. Louis and on his way to Toronto.

With the deadline looming Sunday, there are still a lot of big decisions to be made and big stars who could be getting changes of scenery.

The New York Yankees are in second place in the AL East, three games behind Boston, which almost assuredly means they will be active. The Yankees could be in the market for a quality starter with Phil Hughes struggling and a left-handed reliever to help them chase down the Red Sox.

"If we make moves, we feel that it's to better the club and I can't tell you that we're going to make any moves," Yankees manager Joe Girardi said. "Our club has got to where we are with the pieces we have and we've done a good job. Will we tweak it? I don't know. Past history has shown the Yankees have done everything they can to tweak the club to make it better."

Other teams in baseball's upper echelon like the Red Sox and Phillies will likely be active in the trade market.

Several other teams in limbo have difficult decisions to make. The Minnesota Twins are six games behind the Detroit Tigers in the AL Central. They have a history of late-season surges, but must make a decision soon if they are going to be buyers or sellers this time around.

The Cleveland Indians are in a similar boat. One of the biggest surprises in baseball this season, the Indians trail the Tigers by just two games. They were looking for current help in the outfield with Grady Sizemore and Shin-Soo Choo on the disabled list, but didn't want to give up any of their prized young prospects like infielders Jason Kipnis or Lonnie Chisenhall to do it.

Manager Manny Acta said recently that it would be "an understatement" to say the team needs some help down the stretch, and the Indians made a move on Thursday by adding Cubs outfielder Kosuke Fukudome for a pair of minor league players.

And what about the Cincinnati Reds? They're five games behind the Cardinals in the NL Central — and St. Louis just picked up right-hander Edwin Jackson, too — but some help in the rotation or the outfield could put them right back in the picture.

"We're still buying. ... We've got a lot of things cooking, but nothing close," Reds GM Walt Jocketty said Wednesday.

The Texas Rangers saw what a big deal can do last year when they got Cliff Lee from Seattle and rode him to the World Series.

Here's a quick-hit look at some of the moves that could be made this year to try to accomplish the same goal.

PLAYERS ON THE MARKET:

_Ubaldo Jimenez, RHP, Colorado Rockies: 27-year-old Dominican is 6-9 with a 4.20 ERA, a down year after last year's brilliant effort (19-8, 2.88). But his strikeout numbers are still overpowering and he has a very manageable contract, making him an attractive target. Good fits? Yankees, Reds.

_Heath Bell, RHP, San Diego Padres: Burly All-Star is one of the most proven closers available. His strikeout numbers (6.8 per nine innings) are down from the last two years, but he's still getting the job done with 29 saves. Good fits? Rangers, Angels, Cardinals.

_Hunter Pence, RF, Houston Astros: One of the few bright spots for the lowly Astros this year. Hitting .307 with 11 HRs, 62 RBIs and 24 2Bs. But Houston has been out of race almost since season started and could be looking to sell. Again. Good fits? Braves, Phillies.

_B.J. Upton, CF, Tampa Bay Rays: With Rays languishing in a distant third place in the AL East, could look to cut ties with the 2nd overall pick in the 2002 draft. Upton has 15 HRs and 53 RBIs, but is hitting just .227 and could benefit from a change of scenery. Good fits? Nationals, Tigers.

"I grew up through the minor leagues with a lot of these guys here, so I love being here, I love playing here," Upton said. "Let's hope for the best."

TEAMS TO WATCH:

_Texas Rangers: New ownership has been ultra-aggressive in bringing in talent. Reportedly went hard after Beltran and getting a closer to help Neftali Feliz — his five blown saves are third-most in AL — is a big priority. "I just don't see urgency," manager Ron Washington said of Feliz. "I don't see it."

_Philadelphia Phillies: Those Four Aces could use some run support. Phillies have the best record in the majors, but are 18th in team batting average and 13th in runs scored this year. At corner OF spots, Raul Ibanez and Domonic Brown have struggled sometimes. Pence and White Sox OF Carlos Quentin are two hot names right now.

_Minnesota Twins: GM Bill Smith has been trying to wait as long as possible to decide if his team is a buyer or seller in the weak AL Central. If they buy, Twins need major help in bullpen and rotation. If they sell in an effort to restock a thin farm system, OFs Jason Kubel, Delmon Young and Michael Cuddyer, DH Jim Thome and LHP Francisco Liriano all could come available for the right price to impact a pennant race near you.

_Seattle Mariners: GMs around the country are licking their chops and hoping they finally get word that LHP Felix Hernandez is on the market. M's steadfastly maintain they're holding on to King Felix and All-Star closer Brandon League, but you never know.

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AP Baseball Writers Joe Kay in Cincinnati and Fred Goodall in Tampa, Fla., and Sports Writers Howie Rumberg in New York and Dan Gelston in Philadelphia contributed to this report.

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Oil imports drove May trade deficit to $50.2B (AP)

WASHINGTON – The U.S. trade deficit surged in May to the highest level in more than two and a half years, driven wider by a big increase in oil imports and a decline in exports.

The Commerce Department said Tuesday that the deficit increased 15.1 percent to $50.2 billion in May. That's the largest imbalance since October 2008.

Exports declined 0.5 percent to $174.9 billion. Imports rose 2.6 percent to $225.1 billion. Oil prices have fallen since May, so the effect of higher prices should ease some in the coming months.

The deficit is running at an annual rate of $563.2 billion. That's 12.6 percent higher than the 2010 imbalance. A higher trade deficit subtracts from overall economic growth because it means consumers are purchasing more foreign-made goods and fewer products made by U.S. workers.

Analysts said the wider deficit in May means that the economy probably grew at an even slower pace in the April-June quarter than they had previously forecast. Paul Dales, chief U.S. economist at Capital Economics, said he was now looking for economic growth of around 2 percent in the second quarter. That's roughly the same pace as the first three months of the year.

The deficit with China jumped to $25 billion, the largest monthly gap since November. The deficit with Japan fell 26.4 percent to $2.6 billion. Japanese imports shrank further because of supply-chain disruptions caused by the March earthquake and tsunami.

Economists say Japan is starting to rebound from the crisis and a parts shortage that followed those disasters is beginning to dissipate. As a result, Japan's factories should increase shipments to the United States over the next few months.

"As the supply chain disruptions continue to unwind, we expect imports from Japan over the next few months to recover and for the overall trade deficit to modestly widen later this year before leveling off in 2012," said Troy Davig, an economist with Barclays Capital.

Jennifer Lee, senior economist at BMO Capital Markets, noted that while total imports from Japan declined, imports of Japanese auto parts rose. She said that indicates that Japanese auto plants were starting to resume more normal operations and supply U.S. factories with critical component parts.

American companies depend on component parts supplied from Japan. The supply-chain disruptions have slowed production at U.S. factories, particularly among those companies that make autos and electronics.

Manufacturing has been one of the strongest areas of the U.S. economy in the two years since the recession officially ended. Sales in foreign markets have been helped by increased demand and a weaker dollar, which makes U.S. goods cheaper overseas and imported goods more expensive.

Last year, the U.S. deficit with China hit $273 billion. It's the largest deficit the United States has ever had with any country. The huge trade gap between the two countries has prompted many companies and members of Congress to criticize China for manipulating its current to gain a trade advantage. U.S. manufacturers contend that China is keeping its currency undervalued against the dollar by as much as 40 percent.

The Obama administration has been pressuring China to allow its currency to rise at a faster rate against the dollar. But in May, the administration declined to cite China as a currency manipulator. Such a designation could eventually lead to U.S. economic sanctions against China.

The Chinese government says it has been allowing its currency to rise in value against the dollar for more than a year. But Beijing says it must do so gradually to avoid adverse consequences to the Chinese economy.

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