Sunday, March 14, 2010

360 News Briefs

The Fed and Interest Rates

Federal Reserve policymakers may signal at their meeting this week how and when the improving economy will lead them to start raising record-low interest rates.

Higher rates are still months away, Chairman Ben Bernanke and other Fed officials have signaled in appearances on Capitol Hill and in speeches. They've indicated that low rates are still required to foster the economic rebound.

Yet once the recovery is firmly entrenched, Fed policymakers will need to raise rates to keep inflation in check. Before they do, they first will want to signal that credit will soon be tightened. The trick is doing so without jolting investors and borrowers, who would face higher rates on certain credit cards, some mortgages and other loans.

How best to telegraph the approach of higher rates is likely to dominate discussions when Bernanke and his colleagues meet Tuesday. In particular, the Fed will decide whether to keep, or water down, its year-long pledge to keep rates at "exceptionally low" levels for an "extended period." Economists generally think "extended period" means at least six more months.

The Fed could drop that commitment altogether. Or it could pledge to keep rates low for "some time," which is viewed as briefer than an extended period. Or it could change its language in some other way to stress that credit will be tightened when the time is right. Any such step would send a signal that the days of easy money are fading.

The push for change is already under way inside the Fed. At its last meeting in late January, Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, favored changing the language to say rates would stay low for "some time," according to the meeting's minutes.

The fact that the jobless rate, though high, hasn't budged for two months and fewer jobs are being lost than a year ago suggests the recovery is on track. Factory and service-sector activity is picking up. Consumers and businesses are spending enough to keep the economy growing moderately.

Chris Rupkey, an economist at the Bank of Tokyo-Mitsubishi, doesn't rule out a change in the "extended period" language at Tuesday's meeting. Others think a wording change is more likely at the Fed's next scheduled meeting, April 27-28. By then, the Fed would have another reading on the employment climate.

Some analysts fear that once the program ends, mortgage rates could rise. That could weaken the recovery in housing and the overall economy. The Fed has left the door open to extending the program if the economy weakens.

The average rate on 30-year fixed mortgages dipped to 4.95 percent in the week that ended March 11, from 4.97 percent a week earlier, according to mortgage finance company Freddie Mac. Rates have been hovering around 5 percent.

It is all but certain that the Fed will keep its key interest rate at a record low Tuesday. It's held its target range for its bank lending rate at zero to 0.25 percent since December 2008. In response, commercial banks' prime lending rate, used to peg rates on certain credit cards and consumer loans, has remained about 3.25 percent - its lowest in decades.

The timing is a tough challenge for Bernanke. If he and other Fed policymakers raise rates too soon, they risk derailing the recovery. But if they wait too long, they could unleash inflation or fuel speculative bubbles in assets such as stocks.

Memo: Investigators Can't Replicate Runaway Prius

Investigators with Toyota Motor Corp. and the federal government could not replicate the runaway speeding reported by a Prius owner who said his car's accelerator stuck as he drove on a California freeway, according to a memo for a congressional panel.

The memo, obtained Saturday by a number of bloggers and news organizations, said the experts who examined and test drove the car could not replicate the sudden, unintended acceleration James Sikes said he encountered. A backup mechanism that shuts off the engine when the brake and gas pedals are floored also worked properly during tests.

Sikes, 61, called 911 on Monday to report losing control of his 2008 Prius as the hybrid reached speeds of 94 mph. A California Highway Patrol officer helped Sikes bring the vehicle to a safe stop on Interstate 8 near San Diego.

The incident happened at the worst possible time for Toyota, which has recalled millions of cars because of floor mats that can snag gas pedals or accelerators that can sometimes stick. Just hours before the incident, Toyota had called reporters to its Torrance, Calif. office to hear experts refute claims that the company had not identified -- or fixed -- what might be causing its cars to speed out of control.

Sikes' car was covered by the floor mat recall but not the one for sticky accelerators. He later told reporters that he tried to pull on the gas pedal during his harrowing ride, but it didn't "move at all."

During two hours of test drives of Sikes' car Thursday, technicians with Toyota and the National Highway Traffic Safety Administration failed to duplicate the same experience that Sikes described, according to the memo written by the Republican staff of the House Committee on Oversight and Government Reform. One congressional staff member observed the investigation of Sikes' Prius.

Also, the Prius is designed to shut down if the brakes are applied while the gas pedal is pressed to the floor. If it doesn't, the engine would "completely seize," according to the report that cited Toyota's "residential Hybrid expert."

The memo did say that investigators found the front brake pads were spent.

The brake wear was not consistent with the brakes being applied at full force for a long period, the Wall Street Journal reported Saturday, citing three people familiar with the probe, whom it did not name. The newspaper said the brakes may have been applied intermittently.

Monday's incident appeared to be another blow to Toyota, which has had to fend off intense public backlash over safety after recalls of some 8.5 million vehicles worldwide -- more than 6 million in the United States -- because of acceleration and floor mat problems in multiple models and braking issues in the Prius. Regulators have linked 52 deaths to crashes allegedly caused by accelerator problems.

The congressional memo describes a series of tests conducted by Toyota and the NHTSA on Wednesday and Thursday. A full diagnostics was conducted, followed by an inspection of the brakes and a test drive. Investigators also compared the Sikes vehicle to a 2008 Prius provided by a Toyota dealership.

NHTSA told congressional staff that the results "were the same on both vehicles and within the manufactures specifications," according to the memo.

Following the tests, NHTSA paid Sikes $2,500 for the gas pedal, throttle body and the two computers from his vehicle, the memo said.

Drivers of two other Toyota vehicles that crashed last week said those incidents also resulted from the vehicles accelerating suddenly.

NHTSA is sending experts to a New York City suburb where the driver of a 2005 Prius said she crashed into a stone wall Monday after the car accelerated on its own.

And in Fort Wayne, Indiana, the driver of a 2007 Lexus said it careened through a parking lot and crashed into a light pole Thursday after its accelerator suddenly dropped to the floor. That car was the subject of a floor mat recall. Driver Myrna Cook of Paulding, Ohio, said it had been repaired.

Vatican Denies Celibacy Rule Led To Sex Scandal

The Vatican on Sunday denied that its celibacy requirement for priests was the root cause of the clerical sex abuse scandal convulsing the church in Europe and again defended the pope's handling of the crisis.

Suggestions that the celibacy rule was in part responsible for the "deviant behavior" of sexually abusive priests have swirled in recent days, with opinion pieces in German newspapers blaming it for fueling abuse and even Italian commentators questioning the rule.

Much of the furor was spurred by comments from one of the pope's closest advisers, Vienna archbishop Cardinal Christoph Schoenborn, who called this week for an honest examination of issues like celibacy and priestly education to root out the origins of sex abuse.

"Part of it is the question of celibacy, as well as the subject of character development. And part of it is a large portion of honesty, in the church but also in society," he wrote in the online edition of his diocesan newsletter.

His office quickly stressed that Schoenborn wasn't calling into question priestly celibacy, which Pope Benedict XVI reaffirmed as recently as Friday as an "expression of the gift of oneself to God and others."

But Schoenborn has in the past shown himself receptive to arguments that a celibate priesthood is increasingly problematic for the church, primarily because it limits the number of men who seek ordination.

Last June, Schoenborn personally presented the Vatican with a lay initiative signed by prominent Austrian Catholics calling for the celibacy rule to be abolished and for married men to be allowed to become priests.

In the days following Schoenborn's editorial this week, several prominent prelates in Germany and at the Vatican shot down any suggestion that the celibacy rule had anything to do with the scandal, a point echoed Sunday by the Vatican newspaper, L'Osservatore Romano.

"It's been established that there's no link," said the article by Bishop Giuseppe Versaldi, an emeritus professor of canon law and psychology at the Pontifical Gregorian University in Rome.

"First off, it's known that sexual abuse of minors is more widespread among lay people and those who are married than in the celibate priesthood," he wrote. "Secondly, research has shown that priests guilty of abuse had long before stopped observing celibacy."

A report endorsed in 2004 by the U.S. Catholic bishops' conference, however, argued that an understanding of the problem of clerical sex abuse isn't possible without reference to both celibacy and homosexuality, since the vast majority of U.S. abuse cases were of a homosexual nature.

In its article on the scandal, L'Osservatore also staunchly defended Benedict's handling of the crisis. The article - subtitled "The rigor of Benedict against the filth in the church" - called the pope a "vigilant shepherd of his flock" for having confronted the crisis decisively early on and taken charge of abuse cases himself as prefect of the Congregation for the Doctrine of the Faith.

The Vatican has been on the defensive ever since the first of some 170 former students from Catholic schools in Benedict's native Germany came forward with claims of physical and sexual abuse, including at a boys choir once led by the pope's brother.

Since then, claims have spread to the Netherlands, Austria and Switzerland - all while the pope was preparing a letter for Irish Catholics in response to the decades of systematic abuse in church-run schools, orphanages and other institutions in that predominantly Roman Catholic nation.

On Sunday, the Muenster Diocese in Germany reported that a priest, Rev. Klaus Evers, had been defrocked at his own request after he recalled an instance of past abuse - a memory triggered as a result of the current debate in the church.

The crisis reached the pope himself on Friday. The Munich archdiocese reported that when he was Munich Archbishop Joseph Ratzinger, he had approved therapy for a priest suspected of abuse in the 1980s. The priest was then transferred to another location, where he was convicted of abusing minors.

The Vatican and the archdiocese stressed that Ratzinger didn't authorize the transfer and that an underling had taken "full responsibility." Benedict didn't refer to the scandal Sunday during his traditional noon blessing. He spoke in general terms about the parable of the prodigal son and assured the faithful -- in German -- that God loves everyone "even when they feel estranged" and that God created forgiveness.

But the scandal has clearly shaken the Vatican, and it has responded by going on a full-court media offensive to stem the damage. In an extraordinary move, the Vatican's chief prosecutor for sex crimes, Monsignor Charles Scicluna, detailed for the first time statistics on the number and types of cases of abuse that had been reviewed since the Vatican in 2001 ordered diocese to forward cases of suspected abusive priests to Rome to determine whether church trials were warranted.

In the interview Saturday with the newspaper of the Italian bishops' conference, Scicluna suggested that the statute of limitations for church tribunals be removed altogether for such crimes. Currently the statute is 10 years after the alleged victim reaches age 18.

British Couple Appeals Kiss Conviction

A British couple is appealing a jail sentence after being accused of sharing a passionate kiss in a Dubai restaurant.

Cosmopolitan Dubai has the most lenient social codes in the Gulf, but authorities can still crack down on people charged with pushing the limits.

Ayman Najifi, a Briton working in Dubai, and a female tourist were arrested in November after a complaint about public kissing. They were convicted of inappropriate behavior and other charges - bringing a month in jail.

The couple says it was just a "peck on the cheek." A court Sunday set the appeal for April 4.

In 2008, two Britons were sentenced to three months in jail for what authorities described as sex on the beach. The sentences were suspended.

The Wall Street Journal; NHTSA; L'Osservatore Romano; BBC World.

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