1 of 4. U.S. President Barack Obama delivers remarks on energy at the Argonne National Lab near Chicago, March 15, 2013.

LEMONT, Ill./WASHINGTON | Fri Mar 15, 2013 6:39pm EDT

LEMONT, Ill./WASHINGTON (Reuters) - President Barack Obama tried to move past partisan fights over energy policy on Friday with a modest proposal to fund research into cars that run on anything but gasoline.

Obama toured the Argonne National Laboratory outside of Chicago, known for its research into advanced batteries used in electric cars, then delivered a speech highlighting the need to find more ways to wean vehicles off oil.

The United States has a newfound wealth of oil and natural gas resources made possible by hydraulic fracturing and other drilling advancements, but consumers still face high prices at the pumps because gasoline prices are tied to world markets.

"The only way to break this cycle of spiking gas prices for good is to shift our car and trucks entirely off oil," Obama said in Argonne's advanced photon facility, which says it produces the brightest source of X-rays in the Western Hemisphere, used for an array of research projects.

The Democratic president proposed a fund that will draw $2 billion over 10 years from royalties the government receives from offshore drilling in the Outer Continental Shelf.

The research would be aimed at new ways to lower the cost of vehicles that run on electricity, biofuels, natural gas or other non-oil fuel sources.

Obama first mentioned the Energy Security Trust fund in his State of the Union address last month.

The White House touted the idea as bipartisan, saying it came from retired military and business leaders, including some Republicans, who belong to a policy group called Securing America's Future Energy.

"This is not a Democratic idea or a Republican idea," Obama said, standing in front of three cars designed to run on alternative fuels. "This is just a smart idea."

But Republican approval was far from assured.

"For this proposal to even be plausible, oil and gas leasing on federal land would need to increase dramatically," said Brendan Buck, a spokesman for Republican House of Representatives Speaker John Boehner. "Unfortunately, this administration has consistently slowed, delayed, and blocked American energy production."

By choosing to focus his first energy speech on research - an issue that appeals equally to Republicans and Democrats, industry and environmental groups - Obama is seeking to build common ground on energy, which has been a divisive policy issue.

"In order for something like this to pass the Hill, it will need votes from both sides," said Michael Levi, an energy fellow at the Council on Foreign Relations. "That makes it wise for the president to start with something that Congress can work from."

IS CONGRESS WILLING?

The research trust fund will require consent from Congress, which is grappling with federal budget cuts. Senator Lisa Murkowski of Alaska, the top Republican on the Senate Energy Committee, had proposed a similar idea. But her version called for expanded drilling, which Obama's proposal does not include.

Murkowski's spokesman Robert Dillon said the president's plan relied on royalties that have already been factored into the budget, "which could mean either deficit spending or less funding for the Land and Water Conservation Fund."

"There's a better way that not only funds investment in research, but also addresses our need for affordable and abundant energy," Dillon said, referring to expanded drilling.

White House officials said the president's plan would not add to the deficit because they expect leasing revenues to grow in coming years for several reasons, including changes the administration plans to make to leasing policy.

White House spokesman Josh Earnest said the administration is willing to work with Congress on the research fund plan.

"If there are different ideas people want to offer up, we'll certainly have a conversation with them about that," he said.

Mark Kennedy, the director of George Washington University's Graduate School of Political Management, said despite the misgivings expressed by some Republicans, the White House may be able to negotiate a deal that pleases both sides.

"I think this is the opening bid," Kennedy said. "This is the beginning of the conversation."

In his first term, Obama pushed for laws that would use market forces to reduce climate-changing carbon pollution, but the "cap and trade" bill was opposed by industry and failed in Congress.

His administration pumped $90 billion in economic stimulus funds into clean energy and "green jobs" projects, helping to dramatically expand renewable energy production in America.

But some projects failed, including a California solar panel maker called Solyndra that had received a $527 million government loan. Critics excoriated his administration for that failure, as well as for delaying approval of the Keystone XL crude oil pipeline from Canada.

The energy trust fund "is a more pragmatic approach to try to continue investments in green energy given the degree to which the (clean energy) brand has been damaged," said Kennedy, a former Republican congressman from Minnesota.

(Editing by Doina Chiacu and Mohammad Zargham)

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U.S. Representative Stephen Lynch (D-MA) meets with officials at the Iraqi Foreign Ministry during his visit to Baghdad July 26, 2009.

BOSTON | Thu Jan 31, 2013 4:19pm EST

BOSTON (Reuters) - Representative Stephen Lynch, a Massachusetts Democrat who has represented Boston and its surrounding since 2001, on Thursday formally launched a bid for the U.S. Senate, seeking the seat being vacated by John Kerry following his confirmation as the new U.S. secretary of state.

Lynch, a former ironworker, will face off against fellow House of Representatives member Edward Markey in an April 30 primary, ahead of a June 25 special election to choose a permanent successor to Kerry.

Lynch announced his candidacy with a speech in the headquarters of the ironworkers union he once ran - a site chosen to play up his working-class background.

After a series of appearances in Worcester and Framingham, the state's second- and third-most populous cities, Lynch told a crowd of supporters in Boston about his experience losing a job during a mass layoff at a nearby shipyard.

"I know what it's like to stand in an unemployment line. It's something you never forget," Lynch said, according to a text of his prepared remarks. "I learned that in severe economic downturns, that sometimes the only force that can correct that inequity ... is the government."

Lynch faces an uphill battle against Markey, who has held his seat in Congress since 1976, according to recent polls.

In a primary contest, 52 percent of voters would support Markey and just 19 percent Lynch, according to a Public Policy Polling study of 404 likely primary voters released on Wednesday.

No prominent Republicans have said if they will run for the seat, and observers wonder whether former Republican Senator Scott Brown will seek a return to Washington.

Brown stunned the liberal state's Democratic establishment in 2010 when he won a special election to fill the U.S. Senate seat left vacant with the death of Edward Kennedy.

Brown lost a re-election bid last year to Democrat Elizabeth Warren.

Massachusetts Governor Deval Patrick, a Democrat, on Wednesday named his former chief of staff, William Cowan, to hold the U.S. Senate seat until a successor is elected.

Cowan told reporters he viewed the appointment as temporary and had no plans to run in the special election.

(Editing by Leslie Adler)

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TALLAHASSEE | Thu Jan 31, 2013 6:40pm EST

TALLAHASSEE (Reuters) - Florida's Republican governor on Thursday proposed a hefty $4 billion hike in state spending in a budget plan that includes a $1.2 billion increase in school aid, cuts in business taxes, and relies on fatter state sales-tax collections.

Accompanied by teachers, business leaders and state employees, Gov. Rick Scott told reporters at the Capitol that his $74.2 billion spending plan for fiscal year 2013-14 illustrated economic recovery in Florida and tough budget decisions made by lawmakers over the last few years when revenues were faltering.

Buoyed by increases in sales-tax revenues, Scott's plan was the first since the 2008-09 budget cycle that did not include a sizeable revenue shortfall going into the legislative session set to begin in March.

Scott's proposal includes recommendations to lawmakers, who craft the state's spending plan ahead of the new budget year starting on July 1.

Florida's general revenue portion of the budget, a $27.1 billion pot used for discretionary spending, marks an increase of 4.7 percent over last year.

"This is further evidence that Florida's economy is back on track and growing again," Scott told reporters.

Other states, such as California, are also seeing increased revenues. Jerry Brown, California's Democratic governor, three weeks ago proposed a budget plan with the state's first surplus in a decade, but urged restraint in spending.

Some other governors are championing tax cuts, and in Texas on Tuesday, Republican Gov. Rick Perry recommended returning excess state revenue to taxpayers.

Florida's jobless rate stood at 8 percent in December, the best showing in four years for a state still battling back from the U.S. housing bust. But it still remains among the highest rates and above the national unemployment rate of 7.8 percent, according to federal government data. (For details, please see: here)

For business, Scott's plan calls for expanding the state sales-tax exemption on machinery and equipment used in manufacturing, a tax break expected to save 17,500 employers about $140 million a year.

On the education front, Scott seeks an across-the-board $2,500 raise for public school teachers as part of his proposed $1.2 billon of increases in K-12 education spending.

The plan drew praise from Florida's largest teachers union, whose members generally haven't seen raises in several years.

"We are happy the governor is recognizing and investing in Florida's high performing public schools," said Andy Ford, president of the Florida Education Association. "In most of Florida, our public schools are the largest employer."

The governor's proposal also includes $60 million for Everglades restoration and another $75 million for the state's environmental land buying program.

Scott sees a lean year for bonding. His budget blueprint includes about $750 million in transportation bonds, which are paid for by fuel tax revenues and do not affect the state's general revenue budget. The proposal does not include any bonding for school construction or environmental land purchases.

(Writing and additional reporting by Michael Connor in Miami; editing by Gunna Dickson)

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U.S. Representative Stephen Lynch (D-MA) meets with officials at the Iraqi Foreign Ministry during his visit to Baghdad July 26, 2009.

BOSTON | Thu Jan 31, 2013 4:19pm EST

BOSTON (Reuters) - Representative Stephen Lynch, a Massachusetts Democrat who has represented Boston and its surrounding since 2001, on Thursday formally launched a bid for the U.S. Senate, seeking the seat being vacated by John Kerry following his confirmation as the new U.S. secretary of state.

Lynch, a former ironworker, will face off against fellow House of Representatives member Edward Markey in an April 30 primary, ahead of a June 25 special election to choose a permanent successor to Kerry.

Lynch announced his candidacy with a speech in the headquarters of the ironworkers union he once ran - a site chosen to play up his working-class background.

After a series of appearances in Worcester and Framingham, the state's second- and third-most populous cities, Lynch told a crowd of supporters in Boston about his experience losing a job during a mass layoff at a nearby shipyard.

"I know what it's like to stand in an unemployment line. It's something you never forget," Lynch said, according to a text of his prepared remarks. "I learned that in severe economic downturns, that sometimes the only force that can correct that inequity ... is the government."

Lynch faces an uphill battle against Markey, who has held his seat in Congress since 1976, according to recent polls.

In a primary contest, 52 percent of voters would support Markey and just 19 percent Lynch, according to a Public Policy Polling study of 404 likely primary voters released on Wednesday.

No prominent Republicans have said if they will run for the seat, and observers wonder whether former Republican Senator Scott Brown will seek a return to Washington.

Brown stunned the liberal state's Democratic establishment in 2010 when he won a special election to fill the U.S. Senate seat left vacant with the death of Edward Kennedy.

Brown lost a re-election bid last year to Democrat Elizabeth Warren.

Massachusetts Governor Deval Patrick, a Democrat, on Wednesday named his former chief of staff, William Cowan, to hold the U.S. Senate seat until a successor is elected.

Cowan told reporters he viewed the appointment as temporary and had no plans to run in the special election.

(Editing by Leslie Adler)

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A truckload of corn is dumped into a chute at the Lincolnway Energy plant in the town of Nevada, Iowa, December 6, 2007.

WASHINGTON | Thu Jan 31, 2013 8:09pm EST

WASHINGTON (Reuters) - Corn ethanol would get a larger share of the U.S. gasoline market under a government proposal on Thursday while ranchers, environmentalists and the oil industry aim to kill the renewable fuels mandate altogether.

The Obama administration proposed a 9 percent increase in the so-called renewable fuels standard from 2012, in line with a 2007 law. Half of the 1.35 billion-gallon increase would go to corn ethanol and half to "advanced" biofuels that produce half the greenhouse gases of first-generation ethanol.

Overall, biofuels would be allotted 16.5 billion gallons of the fuel market for cars and light trucks. The mandate reaches 36 billion gallons in 2022, with half of the mandate going to new-generation biofuels.

Last fall, the administration denied a request from several governors from livestock and oil-producing states for a partial or total waiver of the requirement to use ethanol. Corn prices soared during the drought as ethanol makers, livestock producers, and grain exporters competed for a smaller supply.

"We're girding for a fight," said Bob Dinneen of the ethanol trade group Renewable Fuels Association. He said a campaign against the biofuel mandate already was under way.

There will be a 45-day comment period on the latest proposal after which the Environmental Protection Agency will issue a final ruling.

EPA SAYS CELLULOSIC TARGET IS REASONABLE

As part of its proposal, the EPA put the mandate for advanced biofuels at 2.75 billion gallons, including 14 million gallons of cellulosic biofuels, made from grass, shrub and trees.

The cellulosic target "is a reasonable representation of expected production," EPA said was in line with an appellate court decision last week that ruled against an unrealistically high production target.

EPA set its biodiesel target for this year at 1.28 billion gallons in an earlier, separate action.

Traders said Brazilian ethanol, made from sugar cane, and domestic biodiesel would compete to fill the advanced biofuels mandate. Biodiesel counts as an advanced biofuel.

In addition, EPA proposed a new voluntary program to assure the validity of Renewable Identification Numbers, known as RINs. Fuel companies can use RINs, each representing a gallon of biofuel, to meet the renewable fuel mandate.

Fraudulent RINs have been a problem in the biodiesel industry. EPA said it worked with the biofuels industry in developing its RINs proposal.

ETHANOL PRODUCTION FALLS DURING TOUGH YEAR

U.S. ethanol production fell during the second half of 2012 in the face of high corn prices, the drought-shortened crop and weaker demand for gasoline, the Energy Department said on Thursday. And ethanol prices in 2012 were down 8 percent from 2011's average.

The slump continued into this year. Ethanol production in the week ending on January 25 was the lowest in two years and the four-week average pointed to ethanol production of 12.2 billion gallons this year, far below the mandate of 13.6 billion gallons.

"There's not a market. We're trying to build demand," said Dinneen of the RFA.

Three dozen ethanol plants, with 15 percent of industry capacity, were closed as of Tuesday. Analysts said comparatively low demand for gasoline meant limited demand for ethanol too.

Ethanol is a farm-state favorite, where it is embraced as a home-grown antidote for oil imports and a job-creating industry for rural America. About 40 percent of the corn crop is used in distilling ethanol.

Foes ranging from environmentalists to livestock producers and the oil industry want to end the mandate. They say it encourages soil erosion and pesticide runoff from farms and, by driving up the cost of livestock feed, affects beef, pork and chicken meat prices in grocery stores.

(Reporting by Charles Abbott; Editing by Bob Burgdorfer)

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1 of 2. The U.S. Consulate in Benghazi is seen in flames during a protest by an armed group said to have been protesting a film being produced in the United States in this September 11, 2012 file photo. U.S. Secretary of State Hillary Clinton said December 19, 2012, she accepted the findings of an independent panel that faulted the State Department over the deadly September attack and had ordered widespread changes to bolster US. Diplomatic security overseas.

WASHINGTON | Thu Dec 20, 2012 5:06pm EST

WASHINGTON (Reuters) - The U.S. State Department will seek billions of dollars in new funds and revamp security procedures around the globe in response to criticism by an independent investigation of the September 11 attack on the U.S. mission in Benghazi, Libya, senior officials said on Thursday.

U.S. Secretary of State Hillary Clinton's two top deputies appeared at a Senate hearing and conceded that U.S. officials had failed to "connect the dots" ahead of the attack, which killed U.S. Ambassador to Libya Christopher Stevens and three other Americans.

"We learned some very hard and painful lessons in Benghazi," said Deputy Secretary of State William Burns. "We are already acting on them. We have to do better."

The State Department said on Wednesday its security chief had resigned and three other officials were relieved of their posts following the report, which cited leadership and management deficiencies, poor coordination and confusion over who had the authority to make decisions.

Senate Foreign Relations Committee Chairman John Kerry, tipped to be President Barack Obama's pick to replace Clinton when she steps down next month, chaired the session and led the call for increased funding.

"We need to make certain that we are not penny wise and pound foolish when it comes to supporting America's vital interest overseas," Kerry, a Massachusetts Democrat, said.

SECURITY SPENDING EYED

Clinton, unable to appear at the hearing due to illness, has already asked for $1.4 billion in funds for the 2013 fiscal year to be re-allocated to improve security at U.S. diplomatic missions, a State Department fact sheet said.

The State Department is also expected to request $2.3 billion per year for the next 10 years to further this work.

Some Republican lawmakers challenged the call for more money.

"If the State Department intends to blame its long string of failures on inadequate funding, then perhaps it should take a closer look at the money that is being lavished on global climate change, culinary diplomacy programs and other favored projects," House Foreign Affairs Committee chairwoman Ileana Ros-Lehtinen, said at an afternoon hearing.

But the panel's top Democrat, Representative Howard Berman, said the diplomatic security budget was cut so often it "created a culture at the State Department that is more preoccupied with saving money than with achieving its security goals."

Deputy Secretary of State Thomas Nides said the department had formed a task force to implement 29 specific recommendations in the panel's report and sent security assessment teams to 19 U.S. missions in 13 countries.

The department, in cooperation with the Pentagon, intends to send 35 additional Marine detachments, or about 225 uniformed personnel, to beef up security at medium- and high-threat posts and to boost staffing of its own Bureau of Diplomatic Security by about 5 percent, or 150 additional agents, Nides said.

"Implementation of each and every recommendation will be under way by the time the next secretary of state takes office," Nides said.

The State Department said Bill Miller, a diplomatic security special agent since 1987 who has served in Egypt and Iraq, was appointed deputy assistant secretary of state for high-threat posts - a new position in the Bureau of Diplomatic Security.

The job will focus on U.S. posts in Afghanistan, Azerbaijan, Egypt, Indonesia, Iraq, Jordan, Kenya, Libya, Mauritania, Nigeria, Pakistan, Somalia, South Sudan, Sudan, Syria, Tunisia and Yemen, the State Department said.

The Benghazi incident could tarnish Clinton's four-year tenure as secretary of state but the report does not fault her specifically.

Burns said to his knowledge the security requests from diplomats in Libya "did not get as far as Secretary Clinton."

White House spokesman Jay Carney said Obama endorsed the recommendations of the Benghazi report and expects them to be fully implemented.

"Immediately, accountability has been brought to bear with regard to four individuals who are very senior," he said.

'SCLEROTIC' DEPARTMENT

Republican Senator Bob Corker, an outspoken critic of the Obama administration's response to Benghazi, said the panel report revealed a "sclerotic" State Department that has failed to make good use of the resources already at its disposal.

"We have no idea whether the State Department is using its money wisely or not," he said.

Nides said the department still was coming to terms with widespread changes across the Middle East and defended the department's overall track record.

"We get this right about 99 percent of the time. We would like to be at 100 percent without question," he said.

Republicans have focused much of their firepower on U.S. Ambassador to the United Nations Susan Rice, who appeared on TV talk shows after the attack and suggested it was the result of a spontaneous protest rather than a planned attack.

The report concluded there was no such protest and Rice, who had been widely seen as Obama's top pick to succeed Clinton, withdrew her name from consideration last week.

U.S. officials say the assault, which occurred on the anniversary of the September 11, 2001, attacks on New York and Washington, was the work of Islamist extremists and have pledged to bring those responsible to justice.

Burns said the attack highlighted the need to take a broader look at security rather than focus on "specific and credible" threats, which officials insist were absent in Benghazi.

"What happened in Benghazi was clearly a terrorist attack," Burns said. "We did not do a good enough job, as the report highlights, in trying to connect the dots."

(Additional reporting by Tabassum Zakaria and Mark Felsenthal; Editing by Bill Trott and Todd Eastham)

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Fri Oct 12, 2012 10:15pm EDT

n">(Reuters) - Bankrupt solar firm Solyndra has filed a lawsuit against three U.S.-listed Chinese solar players, including Suntech Power Holdings Co (STP.N), seeking $1.5 billion in compensation due to monopolization by these firms, according to court documents filed on Thursday.

The lawsuit was filed against Suntech, Trina Solar Ltd (TSL.N) and Yingli Green Energy Holding Co (YGE.N) claiming that the trio's panel prices moved in tandem - falling 75 percent in four years in the U.S.

Solyndra, which claims in the lawsuit that the trio were involved in predatory pricing and price fixing, filed for bankruptcy a year ago as it could no longer compete with plunging prices of solar panels imported from China.

U.S. solar companies launched a complaint last year alleging protectionism from Beijing for Chinese panel makers, sparking trade disputes between the two countries.

As a result of the ongoing tryst, the U.S. slapped steep final duties on billions of dollars of solar energy products from China earlier this week.

Defendants - Suntech, Trina and Yingli - came to the U.S. and raised money from the stock market and deployed that capital to "destroy" American solar manufacturers, said Solyndra in the suit filed in a Northern California district court.

"We just received notice of this complaint, but from our initial review, these are unwarranted and misguided claims from a company that has a clear history of failed technology and achievements," said Robert Petrina, Managing Director, Yingli Green Energy Americas.

The other two Chinese companies named as defendants were not available for comment outside of business hours.

Solyndra has sold everything from its remaining inventory and assembly equipment to office computers in a bid to raise money to repay creditors.

The Obama administration came under fire for missing signs of financial trouble at the California-based Solyndra and approving nearly $535 million in loans in a bid to spark a clean energy industry and create jobs through stimulus spending.

Last year, executives from bankrupt Solyndra LLC testified that a flood of cheap Chinese solar panels kept it from realizing $1.2 billion in contracts it announced in 2008.

The lawsuit is Solyndra, LLC v. Suntech Power Holdings Co Ltd et al, U.S. District Court, Northern District of California, No. 12-05272.

(Reporting by Thyagaraju Adinarayan and Divya Lad in Bangalore; Editing by Bernard Orr and Michael Perry)

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France's President Francois Hollande (R), his companion Valerie Trierweiler (2ndL) and Louvre museum's president Henri Loyrette visit the new Department of Islamic Arts galleries during its official opening ceremony at the Louvre museum in Paris September 18, 2012.

PARIS | Thu Oct 11, 2012 12:59pm EDT

PARIS (Reuters) - President Francois Hollande's Socialist government moved on Thursday to halt a push to extend a wealth tax to artworks, eager to head off a new tax row during a belt-tightening drive.

Culture Minister Aurelie Filippetti said that Hollande and Prime Minister Ayrault shared her opposition to targeting art with the wealth tax, as sought by a fellow Socialist lawmaker.

Following a proposal from MP Christian Eckert, the lower house of parliament's finance committee backed an amendment to the 2013 budget on Wednesday that would apply the tax to art, even though the measure is divisive for both the left and right.

With a long tradition of public support for the arts, France has spared artworks from the wealth tax since former Socialist president Francois Mitterrand introduced the levy in 1982.

People with assets worth more than 1.3 million euros ($1.68 million) are liable for the wealth tax of 0.25 percent on top of their income tax. The rate doubles to 0.5 percent for assets over 3 million euros.

Hollande's cash-strapped government has already come under fire for adding new taxes on the rich, especially for a new 75 percent tax rate on incomes over 1 million euros which is prompting some wealthy French to consider moving abroad.

Eckert said earlier this week that the measure was more about fiscal justice than raising new revenues, which he acknowledged were unlikely to be significant.

Under the amendment, artworks worth more than 50,000 euros would be included in the assets used to calculate a person's fortune. Eckert had originally sought the threshold to be 5,000 euros.

Filippetti said it would be a "grave error" to take away special tax treatment for art at a time of growing competition between the world's major art markets.

"We have made and will make efforts so Paris recovers a top position. That's the best way to help French artists," Filippetti said in an interview on the website of Les Echos newspaper.

ART WORLD UP IN ARMS

The amendment quickly ruffled feathers in the Paris art world just as it is preparing for the opening next week of its annual flagship art show, the FIAC.

"I think we should be extremely careful in France and very vocal against the extreme danger of this bill," said FIAC director Jennifer Flay.

"It would compromise the art market's healthy fundamentals and put at risk the means by which artists make a living," she added.

The amendment is to be voted on by the lower house of parliament next week and then go before the Senate. The Socialists have a majority in both chambers.

The fiscal credibility of President Hollande's government already took a knock last week when high-profile protests by business owners forced the government to retreat from plans to raise taxes on entrepreneurs when they sell their companies.

Hollande is pushing through France's toughest budget in at least three decades, relying heavily on tax increases on the wealthy as it seeks to get its deficit down to 3 percent of national output next year from 4.5 percent this year.

Socialist party veteran Jack Lang, Mitterrand's culture minister when the wealth tax was introduced, urged lawmakers to vote against the measure on art, warning it would harm the art market and France's cultural reputation.

"It would cause a haemorrhage of art, and collectors' exile to more welcoming countries," Lang said in a statement.

Stephane Jacquin, head of wealth management at Lazard Freres Gestion, said he did not expect the amendment to get sufficient backing in parliament.

"This isn't the first time this debate has come up, and each time art continues to be excluded from the wealth tax," he said. ($1 = 0.7751 euros)

(Reporting by Leigh Thomas and Lionel Laurent; Writing by Leigh Thomas; Editing by Susan Fenton, Ron Askew)

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A man is seen behind the entrance door of the offices of the Financial Services Authority (FSA) in Canary Wharf, London, November 19, 2010.

LONDON | Fri Sep 28, 2012 12:08am EDT

LONDON (Reuters) - Britain's top financial watchdog, in a much-awaited reform of benchmark interest rates that have been plagued by scandal, outlined a 10-point plan to fix Libor but stopped short of scrapping the rates.

Martin Wheatley, head of the Financial Services Authority, acknowledged problems with London interbank offered rates, but said that Libor is so deeply entrenched in the financial system that it cannot be easily replaced. There are no better alternatives now, and any transition to a new benchmark would be difficult, he said.

"The system is broken and needs a complete overhaul," Wheatley said in a speech made available in advance.

Longer term, it makes sense for market participants to examine whether there are other possible benchmark rates, Wheatley said.

The plan marks regulators' first effort to fix the tarnished benchmark, but rulemakers have to thread the needle carefully.

On the one hand, they must restore confidence in the financial system, but on the other hand, they cannot take steps that are too radical without creating big trouble with existing transactions that use the benchmark.

More than $300 trillion of contracts and loans — from U.S. mortgages to Japanese interest-rate swaps - refer to Libor.

Dramatic changes to the rates would have resulted in a "huge amount of legacy contracts to resolve, introducing a lot of disputes," said Darrell Duffie, a derivatives expert and finance professor at Stanford University.

CHARGES OF MANIPULATION

Multiple banks have been accused of trying to manipulate Libor, a series of rates set daily in London. Barclays in June agreed to pay $453 million to U.S. and British authorities to settle allegations that it tried to move Libor to help its trading positions.

Wheatley's program for reform includes auditing banks that contribute data used to calculate the rates, to ensure they are not submitting false rates to benefit trading positions.

Libor, which is meant to reflect the rates at which banks borrow from one another, will be based on actual borrowing transactions, Wheatley said. Previously, banks could estimate where they think they would borrow, which left room for manipulation.

Transactions will be recorded with regular external audits of banks that participate. Bank employees making Libor submissions will have to be approved by the FSA. Wheatley is looking for authorization to criminally sanction those who attempt to manipulate the rate.

Reuters parent company Thomson Reuters collects information from banks, and uses it to calculate Libor rates for 10 currencies and 15 maturities according to specifications drawn up by the British Bankers Association.

SHRINKING THE NUMBER OF RATES

Rates that are infrequently referenced in trades, such as Australian and Canadian dollar rates, will be phased out, Wheatley said. Maturities that are infrequently used, such as four, five, seven, eight, 10 and 11 months, will also be ended.

The reductions will shrink the current number of Libor rates set daily to 20 from 150. Rates that are rarely traded are easier to manipulate.

More banks will be required to submit their borrowing rates, Wheatley said.

"Libor requires collective responsibility if it is to work effectively," Wheatley said.

As expected, the British Bankers' Association, which had overseen the rate, will be replaced with a new, as-yet unidentified oversight panel.

"The British Bankers' Association clearly failed to properly oversee the Libor setting process and should take no further role in the administration and governance of Libor," Wheatley said.

The BBA said it worked closely with Wheatley on his review and it has strongly stated the need for greater regulatory oversight of Libor and tougher sanctions against manipulation.

A major problem that remains is that in financial crises, such as the one in 2008, banks cease lending to one another, effectively causing the evaporation of data needed to calculate Libor.

"There isn't enough transaction data during a financial crisis," said Rosa Abrantes-Metz, principal at Global Economics Group and adjunct professor at New York University's Stern School of Business.

The reforms come amid more crackdowns on the banks that submitted rates used to calculate Libor. Royal Bank of Scotland is expected to be next to settle Libor charges, with other banks to follow.

Britain's government commissioned Wheatley to report on reforming Libor and is expected to back the findings in full. Legislative changes will be inserted into a financial services bill now being approved by parliament.

(Additional reporting by Rick Rothacker in Charlotte, North Carolina, and Carrick Mollenkamp and Jennifer Saba in New York; Writing by Dan Wilchins; Editing by Edmund Klamann)

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George Zimmerman appears for a bond hearing at the Seminole County Criminal Justice Center in Sanford, Florida, June 29, 2012.

MIAMI | Thu Aug 9, 2012 5:14pm EDT

MIAMI (Reuters) - Lawyers for a Florida man charged in the shooting of black teenager Trayvon Martin said on Thursday they will seek a hearing under a controversial self-defense law that could result in the dismissal of criminal charges against him.

George Zimmerman's lawyers said they saw "clear support for a strong claim of self-defense" after prosecutors released much of their evidence in the case.

Zimmerman, 28, has pleaded not guilty to second-degree murder in the February 26 shooting death of Martin in the central Florida of Sanford. He claims he shot the unarmed 17-year-old in self defense while acting as a neighborhood watch volunteer.

Florida's "Stand Your Ground" law allows people to use deadly force when they fear great bodily harm or death. Supporters of the law, which was enacted in 2005, argue it is intended to serve as a deterrent to violent crime, but critics charge it encourages vigilante justice.

In a hearing under "Stand Your Ground," a judge, not a jury, determines whether evidence meets criteria laid out in the law, said David Weinstein, a former Florida state and federal prosecutor now in private practice in Miami.

If the judge rules in Zimmerman's favor, he would be granted immunity from prosecution in Martin's death.

"If Zimmerman wins the hearing, it's case over," said Weinstein.

On the other hand, if the case goes forward to a full-blown trial, the hearing would offer the prosecution a good look at the defense strategy, he added.

"This is your shot. You lay it all out," said Weinstein.

Lawyers for Zimmerman said it would take several months to prepare for the hearing, which they expect to focus on whether Zimmerman "reasonably believed that his use of his weapon was necessary to prevent bodily harm to himself."

CONFRONTATION IN STREET

Zimmerman shot and killed Martin during a confrontation in a gated community. Martin was walking back from a store when Zimmerman called a 911 dispatcher and said the teen looked suspicious.

Zimmerman said he shot Martin after Martin attacked him and repeatedly slammed his head to the ground. Citing the self-defense law, police initially declined to arrest Zimmerman for several weeks after the shooting.

Minutes before he was killed, Martin spoke with a girlfriend on his cellphone. That conversation may prove to be crucial testimony in the hearing, said Charles Rose, a professor at the Stetson University College of Law.

"The hearing may very well rotate around what Trayvon Martin did or did not say while he was on the phone right before the altercation," said Rose.

Ben Crump, a lawyer for Martin's family, said he expects the case will eventually go to trial.

"A grown man cannot profile and pursue an unarmed child, shoot him in the heart and then claim 'Stand Your Ground,'" he said in statement. "We believe that the killer's motion will be denied."

On Thursday, prosecutors released new evidence in the case, including Zimmerman's college records. But they later recalled some of the documents after realizing they included an indistinct photo of Martin's dead body, which is protected under Florida's privacy laws.

Zimmerman is free on a $1 million bond and living in an undisclosed safe house near Sanford.

(Additional reporting by Barbara Liston in Orlando and David Adams in Miami; Editing by Doina Chiacu and Philip Barbara)

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A trader works at the Knight Capital kiosk on the floor of the New York Stock Exchange August 1, 2012.

NEW YORK | Thu Aug 2, 2012 11:12am EDT

NEW YORK (Reuters) - Knight Capital Group Inc is being forced to raise money after an erroneous trading position wiped out $440 million of its capital, the firm said on Thursday, causing its shares to shed half of their value.

Problems at Knight, one of the largest firms that buys and sells stocks to provide liquidity to the markets, emerged at the beginning of trading on Wednesday.

"The company is actively pursuing its strategic and financing alternatives to strengthen its capital base," Knight said in a statement. Its shares were down 49.7 percent at $3.49 in morning trading after hitting an all-time low of $3.15.

Knight has already approached JPMorgan Chase & Co for financing, according to a report on Fox Business Network. But it was unclear if that financing would be granted. A spokesman for JPMorgan declined to comment.

Wednesday's technology breakdown roiled the prices of some 140 stocks listed on the New York Stock Exchange, undermining fragile investor confidence in the stability of U.S. stock markets.

Speaking on Bloomberg Television, Knight Capital Chief Executive Officer Tom Joyce said the firm had "excess capital right now." On Tuesday night, it had put in new software that had a bug, he said.

The firm said it was in compliance with capital requirements and that it had traded out of the entire position.

"This issue was related to Knight's installation of trading software and resulted in Knight sending numerous erroneous orders in NYSE-listed securities into the market," Knight said. "This software has been removed from the company's systems."

The trading glitches are the latest in a series of market snafus that have eroded retail investors' confidence.

Others include the botched Facebook Inc initial public offering, the 2010 "flash crash" in which nearly $1 trillion in market value disappeared in minutes, and the failed public offering of BATS Global Markets, a rival to the NYSE and the Nasdaq.

Specialists in securities industry operations issues said the wave of recent problems pointed to an unsettling reliance on automated trading facilities that is robbing investors of confidence in the markets.

"We're losing the human control in our business," said Joe Anastasio, a founding partner of financial services consulting firm Capco who specializes in stock trading issues. "We've been so focused on automated throughput of orders and high-volume execution with no human intervention that we have lost the human logic factor when things go wrong."

One of the problems, he said, is that millions of orders stack up overnight for automatic execution at the opening of trading, with a single error potentially creating a deluge of bad trades.

Knight said its principal broker-dealer subsidiaries were fully compliant with their net capital requirements despite the pretax loss of about $440 million that has "severely impacted" the parent company's capital base.

The U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority are looking into Knight's trading error, according to William Brodsky, CEO of top U.S. options market CBOE Holdings Inc.

"It's obvious that it appears that there was a technology glitch in the trading algorithm," Brodsky told analysts on Thursday. "All markets have rules to address these types of situations."

On July 18, Knight reported second-quarter earnings of $3.3 million, down 81 percent from a year earlier after recording a $35.4 million pretax trading loss from the Facebook initial public offering. The company has not yet filed its second-quarter report with regulators.

Knight's average daily U.S. equities market-making volume has fallen from a year ago as trading volumes have declined across the stock market. Daily market-making volume was $19.5 billion in June, a 12 percent decline from a year earlier.

More than 83 million shares of Knight stock have changed hands on Thursday, making it the most actively traded issue on U.S. exchanges.

(Additional reporting by Jed Horowitz, Sam Forgione, John McCrank, Ann Saphir and David Henry; Editing by James Dalgleish and Lisa Von Ahn)

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