Ashton B. Carter, a theoretical physicist and former deputy defense secretary, is President Obama's likely choice to be the next defense secretary.
For months, we've been tracking the probability of each party controlling the Senate after the 2014 elections. Here's how the chances have changed over time.
Nov 3 Democrats' chance Republicans' chance
What are the odds of "overtime" — that Senate control hinges on a December runoff in Louisiana? Or that the elections leave Republicans in control of 54 seats or more? In addition to which party controls the Senate, here are some other interesting outcomes worth following.
With the state-by-state probabilities in hand, our machine randomly simulates all 36 Senate elections. Give it a try below. The spinners are calibrated to the current probabilities we've calculated for each state. We let the states move together to some extent, but you'll no doubt occasionally see some surprising results — over 20 percent of the time, at least one of the races we call "likely" will be won by the opposite party.
We run the above simulation 250,000 times and tally the results. (Don't worry, we don't do it by hand.) The table below shows the outcomes of those simulations. By counting up the simulations that resulted in a Republican majority, we can estimate the probability that they will win a majority in the Senate. Likewise for the Democrats.
Below, a compilation of the latest shifts in Senate race ratings — both in our model and in others.
Based on incumbent winning percentages in previous Senate elections, we'd expect about three incumbents to lose their seats this year – these are the five most likely to fail to be re-elected.
We let you explore the effect of different assumptions and submit a new forecast every day. Create and share your own forecast.
It would be the Wall Street equivalent of a parole violation: Just two years after avoiding prosecution for a variety of crimes, some of the world's biggest banks are suspected of having broken their promises to behave.
A mixture of new issues and lingering problems could violate earlier settlements that imposed new practices and fines on the banks but stopped short of criminal charges, according to lawyers briefed on the cases. Prosecutors are exploring whether to strengthen the earlier deals, the lawyers said, or scrap them altogether and force the banks to plead guilty to a crime.
That effort, unfolding separately from a number of well-known investigations into Wall Street, has ensnared several giant banks and consulting firms that until now were thought to be in the clear.
Prosecutors in Washington and Manhattan have reopened an investigation into Standard Chartered, the big British bank that reached a settlement in 2012 over accusations that it transferred billions of dollars for Iran and other nations blacklisted by the United States, according to the lawyers briefed on the cases. The prosecutors are questioning whether Standard Chartered, which has a large operation in New York, failed to disclose the extent of its wrongdoing to the government, imperiling the bank's earlier settlement.
New York State's banking regulator is also taking a fresh look at old cases, reopening a 2013 settlement with the Bank of Tokyo-Mitsubishi UFJ over accusations that the bank's New York branch did business with Iran, according to the lawyers who were not authorized to speak publicly.
The regulator, Benjamin M. Lawsky, the lawyers said, is negotiating a new settlement deal with the bank that, if it goes through, would involve a penalty larger than the $250 million it paid last year. Mr. Lawsky suspects that the bank initially played down the scope of its wrongdoing.
PricewaterhouseCoopers, the influential consulting firm that advised the Japanese bank on that case, is also under investigation, according to the lawyers briefed on the matter. The Manhattan district attorney's office is examining whether the firm watered down a report about the bank's dealings with Iran before it was sent to government investigators.
Those developments, not previously reported, are part of a broader revisiting of settlements with some of the world's biggest banks, an effort that has focused on foreign banks but could eventually spread to American institutions.
As reported earlier by The New York Times, prosecutors are also threatening to tear up deals with banks like Barclays and UBS that were accused of manipulating interest rates, pointing to evidence that the same banks also manipulated foreign currencies, a violation of the interest rate settlements. The prosecutors and banks have agreed to extend probationary periods that would have otherwise expired this year.
The reopening of these cases represents a shift for the government, the first acknowledgment that prosecutors are coming to terms with the limitations of how they punish bank misdeeds. Typically, when banks have repeatedly run afoul of the law, they have returned to business as usual with little or no additional penalty — a stark contrast to how prosecutors mete out justice for the average criminal.
When punishing banks, prosecutors have favored so-called deferred-prosecution agreements, which suspend charges in exchange for the bank's paying a fine and promising to behave. Several giant banks have reached multiple deferred or nonprosecution agreements in a short span, fueling concerns that the deals amount to little more than a slap on the wrist and enable a pattern of Wall Street recidivism.
Even now that prosecutors are examining repeat offenses on Wall Street, they are likely to seek punishments more symbolic than sweeping. Top executives are not expected to land in prison, nor are any problem banks in jeopardy of shutting down.
Still, fearing a certain fallout from the new round of scrutiny, banks have bolstered their legal teams. Standard Chartered, for instance, has retained one of the most lauded litigators in the country, Theodore V. Wells Jr., to work on the reopened sanctions case, according to the lawyers briefed on the matter.
The decision to revisit the cases also draws attention to consulting firms that helped shape the original settlements. When determining the extent of wrongdoing at a bank, the government often relies on assessments from consultants that are handpicked and paid by the same bank.
The Bank of Tokyo-Mitsubishi case demonstrated the potential pitfalls of that approach. When Mr. Lawsky made his initial $250 million settlement with the bank last year, the punishment was based partly on an outside consultant's estimate of the illegal dealings. But the New York State regulator has since uncovered emails indicating that the consultant, PricewaterhouseCoopers, watered down the report under pressure from the bank, according to regulatory records.
In August, Mr. Lawsky imposed a $25 million penalty on PricewaterhouseCoopers, which said at the time that the report was "detailed" and "disclosed the relevant facts."
After that settlement, people briefed on the matter said, prosecutors at the Manhattan district attorney's office opened an investigation into the work that PricewaterhouseCoopers did for the Japanese bank, a previously unreported development. Already, the prosecutors have requested the consulting firm's records in the case.
The investigations, the people said, also unearthed emails showing that PricewaterhouseCoopers changed the report not only at the suggestion of the bank, but also at the behest of lawyers working on the bank's behalf. Like many banks caught in the government's cross hairs, the Bank of Tokyo-Mitsubishi turned to Sullivan & Cromwell, an elite law firm as woven into the fabric of Wall Street as the banks it represents. Sullivan & Cromwell also represented Standard Chartered in the bank's 2012 settlement with the Justice Department in Washington and the district attorney's office in Manhattan.
More recently, the government has grown skeptical of the argument that some banks are simply too big to charge, an argument that Sullivan & Cromwell often employs for its clients. That argument was tested in a recent case against BNP Paribas, the giant French bank accused of processing billions of dollars for Sudan and Iran.
At a meeting in Washington this year, a lawyer from Sullivan & Cromwell cautioned prosecutors about the potential fallout from BNP pleading guilty to a crime, according to people briefed on the meeting. To illustrate the concern, the lawyer presented prosecutors with a fake newspaper article reporting that a huge bank had pleaded guilty for the first time in decades. The hypothetical report detailed what regulatory problems could befall the bank if prosecutors did not lower their demands for a fine and take precautions when extracting a plea.
Weeks later, after lowering the fine to $8.9 billion, the prosecutors forced the bank to plead guilty. Far from reporting a crisis, BNP's chief executive that day noted that the bank "will once again post solid results this quarter."
Not every bank will have to plead guilty in future cases. Prosecutors still see benefits from deferred-prosecution agreements, which can require banks to install independent monitors and more broadly overhaul their practices than in the event of a guilty plea.
Lawmakers and other critics, however, contend that the agreements can lack teeth, begetting a pattern of misbehavior.
Since 2001, at least eight big banks have committed further offenses after receiving an initial deferred-prosecution agreement, according to data assembled by Brandon L. Garrett, a University of Virginia law school professor and author of the book, "Too Big to Jail: How Prosecutors Compromise With Corporations."
UBS has reached three deferred or nonprosecution agreements since 2009. On Tuesday, the Swiss bank said it had reached an agreement with the Justice Department to extend by another year a two-year nonprosecution agreement that was scheduled to expire in December.
The cycle of misbehavior is difficult to break.
Regulators and prosecutors blame a culture that prioritizes profit over compliance. And as banks have grown larger, and more international, illegality can stop in one unit of a bank even as it flourishes in another.
Standard Chartered is at risk of becoming Exhibit A of corporate backsliding. The Justice Department's criminal division in Washington and the district attorney's office in Manhattan, which settled with Standard Chartered in 2012 over its business dealings with Iran, are exploring whether the bank repeatedly violated that deferred-prosecution agreement.
The bank, which declined to comment for this article, previously said it was "cooperating with all relevant ongoing reviews, requests for information and investigations."
The prosecutors, Leslie R. Caldwell in Washington and Cyrus R. Vance Jr. in Manhattan, have not decided whether to take additional action against the bank. But as an initial step, lawyers briefed on the matter said, they are expected to extend the length of the deferred-prosecution agreement, which would have otherwise expired in December. In an August regulatory filing, the bank acknowledged that the agreement "is likely to be extended."
The prosecutors are questioning whether the bank underestimated the amount of its improper dealings with Iran, according to the lawyers briefed on the matter. In the course of an investigation into another bank, the lawyers said, evidence emerged that Standard Chartered had processed other transactions that it did not relay to the government. And because the 2012 settlement agreement applied only to transactions that had "already been disclosed," the discovery of additional illegal transactions could scuttle the deal.
The prosecutors also took notice of Mr. Lawsky's recent decision to file his second case against Standard Chartered in two years, faulting the bank for breakdowns in a computer system that was supposed to catch suspicious transactions. In August, Mr. Lawsky fined the bank $300 million for the lingering compliance woes, a penalty that came in addition to the $340 million the bank paid Mr. Lawsky's agency in 2012.
It didn't take long for concerns to arise. Just weeks after the bank settled in late 2012, its chairman appeared to violate a provision of the deal that forbade Standard Chartered executives from issuing "any public statement contradicting the acceptance of responsibility."
In a conference call, the chairman referred to the illicit transactions as "clerical errors" — comments he later retracted.
FRANKFURT — The bulk of Europe's biggest banks would be able to survive a financial crisis or severe economic downturn, the European Central Bank said on Sunday, concluding a yearlong audit of eurozone lenders that is potentially a turning point for the region's battered economy.
The highly anticipated assessment of European banks was intended to remove a cloud of mistrust that has impeded lending in countries like Italy and Greece and has left the eurozone struggling to avoid lapsing back into recession for the third time since the global financial crisis began six years ago.
By exposing a relatively small number of sick banks — only 13 of the 130 big eurozone banks under review — the central bank could make it easier for healthier ones to raise money that they can lend to customers.
Analysts predicted that financial markets would react with relief on Monday to the news that there were no unpleasant revelations about Europe's biggest banks. But some wondered whether the relatively sanguine results meant that the health exam was not tough enough, despite the central bank's promises that the assessments would be rigorous.
The European Central Bank said that 13 banks in the eurozone — including four in Italy and two in Greece — showed shortfalls in their own money, or capital, after a review devised to uncover hidden problems and test their ability to withstand a sharp recession or other crisis. But no major European banks failed the central bank's test.
Contrary to some forecasts, the stress-test results were not likely to force any banks to close. Those deemed having too little capital to protect against risk have two weeks to file plans for raising more, and will then have up to an additional nine months to meet the minimum threshold.
"The massive nature of the exercise deserves to be acknowledged," Vítor Constâncio, the vice president of the E.C.B., said at a news conference Sunday. "The results are credible."
The 13 banks that failed the stress test were among 25 that the central bank found had capital shortfalls through the end of 2013, which was the period under review. The total shortfall for those 25 banks was 25 billion euros, or about $31 billion. But a dozen of those banks have since then already raised capital or made other moves to bolster themselves.
"Generally speaking, the absolute number that needs to be raised is not large," said Neil Williamson, co-head of credit research at Aberdeen Asset Management. "There are still plenty of question marks about some banks."
The €25 billion capital shortfall was on the lower end of analysts' estimates. However, the review also uncovered €136 billion in troubled loans that banks had not previously reported. Partly as a result, banks had overvalued their other holdings by €48 billion, the central bank said.
The review was intended to take the same sort of cold-eyed scrutiny to European banks that regulators in the United States gave to the books of American lenders several years ago in the wake of the financial crisis. Experts say that the American regulators, by forcing deficient banks to raise more money to buffer themselves against risk, helped the United States financial system and economy bounce back much faster than Europe's has been able to do.
The assessment also comes as the European Central Bank is about to assume much greater powers for overseeing the biggest banks in the eurozone – more similar to the authority the Federal Reserve wields in the United States. Before taking on that oversight, the European Central Bank was intent on knowing the health of the banks it will regulate.
The biggest effects of the review may be felt in week and months to come, as investors, customers and potential business partners pore over the enormous amount of data that the E.C.B. made available about individual banks. Weaker lenders are likely to face pressure to improve their performance or seek merger partners.
There was immediate speculation that the bank with the largest capital deficit, Monte dei Paschi di Siena of Italy – the world's oldest bank – would seek a buyer. The troubled bank, which has already received a government bailout and tapped investors several times for additional funds, was €2.1 billion short of the money it would need to survive a crisis, the E.C.B. said.
On Sunday, Monte dei Paschi di Siena said that its board of directors had hired UBS and Citigroup as financial advisers to help it define and implement a plan to raise capital and evaluate "all strategic alternatives."
Greece's banking system was also hit hard, with three banks found short of capital at the end of 2013. One, Piraeus Bank, has since raised enough capital to satisfy regulators. The other two are Eurobank, which must raise €1.76 billion, and National Bank of Greece, which must raise €930 million.
But the Greek central bank said on Sunday that because the European Central Bank review did not take into account various restructuring plans the banks have made since the end of 2013, Eurobank and National Bank of Greece were in better shape than those numbers would indicate.
Estimates of what the overall capital shortfall would be had varied widely, from tens of billions of euros to hundreds of billions. Many banks had already begun protectively shoring up their capital. Banks in the eurozone had increased their capital by about €200 billion since the summer of 2013, according to E.C.B. estimates.
Even banks that will not be required by the E.C.B. to raise capital may find themselves under market pressure to do so, especially those that the central bank found had been overly optimistic about the values of their holdings.
The fact that 25 banks had failed the initial test through the end of 2013 had been known since Friday, after a draft of the central bank's report began circulating. But the size of the shortfall and the scope of overvalued assets were not disclosed until Sunday. Nor was it known how many banks would still be considered deficient; Sunday's figure of 13 was higher than the 10 rumored last week.
Results of a parallel review by a second regulator, the European Banking Authority, which included 20 banks in Britain, Sweden and other European Union countries outside the 18-member euro currency bloc, were also announced on Sunday.
The findings were largely in line with the European Central Bank's review. None of the banks that the authority's stress tests found at risk were outside the eurozone. In Britain, the major banks all passed the stress test comfortably.
For the most part, Germany's banks fared well in both reviews, which is crucial because of the outsize role the German economy plays in the eurozone. Deutsche Bank, the country's largest lender, did not have any significant revaluation of its holdings.
HSH Nordbank, a lender in Hamburg, Germany, that many analysts had expected to fail because of its exposure to the depressed shipping industry, passed the stress tests. But the results appeared unlikely to put to rest doubts about the bank's ability to survive in the longer term.
"The situation we have of banks without sustainable long-term business models still exists," said Martin Hellmich, a professor at the Frankfurt School of Finance and Management. "There are still serious problems in the banking sector."
French lenders, whose balance sheets account for about 30 percent of eurozone banking assets — second only to Germany's — had an "excellent" showing, Christian Noyer, the governor of France's central bank, said at a news conference Sunday in Paris.
The European Central Bank audit, conducted by 6,000 civil servants and outside consultants, was also a test for the central bank and its ability to handle its new function as supreme bank supervisor for the eurozone.
Previous stress tests by different regulators, which examined fewer banks and relied heavily on information from the banks' national supervisors, were unconvincing because banks that had passed later ran into serious problems.
The audit was a prelude to the creation of a banking union overseen by the European Central Bank, a move that supersedes the Balkanized financial system that has prevailed since the euro currency went into use in 1999.
The central bank will formally become the eurozone's so-called single supervisor on Nov. 4.
Danièle Nouy, who will head the central bank's new regulatory arm, said in a statement that the findings of the review would "enable us to draw insights and conclusions for supervision going forward."
Some pickup in bank lending after the tests is almost inevitable. Bank executives complained that the burden of complying with European Central Bank demands during the review had drained resources and impeded their ability to make loans. Now that the exam is over, they should be able to get back to business.
But if investors and analysts decide that this new test was still too easy for banks to pass, it would be a setback for both the European Central Bank and the eurozone economy.
"On the whole it seems to me that the E.C.B. has passed its own stress test today, " Nicolas Véron, a senior fellow at Bruegel, a research organization in Brussels, said by email. "This exercise appears credible as of now."
"Of course, if new information emerges in the next few weeks that is inconsistent with today's disclosures," he added, "then the E.C.B. will have egg on its face."
Chad Bray contributed reporting from London, David Jolly from Paris and Niki Kitsantonis from Athens.
Q. Can I get Ebola from public transportation? As in, if a passenger coughed into their hand and then held onto the pole, and then another passenger held onto that pole and inadvertently wiped their eye?
A. Updated on Oct. 23. | My original answer was simply no. A more nuanced answer is that it is extremely unlikely to spread through public transit.
Many readers have argued that the original answer was inconsistent with some statements by the Centers for Disease Control and Prevention or the World Health Organization. In fact, some C.D.C. and W.H.O. statements are inconsistent with each other and shifting as more questions are raised. The W.H.O. on Monday issued a new Ebola situation assessment entitled "What We Know About Transmission of the Ebola Virus Among Humans."
Starting off my answer with a blanket "No" was wrong. But I would consider it irresponsible to have responded "Yes." Implying that Ebola is caught as easily as flu or colds would be untrue and inflammatory.
It is extremely unlikely for the Ebola virus to spread through public transit for several reasons.
Not all viruses build up to infectious doses in all bodily fluids. Usually, Ebola does not at first make victims cough or sneeze, although someone who also had the flu could, in theory, spray vomitus or blood. Once Ebola invades the lungs, the body will cough to clear them. But passengers that deathly ill are not likely to be on public transit.
According to the recent W.H.O. statement, high levels of Ebola virus in saliva are rare except in the sickest victims, and whole virus has never been found in sweat. The fluids known to build up high viral loads are blood, feces and vomit.
How much virus is needed to cause illness is not exactly known. Viruses differ that way. In any group that shares needles, hepatitis C will spread more readily than H.I.V. because smaller doses infect.
No one has tested Ebola transmission on subways. But no case of transmission to a human from a dry surface has ever been confirmed. The C.D.C. has said there is "no epidemiological evidence" for transmission from hospital surfaces, including bed rails and door knobs – which are as close as a hospital room gets to having a subway pole and a bus handle. A 2007 study cited by C.D.C. experts shows that swabs of 31 surfaces — including bed frames, a spit bowl and a used stethoscope — in a very dangerous environment, an active Ebola ward in Uganda — did not have virus in a single sample.
So how might Ebola be passed on a subway? If someone ejected bloody mucus or vomitus onto a subway pole, and the next passenger were to touch it while it was still wet and then, for some unimaginable reason, were to put those wet fingers into an eye or mouth instead of wiping them in disgust — then yes, it could happen. Similarly, if an extremely ill passenger with high viral saliva loads were to sneeze large, wet droplets directly into the mouth or eyes of another passenger, the infection might be passed. But the influenza route — sneeze to hand to pole to hand to eye — has never been known to happen and is considered extremely unlikely.
Africa is full of overcrowded public transport — buses, minivans and some trains. There are no known instances of transmission in those environments. On July 20, a dying Liberian-American flew to Nigeria and was vomiting on the plane. All 200 people aboard were monitored; none fell ill.
Dr. Craig Spencer, the patient with Ebola currently in isolation in Bellevue Hospital, did ride the subways since arriving in New York on Oct. 14. He rode the A, L and No. 1 trains, according to Dr. Mary Bassett, the New York City health commissioner. Dr. Bassett said Dr. Spencer had been taking his temperature twice a day since he left Guinea. Until Thursday morning, his temperature was normal and he was not experiencing any of the early symptoms of Ebola disease, such as nausea or diarrhea. Ebola experts say the disease cannot be transmitted before the appearance of symptoms.
Q. How long does the Ebola virus live on contaminated surfaces, such as bed sheets, door knobs, etc.?
A. It's different in every set of circumstances. The Ebola virus eventually dries out in the air and dies. It's not like anthrax, which forms a hard capsule around itself and can survive for months or a year. Ebola is a virus that is meant to live inside blood or fluid in your cells. It's not meant to live in the open air, so it dies. A sheet that has wet blood in it is more dangerous than one with dried blood, because by then it would have dried out. There's not one answer, but it is considered to be fairly safe after about 24 hours, certainly in environments that are cleaned regularly like hospitals.
Q. Can a blood test show if a person has the Ebola virus before they are symptomatic?
A. With blood tests that we have now, no. In fact, in order to be fairly certain, you have to have the first symptom, which is a fever, for about three days before there's enough virus coursing around in your blood for the blood test to be accurate.
Q. Many viruses (such as herpes) can be transmitted before a person shows symptoms. Why is that not the case for Ebola?
A. The basic answer is that all viruses are different. In the case of Ebola, you have to get a basic all-over body infection with infected blood and vomit coming out of you before you can pass the disease on to anybody else.
More Ebola Stories That May Interest You:
Can You Get Ebola From a Bowling Ball?
Understanding the Risks of Ebola, and What 'Direct Contact' Means
What Are the Chances Ebola Will Spread in the United States?
Ebola Patient's Journey Shows How Global Travel Spreads Disease
Use of Ebola Survivors' Blood as Possible Treatment Gains Support
The Secret Service on Wednesday evening apprehended a man who had jumped over the fence at the White House.
The man was subdued by Secret Service personnel, and a dog played a role in helping to stop him, Secret Service officials said.
The incident occurred just more than a month after a man jumped over the fence and ran through the front door of the White House, prompting an investigation of the Secret Service and the resignation of its director.
Update 9:26: The White House jumper made it onto the North Lawn, but was apprehended shortly after he got over the fence. Two dogs were involved. Both of them were injured and taken to a veterinarian. The man who jumped the fence was injured by the dogs, and he was taken to a hospital.
Second update 9:57: The man was identified as Dominic Adesanya, 23, of Bel Air, Md. He was unarmed at the time of his arrest and taken into custody. Charges are pending.
Fox News broadcast a video of a guard dog attacking the intruder, who responded with a series of punches.
Tom Steyer, the billionaire hedge fund founder who has pledged to spend $50 million of his own money to defeat Republican candidates in Senate and governor's races this campaign cycle, exceeded that mark in September.
Mr. Steyer's "super PAC," NextGen Climate Action Committee, reported on Monday night that it received $15 million from him last month, putting his total contributions to the committee since June 2013 at $55 million.
That makes Mr. Steyer the largest super PAC donor, putting him ahead of the casino magnate Sheldon G. Adelson, who gave $49.8 million to super PACs during the 2012 campaign. More than half of Mr. Steyer's donations to NextGen have come in the previous two months; he also gave $15 million in August.
NextGen has paid for millions in television advertisements and other campaign activities in Senate races, but also has become a donor to environmental organizations and to state committees: In September it sent $5 million to its Florida affiliate and $925,000 to the League of Conservation Voters Victory Fund.
How do you get people to vote early? If you're President Obama, you go home to cast your ballot on the day early voting begins.
Mr. Obama's decision to vote on Monday had been tightly held by White House officials. But he revealed it himself at an event on Sunday night for Gov. Pat Quinn of Illinois, a Democrat who is facing a tough challenge for re-election. Mr. Obama told a raucous crowd at Chicago State University that he would vote the next morning.
And it won't be a secret ballot, either. Mr. Obama pledged to vote for two longtime friends, Mr. Quinn and Senator Richard J. Durbin.
"The first I'm going to do tomorrow is cast my vote to re-elect Dick Durbin and give Pat Quinn four more years as governor," Mr. Obama declared.
No word yet on where he will cast his ballot.
FRANKFURT — The global market turmoil is a vivid reminder that the European crisis didn't go away — it has just been lying dormant.
One big reason is that authorities never dealt with the dysfunctional banking system. And investors are increasingly concerned that more problems might be lurking in the banks' books.
The European Central Bank is trying to restore confidence with a deep dive into the banks to determine which are in good shape, which need to shore up their finances and which should be shut down. But the results, which are set to be released next weekend, may further rattle the markets if banks unexpectedly have to write down bad loans and quickly raise capital.
Officials say that the short-term pain is necessary to put the European economy back on track. Regulators in the United States forced a similar catharsis on American banks in 2009, helping set the stage for the current recovery.
The fragmented eurozone took a more timid approach. A review in 2011, conducted by another regulator, gave passing grades to banks in Belgium and Portugal that later imploded, casting doubt on the stability of the entire European financial system.
Europe is paying the price. The uncertainty has made it difficult for banks to raise funds, creating a severe shortage of credit in some regions. Since businesses cannot obtain loans to invest in equipment or hire people, growth is at a standstill and unemployment remains high.
The best way to create confidence "is to recognize loans that are bad and write them off, " said William White, the former economic adviser to the Bank for International Settlements, the bank for central banks. The risk in not doing so, he said, is a cycle of stagnation like in Japan.
Doubts, too, persist about whether the European Central Bank president, Mario Draghi, will make the bold moves necessary to revive the moribund economy and combat the deflationary trend. While he has unveiled an aggressive plan to buy bonds and pump money into the economy, details have been limited. That vacuum has only fed market concerns about the weakness in the global economy.
"You could argue the falloff of the eurozone economy is at the epicenter of this," said James W. Paulsen, chief investment strategist at Wells Fargo Asset Management. With the current weakness, investors will now be paying close attention to the verdict of the bank review. "Three or four weeks ago, no one in the U.S. would have cared," he said.
Europe's new banking overseer, Danièle Nouy, has vowed that the E.C.B. bank tests will be tough.
The review is part of a broader effort to create a uniform system of regulation for Europe's biggest banks, replacing a country-by-country patchwork of supervision that the financial crisis exposed as woefully ineffective. The new pan-European regulator, the so-called Single Supervisory Mechanism that will officially take charge on Nov. 4, has the broad powers to curtail risky behavior and impose penalties.
The head of the group, Ms. Nouy, a lifelong civil servant steeped in esoteric banking rules, has been on a hiring spree, helping expand a small army of civil servants and outside consultants to scrutinize banks' books. An estimated 6,000 people are involved in the review.
Compared with previous efforts, the E.C.B is taking a more comprehensive look, sifting through about 135,000 loan files at 130 of the largest banks in the eurozone as well as Lithuania, which will become the 19th country in the currency union next year. That amounts to 85 percent of banks' outstanding loans and other assets, according to the E.C.B.
The banks will also undergo a so-called stress test to see if they could withstand a major recession, bond market panic or other adverse situation. The E.C.B. has deliberately kept some of the methodology secret, to prevent banks from trying to manipulate the results.
Investors "will know what is in the balance sheet of European banks," Ms. Nouy said in an interview. "I am totally confident about that."
The main goal is to expose so-called zombie banks, lenders that have covered up deep problems by issuing new credit to troubled borrowers rather than allowing them to default. Lenders in Italy, Greece and Portugal are under scrutiny, given the weakness in those countries. Banks with a heavy concentration in certain industries, like commercial real estate, also face pressure.
For example, HSH Nordbank, a lender in Hamburg, has been hit hard by huge loans it made to the depressed shipping industry. The bank's position is considered particularly perilous because its options are limited if the E.C.B. finds a capital shortfall. HSH does not have a stock market listing, so it cannot sell additional shares, a standard way to raise more money.
HSH Nordbank declined to comment. But a person with knowledge of the E.C.B. examination said the bank had enough capital to pass the asset quality review.
Pressure from E.C.B. auditors has already helped uncover grave problems at one bank, Banco Espírito Santo in Portugal, which collapsed in August in the face of fraud accusations. The specter of E.C.B. scrutiny has also prompted a scramble for new capital to provide bigger cushions against potential shocks. Banks including Deutsche Bank of Germany and Monte dei Paschi di Siena of Italy have raised 200 billion euros, or $256 billion, since last summer, according to an E.C.B. estimate.
To truly clean up the system, Ms. Nouy and the rest of the E.C.B. have to be willing to force some harsh medicine on the banks — and come to a consensus on those decisions. That hasn't always been easy, at least based on Cyprus's experience.
By 2013, the E.C.B. had approved more than €9 billion in loans made by the country's central bank to its second-largest financial institution, Cyprus Popular Bank. The money flowed to the institution, which later changed its name to Laiki Bank, despite objections by one top official who said it was insolvent, according to previously undisclosed minutes of meetings held by the E.C.B.'s decision-making arm.
The minutes, which cover E.C.B. governing council meetings from May 2012 to January 2013 and were reviewed by The New York Times, highlight stark divisions between Germany, an economic powerhouse, and other countries. The head of the Cyprus central bank at the time, Panicos Demetriades, said that letting Laiki fail risked a larger market panic. His colleagues — save for Jens Weidmann, the hawkish head of Germany's Bundesbank — agreed.
Mr. Weidmann said that the value of Laiki's collateral had been inflated and exposure should be reduced, according to the minutes. Providing money to Laiki, he said, would violate a core tenet of the E.C.B.
"It was not the governing council's job to keep afloat banks that were awaiting recapitalization and were not currently solvent," Mr. Weidmann said at a meeting in December 2012.
Two months later, Laiki folded.
In a statement, the E.C.B. noted that such aid was the responsibility of national central banks, although the central bank's governing council retains veto power. The E.C.B. said it was not acting as bank supervisor and "fully relied on the assessment of the Central Bank of Cyprus."
"To draw conclusions about the E.C.B.'s future banking supervision role" based on the Cyprus aid "is tendentious," the central bank said in a statement.
Ms. Nouy, who began work at the E.C.B. on Jan. 2, after the Cyprus episode, said the central bank was now better equipped to deal with troubled banks.
The E.C.B.'s new powers will allow it to intervene in bank management in ways it could not during the Cyprus crisis. The E.C.B. would be able to block a bank from paying dividends to shareholders and use the money to build up capital. A new central authority, which will start taking effect next year, will also provide a less disruptive process for winding down banks and selling off assets.
"What is different this time is that we are much better equipped," Ms. Nouy said. "When there are crises, we will be able to organize the closure of a bank in an orderly fashion without creating domino effects."
"I'm sure that all those measures are making the financial sector safer," Ms. Nouy said. "But," she added, "I am not promising that there will not be banking crises anymore."
Jack Ewing reported from Frankfurt and Landon Thomas Jr. from New York.
Wall Street's big year of deal-making may have ended early — after peaking on the morning of Sept. 19.
It was then that the Chinese e-commerce giant Alibaba went public with a valuation of more than $168 billion. Eight minutes later, the Standard & Poor's 500-stock index hit an all-time high. Earlier that week, several big acquisitions were announced.
Now, less than a month later, September's exuberance feels like a distant memory.
The S.&P. 500 has fallen more than 7 percent. Alibaba still trades above its offer price, but other initial public offerings have been shelved for now. Merger and acquisition announcements have slowed.
"If we get a lot more volatility and there's a significant correction, there's a real risk that deals could get pulled," said Mark G. Shafir, co-head of global mergers and acquisitions at Citigroup.
All year, the stock markets have advanced, initial public offerings have boomed, and mergers and acquisitions have roared back to their highest levels since the financial crisis.
The more than $1.3 trillion in announced mergers and acquisitions so far this year in the United States is the highest amount on record, according to Dealogic, fueled by megadeals like Comcast's $45 billion purchase of Time Warner Cable and Medtronic's $43 billion deal for Covidien. The more than $81 billion in I.P.O.s is the most since 2000, the height of the dot-com boom, led by the Alibaba offering.
In a few short days, however, much of that optimism has evaporated. Bankers across Wall Street say that deals on the verge of being announced are suddenly delayed. I.P.O.s set for this week and next are postponed indefinitely. And the confidence that had fueled record levels of deal-making is nowhere to be found.
"When you're buying and selling companies, you need stability in the markets," said Michael Carr, head of Americas M.&A. for Goldman Sachs. "It doesn't take much for stocks to get out of alignment, and that's what is going on right now."
The sustained run of mergers and acquisitions is particularly vulnerable to suddenly volatile markets, several senior investment bankers said. A majority of the deals announced this year have involved at least partial payment in stock.
"Unlike on the trading side of the business, volatility is not our friend in M.&A.," Mr. Shafir noted.
When the acquirer's stock suddenly loses value, what was once an economical deal can suddenly seem unaffordable. Similarly, when a company that was poised to sell sees its stock fall, executives often want to wait for the stock price to recover before selling to get the best possible price.
"A good M.&A. market happens when both parties are comfortable with the relative relationships between their two stocks," Mr. Carr said. "That relationship is a really narrow and sensitive band."
But with companies' valuations jumping around, many deals are expected to be delayed until the markets stabilize.
For companies seeking to go public, the roller coaster markets are similarly disruptive.
"The market is taking a breath, and therefore the I.P.O. market will also take a breath," said David Hermer, global head of equity capital markets at Credit Suisse. "Issuers are standing on the sideline for the moment."
In Europe, a handful of planned I.P.O.s were withdrawn in the last two weeks, including those of the British bank Aldermore, the Italian cosmetics company Intercos, the French energy services company Spie, and the Italian technology company Italiaonline.
With renewed fears of an economic slowdown in Europe, sustained unrest in the Middle East and Ukraine, and swelling fears of Ebola around the globe, the markets may not stage a strong recovery anytime soon.
"There's a lot of stuff going on the world right now," said Neil Dhar, United States capital markets leader at PricewaterhouseCoopers. "Volatility is not the friend of an I.P.O. It creates a lot of angst in the marketplace."
And still, many deal makers said they believed that the underlying conditions for mergers, acquisitions and I.P.O.s remained healthy. Investors are looking for growth, which leads to deals and new public offerings. And companies have lots of cash to spend.
"A one or two week up-and-down in the marketplace isn't going to change global M.&A. activity overnight," Mr. Dhar said. "It's not the sign of a death knell for new issuance through the end of the year."
And there are some bright spots.
Several big breakups and spinoffs, including those of Hewlett-Packard, eBay and Symantec, could lead to activity in the months ahead. Big industrial groups like DuPont and Dow are also expected to sell off business units.
"In the pipeline there are a huge amount of spinoffs," said Sriram Prakash, global head of M.&A. insight at Deloitte. "Those are likely to keep the M.&A. markets busy."
What is more, if stock prices fall precipitously and remain low, some companies may go after targets that suddenly seem affordable.
"Some opportunistic corporate players who have cash and a strong balance sheet may take the opportunity to act in a market when values are down," Mr. Carr said.
Private equity firms, which have largely held back from buying companies this year, might also be emboldened by a sustained dip in corporate valuations.
Noting the $18 billion war chest in its possession, the private equity giant Blackstone Group said it would look for opportunities in the market turmoil.
"We are uniquely positioned to take advantage of market volatility across all of our businesses," Stephen A. Schwarzman, Blackstone's chairman and chief executive, told analysts on Thursday. "With one of the largest pools of dry powder capital, we can and will move quickly to respond to market dislocations. These types of investment environments end up becoming some of our best vintages."
By MICHAEL J. DE LA MERCED
The Chinese Internet giant, which raised $21.8 billion in its stock sale, instantly became one of the biggest publicly traded technology companies in the world.
Updated, 8:10 p.m. |
For a day at least, Wall Street was able to work through its worries about the world economy.
After Wednesday's mayhem, stock markets around the world mostly stabilized on Thursday. The Standard & Poor's 500 benchmark of American stocks recovered from an early slump to close ever so slightly higher, at 1,862.76.
The Nasdaq composite index rose 2.97 points, or 0.05 percent, to 4,217.39, while the Dow Jones industrial average fell 24.50 points, or 0.15 percent, to 15,117.24.
Most European markets, which were hit particularly hard on Wednesday, fell again, but ended up off their lows.
The yield on the 10-year Treasury climbed after dipping below the psychologically important 2 percent mark for the second consecutive day.
In recent years, investors have piled into Treasuries during times of stress, so the small increase in the yield, to 2.15 percent, from 2.13 percent late Wednesday, was a sign that investors had shed some of their nerves. The price on the 10-year Treasury note fell 7/32, to 101 31/32.
As some calm settled on Wall Street, some executives wondered whether fears about the global economy — which prompted some of the frantic selling in recent days — might be overdone.
"In speaking with our economists only yesterday," Harvey M. Schwartz, chief financial officer of Goldman Sachs, said on a conference call on Thursday, "they would argue that nothing has fundamentally changed in the past two weeks, or certainly the last 24 hours, regarding the long-term outlook for the global economy."
But it is not clear that the world's biggest economies have enough momentum to please markets.
The exception might be the United States economy. After a handful of uninspiring economic releases on Wednesday, two strong ones came out on Thursday, including a low number for people claiming unemployment benefits. In addition, James Bullard, the president of the Federal Reserve Bank of St. Louis, suggested that the Federal Reserve could consider delaying the end of its bond-buying stimulus program.
Average for some Federal Home Loan Mortgage Corp. securities.
But investors' fears focus on Europe, where it is not clear that policy makers will reinvigorate the region's wheezing economy.
On Thursday, the European Union said that inflation in the 18 countries using the euro had fallen to 0.3 percent in September, its lowest level in five years. Spain, Italy and Greece actually had deflation.
Falling prices are considered troubling because they can feed on themselves and deepen an economic malaise.
"Europe faces the risk of a prolonged period of substantially below-target inflation or outright deflation," the United States Treasury Department warned on Thursday in a semiannual report to Congress.
Many economists believe an emphatic response is necessary to reverse deflation. The European Central Bank has two substantial stimulus programs in place to induce bank lending. But some economists want the central bank to go one big step further and print money to buy large amounts of government bonds, a policy that the Federal Reserve pursued in earnest in the United States.
While such stimulus has left trillions of dollars idling in American banks, it nevertheless seems to have the effect of sending a clear signal that the government is determined to bolster the economy, which can then persuade businesses and consumers to spend.
Even so, resistance in Germany to government bond buying is strong. That may delay the European Central Bank from doing it — or prevent it altogether. The German skeptics say that aggressive monetary policies like bond buying simply cannot solve the impediments to growth that they perceive to exist in countries like Spain and Italy.
Hans-Werner Sinn, president of the Ifo Institute for Economic Research in Germany, contends that wages in the peripheral European countries rose to unsustainably high levels in the years before the sovereign debt crisis and that while they have fallen, they still need to fall further. He noted that Spanish manufacturing wage costs are about 23 euros per hour, versus seven euros for Poland.
"They are more than three times as expensive," Mr. Sinn said.
The Germans have taken to the courts to stop the European Central Bank from carrying out government bond buying, asserting that it would fall afoul of a European Union treaty.
Some economists still believe that Europe can make it out of its difficult patch without government bond buying. They, for instance, expect a boost from the regulatory tests at European banks to determine whether they have sufficient capital.
The so-called stress tests, whose results are scheduled to come out later this month may have temporarily distracted and deterred European bankers from stepping up their lending. And if the tests are seen to be credible, they could bolster confidence in the region as a whole.
"The stress tests are a tool that worked in U.S. and they will work in Europe," said Markus Schomer, chief economist at PineBridge Investments.
But to others, Europe is not strong enough to wait to see if things like stress tests and efforts to bolster economic competitiveness can revive the region. At the very least, according to this view, government bond buying could significantly guard against the risk of deflationary slump.
"Yes, there is a belief that the E.C.B. will act if necessary, but the question is how bad things have to get before it does so," said Mark H. Haefele, global chief investment officer at UBS's wealth management unit.
Updated, 9:10 p.m. | The party is over.
Waves of nervous selling buffeted the stock market in the United States on Wednesday, after a steep sell-off in Europe. At one point, the Dow Jones industrial average had plunged 460 points, or 2.8 percent, though it later swung higher to close down 1.1 percent, or 173.45 points. The Standard & Poor's 500-stock index fell 0.8 percent, or 15.21 points. Since their peak a month ago, American stocks have lost over $2 trillion in value, losses that may ripple through the wider economy.
"It was a roller coaster, and I think you will have these wild price movements for a few more weeks," said Peter P. Costa, a top executive at Empire Executions, a trading firm on the floor of the New York Stock Exchange.
Dizzied by the turmoil, Wall Street experts agreed on one thing: The jarring day showed that fear had finally returned to markets that had become disconcertingly complacent.
"I think what is good is that it finally felt scary today," said James W. Paulsen, chief investment strategist at Wells Capital Management. "Prior to today, all the commentary was that this was a refreshing pause, but that's not what you are going to read tomorrow."
The steep plunges on Wednesday also signaled something more serious to other analysts and investors. They fear that governments and central banks have failed to anticipate a recent weakening in the global economy — and that policy makers may now struggle to prevent their economies from stalling. As a result, the faltering global recovery after the 2008 financial crisis may now be in jeopardy, particularly in Europe.
Speaking to investors on Wednesday, Laurence D. Fink, the chief executive of BlackRock, the $4.5 trillion asset management company, underscored the concerns that Europe could sink into recession and the European Central Bank might have limited ability to do anything about it. "Investors are questioning the E.C.B.'s efforts to stabilize the European economy," Mr. Fink said.
"We need a more expansionary fiscal policy from Germany," he added in an interview, expressing a widespread worry that Europe's economic powerhouse was not doing enough to stimulate growth by increasing government spending.
European stocks were particularly hard hit on Wednesday, with Italian shares diving more than 4 percent. The German and French stock markets both fell by nearly 3 percent.
As is often the case in times of stress, investors sought relative safety in government bonds, pushing their yields — which move in the opposite direction from their prices — sharply lower. The drop in the yield on the 10-year Treasury note, a benchmark for many interest rates, was particularly stunning in its size and speed on Wednesday morning. Its yield fell the most since March 2009, tumbling below 2 percent, before rising later in the day to 2.13 percent, from 2.20 percent late on Tuesday.
In other markets on Wednesday, the dollar was weaker against most major currencies, while crude oil regained some ground after a slide had the price flirting with $80 a barrel.
The Chicago Board Options Exchange's index of volatility, known as the Vix and sometimes referred to as "the fear index" of the stock market, surged on Wednesday to its highest level since 2011.
Much of the selling in United States stocks, traders said on Wednesday, was driven by hedge funds unloading big holdings in benchmark stocks that for most of the year have had strong returns. With the end of the year approaching and markets falling rapidly, these momentum investors turned tail.
What caused the sudden rally in the stock market just before 1:30 p.m. is not clear. But it may have been fueled in part by a report from Bloomberg News saying that Janet L. Yellen, the chairwoman of the Federal Reserve, had expressed confidence about the United States economy at a closed meeting in Washington last weekend. The Fed is winding down its monetary stimulus program.
Adding to the nervousness, Walmart Stores, often a barometer for the American economy, on Wednesday lowered its sales forecast for its current fiscal year. An announcement of a third case of Ebola in Dallas injected its own sinister chill and put downward pressure on airline stocks. And the early sell-off in the market came after unexpectedly anemic economic releases in the United States.
Still, a good share of the worries were focused on Europe. The growing worry is that the European Central Bank and governments in the region may have been badly caught out by recent signs of a slowdown there.
On Wednesday, for the first time in months, there was a sell-off in eurozone government bonds, led by Greece but including Italy and Portugal as well.
This has led to calls for the European Central Bank to do more. In particular, some analysts want the central bank to buy large amounts of government bonds, a stimulus measure that the Federal Reserve employed.
But in Germany, Europe's largest economy, there is considerable resistance to that idea. The opposition is often rooted in the belief that southern European nations have not yet made their economies sufficiently competitive. As a result, according to this view, bond buying would do little to help some of the struggling European countries.
"You cannot solve this problem with monetary or fiscal policy measures," Hans-Werner Sinn, president of the Ifo Institute for Economic Research in Germany, said in an interview. "It is a different disease, so we need a different medicine."
Despite the red on trading screens, some stock market experts saw reasons to be hopeful.
The jitters, for instance, have come just as companies in the United States are reporting their third-quarter earnings. If they report surprisingly strong profits, investors might be tempted to pile back into the market.
"Everyone is hoping for the white knight to come, which is earnings," said Howard Silverblatt, senior index analyst with Standard & Poor's. Over 130 large companies report earnings next week, he noted.
The S.&P. 500-stock index is now down 7.4 percent from its peak in September, leaving it up 0.76 percent this year. The last time United States stocks declined 10 percent or more from their previous peak — called a correction in Wall Street parlance — was in 2011, when Europe's economic and financial woes loomed large.
Some stock market experts thought Wednesday's action might at least be the start of a cathartic selling splurge that often marks a bottom for the market.
"Before, people were willing to weather the downside, particularly when there was a buy-on-the dip mentality," Dan Suzuki, an equity strategist at Bank of America Merrill Lynch, said. "But now that we're seeing close to a 10 percent sell-off, they might be saying, 'I am not willing to stick around.' "
Certain traders said they made money from Wednesday's swings. Manoj Narang, the chief executive of Tradeworx, a high-frequency trading firm, said his company had benefited from the volatility in the market. "It was one of our better days," he said.
Even with the late recovery, some investors took little solace.
"I'm like, really? It came all the way back? That's stupid," said Tom Shafer, a former specialist at the New York Stock Exchange, who now runs a timber company in Maine. "I'm always a half-empty guy. I've been waiting for two years for the sell-off."
William Alden contributed reporting.
The JPMorgan Chase Corporate Challenge, a series of charitable races held each year in big cities across the world, is one of those feel-good events that bring together professionals from scores of big companies.
It was also a target for the same cyberthieves who successfully breached the bank's digital perimeters, compromising the accounts of 76 million households and seven million small businesses, according to people with knowledge of the matter.
The JPMorgan Chase Corporate Challenge website, which is managed by an outside vendor, has been conspicuously inaccessible since early August, with visitors to the site seeing only a lonely list of coming races. The link between the breach on that website and the broader attack, which the bank said did not compromise any financial information, has not been previously reported.
The bank said it discovered the breach in the Corporate Challenge website on Aug. 7, about a week after it learned of the broader intrusion into its computer network. By infiltrating the race website, hackers were able to gain access to passwords and contact information for participants, the bank informed them.
The website — maintained and run by an outside firm and hosted on a server system owned by a small company in Ann Arbor, Mich. — was one of several gateways that hackers tested to delve deeply into JPMorgan's internal systems. Ultimately, the hackers found multiple entry points, the people said, but the race website was not among them. One route that proved somewhat successful was through an older human resources system at the bank.
Patricia Wexler, a JPMorgan spokeswoman, emphasized that the race website was "unconnected to our systems and contained no information about our network."
The attackers' persistence in scanning every JPMorgan system and vendor for possible weaknesses exposes a stark new reality for American corporations. They are under almost constant siege by online criminals, and their computer networks, security analysts worry, have become "too big to secure." Every single system and every single vendor — even those as seemingly innocuous as a website for a charitable race — can be chinks in the most heavily fortified institutions.
"Any organization with a sophisticated information technology system needs to connect its system to systems in other organizations," said Herbert S. Lin, a computer expert at the National Research Council. The trade-off is "even if the first organization's system is very secure, vulnerabilities in these other systems provide a route for an attacker."
He added, "These other organizations are ones that you would least expect to be targets of serious attackers, like the janitorial suppliers or the food vendors."
In attack after attack, Mr. Lin and other security experts note that when the hackers' frontal assault fails, they almost always turn to a company's vendors. At Target last year, for example, hackers used credentials from the retailer's heating and cooling vendor to gain access to its systems. At a large oil company, hackers took a more creative approach, planting malware in the online takeout menu of a Chinese restaurant frequented by its employees.
JPMorgan has maintained that there has been no evidence of fraud arising from the breaches.
Jamie Dimon, the bank's chief executive, highlighted the need for greater collaboration and control in the digital security landscape, including over vendors, during an earnings call on Tuesday. Guarding against breaches, he said, goes beyond the bank's own defenses.
"It's making sure that all of your vendors you deal with have proper cybercontrol, that all the exchanges have proper cybercontrol," said Mr. Dimon, who did not specifically mention the Corporate Challenge website. "We have identified this as a huge effort. We've been very good at it until this recent breach, which we are not going to make excuses for."
As the intrusion at JPMorgan reverberated across Wall Street last week, with news that the same hackers who breached JPMorgan also tried to attack at least a dozen other large financial institutions but were largely thwarted, questions proliferated about why the attacks succeeded at JPMorgan, which has plowed hundreds of millions of dollars into its digital defenses.
Within JPMorgan, some people wondered whether the attempted intrusions at other financial institutions were little more than a smoke screen, meant to obscure the real target, according to people with knowledge the investigations.
"We don't have any indication that the hackers got into JPMorgan through a third-party vendor," Ms. Wexler said. "We are unaware of any other third-party-vendor-run site that was breached."
The identity of the vendor that managed the Corporate Challenge website has not been disclosed by either JPMorgan or Online Tech, the company that hosted it. Online Tech, which said it sold server space to the vendor, learned of the Corporate Challenge website breach just this week when contacted by a reporter. Online Tech also did not know the vendor was managing a website for JPMorgan.
The vendor also never notified Online Tech that hackers had infiltrated the race website. But that is not unusual in the Internet-hosting business, says a person familiar with industry practices.
The vendor managing the Corporate Challenge website did not buy a specialized security package offered by Online Tech. It is unclear what security systems the vendor used on its own, but the Online Tech security package — which includes firewall and antivirus protection, log and file monitoring, vulnerability scanning and two-factor authentication — could have made it easier for the hosting company to detect the intrusion earlier.
"The client hosting the JPMorgan Chase Corporate Challenge website chose to manage their own monitoring and security and not purchase any of our security and compliance services," said Shawn Fergus, director of marketing for Online Tech, which has more 300 customers. "This does not mean that safeguards were not in place."
Mr. Fergus noted that, to the company's knowledge, no other client of Online Tech was affected by the breach of the Corporate Challenge website.
At least one person with knowledge of the investigation said hackers might have been able to breach the site using some user names and passwords that were stolen by a Russian crime ring. Hold Security, a Milwaukee firm, said in August that it had discovered that a band of Russian cybercriminals had stolen more than a billion passwords and 500 million email addresses from more than 420,000 websites.
The developments, security analysts say, underline the challenges for corporations in monitoring the security of outside vendors.
Mr. Dimon acknowledged last week that the $250 million a year that JPMorgan is spending on online security may not be enough to deal with the problem, and he expects the bank to roughly double that over the next few years.
It also remains unclear whether an exodus of some important security personnel from JPMorgan to First Data, a payment-processing company, left the bank vulnerable to a breach, the people with knowledge of the investigation said.
Over the last several months, several staff members followed Frank Bisignano, JPMorgan's former co-chief operating officer, to First Data, including its digital security czar, Anthony Belfiore. Dozens of other lower-level security employees also made the move to First Data, but most of Mr. Belfiore's team remained at the bank.
In June — coincidentally, just as it is thought the attack was beginning — the bank hired Greg Rattray, a former Air Force official who specializes in online defense, as its new head of information security.
JPMorgan is continuing to hire as it bolsters its digital security. A review of LinkedIn found about a dozen job postings for online security over the last two months, including positions for experts in detecting web malware and data security engineering.
But the bank, like most other large corporations in its predicament, may have a hard time. "The reality is, everyone is hiring security professionals," said Dan Kaminsky, a security researcher, "and there aren't really enough to go around."
Michael Corkery contributed reporting.
The biggest corporate takeover of the year has essentially been called off.
In the wake of new rules penalizing inversions, AbbVie has walked away from its bid to acquire Shire, the Irish drug maker, for $54 billion.
Late Wednesday, AbbVie, the pharmaceutical company based in Illinois, said it would recommend that its shareholders vote against approving the deal in the event that it is put to a vote.
"AbbVie and its board of directors made this determination following a detailed consideration of the impact of the U.S. Department of Treasury's unilateral changes to the tax rules," the company said in a statement.
Those changes, announced last month, have been effective, scuttling some deals and forcing others to restructure financial terms. AbbVie expressed concern that the Obama administration appeared to be taking unusual steps to disrupt a certain type of deal, and a specific group of companies.
"The breadth and scope of the changes, including the unexpected nature of the exercise of administrative authority to impact longstanding tax principles, and to target specifically a subset of companies that would be treated differently than either other inverted companies or foreign domiciled entities, introduced an unacceptable level of uncertainty to the transaction," Abbvie said.
In particular, AbbVie indicated that the new Treasury rules, which targeted the ability of companies that moved abroad to use overseas cash on a tax-free basis, had made the deal for Shire less financially attractive.
"Additionally, the changes eliminated certain of the financial benefits of the transaction, most notably the ability to access current and future global cash flows in a tax efficient manner as originally contemplated in the transaction," AbbVie said. "This fundamentally changed the implied value of Shire to AbbVie in a significant manner."
AbbVie's board had intended to meet next Monday to consider whether to walk way from the deal, after notifying Shire that it was having second thoughts late Tuesday night. But after Shire's waiver of a three-day notice period before an AbbVie board meeting, the directors met sooner and quickly decided.
AbbVie will now have to pay Shire a breakup fee of $1.6 billion, and the deal will join a long list of large mergers and acquisitions that have been withdrawn this year.
"AbbVie has always been financially disciplined and we have rigorous standards in place to ensure transactions are financially sound and deliver compelling stockholder returns," said AbbVie's chief executive, Richard A. Gonzalez. "Although the strategic rationale of combining our two companies remains strong, the agreed upon valuation is no longer supported as a result of the changes to the tax rules and we did not believe it was in the best interests of our stockholders to proceed."
AbbVie is still required to hold a special meeting and allow shareholders to vote on the deal unless Shire and the British takeover panel agree otherwise. At this point, however, such a meeting would appear to be a formality.
Shire was not immediately available for comment.
The United States went to war in Iraq expecting to destroy an active weapons of mass destruction program. Instead, it found only remnants of chemical arms built in close collaboration with the West.
Updated, 11:41 p.m. | The accusations read like a pulp thriller: Citigroup employees in Mexico are suspected of pocketing millions of dollars in kickbacks from vendors. And bodyguards for bank executives bought audio recordings of personal phone calls and created shell companies to disguise their fraud.
A new scandal has erupted at Citigroup's Mexican unit just months after a $400 million fraud involving a well-connected client. Now the sprawling global bank — which separately announced plans on Tuesday to withdraw from consumer banking in 11 other markets — is wrestling with how to get its house in order in one of its oldest foreign operations. A crucial part of that decision rests on how to nudge aside the most powerful executive overseeing Mexico, a country where Citigroup has been doing business since 1929.
What makes that decision particularly difficult is that the Mexican unit, Banamex, mints money. Still, the scandals at Banamex — and the investigations in two countries that have come as a result — have exposed the bank to risk at a time when Citigroup is trying to reduce its legal and regulatory burdens.
In a delicate dance, Citigroup is encouraging its Mexico chairman, Manuel Medina-Mora, 64, to retire, according to four people briefed on the matter. The bank has been quietly laying the groundwork for his departure, which could come by early next year, the people said.
Still, Mr. Medina-Mora's business acumen and connections to the country's ruling elite have made him critical to the bank's success in Mexico. Citigroup and its chairman, Michael E. O'Neill, cannot afford to alienate Mr. Medina-Mora and risk jeopardizing those relationships, these people said. But the latest problems uncovered at Banamex are augmenting concerns about lax controls and oversight in Mexico.
In particular, Mr. O'Neill has privately expressed concerns to board members that Mr. Medina-Mora, who is also co-president of the parent company, has not always relayed problems in the region to executives at the bank's headquarters on Park Avenue, according to the people briefed on the matter. Instead of looping in executives in New York, Mr. Medina-Mora has at times chosen to handle the issues himself.
Mr. O'Neill and Citigroup's chief executive, Michael L. Corbat, respect Mr. Medina-Mora's long track record overseeing Banamex, which has reported strong, consistent profits under his stewardship, according to two people close to the bank executives. The timing for a change might be right for Mr. Medina-Mora, who commutes between New York and Mexico, where his family is. He has told colleagues that he has long wanted to retire by age 65, these people said.
In a statement on Tuesday, when the bank also released its third-quarter results, the Citigroup spokesman Mark Costiglio said: "Manuel Medina-Mora is a highly valued and well-respected member of the management team who has an outstanding track record globally in consumer banking, as today's results show."
The gentle handling of an exit for the Mexican chieftain contrasts with a startling boardroom coup nearly two years ago when Mr. O'Neill led the ouster of Vikram S. Pandit, who had steered the bank through some of its darkest days, as chief executive.
It has been a rocky year for Banamex. In February, Banamex disclosed a $400 million fraud involving the politically connected, but financially troubled, oil services firm Oceanografía.
The latest scandal at Banamex centers on the bank's security unit. An internal investigation, begun by Citigroup in July, found evidence that the security unit was overcharging vendors and may have been taking kickbacks, a person briefed on the investigation said. The internal inquiry also found shell companies that had been set up to look like vendors and receive payments from the Banamex unit.
The security unit was created in 1994, after a former Banamex president had been kidnapped and held for ransom by a guerrilla group. It remained intact after Citigroup acquired Banamex in 2001.
The security unit's primary purpose was to protect the Banamex leadership, but at some point, the unit started operating beyond its approved duties, according to the person briefed on the matter who was not authorized to speak publicly because of the criminal investigation. The security unit was also providing protection and security consulting services for people outside the bank, sometimes as a courtesy and at other times for money, the internal investigation found. The conduct spanned more than a decade, the investigation found, extending into last year.
The unit, which Citigroup disbanded in light of the investigation, was run by Frederico Ponce Rojas, a former official with the Mexican attorney general's office who resigned from Banamex in December. Mr. Ponce did not respond to requests for comment.
His exit was followed a few months later by the departure of Banamex's chief executive, Javier Arrigunaga, a 12-year veteran of Banamex's management team. There was no evidence that the fraud reached executives.
Even so, in a statement on Tuesday, Mr. Corbat called the conduct of individuals in the security unit "appalling."
Citigroup's outside lawyers have turned over information to law enforcement officials in Mexico and the United States, but there are many things the bank doesn't know about the rogue security unit. For example, the security team had purchased audio surveillance files from "third parties" that included cellphone and landline conversations of dozens of people — some of a highly personal nature, the person said. The Banamex unit then transcribed many of these files. It was unclear why the security team was amassing records of the personal conversations. The bank's investigators are still working to determine why the security unit gathered the conversations, involving dozens of people, many of whom had nothing to do with the bank.
And despite the latest headline-grabbing turmoil at Banamex, Citigroup does not want to cede any ground in Mexico where it dominates a large portion of the retail market.
In other less profitable parts of the world, Citigroup is retreating. On Tuesday, the bank announced that it was selling its consumer business in 11 markets, across Latin America, Asia and Europe.
The plan to cast off the international consumer businesses is expected to be completed by the end of 2015. The sales represents another milestone for the sprawling global bank.
Since the financial crisis, Citigroup executives have been trying to winnow the bank's business lines and hone its strategy to focus on investment banking and more affluent consumers, particularly in the United States. That effort to simplify its operations gained urgency earlier this year after the Federal Reserve rejected the bank's capital plan, citing concerns about its projections for potential losses in "material parts" of its global operations.
The latest fraud investigation in Mexico marred otherwise positive third-quarter results, which the bank also announced on Tuesday. Citigroup said its profit increased 13 percent from the period a year earlier, as trading picked up and credit losses continued to decline.
The bank reported profit of $1.15 a share on revenue of $19.97 billion, adjusting for one-time items. Wall Street analysts surveyed by Thomson Reuters expected adjusted net income of $1.12 a share and revenue of $19.05 billion.
Elisabeth Malkin and Ben Protess contributed reporting.
Gretchen Reynolds on the science of fitness.
You already know your chronological age, but do you know your fitness age?
A new study of fitness and lifespan suggests that a person's so-called fitness age – determined primarily by a measure of cardiovascular endurance – is a better predictor of longevity than chronological age. The good news is that unlike your actual age, your fitness age can decrease.
The concept of fitness age has been developed by researchers at the Norwegian University of Science and Technology in Trondheim, who have studied fitness and how it relates to wellness for years.
Fitness age is determined primarily by your VO2max, which is a measure of your body's ability to take in and utilize oxygen. VO2max indicates your current cardiovascular endurance.
It also can be used to compare your fitness with that of other people of the same age, providing you, in the process, with a personal fitness age. If your VO2max is below average for your age group, then your fitness age is older than your actual age. But if you compare well, you can actually turn back the clock to a younger fitness age. That means a 50-year-old man conceivably could have a fitness age between 30 and 75, depending on his VO2max.
Knowing your fitness age could be instructive and perhaps sobering, but it also necessitates knowing your VO2max first, which few of us do. Precise measurement of aerobic capacity requires high-tech treadmill testing.
To work around that problem, the Norwegian scientists decided several years ago to develop an easy method for estimating VO2max. They recruited almost 5,000 Norwegians between the ages of 20 and 90, measured their aerobic capacity with treadmill testing and also checked a variety of health parameters, including waist circumference, heart rate and exercise habits.
They then determined that those parameters could, if plugged into an algorithm, provide a very close approximation of someone's VO2max.
But while fitness age may give you bragging rights about your youthful vigor, the real question is whether it is a meaningful measurement in terms of longevity. Will having a younger fitness age add years to your life? Does an advanced fitness age mean you will die sooner?
The original Norwegian data did not show any direct correlation between fitness age and a longer life.
But in a new study, which was published in June in Medicine & Science in Sports & Exercise, the scientists turned to a large trove of data about more than 55,000 Norwegian adults who had completed extensive health questionnaires beginning in the 1980s. The scientists used the volunteers' answers to estimate each person's VO2max and fitness age.
Then they checked death records.
It turned out that people whose calculated VO2max was 85 percent or more below the average for their age — meaning that their fitness age was significantly above their chronological years — had an 82 percent higher risk of dying prematurely than those whose fitness age was the same as or more youthful than their actual age. According to the study's authors, the results suggest that fitness age may predict a person's risk of early death better than some traditional risk factors like being overweight, having high cholesterol levels or blood pressure, and smoking.
Of perhaps even greater immediate interest, the scientists used the data from this new study to refine and expand an online calculator for determining fitness age. An updated version went live this month. it asks only a few simple questions, including your age, gender, waist size and exercise routine, before providing you with your current fitness age. (I discovered my own fitness age is 15 years younger than my chronological age — a good number but still not as low as I could wish.)
Thankfully, fitness age can be altered, said Ulrik Wisloff, a professor of exercise science at the Norwegian University of Science and Technology, who led the study. His advice if your fitness age exceeds your chronological years or is not as low as you would like? "Just exercise."
Dr. Wisloff and his colleagues offer free exercise suggestions on their website. But he said almost any type and amount of exercise should help to increase your VO2max and lower your fitness age, potentially increasing your lifespan.
In upcoming studies, he added, he and his colleagues will directly compare how well fitness age stacks up against other, more established measures of mortality risk, like the Framingham Risk Calculator (which does not include exercise habits among its variables). They also hope to expand their studies to include more types of participants, since adult Norwegians may not be representative of all of the world's population.
But even in advance of this additional data, there is no harm in learning and lowering your fitness age, Dr. Wisloff advised. "There is a huge benefit," he said, "larger than any known medical treatment, in improving your fitness level to what is expected for your age group or, even better, to above it."
