Hedge Fund Short Selling Caused Market Dive, Cameron New Brit PM, Govt Changes Approach to Oil Oversight - News Headlines 11 May 2010

From Denny: OK, everyone raise their hand who believes the latest Wall Street story about why the American stock market took a dive last week. Yes, I thought so. All of you know they are still lying. Oh, this story is PART of the truth but not all of it and we ALL know it!

What the public is furious about is how Wall Street continues to play the financial shell game with us, along with lying, and no one stops them. The politicians are in the back pockets of Wall Street because of enormous campaign funds drug dripped to them ever so carefully over decades to decide who gets in and who stays out of office.

One smart thing to come out of the Obama White House today - and a long time coming - is the decision to divide in two the Minerals Management Service under the Department of the Interior. After the BP oil spill flashed a glaring light on how cozy parts of our government are with the oil industry it was the smart political move.

Minerals Management Service will now have two agencies: one for inspecting oil rigs, actually enforcing safety regulations like they are supposed to do and shining the light of investigation on oil companies when they need it (which will probably be a continuing effort).

The second agency will oversee the leases for oil drilling as well as collecting those billions of dollars in oil royalties. (Which Louisiana never saw for decades - until recently when the government promised them to the state. Of course, we have yet to see those royalties or we would not be having a state budget shortfall to the tune of $1 billion.)

CBS did a long series of interviews with Secretary of State Hillary Clinton about her global mission. Included are links to all the video clips.

What I find to be an alarming development that could cascade and cause our fragile economy to collapse or develop a severe limp is this new trend of homeowners walking away from devalued homes while they can still afford to pay. It's called "strategic default" and already over one million homeowners have done this. Currently, there are over 11 million homeowners across the nation who are struggling to pay their mortgages.

There is no way the banks can absorb this many toxic assets. Of course, the big banks dug themselves into this hole and refuse to work with homeowners. They haven't even dipped into the huge billions Obama gave them to help restructure mortgage debt.

And you think the BP oil spill is a mess - wait until this real estate walk away spreads past Arizona and California. I simply do not understand why banks are so incredibly stupid. It just goes to the old Louisiana saying, "Greed will bring you to your knees." There is no way the American taxpayers will ever again OK a bailout for any big banks or Wall Street. These banks will fail.

And, late this afternoon in my Central Time Zone, we heard that Britain finally hammered out a deal to make David Cameron Prime Minister. It sure looks like he has some fine ideas for real change to pull his odious party away from the Thatcher model into the new century and actually care about people. Hopefully, he will succeed, if he is true to his agenda and promises.






WSJ: Hedge Fund's Bet May Have Triggered Market Dive (CBS)


Last Thursday's incredible market plunge may not have been set off by a typographical error, as originally speculated, but rather by a hedge fund's big bet that stocks would decline, according to a Wall Street Journal report ($) Tuesday.

The furious sell-off, which sent the Dow Jones industrials down nearly 1,000 points on the day in a matter of minutes, took place shortly after hedge fund Universa Investments LP executed a $7.5 million trade for 50,000 options contracts, according to the report. Traders on the other side of the transaction, including Barclays Capital, engaged in their own selling in order to offset the risk, creating a tidal wave of selling that clogged up exchanges.

Ordinarily, Universa's trade, which would have paid off around $4 billion if the S&P 500 falls to 800 by June (it was 1145 at the time of the transaction), might have had a temporary impact on stock prices, but not cause a dramatic ripple effect. But among markets already jittery because of Europe's debt woes, the transaction may have triggered more widespread selling, according to the report.

The episode points out a "structural flaw" in the markets, Gus Sauter, chief investment officer at Vanguard Group, told the Journal.

As the report notes, physical exchanges like the New York Stock Exchange are becoming less important as computer-driven trading operations at firms around the country drive much of the market. That leads to greater potential for disorder and makes controlling markets more difficult.





Official Seeks Changes to Oil Drilling Oversight (CBS)

Interior Secretary Ken Salazar Wants to Split Agency that Oversees Offshore Drilling


The Obama administration is proposing to split up a U.S. Interior Department agency that oversees offshore drilling, as part of its response to the Gulf Coast oil spill, The Associated Press has learned.

An administration official who asked not to be identified because the plan is not yet public said Interior Secretary Ken Salazar will call for splitting the Minerals Management Service in two. One agency would be charged with inspecting oil rigs, investigating oil companies and enforcing safety regulations, while the other would oversee leases for drilling and collection of billions of dollars in royalties.

Currently, the Minerals Management Service, an arm of the Interior Department, is responsible for collecting more than $10 billion a year from oil and gas drilling and with enforcing laws and regulations that apply to drilling operations.

Some critics have said the two roles are in conflict and are one reason the agency has long been accused of being too cozy with the oil and natural gas industry.

An administration official said Salazar has the authority to split up the agency but is likely to propose other changes Tuesday that would require congressional approval.

An internal investigation in 2008 described a "culture of substance abuse and promiscuity" by workers at the minerals agency. The investigation by Interior's inspector general found workers at the MMS royalty collection office in Denver partied, had sex with and used drugs with energy company representatives. Workers also accepted gifts, ski trips and golf outings, the report by Inspector General Earl E. Devaney said.

Devaney decried "a culture of ethical failure" and an agency rife with conflicts of interest.

More than half a dozen workers out of around 50 at the Denver office were disciplined - and several were fired - because of the scandal.

Salazar, who promised aggressive reform when he took over the Interior Department early last year, believes the tragedy aboard the Deepwater Horizon oil rig - and the resulting massive oil spill has made reform even more urgent, the administration official said.

The Interior Department will move to establish an independent energy inspection agency within the Minerals Management Service "so that the American people know that they have a strong and independent organization holding energy companies accountable and in compliance with the law of the land," the official said...





Secretary of State Clinton's Global Mission (CBS)

She Talks to "60 Minutes" About America's Foreign Policy Challenges, the War on Terror, and Being the Country's Top Diplomat


After the car bomb was found in Times Square, we wanted to ask the secretary of state about the administration's efforts against terrorism in Pakistan and Afghanistan. "60 Minutes" correspondent Scott Pelley spoke with Secretary Clinton at the State Department on Friday.

It was the last in a series of interviews that we've done with her over the last six months. During that time, we've been traveling with Mrs. Clinton to see how this surprising choice for secretary of state is engaging the world. We didn't expect such a far flung story would begin with questions about events in the heart of Manhattan.



Watch CBS News Videos Online



Full segment of interview with Sec. Hillary Clinton - Scott Pelley follows Hillary Rodham Clinton as she performs her duties as secretary of state and questions her on the latest developments in foreign policy and the recent terror scare in New York's Times Square.

Web Extra: Pakistan & Terror In The U.S. - In the aftermath of the attempted Times Square bombing, Secretary of State Hillary Clinton discusses the United States' relationship with Pakistan.

Web Extra: Terror & Citizenship - Secretary of State Hillary Clinton on the bill in Congress that would strip U.S. citizenship from terrorists.

Web Extra: Hillary's Future - How long does Secretary of State Hillary Clinton plan on staying in her job as the nation's top diplomat? And, is there another run for the White House in her future?

Web Extra: Inside Secretary Clinton's Office - Secretary of State Hillary Clinton gives Scott Pelley a behind the scenes look at her private office.



Watch CBS News Videos Online





Strategic Default: Walking Away from Mortgages (CBS)

60 Minutes: A Million Have Walked Away; Trend Could Undermine the Fragile Economic Recovery

Despite some indications that the economy is recovering, the housing market remains a disaster area. Currently, about seven million homeowners are behind on their mortgages and that number is only getting worse.

Banks, with the help of the government, are offering some relief to homeowners who've lost jobs and just can't meet their payments.

But there's a growing number who can pay but are simply walking away from houses that are now worth as little as half of what they paid for them.

It's called "strategic default." People have done the math and decided making those monthly payments is just throwing money away, leaving the mortgage holders - the banks - as zookeepers of an ever-growing parade of white elephants.

In the past year it is estimated that at least a million Americans who can afford to stay in their homes simply walked away...


The Southwest has become an inland ocean of bad mortgage debt. In Arizona, a full 50 percent of houses are underwater, and in Nevada it's even worse: 65 percent of houses there are drowning and the rivers are rising.

And it's not just the Southwest: according to CoreLogic, more than 11 million homeowners across the country are underwater. It's estimated that number could double in the next year, which means nearly half of all American mortgage holders will owe more on their homes than those homes are currently worth....

To try and stem the tide of foreclosures, Stevens says the Obama administration has set aside billions to give banks incentive to help struggling and underwater borrowers with their mortgages. But banks have been slow to modify the terms of those loans....



Watch CBS News Videos Online






U.S. Missiles Slam Pakistan Taliban Sanctuary 9CBS)

Officials Say 14 Alleged Insurgents Killed in Massive Strike Near Afghan Border

Up to 18 American missiles slammed into a Taliban sanctuary in Pakistan close to the Afghan border Tuesday, killing 14 alleged insurgents in the third such strike since a failed car bombing in New York drew fresh attention to the region, officials said.

The number of missiles fired into North Waziristan was unusually high, reflecting multiple targets.

They struck cars, homes and tents across a wide area in the Doga area, where insurgents have hideouts and training facilities, two intelligence officials said on condition of anonymity because they were not authorized to speak to the media. The identities of the people killed in the attack were not immediately known.

North Waziristan has been the target of nearly all of about 30 other American attacks this year. In recent months, it has become a new haven for militants who fled a Pakistani army offensive in their previous stronghold, neighboring South Waziristan...





Oh, how politics change on the wind! :)

late this afternoon in America:


David Cameron, UK's "Tory Blair," Rises to Power (CBS)

Britain's New Conservative Prime Minister Known as Privileged yet with Common Touch


Upper-class David or down-to-earth Dave? Perceptions of David Cameron, the man who led the Conservatives back to power after a generation, all depend on the eye of the beholder.

One newspaper last week cast Cameron in a homage to the famous blue-and-red image of President Obama, over the words "Our Only Hope." In contrast, another ran a photo of him as a rich young Oxford University student, haughty in stiff collar and tails.

On one hand, Cameron is a modern urbanite who has tried to remake his party in his own image as an eco-friendly, down-to-earth man of the people who rides his bike to work. Yet he's also the privileged product of Eton, Britain's most elite private school, and Oxford University - and is married to an aristocrat's daughter.

At 43, Cameron is the youngest prime minister in almost two centuries, a few months younger than Tony Blair was when he became leader in 1997.

Sometimes called the "Tory Blair," Cameron has dragged the Conservatives back from the wilderness to which they were consigned by Blair's Labour landslide, moving his right-of-center party toward the center of British politics, promoting inclusive politics, environmental concerns, and a certain modern sensibility.

He's recruited more women and minorities, declared his loyalty to public services and - gingerly - tried to draw the Tories from under the shadow of Margaret Thatcher, the polarizing leader who dominated British politics in the 1980s...


early this morning in America:


British Election Result: Still Under Negotiation (CBS)

Election Yielded No Outright Winner, Leaving Reform-Minded Liberal Democrats in Potential King-Maker Role

Britain's pivotal third party kept its larger suitors - and the electorate - hanging Tuesday, opening formal negotiations with Prime Minister Gordon Brown's Labour Party to form a new government after talks with the rival Conservatives.

Five days after an election that produced no outright winner, the third-placed Liberal Democrats were playing hardball in hopes of extracting maximum concessions in return for propping up a Conservative or Labour administration.

Brown's dramatic decision Monday to announce his impending resignation opened the way for a possible deal with the Liberal Democrats - who had demanded his removal as a condition.

Both of the two main political parties have now offered to meet the Liberal Democrats' key demand - electoral reform - muddying the differences between the two offers.

Conservative leader David Cameron appeared miffed at the sudden turn of events, which came after both the Conservatives and the Liberal Democrats claimed to be making progress Monday in their coalition talks...

Cameron's Conservatives - who won the most seats in Parliament in Thursday's national election but fell short of capturing a majority - have struggled in their attempts to win over the Liberal Democrats.

Though the Liberal Democrats appeared genuinely open to a deal with the Conservatives, they are more ideologically compatible with Labour. Brown's offer to resign could give Liberal Democrat leader Nick Clegg a viable chance at passing electoral reform and a role in the British government after years on the political fringe...





Pope: Church Facing Its "Greatest Persecution" (CBS)

In Strongest Comments Yet on Sex Abuse Scandal, Pontiff Also Says Sins Inside Church, Not Outside, to Blame


Pope Benedict XVI says the clerical abuse scandal represents "the greatest persecution of the church," but said it was born from sins inside the church, not outside.

He called for profound purification and penance within the church as well as pardon and justice.

In some of his strongest comments to date, Benedict said the Roman Catholic Church had always suffered from internal problems but that "today we see it in a truly terrifying way..."





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USA Offshore New Oil Drilling Halted, New USA Terrorist Screening, 3-Way Tie in Brit Election - News Headlines 6 May 2010

From Denny: It just goes to show how much of a shell game is still going on in Congress with the latest GOP amendment voted down by the Democrats. There are two versions of how the bill was viewed even by the media. Essentially, the Democrats voted down the breaking up of big banks. On the flip side, Democrats safeguarded consumer protections the GOP wanted to get rid of in the financial industry. So, basically, Big Business got what it wanted: financial monopoly to keep screwing over the consumer.

Speaking of screwing over, there is a movement a foot in America of younger generation home owners - who owe on their mortgages far more than their homes are worth - well, these home owners are walking away from their financial responsibility. They have jobs. They are not bankrupt. They are angry at Big Banks and Big Business for constantly changing the terms of contracts and the financial mess on Wall Street that caused their real estate assets to turn into liability nightmares.

Apparently, they have no patience to wait for the real estate market to come back up to bring up the values of their homes. They believe they can get another house ten years from now, while saving up money. I'm not so sure that by intentionally defaulting on these mortgages now will make it possible in the future to be considered for another mortgage. That's quite a gamble.

Arizona continues to scare away the hard-working illegals as families run to Colorado or California. They fear the law will separate the undocumented parents from their children who were born here as American citizens. They are probably right. The sad thing is the criminals are not these families. It will be interesting to see how things shake out on this immigration law in Arizona as they bleed workers from their state who took the lowest paying jobs Americans did not want. Then what?

As to the oil rig spill disaster still playing out in the Gulf of Mexico, growing larger every day, it seems a new villain to rear its ugly head is Transocean. It is just now coming out that Transocean spirited away from the media - and their families - for a 15 hour interrogation - to coerce these traumatized survivors to sign legal documents while still in shock to release Transocean from legal responsibility.

You have got to be kidding me! Who do they think they are? The CIA after terrorists? Talk about sear into the survivors more PTSD symptoms when they were postponed treatment for their injuries, whether physical or psychological. These scumbag corporate lawyers and investigators need to be investigated for wrong-doing and prosecuted. They basically kidnapped these survivors against their will because they denied them access to leave and denied the families, the police and the media access to visit or talk to them.


*** ALSO: Transocean Kidnapped Oil Rig Survivors, Coerced Signing No Legal Repsonsiblity





Feinstein: Terrorist Screening Must Improve (CBS)

Sen. Dianne Feinstein said the government will have to improve screening of potential terror suspects, including making changes to how airlines use the no-fly list.

In the wake of Faisal Shahzad's near getaway on board a Dubai-bound Emirates airline flight late Monday, despite the fact that he was added to the no-fly list earlier that day, airlines are being required to check the list every two hours. Shahzad's no-fly status was apparently unknown to the airline when he boarded the flight...

"I would even prefer if it were sooner. And I think at some point the government is, in fact ... going to take over the list. And then it become as strict governmental responsibility. I think that's one reform that can easily be made," she said.

Feinstein said the Transportation Security Administration should enforce the list, not just domestically, but internationally as well.

"This is not an easy thing because I think we're now finding that there is a new prototype of this kind of terrorist. And this man, in fact, is a citizen. ... He's made a number of trips to Pakistan back and forth. And there are about 180,000 people a year going to Pakistan, 160,000 coming back. That's a lot of people to set up an improved screening system. But I think this is one of the things that has to happen because if we're going to prevent these attacks, we have to have a better screening of individuals who are likely suspects. And that's a very tall order."

Feinstein also addressed a proposal by Sen. Joseph Lieberman, I-Conn., to strip terror suspects of their citizenship, regardless of whether they've committed any crimes.

"Sen. Lieberman proposed that once before. I took a look at it then ... and my analysis was that it would not stand the constitutional test based on law made by the Supreme Court. I haven't seen the latest draft and don't know whether it's changed. So I really can't say."





Brits Head to Ballots to Elect New PM (CBS)

Outcome Said Likely to Reshape Nation's Politics in Historic Ways


There's only one good bet in Britain's razor-edge election: It's likely to reshape the country's politics in historic ways.

Should Gordon Brown cling to power, his Labour Party will have pulled off one of the most unlikely political comebacks in modern times. Victory for the Conservatives' David Cameron would return his once-discredited party to office after 13 years.

More likely - in an election with important consequences for everything from the war in Afghanistan to the global economy - there will be no clear winner, and a good showing for Liberal Democrat upstart Nick Clegg.

Only months ago, most thought the election would be the Conservatives' for the taking - but that was before the perfect political storm emerged.

An embarrassing expense scandal last year enraged voters after lawmakers were caught being reimbursed for everything from imaginary mortgages to ornamental duck houses at country estates, bringing trust in British politics to a record low.

And although lawmakers from all three parties were involved, the backlash was most severe for Britain's old guard, the Conservatives and Labour. Labour's popularity, slipping since Tony Blair's landslide victory in 1997, took a nose-dive after the unpopular Brown took the reins.

Then came the surprise success of Clegg, an affable 43-year-old who called for a complete overhaul of British politics during the country's first-ever televised election debates. His impressive performance thwarted Cameron and added to nagging worries over the extent to which the Tory leader has actually overhauled the stodgy Conservatives.

The 43-year-old Cameron has also been hampered by his own elite background. Eton-educated and married to an aristocrat's daughter, many question whether he can relate to an electorate that has endured 1.3 million layoffs and tens of thousands of foreclosures over the past year and a half.

"This could go down as one of the most revolutionary elections in the history of this country," said Bill Jones, a political analyst at Liverpool Hope University.

The stakes are high - both domestically and internationally. As Europe grapples with Greece's financial crisis, global markets are waiting impatiently for Britain's election outcome - anxious to know how quickly work can begin to cut the country's record 153 billion-pound ($236 billion) deficit, and whether the parties will be able to cooperate to pass key legislation.

A Conservative majority would likely lead to a stock market rally and a boost for the British pound because the Tories favor more aggressive, and immediate, cuts than Labour to Britain's huge budget deficit. But even a Labour majority could see a rally purely because it would erase market uncertainty.

The impact of a hung Parliament - in which no party wins enough seats to govern outright - is far less certain. Some analysts suggest that fears about delayed action on the deficit could weigh on Britain's currency and stocks. Others say the markets have already factored that in and believe rapid action on the deficit is possible - as long as a new government is formed quickly.

If the Liberal Democrats are able to push through their main goal - overhauling Britain's centuries-old electoral system so it is more proportionate - the changes would favor center-left parties, and potentially shut Cameron's Conservatives out of power for decades.

Britain's four-week electoral campaign was transformed by the country's first televised debates. The three prime-time clashes offered Clegg rare equal billing with Brown and Cameron, and he shined - combining his telegenic, friendly manner with sharp attacks on his rivals and the country's electoral system.

The Liberal Democrats - who have traditionally won about 20 percent of the vote since the party formed in a merger in 1988 - have held on to that unlikely surge, despite a dip in the last week of the campaign.

The same system that Clegg wants to overhaul, in which the number of districts won - not the popular vote - determines who runs the country, could produce perhaps the most bizarre election scenario. Labour could win fewer seats than the Conservatives, but still stay in power.

That's because convention holds that in the event of a hung Parliament, Queen Elizabeth II should offer the sitting prime minister the first chance to try to form a government - even if his party wins fewer seats than the opposition.

In such a scenario, Clegg could find himself with the balance of power. The backing of his expected bloc of about 80 seats in a coalition would give Cameron or Brown the ability to form a government and pass laws.

However, Clegg has already indicated his price will likely be Brown's resignation, as well as key government positions and a commitment to a proportional voting system - which Cameron bitterly opposes.

Graham Smith, of Republic, a lobby group seeking to abolish Britain's monarchy, said the queen could face a public backlash.

"The queen is terrified of making a decision because of the consequences for her if that decision is unpopular," he said.

It's also possible that as early as Friday, Cameron will take the keys to London's No. 10 Downing Street after ousting the 59-year-old Brown - who may decide to quit if his party is humbled...





Push Underway for Nuke-Free Mideast (CBS/AP)

Israel Likely to Face Pressure as World's Nuclear Powers Say They Are Ready for "Concrete Steps"

The United States and the world's four other major nuclear powers say they are ready for "concrete steps" to help move the Middle East toward establishing a regional nuclear weapons-free zone.

After 15 years of inaction, this long-dormant Arab idea, intended to pressure Israel to give up its secretive atomic arsenal, has been revived at the monthlong conference reviewing the Nuclear Nonproliferation Treaty (NPT).

But how far the United States, Israel's strongest supporter, is willing to go is not yet clear. Washington's chief arms control official said the lack of a comprehensive Arab-Israeli peace remains an obstacle.

"The question is, how do you do that in the absence of a peace plan?" Undersecretary of State Ellen Tauscher said Wednesday of the ``nuke-free'' zone idea.

But in answer to a reporter's question, she said the U.S. has been working "for months" with Egypt on the issue. Washington also has been discussing it with the Israelis, said another Western diplomatic source, who asked for anonymity since he was discussing other countries' contacts.

"The Five," the treaty-recognized nuclear powers United States, Russia, Britain, France and China took their position in a joint statement of nonproliferation and disarmament goals read to the conference Wednesday, in its third day, by Russian arms negotiator Anatoly I. Antonov.

Of the proposal for a Mideast free of weapons of mass destruction, he said, "We are ready to consider all relevant proposals in the course of the review conference in order to come to an agreed decision aimed at taking concrete steps in this direction."

In 1995, another of these twice-a-decade conferences adopted a resolution calling for a Mideast zone free of nuclear, chemical and biological weapons. Such a zone would join five other nuclear-free regions globally Africa, Southeast Asia, Central Asia, the South Pacific and Latin America.
It was support for that 15-year-old resolution that the five powers reaffirmed on Wednesday.

Although the U.S. has long endorsed the idea, it has never pushed for action. In her speech to the nuclear conference on Monday, however, Secretary of State Hillary Rodham Clinton said Washington would support "practical measures for moving toward that objective."





GOP Challenge to Financial Reform Bill Fails (CBS)


Following strong pushback from the White House, Senate Democrats today voted down a Republican proposal that opponents suggested would have effectively "gutted" consumer protections in the financial industry reform bill.

The amendment failed 38 yeas to 61 nays.

The bill being proposed by Democrats creates a consumer protection division housed at the Federal Reserve that would consolidate various consumer protections. The GOP amendment would have based that consumer protection division within the Federal Deposit Insurance Corp., or FDIC.

As CBS News Capitol Hill producer John Nolen reports, Republicans argued that the Democrats' proposal created unnecessary bureaucracy and represented government overreach; they suggested it would impact small businesses caught up in new regulations.

For their part, Democrats said that if the GOP amendment passed, the consumer protection division would lack independence and authority and essentially leave oversight to the same regulators that failed last time around...

President Obama released a statement earlier today hammering the Republican amendment as one that "will gut consumer protections and is worse than the status quo."

"This amendment will significantly weaken consumer protection oversight, includes dangerous carve outs for payday lenders, debt collectors, and other financial services operations, and hurts the ability of community and local banks to compete by creating an unlevel playing field with their non-bank competitors," the statement said, deeming the amendment "unacceptable..."

Meanwhile, Senate Majority Leader Harry Reid, in an interview with the Huffington Post, said he would ensure that an amendment to break up big banks would come up for a vote - adding that he was leaning toward backing it. Majority Whip Dick Durbin has already come out in favor of the amendment. Under the amendment, designed to end "too big to fail," no bank could hold more than 1/10th of U.S. deposits.

Reid also said he supported an amendment to audit the Federal Reserve. That could mean, among other things, exposing payoffs to companies financially intertwined with AIG following the government bailout of the company.


**************


Senate Kills Bid To Limit Size Of Banks (NPR)

A bipartisan Senate coalition has rejected a proposal to limit the size of the nation's largest banks as a means of reining in the financial sector.

The Senate voted 61-33 against a proposal that would have required the nation's giant banks to split up. The Obama administration has argued that the size of financial institutions was not the root cause of the 2008 Wall Street crisis.

The proposal by Democratic Sens. Sherrod Brown of Ohio and Ted Kaufman of Delaware was opposed by the bank industry. Brown and Kaufman argued that cutting banks down to size would end firms deemed "too big to fail."

Among the banks that would have been affected were Bank of America, JPMorgan Chase, Citigroup, Goldman Sachs and Morgan Stanley.

Earlier, Senate Republicans failed to get support for their own version of a consumer protection agency.

The GOP proposal failed on a vote of 38 to 61. Two Republicans — Olympia Snowe of Maine and Charles Grassley of Iowa — joined Democrats to defeat the measure.

Republicans proposed a council devoted to consumer lending within the Federal Deposit Insurance Corp. Their plan sought to narrow the focus to businesses they said were at the core of the economic crisis — such as nonbank mortgage companies.

The White House criticized the proposal.

"Alternatives that gut consumer protections and do nothing to empower the American people by cracking down on unfair and predatory practices are unacceptable," President Obama said in a statement before the vote.

Sen. Jack Reed (D-RI) said the Republican plan essentially created a loophole for payday lenders, debt collectors and other financial businesses.

"They would create an oversight agency and then exempt virtually the entire financial industry for consumer lending oversight," Reed said. "It's more like a lapdog then a watchdog."

The current legislation seeks a consumer bureau headed by a presidential appointee, with its own budget and rule-making authority. It would be housed within the Federal Reserve. It would write and enforce laws over all kinds of personal lending — from student loans to credit cards and mortgages. That responsibility is at present spread across seven agencies.

But Sen. Richard Shelby (R-AL) said the current plan would create a "massive new bureaucracy whose power and scope would have no equivalent in the U.S."

The Senate then turned its attention to another amendment opposed by the Obama administration — a proposed audit of the Federal Reserve that has bipartisan support and that even Senate Majority Leader Harry Reid (D-NV) has said he is inclined to support.

It would require the Federal Reserve to undergo a thorough audit by Congress' investigative arm, the Government Accountability Office.

The measure, proposed by Vermont independent Sen. Bernie Sanders, has populist support from across the political spectrum, from Tea Party activists to liberals and labor organizations. The Federal Reserve and the Treasury oppose the measure, arguing it could interfere with the Fed's independence, a crucial element if the Fed is to carry out unpopular but economically essential policies.

Sanders stressed Thursday that the GAO examination would not intrude on the Fed's job of setting monetary policy. Instead, it would focus on the Fed's emergency lending authority to banks and would require that it make public the recipients of that money.

"We cannot let the Fed operate in secrecy any longer," Sanders said.





Interior Secretary Halts Offshore Drilling Leases (NPR)

Interior Secretary Ken Salazar ordered a halt Thursday to all new offshore drilling permits nationwide until at least the end of the month, stepping up scrutiny of the entire industry amid a catastrophic oil spill in the Gulf of Mexico.

Salazar spoke to reporters Thursday outside BP's Houston crisis center and said lifting the moratorium on new permits will depend on the outcome of a federal investigation over the Gulf spill and the recommendations to be delivered to the president May 28.

He said until then, "We are putting things on hold relative to the granting of permits for well construction on the outer continental shelf."

The ramifications of his order extend beyond the Gulf and affect permits pending in Alaska as well.

"They will not get those permits until we have an opportunity to complete this review," he said. "We will see what lessons we learn between now and then and at that point will make a decision about how we're going to move forward..."

He said this was his second trip in a week to the BP operation in Houston — "to make sure" BP Plc is doing everything it can to respond to the slick.

Earlier, the Interior Department suspended planned lease sales for oil drilling off the coast of Virginia.





Immigrant Families Leave Arizona, Fearing Law (CBS)

At Least 100,000 Illegal Immigrants Flee the State Fearing Legislation; Some Citizens Angered by Financial Impact

...Manuela Quintana said that they decided to leave when the Arizona governor signed the new immigration law.

For years, their family thrived with jobs in restaurants and construction, reports CBS News correspondent Kelly Cobiella. Their 10 children were born here and are U.S. citizens. Both she and her husband are undocumented, and currently unemployed.

She said that her biggest fear is being put in jail and having her children taken away from her. Just the thought of moving scares their 12-year-old daughter Graciela...

Two years ago, this park was filled with families every weekend. Arizona was home to more than half a million illegal immigrants. Since then, at least 100,000 have left...





Rig Survivors Felt Coerced To Sign Waivers (NPR)

Hours after they had been rescued, workers who survived an explosion on an oil rig in the Gulf of Mexico were asked to sign form letters about what they had seen and whether they had been injured.

Lawyers for the oil rig's owner, Transocean, requested that workers who had survived the blast sign the form in the wake of the April 20 blowout on the Deepwater Horizon. This was hours before the workers had been allowed to see their families.

Now some of those survivors say they were coerced and that the forms are being used against them as they file lawsuits seeking compensation for psychiatric problems and other injuries from the blast.

"The form that they made them sign had, 'I was here when it happened, I didn't see anything.' Or 'I saw this and I was or was not hurt,' " says Steven Gordon, a Houston attorney who represents some of the survivors.

It's a pre-printed form letter. The surviving rig worker was asked to fill in the date, his name and address and where he was at the time the evacuation was ordered.

Then there are the two paragraphs at the end.

One says: "I was not a witness to the incident requiring the evacuation and have no first hand or personal knowledge regarding the incident."

The second says: "I was not injured as a result of the incident or evacuation."

The men were asked — if they agreed — to initial those statements.

Documents show those initials now are being used against the survivors as they file lawsuits seeking payment for emotional distress and other claims. Gordon says "When we were hired by one of the survivors, we gave notice to Transocean's lawyers. And the immediate response was, 'Wow, we're surprised. Here's a statement that says he's not hurt.'"

Gordon and attorney Kurt Arnold each have one client who has received letters from Transocean in the past few days.

Arnold says asking the men to sign those forms was coercive. He says the request came more than 24 hours after the rescue, after the men had seen 11 of their friends die in the explosion and chaos of that night, and after they had run to lifeboats to try to save their own lives.

Arnold's clients aren't speaking publicly but have described the scene to him. "It's extremely gruesome," he says. "I mean, one of the guys told me that as he's running out, there's guys burning and some guys missing limbs. It's like a war zone."

Arnold and Gordon say the survivors were kept on the water, in boats and on another rig for 15 hours or more. The explosion on the rig happened at about 10 p.m. on Tuesday, April 20. "They did not bring them in till 3 a.m. Thursday morning," Gordon says.

When they did get to shore, he says: "They were zipped into private buses, there was security there, there was no press, no lawyers allowed, nothing, no family members. They drove them to this hotel and they escorted them into the back of this hotel, once again under escort."

It would be many hours more, according to lawyers and survivors, before they could see family and, for many, even telephone loved ones to say they were safe.

Secluded at a hotel, they were questioned by company consultants and investigators. And given the form to sign.

Arnold says it only added to his client's emotional distress. "Talking about adding to post-traumatic stress. Don't take them in once you get 'em off the rig. Just keep 'em there for 15 hours so that they can watch, watch their rig burning up, knowing they had to leave some of those guys behind. I mean come on. Really? Was there any reason for that?"

But Arnold thinks it was very deliberate. "The reason they were doing that, I think, is so they could assemble their teams onshore of investigators so that when they got to the hotel room they could try to get these guys to sign statements and such before they'd even let them go to bed. That's what they did. Unbelievable."

Other legal experts said the tactic of such letters is extreme but not unheard of — and that courts may question them. Says Robert Anderson, who teaches maritime law at Pepperdine University School of Law in California: "I think the court would respond very skeptically to a waiver of any type of these basic rights where the seaman was acknowledging that he or she was not injured or suffered no damages or otherwise was releasing the employer, particularly if that waiver was executed in the wake of a rescue at sea."

NPR contacted Transocean and the company sent a response by e-mail. "From the beginning," the response says, "our focus has been on the crew members and their families, working with all parties in the response efforts and conducting a Transocean investigation into the incident. At this time, it would be inappropriate to comment on litigation."



*** ALSO: Transocean Kidnapped Oil Rig Survivors, Coerced Signing No Legal Repsonsiblity





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