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The euro zone does not risk the sort of debt problems plaguing Dubai, senior European Union officials said on Sunday.

Dubai was forced to seek a debt standstill last week, rocking global markets and reviving concerns about the fiscal health of some euro zone members, notably Greece.

Luxembourg Prime Minister Jean-Claude Juncker, who chairs the Eurogroup of euro zone finance ministers, said he saw no risk of such a default in the euro area.

European Central Bank Governor Jean-Claude Trichet “entirely” confirmed what Juncker said.

The two were speaking at a news conference after a day of talks with Premier Wen Jiabao and other senior Chinese officials.

(Reporting by Simon Rabinovitch and Chris Buckley; Writing by Alan Wheatley; Editing by Mike Nesbit)

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A man who claims to be the "Godfather of Spam" has been sentenced to 51 months in prison by a federal judge in Detroit for his lead role in an e-mail stock scam scheme, according to court documents.

Alan Ralsky, 64, also faces five years probation and will have to forfeit $250,000 that was seized by the government in 2007.

U.S. District Judge Marianne Battani also sentenced three others Monday for their involvement in the scheme, including Ralsky’s son-in-law Scott Bradley, 48, who received 40 months in prison and five years probation.

Ralsky and Bradley were charged for conspiring to commit wire and mail fraud and violating the CAN-SPAM Act, which criminalizes large, commercial e-mail messages sent using an unauthorized computer or with the intent to hide the e-mail’s original source, according to the office of the U.S. Attorney for the Eastern District of Michigan. They were also charged with committing wire fraud and engaging in money laundering.

Ralsky and Bradley, both of West Bloomfield, Mich., pleaded guilty to the charges in June.

Ralsky’s history as a prolific spammer dates back to 1997. Before the Bush administration passed a law to crack down on e-mail marketers in 2003, Ralsky reportedly sent 70 million messages a day from fake names.

In the operation that began in January 2004, the team sent billions of illegal e-mail advertisements to inflate the price of Chinese penny stocks and then reaped the profit, according to the prosecutor’s office. They raked in nearly $3 million during the summer of 2005.

The prosecution said Ralsky worked with How Wai John Hui, a resident of Hong Kong and Canada, to run the operation. Hui was also sentenced to 51 months in prison and 3 years of probation, and he agreed to forfeit $500,000 easy payday loans.

Hui was the CEO of China World Trade and served as the lead dealmaker representing companies whose stocks were being promoted in the spam e-mails. Hui plead guilty in December 2008.

John Bown, 45, of Fresno, Calif., was sentenced to 32 months in prison for his role in the scheme. He will face 3 years of probation and will forfeit $120,000.

"With today’s sentence of the self-proclaimed ‘Godfather of Spam,’ Alan Ralsky, and three others who played central roles in a complicated stock span pump- and-dump scheme, the court has made it clear that advancing fraud through the abuse of the Internet will lead to several years in prison," said U.S. Attorney Terrence Berg, in a statement Monday.

Though the government originally recommended that Ralsky receive up to 87 months in prison, it lowered the sentence recommendation range in November to between 35 and 43 months because of Ralsky’s cooperation.

Ralsky’s lawyer, Steven Fishman, said he believed the sentence was "excessive."

"It was the most disappointing event that I have ever experienced in 36 years as a lawyer," Fishman said. "The sentence was higher than even what the government recommended, and I never imagined that in a million years. Everyone in the court house was stunned."

The FBI conducted a 3-year investigation and indicted the 11 involved individuals in December 2007.

Five others, who also pleaded guilty, were to be given their sentence Tuesday. Cases for two other individuals that were indicted were still pending. 

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Dubai’s debt troubles have exposed the fallacy of its once much-vaunted “model” of raising shining cities in the desert with foreign residents, finance and labor.

They have also set in train a power shift toward Abu Dhabi.

On Wednesday, Dubai’s government said it will ask creditors of two of its flagship firms, Dubai World and property group Nakheel, for a debt standstill as it restructures the Dubai World group.

Questions are now being raised by investors about whether Abu Dhabi will bail out Dubai and at what price?

Though Abu Dhabi is the United Arab Emirates capital, the seat of most of its oil wealth and the largest of the seven self-governing emirates by size, it took a back seat in recent years as Dubai undertook spectacular real estate projects as a tourism and finance hub.

Dubai’s population rocketed to 1.5 million, as white-collar professionals from around the world took plum jobs in a country marketed as a liberal enclave in the Gulf sun.

An army of Asian workers was hired to construct the glitzy projects, drawing accusations of slave labor from rights groups, while Dubai’s own citizens dwindled to a small minority, bringing strains as cultural values mixed warily.

Since the financial crisis, the credit-driven boom has ground to a halt, many of the more affluent foreigners have left and the freewheeling emirate — a dynastic autocracy under the Al Maktoum family — is left with up to $80 billion in debts.

Abu Dhabi has stepped in to help, but avoided a direct bail-out of its neighbor — but it could be drawn into more direct backing if its own prestige is affected by Dubai’s woes.

“In exchange for Abu Dhabi providing cash, it wants Dubai to eliminate or reform a lot of the tangled web of competing of Dubai-based companies,” Eurasia Group said on Wednesday.

“Dubai has been resistant to some of Abu Dhabi’s demands, and its leaders have seen their political power and prestige dissipate in wake of the financial crisis.”

The federal central bank — effectively under Abu Dhabi control — took up $10 billion of a $20 bond issue by Dubai government earlier this year, and this week two Abu Dhabi banks took up $5 billion.

POWER SHIFT

The fiasco is playing into Abu Dhabi’s ambition to unify UAE policies, clean up the Gulf state’s image and project the country as a political power in the region.

The power shift is a sensitive issue — Dubai ruler Sheikh Mohammed bin Rashid al-Maktoum said this month the UAE was one big family and detractors who talk of division should “shut up.” 

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WASHINGTON–The apparent end of the recession and stabilizing financial markets have not cured the U.S. banking industry, as souring and past-due loans have reached the highest levels in 26 years, the Federal Deposit Insurance Corp. said Tuesday.

Banks earned $2.8 billion (U.S.) in the third quarter, but loan balances plummeted and the fund that insures their deposits was $8.2 billion in the red.

The number of banks on the FDIC’s "problem list" rose to 552 from 416 on June 30, the highest level in 16 years. Fifty banks failed during the quarter – the largest number since the second quarter of 1990.

The FDIC’s fund that insures bank deposits fell by $18.6 billion, mostly because $21.7 billion was set aside for expected losses on future bank failures. The last similar deficit was in Dec. 1991, when a predecessor fund was more than $7 billion in the red.

Separately, the Office of Thrift Supervision said Tuesday that thrifts eked out a $200 million profit in the third quarter. The agency called it "another break-even quarter," after a small second-quarter profit was revised downward to a $94 million loss.

Still, it was the first profitable quarter since the same period in 2007.

The nominal profit for the third quarter is $1.3 billion, but $1.1 billion is a one-time gain at a single institution.

The agency says the number of "problem thrifts" rose to 43 from 40 last quarter.

Thrifts differ from banks in that they are required, by law, to have at least 65 per cent of their lending in mortgages and other consumer loans. That makes them especially vulnerable to the housing downturn and unemployment. It also means they will play a key role in an eventual economic recovery.

The FDIC voted this month to require banks to prepay three years of deposit insurance premiums by the end of next month to help replenish the dwindling deposit insurance fund, which is at its lowest point on record. That will raise about $45 billion.

But bank failures this year through 2013 are expected to cost the fund $100 billion, so the prepayments won’t provide a long-term fix for the insurance fund. It does spare ailing banks the immediate cost of paying a second emergency fee this year.

Depositors’ money – insured up to $250,000 per account – is not at risk, since the FDIC has the option of tapping a credit line with the Treasury Department no checking account payday advance.

"While bank and thrift earnings have improved, the effects of the recession continue to be reflected in their financial performance," FDIC Chairman Sheila Bair said.

A 2.8 per cent drop-off in loans outstanding – the largest percentage decline on record – showed that credit for consumers and businesses remained tight, she said.

"There is no question that credit availability is an important issue for the economic recovery," Bair said. "We need to see banks making more loans to their business customers.”

That’s especially important for small businesses, which get more than 60 per cent of their credit from banks the FDIC insures, she said.

Bank profits returned in the third quarter after a $4.3 billion loss in the previous quarter and $879 million in earnings last year. But analysts warned not to read much into the better earnings.

"A few very large banks are making a pile of money, and the rest of the industry is hurting," said Daniel Alpert, managing director of the New York investment bank Westwood Capital LLC.

The largest Wall Street firms are benefiting from a host of government subsidies – such as capital injections, asset guarantees, low-cost borrowing – that cost taxpayers without improving the economy, Alpert said.

"We’re creating riskless profits for the big banks," he said.

Still, banking analyst Bert Ely said the Federal Reserve’s low-interest rate policy is helping the whole industry.

Net interest margin – the difference between what it costs banks to borrow and what they pay to depositors – reached a four-year high.

It was a rare bright spot in the FDIC report.

That bright spot comes at the expense of consumers, who are earning historically low interest rates on their deposits.

"Americans are getting nothing in terms of interest on their savings so that the banks can make money," Alpert said.

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NEW YORK–As U.S. consumers compile their holiday shopping lists, Motorola Inc.’s Droid smartphone is expected to feature prominently, at the expense of Palm Inc.’s Pre and Research In Motion Ltd.’s BlackBerry.

Heavy marketing by Verizon Wireless will help sales of what Motorola hopes is its comeback phone, though the Droid will still lag by far the total sales of BlackBerry or Apple Inc’s iPhone, analysts say.

U.S. market leader Verizon Wireless, owned by Verizon Communications Inc. and Vodafone Group PLC, is also looking for a bit of a comeback itself, having lost market share in the third quarter to iPhone carrier AT&T Inc.

"It sounds like early feedback from Droid has been pretty positive," said JPMorgan analyst Michael McCormack. "There’s no question that we’ll see better results from Verizon" than in the third quarter.

Motorola is expected to sell 500,000 to 1 million units of the Droid in the fourth quarter, according to estimates from four analysts. That would be a good start for a company that has been losing ground to rivals for more than two years.

"Droid’s eating into competitor phone sales at Verizon," said Charter Equity Research analyst Ed Snyder, adding that Verizon’s Droid promotions are a problem for RIM.

He said that RIM does not have as exciting a product line this holiday season as it did a year ago, when the BlackBerry Storm was the highest-profile phone on Verizon’s network.

The Storm attracted attention because it was RIM’s first touchscreen phone, whereas the latest batch of BlackBerrys are mostly just upgrades of older phones, analysts said.

Reuters News Agency

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Taliban fleeing a Pakistani offensive are regrouping in the country’s northwest, threatening to spread and prolong a conflict that has strained the nation’s economy and may hamper efforts to attract foreign investment.

While Pakistan says its month-old offensive in South Waziristan has destroyed the largest Taliban sanctuary, some militants are falling back to Orakzai, a mountain region less than 16 kilometers (10 miles) south of Peshawar, the capital of North West Frontier Province, said Talat Masood, an independent military analyst in Islamabad.

Rising violence in the region last year prompted London- based Tullow Oil Plc to give up operational control of drilling operations near Orakzai. A wider conflict may make it harder to attract companies like Mol Nyrt., Hungary’s largest oil refiner, which this month started natural gas production in the province.

“Naturally, this violence is not good for the investment climate, but the government’s decision this year to tackle the Taliban is a good one for the long term,” said Habib-ur-Rehman, who manages $48 million of stocks and bonds at Karachi-based Atlas Asset Management Ltd.

Peshawar, Pakistan’s eighth-largest city, suffered 11 major terrorist attacks this year, including a Nov. 19 suicide bombing at the main courthouse that killed 18 people. The city has a U.S. consulate and straddles the truck route for supplies from the port of Karachi to U.S. troops in landlocked Afghanistan.

Mountainous Trails

South of Peshawar, guerrillas are escaping over trails that snake through the mountains, military spokesman Major General Athar Abbas said in a Nov. 13 interview. While “sealing off the footpaths is not realistic,” the army is “preventing the militants from moving vehicles or heavy weapons,” he said.

Some escaped militants will abandon the Taliban movement and others will continue, making Orakzai the army’s possible next target, Abbas said. Pakistani air force jets have bombed Taliban positions there this month, killing as many as 20.

The fighting is hurting what the International Monetary Fund has called an “anemic” economy. Foreign aid and loans financed 40 percent of Pakistan’s $10 billion current account deficit in the year ended June 30, said Asad Farid, an economist at AKD Securities in Karachi. This year such assistance will entirely cover a deficit of $6 billion, he said.

Rising Cost

The war against the Taliban has been costing the government $8.5 billion a year, Finance Minister Shaukat Tarin said July 15. This year’s figure is higher, Tarin told reporters Nov. 16, declining to give details.

Successes in South Waziristan, where the army has captured militant strongholds and main roads, may revive an argument with the Obama administration over which Taliban factions Pakistan’s forces should strike next payday loans guaranteed no fax. U.S. National Security Adviser James Jones has renewed pressure for Pakistan to hit the groups that attack U.S.-led forces in Afghanistan, the New York Times reported Nov. 15, citing unnamed U.S. officials.

“The Pakistani response to any new U.S. demand will be the same as before: that they have no resources to open a new front,” said Shuja Nawaz, director of the South Asia Center of the Atlantic Council in Washington.

The army’s current offensive targets a Taliban faction in South Waziristan that opposes Pakistan’s government, which blames it for 80 percent of Islamic attacks in the country. While Taliban groups that fight in Afghanistan are based nearby in North Waziristan, Abbas said the army has no plans to expand its assault there.

Shifting Focus

“Cost and security reasons” led oil developer Tullow to hand over control of a drilling project at Kohat, near Orakzai, to its local partner, spokesman George Cazenove said in an e- mail. “Because they are no longer the operator, the number of Tullow employees in Pakistan has been reduced significantly,” although Tullow retains a 40 percent stake in the project, Cazenove said.

Budapest-based Mol, Hungary’s largest oil refiner, began production at its Manzalai field last week after an initial investment of $500 million. Initial output of 250 million cubic feet of gas a day will be increased 40 percent to 350 million cubic feet by 2013, Mol Chief Executive Officer Gyorgy Mosonyi told a press conference in Islamabad on Nov 11.

“We are reducing risk to the possible minimum,” the company said in a statement in response to questions about security. “Operations at both the office in Islamabad and at the countryside facilities are continuous and uninterrupted.”

The Karachi Stock Exchange 100 Index fell 2.1 percent last month, the most since January, as bombings and assaults in major cities eroded confidence.

Sanctuary Disrupted

The South Waziristan campaign will improve Pakistan’s security because it has disrupted the country’s largest Taliban sanctuary, said Mahmood Shah, an analyst who once served as security chief for the border zone.

“We should see a reduction in the attacks within as little as two weeks,” Shah said.

On Oct. 17, the army sent 28,000 troops into the lands of the ethnic Pashtun Mehsud tribe, which has about 5,000 to 8,000 Taliban fighters, Abbas said. The battlefield is a forested, mountainous zone of 2,200 square kilometers, about half the size of the U.S. state of Rhode Island.

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Air Canada has become the first Canadian airline to offer in-flight Internet access to at least some of its passengers.

The airline launched a 10-week trial period Friday, during which select flights on the Montreal-Los Angeles and Toronto-Los Angeles routes will offer Web surfing.

Access will cost $9.95 (U.S.) for a laptop and $7.95 for smartphones and PDAs.

The service, known as Gogo, will initially be available only when flying over the territorial U.S.

At the end of the 10-week trial on Jan. 29, the airline will consider expanding the service to other routes.

A spokesperson for Air Canada said a full launch of the service will depend on the outcome of the trial, regulatory approval and developing the necessary ground infrastructure in Canada to provide a domestic network.

Initially, the system will be available on Aircell, a U.S.-only high-speed mobile network for aviation. Air Canada said it hopes to assist in the development of a Canadian air-to-ground network in the near future.

The airline’s chief domestic competitor, WestJet, said it has no immediate plans to offer wireless on its flights but said it will continue to evaluate the concept.

In-flight Internet access through the Gogo network is already available on some U.S. airlines, including Virgin America, Delta, AirTran and American Airlines.

With files from Reuters

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India’s central bank must tighten its monetary policy “fairly soon” to stem inflation, the Organization for Economic Cooperation and Development said.

“Given the magnitude of easing and the speed at which inflation has bounced back, monetary policy will need to be tightened fairly soon,” the Paris-based OECD said about India in a report released yesterday.

Expectations of higher interest rates have sent Indian bond prices down by 5.9 percent in 2009, the worst performance among 10 Asian local-currency debt markets tracked by HSBC Holdings Plc. The central bank took the first steps to raise borrowing costs last month by ordering lenders to set aside a bigger proportion of their deposits in government bonds.

India’s consumer price index for industrial workers may average 5.4 percent in the 12 months starting April 1, more than double the rate in the current year, the OECD said. During the same period, India’s economic growth may accelerate to 7.3 percent from 6.1 percent, it estimates.

Central bank Governor Duvvuri Subbarao has injected 5.85 trillion rupees ($126 billion) of cash into the economy since September 2008 to protect India from the worst financial crisis since the 1930s.

In the last monetary policy announcement on Oct. 27, Subbarao raised the statutory liquidity ratio to 25 percent from 24 percent and kept the benchmark policy rates unchanged . He maintained the central bank’s economic growth forecast for the year ending March 31 at 6 percent “with an upward bias.”

Inflation Pressures

“Given that activity is expected to strengthen relatively quickly and that the recovery is likely to have begun with only a modest level of slack in the economy, delayed fiscal consolidation will also contribute to higher inflationary pressures,” the OECD said.

India also loosened the fiscal policy to stimulate the economy amid the global recession, cutting excise and customs tax rates, raising government salaries and stepping up spending on roads and power.

As a result, India’s national budget deficit, including federal and state government finances, may reach 10.1 percent of gross domestic product in the year ending March 31 from 4.2 percent of GDP two years ago, the OECD said.

The OECD said it projects only a “modest narrowing” in the budget shortfall because much of the increase in expenditure in the past year, such as the rise in salaries of government workers, is permanent in nature.

The deficit is forecast by the OECD to narrow to 9 percent of GDP in the next financial year starting April 1.

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Goldman Sachs Group Inc could have suffered dramatic losses if the federal government had not intervened to prop up American International Group Inc, according to a government report.

The report by the special inspector general for the government bailout program raises doubts about Goldman’s previous claims that it was hedged against potential AIG losses.

Last fall, as the financial services industry stood on the brink of collapse, the government stepped in with an unprecedented effort to rescue the system. AIG was among the companies that received billions of dollars from the U.S. Treasury’s Troubled Asset Relief Program.

If AIG had collapsed, it would have made it difficult for Goldman to liquidate its trading positions with AIG, even at discounts, the report said. It also would have put pressure on other counterparties that “might have made it difficult for Goldman Sachs to collect on the credit protection it had purchased against an AIG default.”

Finally, the report said, an AIG default would have forced Goldman Sachs to bear the risk of declines in the value of billions of dollars in collateralized debt obligations bad credit cash loans.

A Goldman spokesman called the risks discussed in the report a “moot point.”

“Goldman Sachs has consistently said its exposure with AIG was collateralized and hedged and therefore we had no direct credit exposure,” Goldman Spokesman Michael DuVally said. “Given the hedges, collateral, and government backing as a result of the bailout, the additional risks of declining market values in the event of an AIG default are a moot point.”

AIG has received pledges of up to $180 billion in taxpayer aid since last fall to help save it from collapse. It was revealed in March that Goldman received $12.9 billion in payments and collateral from AIG.

David Viniar, Goldman’s chief financial officer, in March told reporters that the Wall Street bank did nothing wrong when it accepted payments to close out trades with AIG.

The full report can be viewed at: here

(Reporting by Steve Eder; editing by John Wallace and Tim Dobbyn)

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General Motors Co. will announce Monday it plans to start repaying a $6.7 billion loan to the U.S. Treasury by year-end due to modest operating improvements, a source knowledgeable about the situation said.

GM , due to unveil its first post-bankruptcy earnings report Monday, will begin making $1 billion quarterly installments on the loan on Dec. 31. At the same time, the automaker also will start repaying a $1.4 billion loan to Canada at a rate of $200 million per quarter.

GM was not required to make any payments on the U.S. loan before it matured in July 2015, but better-than-expected vehicle sales will let it start repayments much sooner than expected.

"The reason GM is in a position to do that is that they have seen performance that has been modestly ahead of what the expectation was when GM went into bankruptcy and emerged from bankruptcy," said the person, who was not authorized to speak publicly about the repayment plan.

GM vehicle sales fell off less than expected during its government-supported bankruptcy in June and July, which lasted only about 39 days. Sales since then, aided partly by government "cash for clunkers" incentives, have performed ahead of plan.

Early exit

As a result, GM has not been forced to burn through some $16 billion in taxpayer cash provided to the company when it emerged from bankruptcy. The source said GM has used only about $3 billion of these funds, which are contained in a restricted escrow account that cannot be accessed without Treasury approval.

GM will make its loan payments from the escrow account, the source said, adding that the arrangement resulted from discussions between the Obama administration’s auto task force and the GM board no credit check payday loans.

"It is consistent with the U.S. government’s focus on exiting the position as early as practicable," the source said.

The government stepped in to bail out both GM and Chrysler Group to save a key portion of the U.S. manufacturing sector from collapse amid the recession.

The $6.7 billion in senior debt is only a small portion of the more than $50 billion in taxpayer funds provided to GM. Much of this was converted to a nearly 61 percent equity stake, making the Treasury GM’s largest shareholder. Treasury officials have said they hope to sell shares in a GM initial public offering in the next year.

The source said this would not happen in the first half of the year, so the repayment plan would let GM reduce the loan by at least $3 billion "before any plausible IPO."

The repayment schedule also could be altered to accommodate IPO plans or accelerated payments, should conditions warrant.

But the source cautioned that GM’s condition was only modestly better than expected and it was not yet ready to repay the full loan amount.

"While there are modest improvements which were important and put them in the position to do this, they are at the very beginning of a difficult restructuring and are not in any way out of the woods," the source said. 

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