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The Federal Reserve is worried about indecision in Congress.

At its last meeting in April, the central bank’s top officials discussed how coming tax increases and spending cuts could weigh on the recovery, and debated whether the Fed should provide additional stimulus to spur consumer spending.

"Participants expected that the government sector would be a drag on economic growth over coming quarters. They generally saw the U.S. fiscal situation also as a risk to the economic outlook; if agreement is not reached on a plan for the federal budget, a sharp fiscal tightening could occur at the start of 2013," the minutes from the meeting said.

The central bank is not alone in its fear of a coming "fiscal cliff" in 2013. The Bush tax cuts, payroll tax cut and extended unemployment benefits are all set to end, at the same time that the government slashes more spending.

While the Fed also acknowledged improvement in the economy early in the year, several members expressed concern that it could be due to waning temporary factors such as warmer winter weather.

As the Fed prepares to wind down its latest round of stimulus, known as Operation Twist, some have called for the central bank to do more to fuel growth.

Fiscal cliff: What you need to know

While those calls have yet to be answered, the minutes showed that the Fed is not ready to close the door on that option.

"Several members indicated that additional monetary policy accommodation could be necessary if the economic recovery lost momentum or the downside risks to the forecast became great enough," the minutes said.

Operation Twist was designed to bring down long-term interest rates and encourage spending by shifting $400 billion from short-term to long-term bonds faxless cash advances. Launched last September, the program is set to end in June.

Since 2008, the Fed has taken numerous steps to bolster the economy, including keeping its key interest rate near zero in an effort to give businesses and consumers cheaper access to credit.

In addition, the Fed has also enacted two rounds of asset purchases known as quantitative easing, also designed to bring down interest rates. But nearly four years later, the economy is still struggling to return to robust growth, leading many to call for more action from the Fed.

The minutes also showed that Fed members discussed the job market in great detail.

"Labor market conditions improved in recent months," the minutes said. "So far this year, payroll employment had expanded at a faster pace than last year and the unemployment rate had declined further, although it remained elevated."

At the last meeting, the Fed improved its forecast for the unemployment rate this year, but continued to believe the economy would be weak enough to warrant historically low interest rates until "at least through late 2014."

The unemployment rate was at 8.1% as of April, and the Fed expects it to fall to between 7.8% and 8% by the end of the year.

Separately, the Fed released a new schedule of two-day meetings for its policy-making committee. Previously, the meetings were set to last either one or two days. 

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Congress will weigh in on the news that JPMorgan Chase lost $2 billion on complex trades intended to hedge against economic risk, and that the losses could mount.

The Senate Banking Committee on Monday announced future oversight hearings, including one that will look into the trading losses at JPMorgan Chase from a regulatory angle. Lawmakers plan to question regulators, not JPMorgan Chase (, Fortune 500) officials.

Sen. Bob Corker, a Tennessee Republican, was the first to call for a hearing on Friday.

"Clearly the losses posted by JPMorgan are significant, and as policy makers we should understand in detail what has transpired," Corker said in a letter to Banking Committee chairman Tim Johnson, a South Dakota Democrat.

House Financial Services Committee and House Oversight Committee staff members said they had no plans yet to hold hearings yet.

The JPMorgan controversy comes a little less than two years after a big push for Wall Street reform led to the passage of the Dodd-Frank Act.

On Friday, two senators who helped craft the Volcker Rule — a new, not-in-effectpart of Dodd-Frank that bars banks from making trades for their own profit-chasing purposes — denounced JPMorgan’s trades.

JPMorgan CEO Jamie Dimon said last week that the faulty trades would have been allowed under the Volcker Rule, named for former Fed chief Paul Volcker, since the rule appears as though it will allow for economic hedging free instant credit score.

However, Democratic senators Jeff Merkley of Oregon and Carl Levin of Michigan, said they intended the law to ban the kind of trades that JPMorgan Chase traders made. They plan to push regulators to write and enforce a strict ban on so-called proprietary trading and hedging against economic forces.

"The law very clearly already excludes this activity," Levin said in a call with the media on Friday. "It specifically says that every single position that you take as a hedge has got to be tied to a specific risk arising from another specific position. Now, that’s about as clear as you can write. So the regulators are now hopefully going to implement the law as written."

The news has even drawn angry accusations from the political field. Elizabeth Warren, a Democratic candidate for U.S. Senate in Massachusetts, has called Dimon to step down from his position as a board member of the New York Federal Reserve.

"This is about accountability," Warren told CNN’s "Starting Point" on Monday. "Jamie Dimon not only is CEO of JPMorgan Chase, he holds this position of public trust, advising the New York Fed on how to regulate risk for these large financial institutions like his own financial institution,"  

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How can a bank lose $2 billion in six weeks?

That’s just one of the mysteries surrounding the news that JPMorgan Chase, widely thought one of the safest U.S. banks, is gushing red ink from bad trading bets. As details slowly emerged Friday, the shares of the nation’s largest bank fell hard, as did those of several rivals.

The story behind the loss is complex, and rich in irony. How it’s viewed could influence regulators implement a major financial overhaul law called Dodd-Frank. How hard regulators crack down on bank could have a big impact on the stability of the financial system.

Here are answers to some questions about the loss:

Q: How exactly did the bank lose so much so fast?

A: First, start with the irony. JPMorgan says the losses came from a trading portfolio designed to offset losses in the bank’s lending business. Instead of offsetting losses, these so-called “hedges” added to them.

JPMorgan extends money to companies through loans and by buying bonds. The bank was worried that it might not get all its money back, so it bought protection. Though it didn’t detail how it did this, banks typically buy credit default swaps, essentially insurance contracts that pay out when companies stiff their lenders.

It gets more complex. In the often dizzying, Alice-in-Wonderland world of banking, these hedges are themselves sometimes hedged, and that’s exactly what JPMorgan did. The bank apparently thought it had bought too much protection, so it hedged its hedge.

It’s that second hedge, basically a bet that companies would pay back their loans, that led to the losses.

Q: How does the “London Whale” figure into the story?

A: News reports before the bank announced its loss said that a trader at the bank dubbed the “London Whale” had invested heavily in an index of credit-default swaps, and that the bets were producing losses. But in a conference call Thursday, Jamie Dimon, the CEO of JPMorgan, said the news reports about London trades were only “somewhat related” to the losses. He provided no other details.

Q: Why are other bank stocks falling on the news?

A: It’s not just the size of the bet that’s scaring investors, but its complexity. The fact is, not even experts know how precisely big banks make money, and occasionally lose it. Their wagers are largely hidden. The opaqueness, which investors normally shrug off, is spooking them now.

Investors are uneasy also because JPMorgan has a reputation of managing risks better than almost anyone in the business. Investors seem to be asking: If this bank can lose $2 billion in six weeks, maybe others can, too?

Finally, there’s the regulatory threat. The loss comes amid heated debate in Washington over just how tightly to regulate banks. “The timing of the JPMorgan announcement couldn’t be worse,” said Whitney Tilson, head of hedge fund T2 Partners, speaking at an industry gathering in Las Vegas.

Investors fear that bank profits could be pinched by the so-called Volcker Rule restricting trading that banks do with their own money, as opposed to clients’ funds. Dimon has been an outspoken critic of the rule, and an impactful one given his skill at navigating his bank in recent years. JPMorgan was the only bank to remain profitable during the 2008 financial crisis.

Now that Dimon has been pushed off his pedestal, investors are worried that regulators will be tougher in enforcing the new rule.

Q: Isn’t the trading that led to the loss banned already?

A: No. The rule doesn’t take effect until July, and even then regulators are suggesting banks will have another two years to comply.

In any case, it’s not clear that the trade in question were subject to the rule. In the conference call Thursday, Dimon said the trades that backfired were hedges, not bets for profit, so they wouldn’t have fallen under the rule.

But some experts have doubts.

Nancy Bush, a banking analyst at NAB Research, says it’s not always clear what is hedging and what is gambling. The size of JPMorgan’s loss makes her suspicious.

“So they made money on hedges and then they hedged some more,” she said. “At some point it goes from being a hedge to being a money maker. They crossed the line here somewhere and it’s going to cost them.”

Sen. Carl Levin from Michigan, the chair of a subcommittee that investigated the crisis, put it more bluntly. “This is not a hedge,” he said. He called the loss a “stark warning” about the danger of “risky bets” at banks.

Q: How much will the trading loss hurt JPMorgan?

A: Likely not much at all, putting aside the impact of tougher regulation. JPMorgan is a big money maker. The $2 billion loss, which is before accounting for taxes, compares with $19 billion in net income last year and $16 billion the year before that.

What’s more, Dimon said that $2 billion loss will be offset by $1 billion trading bets that have already paid off. Dimon said there are $7 billion more paper gains from trades that he can tap in case losses grow.

Q: Are more losses possible?

A: Dimon said he is trying to unwind the bad bets in a “responsible” manner to minimize losses, but prices can move against him. That would mean more losses. Dimon has said the $2 billion could become $3 billion depending on how markets react.

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CALGARY

China may first relax controls on borrowing costs and widen the

Upbeat U.S. economic indicators helped stock markets rise on Monday, offsetting concerns about Spain, which had seen its borrowing rates jump on fears it will eventually need a bailout.

The Commerce Department said U.S. retail sales rose 0.8 percent in March despite a strong increase in gas prices. Retail sales hit a record high of $411.1 billion, 24 percent higher than the recession low in March 2009.

The figures are important for global markets because U.S. consumer spending is a major driver of growth. Signs that the U.S. economy was recovering had helped markets post strong gains earlier this year, before hitting a soft patch in the past month.

Monday’s strong data also encouraged investors look past the flare-up in the debt crisis in the 17-nation eurozone.

Spain’s 10-year bond yield, the rate the country would pay if it were to tap markets for money, jumped to 6.10 percent on Monday, from about 5.90 percent on Friday, but eased back to 5.96 percent by mid-afternoon.

Yields rose in other financially shaky countries like Italy, but Spain was the focus as investors consider it the next weakest link in Europe.

The country is caught between the needs to lower debt by cutting spending and to boost growth by investing. Above all, if Spain were to need a bailout, Italy would be severely destabilized as well. The eurozone bailout funds, totaling (EURO)800 billion, would be too small to rescue both.

“The fiscal spotlight has refocused on the considerable challenges facing Spain,” analysts at Capital Economics wrote in a note to clients.

The focus will remain this week on Spain, which will hold government bond auctions on Tuesday and Thursday. Any signs that investors are shying away from the country’s bonds would likely increase tensions and push Madrid’s borrowing rates even higher.

At the end of the week, the International Monetary Fund will hold a global conference in Washington, where European government officials are expected to push for an increase in the organization’s lending capacities to reassure investors it can help fight the eurozone crisis bad credit personal loan lenders. So far, major IMF members like the U.S. have been reluctant to infuse the fund with more money.

By mid-afternoon in Europe, Germany’s DAX was up 1.1 percent at 6,654.12 while France’s CAC 40 rose 1.3 percent to 3,231.21. Britain’s FTSE 100 was up 0.8 percent at 5,696.32. The euro fell 0.2 percent to $1.3038.

Wall Street gained on the open, with the Dow average up 0.7 percent to 12,944.88 and the S&P 500 rising 0.1 percent to 1,371.82.

Asian markets closed mostly lower, however, as traders focused on data released Friday showing China’s economy slowed to a 8.1 percent growth rate in the January-March quarter, the slowest in almost three years. In the fourth quarter, growth was 8.9 percent.

Japan’s Nikkei slid 1.4 percent to 9,502.95, bruised also by a higher yen. The dollar fell to 80.56 yen from 81.10 yen.

South Korea’s Kospi was down 0.9 percent at 1,990.84 after the Bank of Korea lowered its 2012 economic growth outlook to 3.5 percent, from a December estimate of 3.7 percent, Yonhap news agency reported.

Hong Kong’s Hang Seng fell 0.7 percent to 20,559.03 and Australia’s S&P/ASX 200 lost 0.4 percent to 4,304.40. Benchmarks in Singapore, Taiwan, Mumbai and Indonesia also fell.

Benchmark oil for May delivery was up 18 cents to $103.01 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 81 cents to finish at $102.83 per barrel on the Nymex on Friday.

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Consumer products maker Procter & Gamble Co. is raising its quarterly dividend by 7 percent to 56.2 cents.

The Cincinnati company had been paying a quarterly dividend of 52.5 cents. It pays dividends on common shares certain preferred shares. Its next dividend is payable May 15 to shareholders of record as of April 27.

Procter & Gamble makes Tide laundry detergent, Crest toothpaste, Pampers diapers, and other products.

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J.C. Penney Co.’s Chief Financial Officer Michael Dastugue will leave the company Friday in the wake of a broader shakeup of the department store operator’s business.

The company said Wednesday that Chief Operating Officer Michael Kramer will serve as interim CFO while it looks for a permanent replacement.

Kramer joined J.C. Penney in December, after serving for three years and president and CEO of Kellwood Co. He was also executive vice president and CFO at Abercrombie & Fitch Co. and served as CFO of Apple’s retail division.

The announcement comes less than a week after J.C. Penney said it laid off 600 workers, or 13 percent of the staff at its headquarters in Plano, Texas, as the company looks to streamline its operations. It will also eliminate 300 more jobs at its customer call center in Pittsburgh when it closes the center July 1.

The company’s new CEO, former Apple Inc. executive Ron Johnson, is transforming every aspect of Penney’s business, from pulling back on constant promotions to rethinking the brands it carries. Johnson became CEO on Nov. 1.

In recent years Penney has suffered because its core middle-income customers have been among those hardest hit by the weak economy. It’s also lagged behind rivals like Macy’s Inc. making its stores fun places to shop. In its latest fiscal year ended Jan. 28, Penney reported a loss of $152 million on revenue of $17.26 billion. That compares with a profit of $389 million on revenue of $17.76 billion in the same period last year.

Revenue at stores open at least a year, considered a key indicator of a retailer’s health, rose a slim 0.2 percent for the latest fiscal year. Rival Macy’s Inc. enjoyed a 5.3 percent increase.

J.C. Penney has 1,100 stores. Its stock added $1.03, or 3.1 percent, to $34.24 in midday trading. Over the past year, the shares have traded between $23.44 and $43.18.

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It took David Jeffrey more than a year to get back on his feet after losing his job at Sallie Mae. As of February, he is witness to the factory rebound that has boosted confidence among American men.

Stock futures are falling as financial turmoil grips Spain and before a U.S. report that is expected to show a slight rise unemployment benefit applications.

Dow Jones industrial futures are down 26 points to 13,027 and the Standard & Poor’s 500 futures are down 3.3 points to 1,396.9. The Nasdaq composite futures are down 5.75 points to 2,762.25.

Protesters flooded the streets of Madrid on Thursday and there are clashes with police a day before massive spending cuts and tax hikes are expected to be revealed.

European markets are down with investors keeping an eye on events at home and in Asia, where Chinese economic indicators are compounding fears of a broader economic slowdown.

The U.S. Labor Department will release its latest unemployment claims numbers at 8:30 a.m. Eastern time.

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