Bernanke discusses future of Fannie and Freddie

Fed chairman says government will need to back mortgage loans going forward regardless of what happens to Fannie Mae and Freddie Mac.

NEW YORK (CNNMoney.com) -- Federal Reserve Chairman Ben Bernanke said Friday that the federal government will need to continue to play a role in the future of the mortgage financing market.

In a speech broadcast to an economic symposium in Berkeley, Calif., Bernanke said there are many alternatives that need to be considered but that all will involve a role for the federal government and federal guarantees for securities backed by mortgage loans.

"Government likely has a role to play in supporting mortgage securitization, at least during periods of high financial stress," he said.

The remarks included a detailing of the recent problems in the mortgage markets, which led to the Treasury Department putting mortgage financing giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) into conservatorship on Sept. 7.

The two government sponsored firms either owned or guaranteed about $5 trillion in mortgages between them and their problems could end up costing taxpayers hundreds of billions of dollars in future losses.

But Bernanke said having them replaced by totally private firms could cause greater problems for the economy during a future financial crisis. Thus, he said that the federal government will likely have a role guaranteeing mortgages into the future.

"From a public policy perspective, a greater concern with fully privatized [firms] is whether mortgage securitization would continue under highly stressed financial conditions," he said. "As I have noted, almost no mortgage securitization is occurring today in the absence of a government guarantee."

Bernanke did not endorse any specific alternative for Fannie and Freddie and he stopped short of advocating for the government to completely nationalize the two firms. Instead, he gave a rundown of numerous proposals that have already been raised by Fed and Treasury officials as well as other experts.

Bernanke did caution that going back to the structure of Fannie Mae and Freddie Mac before the credit crisis -- as shareholder-owned companies with only an implicit government guarantee -- is not a good idea, especially with their huge portfolios of mortgage loans.

"As the Federal Reserve has argued for many years, the enormous [Fannie and Freddie] portfolios pose risks to financial stability," he warned.

Colts could get Sanders back for Patriots game

Injured Indianapolis Colts safety Bob Sanders, running back Joseph Addai and cornerback Kelvin Hayden all practiced Wednesday. They could be healthy enough to play Sunday against archrival New England.

"I expect that they will all be out there (Wednesday), and if all goes well, I expect them to play Sunday," coach Tony Dungy said before practice.

None of the three was listed on the team's practice report, meaning the three players participated in all drills.

The Colts held out of practice two other starters — Pro Bowl receiver Reggie Wayne and cornerback Marlin Jackson — with knee injuries. Wayne was hurt late in Monday night's loss at Tennessee when another player rolled into his leg, but both players finished the game.

The Colts do not provide injury updates after practice.

Dungy said he wanted to see how Sanders, Addai and Hayden each responds when they return to the team complex Thursday morning, and even then the Colts may limit their playing time.

Sanders, the 2007 Defensive Player of the Year, is the emotional leader. He's missed the last five games with a high ankle sprain, an injury that typically takes four to six weeks to heal. He also had arthroscopic knee surgery during his absence. Indianapolis has not said which knee Sanders had repaired, but Dungy has explained the knee injury did not delay Sanders' return.

Second-year safety Melvin Bullitt has played well enough in Sanders' absence that the Colts (3-4) are now trying to make him a regular part of the defense.

"I don't know that Bob will be able to play 60 plays right out of the box," Dungy said. "But we've got to find ways to get Melvin in the game."

Sanders has a long history of injuries. He played in a career-high 15 games last season and has been the subject of a strange even-year hex. He missed a combined total of 22 games in 2004 and 2006, compared with a total of three games in 2005 and 2007.

Addai, who made his first Pro Bowl last season, went down with a hamstring injury early in the Baltimore game Oct. 12. There was speculation Addai tore the hamstring and could miss up to a month, something Dungy denied.

Now, three weeks later, Addai could be back in the lineup. He was replaced by former 1,000-yard runner Dominic Rhodes, who has helped invigorate a previously stagnant ground game. Rhodes sat out Wednesday's practice with an ankle injury.

Hayden missed the last three games after tearing the meniscus in his left knee and said Wednesday he felt good enough to play this week.

"I'll practice today and see how it feels," he said. "It should be a good test. I don't think I'm 100 percent, but I think I'm close enough to 100 percent to play."

The returns couldn't come at a better time.

Indy has lost two straight, fallen four games behind unbeaten Tennessee in the AFC South and begins a tough stretch against New England on Sunday night. Then Indy visits Pittsburgh, hosts Houston and has consecutive road trips to San Diego and Cleveland.

Linebacker Freddy Keiaho, second in tackles (68), was limited in practice with a knee injury.

Three other starters — defensive ends Dwight Freeney and Robert Mathis and linebacker Gary Brackett — rested Wednesday, along with cornerback Tim Jennings.

Also missing practice Wednesday were running back Clifton Dawson (concussion), receiver Roy Hall (knee), cornerback Dante Hughes (ankle) and tight end Tom Santi (shoulder).

Police: PGA Tour golfer John Daly drunk, detained in North Carolina

WINSTON-SALEM N.C. — Golfer John Daly was taken into custody Sunday morning by Winston-Salem police after he was found drunk outside an area Hooters restaurant.

Police said in a statement Wednesday that said officers went to the restaurant on a medical call.

When they arrived, Daly was being treated by emergency workers after losing consciousness.

While at the restaurant, police said Daly "appeared extremely intoxicated and uncooperative," refused repeatedly to be taken to the hospital and was asked to leave the restaurant by several workers.

Daly was taken to the Forsyth County Law Enforcement Detention Center for a 24-hour stay, until he was sober.

Procter & Gamble Lowers Profit Outlook for Year

lowered its full-year forecasts on Wednesday because of a stronger dollar and higher costs for materials used in products like Tide laundry detergent.

The company lowered the bottom end of its profit forecast for the current fiscal year, which began July 1, citing volatility in commodity, energy and currency markets.

Procter & Gamble, the world’s largest consumer products maker, said it still faced high commodity prices.

“We’re not seeing that commodity recession. You might be seeing it on television, but we’re not seeing it in the reality in the marketplace,” A. G. Lafley, chairman and chief executive, said in a conference call.

Now that prices of some commodities are falling, analysts have questioned whether consumers will soon see lower prices in stores as well.

Mr. Lafley said that the company was not lowering prices at this time, but would do so if commodities moved down in a meaningful way.

P.& G. said consumers were continuing to buy more expensive items like clinical-strength deodorants, as well as products like Luvs diapers, which are priced lower than the company’s Pampers brand.

P.& G. said profit in its fiscal first quarter rose 9 percent, to $3.35 billion, or $1.03 a share, from $3.08 billion, or 92 cents a share, a year earlier, matching analysts’ average forecast, according to Reuters Estimates.

The results were helped by price increases and a benefit from foreign exchange rates.

Now that the dollar is gaining, sales in foreign markets have a lower value on the income statement.

Sales rose 9 percent, to $22.03 billion, from $20.2 billion. Excluding the impact of acquisitions, divestitures and currency changes, sales increased 5 percent.

P.& G. says it now expects to earn $3.77 to $3.87 a share in fiscal 2009, versus a previous forecast of $3.80 to $3.87 a share. Analysts were expecting earnings, on average, of $3.83 a share.

The company said its credit ratings were in the top 5 percent of all public companies, which should allow it to gain access to the credit markets. Its shares fell $1.90 to $61.33.

Fed Creates Swaps With South Korea, Brazil, Mexico

By Steve Matthews and William Sim

Oct. 29 (Bloomberg) -- The Federal Reserve agreed to provide $30 billion each to the central banks of Brazil, Mexico, South Korea and Singapore in its biggest effort yet to curtail the spread of financial market turmoil beyond developed economies.

The Fed set up ``liquidity swap facilities with the central banks of these four large systemically important economies'' effective until April 30, the central bank said today in a statement. The arrangements aim ``to mitigate the spread of difficulties in obtaining U.S. dollar funding in fundamentally sound and well managed economies.''

The global credit crisis that started last year with the collapse of the U.S. mortgage-backed securities market has roiled developing nations, sending the premiums on their government bonds up and their currencies down. Today's Fed announcement coincided with a decision by the International Monetary Fund to almost double borrowing limits for emerging market countries.

``The Fed is there to support large emerging markets that have done their homework over the past several years like South Korea, Brazil, Singapore and Mexico,'' said Alonso Cervera, a Latin America economist with Credit Suisse Group in New York. ``These are large, relevant emerging countries that have followed responsible fiscal and monetary policies for the past several years and now are going through tough times.''

The yield premium on emerging-market dollar bonds over U.S. Treasuries narrowed today by 61 basis points, or 0.61 percentage point, to 7.21 percentage points, according to JPMorgan Chase & Co.'s EMBI+ index. The spread has jumped 5.72 percentage points from a record low of 1.49 percentage points in June 2007, and reached its widest since 2002 earlier this month.

Global Crisis

``The hoped-for result is that we don't see the global financial crisis worsen still more,'' said Lyle Gramley, a former Federal Reserve governor who is now senior economic adviser at Stanford Group Co. ``The Fed is making dollars available to the central banks of these countries who are trying to meet the needs of their banking systems.''

The Fed also created this week a $15 billion swap line with its New Zealand counterpart and removed limits this month on four existing swap lines, including one with the European Central Bank. The Fed set up a $10 billion arrangement with Australia's central bank last month and then tripled it to $30 billion.

The Bank of Korea cut interest rates by a record amount on Oct. 27 and the government pledged to guarantee local banks' debts to help lenders struggling to access foreign funds. Stocks and the won tumbled last week, prompting concern the country may face a currency crisis a decade after the IMF organized a $57 billion bailout to help repay overseas debt.

``The Bank of Korea will continue to strive for financial market stability through cooperation with other central banks,'' the bank said in a statement. Using the swap line, the central bank ``will provide liquidity in Korea through competitive auction facilities to banks established in Korea.''

Market motion sickness to continue

The Dow soared nearly 900 points Tuesday. Experts say investors need to prepare for more big moves - both up and down - in the coming months.

NEW YORK (CNNMoney.com) -- Don't get too excited: The Dow may have surged nearly 11% on Tuesday, but we've been here before...just two weeks ago.

On Oct. 13, the Dow jumped 936 points, and then went on to shed more than 1,200 points, or 13%, in the days before yesterday's big move.

The plain fact is, massive selling will lead to occasional massive pops.

Peter Sorrentino, senior portfolio manager with Huntington Asset Advisors in Cincinnati, said that many mutual funds and hedge funds have been forced to sell stocks because they face looming redemptions, i.e. investors demanding their money.

Talkback: How much longer will the market volatility last?

But at the same time, whenever there is even a whiff of a rally, other investors that have piles of cash waiting to invest may need to jump in and buy due to fear of missing a big move upwards.

"The hedge funds are still out there. Many are forced sellers and they have no choice. But there are also people that have gone to cash who are left at the dock and are afraid that the boat is going to set sail," Sorrentino said.

With that in mind, it's hard to make sense of where the market is headed in the near-term as long as it remains this tumultuous. And so far this month, just about every day has seen either a big gain or a huge loss.

The Dow has experienced a move of at least 100 points in 18 of the 20 trading days in October, as well as in each of the past 11 sessions.

It's going to be tough to declare that the market has finally bottomed out until stocks finally stop shooting up and down so violently.

"It's encouraging to see that we don't plunge day after day but it's still disconcerting that volatility remains this high," said Sorrentino. "Investors can't believe in the rally until the volatility goes away."

We are undeniably in a bear market and, it seems apparent that we are in a recession - even though the National Bureau of Economic Research has yet to declare it as such.

But as I've written consistently in the past few months, I do think that there are signs of hope that a recovery will soon be in the cards. This may be a longer and more painful recession than most but it's still a recession, not a depression.

The government's controversial bank bailout plan has slowly started to loosen up the gummed-up credit markets. That's a good thing.

Investments in stronger banks by the Treasury Department may also encourage consolidation. Weeding out the weak banks is also a good thing.

And the Fed cut rates again this afternoon, which should also eventually help get the credit markets back on track.

Still, any reasonable investor should realize that it may take months for the bailout, as well as all the Fed's previous rate cuts, to truly work their magic and stimulate the borrowing and lending activity that is crucial to a growing economy.

But just because they aren't working overnight doesn't mean that they are a failure.

"There is starting to be a sense that it will take time for all this to work out. There have been ounces of medicine and the market is digesting a pound of cure," said Matthew Lloyd, chief investment strategist of Advisors Asset Management, an institutional investment firm based in Monument, Colo.

Lloyd added that even though it would be premature to declare that yesterday's stock surge is a sign that the worst is over, it is still a good sign that some investors appear to be out there bargain hunting since many stocks are trading at attractive valuations.

"At least there's money out there that's willing to come in and buy at certain levels. It gives us some consolation that the bottom may be near," he said.

Bill Stone, chief investment strategist for PNC Wealth Management in Philadelphia, agreed. He pointed out that stocks rallied yesterday despite more evidence that housing prices are continuing to fall and a report showing that consumer confidence dropped to its lowest level in history.

"You can't really spin a big up day into that much of a worrisome sign. One thing's for sure. We were so oversold that the spring was coiled for a rally," Stone said.

"Eventually, all the bad news will be priced in and the selling will have exhausted itself. It's impossible to know when but the market likely will move before economic data gets better," he added.

What that means is that is probably a great time to buy stocks for the long-term. You just have to resist the urge to check on how your portfolio is doing every 10 minutes.

A lot of traders will make impulsive moves. Investors, however, should recognize that stocks are probably going to keep spinning wildly, like those cups in Disney World's Mad Tea Party ride.

"When you get in periods like this where people are trying to figure out where the bottom is, emotions start to drive things," said Jason Tyler, senior vice president and director of research operations with Ariel Capital Management, an institutional investment firm in Chicago.

"We have to get used to a prolonged period of volatility for the next several months.

Canadian convicted of terror charges

OTTAWA (AFP) — Mohammed Momin Khawaja, the first Canadian tried under the nation's anti-terrorism law, was found guilty Wednesday of several charges related to a foiled plot against several British targets.

The Ottawa software developer of Pakistani descent was found to have "knowingly participated" and "knowingly facilitated" a terrorist group's plan to attack a popular London nightclub, a shopping mall and a natural gas network.

However, he may not have known about the plot itself, Justice Douglas Rutherford said in his 52-page decision.

Khawaja, 29, was arrested in March 2004 and was accused of developing bomb detonators, possession of explosives, financing terrorism, and training as a terrorist in Pakistan.

Khawaja's defense lawyer had argued Khawaja meant all of this in support of an insurgency in Afghanistan against coalition forces, not against British targets.

The judge ruled the prosecution did not prove Khawaja's "guilty knowledge of the fertilizer bomb plot" in London.

"There is no direct evidence that Khawaja knew of the ammonium nitrate fertilizer (obtained by his co-conspirators) or the consideration of domestic targets" in Britain, he said.

However, Khawaja's description to one of his co-conspirators about how the bomb detonator he built for them worked "leaves no doubt that Momim Khawaja knew he was building a device to trigger explosions," the judge said.

And so, "I have no reasonable doubt in concluding that in doing the things the evidence clearly establishes that he did, Momin Khawaja was knowingly participating in and supporting a terrorist group," the judge concluded.

Khawaja's defense lawyer Lawrence Greenspon claimed a partial victory in that "he was acquitted of the London bombing."

He did not indicate whether he would appeal the verdict.

Wesley Wark, a visiting professor at the University of Ottawa and a specialist in intelligence and national security issues, however, said: "It does not matter that Momin Khawaja did not know the full details of what his London co-conspirators intended to do."

"He was convicted for the fact that he aligned himself with the London group and he facilitated its preparation to conduct terrorism," he told AFP.

Canada's anti-terrorism law was written to reflect the fact that not all members of terrorist groups are privy to all plot details, he explained.

The prosecution was considered a key test of Canada's anti-terrorism legislation, enacted after the September 11, 2001 attacks in the United States, and tweaked last year after a portion of it was thrown out by a judge because it attempted to define terrorism by what motivated it, and so wrongly attempted to police people's thoughts, religious beliefs or opinions.

Still, the trial was allowed to continue while parliament worked on a fix.

"The anti-terrorism act provisions themselves were on trial in the Khawaja case," said Wark.

"They have been controversial provisions," he said. But "I think the very clear conclusion to be drawn from the Khawaja case is that the antiterrorism act works."

Khawaja was the first to be arrested under the act, and pleaded not guilty.

The devout Muslim was born in Canada of Pakistani immigrant parents and once worked as a computer expert at Canada's Foreign Affairs Department.

The prosecution had argued he sought out the fanatic group of British Muslims, also of Pakistani descent, and designed for them a remote detonator to set off a fertilizer bomb.

The detonator was found in Khawaja's Ottawa house along with an arsenal of guns during a police raid in 2004, the court heard.

The prosecution also laid out emails, and descriptions of video and wiretap surveillance that purportedly tied him to the bomb plot.

In one email sent from a Foreign Affairs ministry computer, according to prosecutors, Khawaja discussed using a courier to send the detonator to his contacts in London.

In 2003, Khawaja also traveled to northern Pakistan for weapons training, and made his secondary residence in Pakistan available to his new "bros" (brothers).

Sentencing is set for November 18.

Khawaja faces possible life in prison.

UN peacekeeping forces condemn killing of Chinese oil workers in Sudan

KHARTOUM, Oct. 29 (Xinhua) -- The UN peacekeeping forces in Sudan condemned on Wednesday the killing of four Chinese oil workers by armed kidnappers in southwest Sudan on Monday.

In a statement, the peacekeeping forces, the UN Mission In Sudan (UNMIS), said it "condemned the kidnapping and killing of four Chinese oil workers in Sudan."

"UNMIS offers its sincere condolences to the bereaved families and calls for the immediate and unconditional release of the remaining hostages," the statement said.

It said it condemns the use of violence for political purposes and "those responsible for this heinous act should be brought to justice."

Four Chinese oil workers, who were abducted with other five in an oil field in the Kordofan region in southwest Sudan, which neighbors the restive Darfur region, on Oct. 18, were shot to death by the kidnapper on Monday.

Three others had escaped the danger but one of them were seriously injured while the other two were lightly wounded. The three persons were transported by Khartoum on Tuesday for treating their wounds.

The fate of another two Chinese oil workers are still unknown

McCain, Palin criticize L.A. Times over Obama video

John McCain and Sarah Palin, the Republican nominees for president and vice president, sharply criticized the Los Angeles Times today for withholding a video of a 2003 event in which Barack Obama, their Democratic rival, praised a Palestinian scholar.

"It must be nice for a candidate to have major news organizations looking after his best interests like that," Palin said in Bowling Green, Ohio. "Maybe some politicians would love to have a pet newspaper of their very own. In this case, we have a newspaper willing to throw aside even the public's right to know in order to protect a candidate that its own editorial board has endorsed."

The Times has said that making the recording public would violate a promise to a confidential source.

The video was mentioned in a Times story in April 2008 on Obama's friendships with Palestinian Americans in Chicago. The story said that Obama attended a farewell dinner for the Palestinian scholar, at which some speakers spoke angrily of Israel's treatment of Palestinians and of U.S. policy toward Israel. It said that Obama spoke warmly at the dinner of the scholar, Rashid Khalidi, but that his comments focused on finding common ground.

McCain, in an interview today with radio station WAQI in Miami, which serves the Latino community, asserted that the tape could shed light on Obama's relationship with William Ayers, the onetime Weather Underground radical who later came to know Obama.

"We should know about their relationship including, apparently, information that is held by the Los Angeles Times concerning an event that Mr. Ayers attended with a PLO spokesman," McCain said. "The Los Angeles Times refuses to make that videotape public. I'm not in the business about talking about media bias, but what if there was a tape with John McCain with a neo-Nazi outfit being held by some media outlet? I think the treatment of the issue would be slightly different."

The Times' April story said that the 2003 dinner was videotaped and that it had obtained a copy. But the story did not say that Ayers attended the event. The story described Khalidi as someone who had spoken to reporters on behalf of the Palestine Liberation Organization in the 1970s, rather than as a PLO spokesman.

To support McCain's statement that Ayers had attended the Khalidi dinner, the McCain campaign cited an account in the New York Sun newspaper. That story did not say that Ayers attended the event, but that a commemorative book associated with the dinner included testimonials from friends and political associates, including Ayers.

The McCain campaign has highlighted Obama's relationship with Ayers over the course of several months, saying that it casts doubt on Obama's judgment.

In a statement Tuesday, The Times explained its decision not to make the video public.

"The Los Angeles Times did not publish the videotape, because it was provided to us by a confidential source who did so on the condition that we not release it," said the newspaper's editor, Russ Stanton. "The Times keeps it promises to sources."

Jamie Gold, the newspaper's readers' representative, said in a statement Tuesday: "The Times is not suppressing anything. Just the opposite -- the L.A. Times brought the matter to light."

Palin, in her morning comments on the subject, said that "if there's a Pulitzer Prize category for excelling in kowtowing, then the L.A. Times, you're winning. But it's not too late, and if there is an ounce of credibility there, if the newspaper wants to keep that shred of credibility, let alone its dignity, then I say the public has a right to know. Let's go to the videotape, L.A. Times."

McCain told a radio interviewer: "Now why that should not be made public is beyond me. ... Of course, Americans need to know, particularly about Ayers, also about the PLO. Hopefully, there will be enough pressure on the L.A. Times that it'll come up, but it's really unfortunate that we have to go through this."

UN's Ban Says Zimbabwe's Mugabe 'Should Meet' World Expectations

United Nations Secretary General Ban Ki-moon urged African leaders Wednesday to take "decisive" action to end the deadlock between President Robert Mugabe and prime minister-designate Morgan Tsvangirai over the allocation of cabinet positions in the national unity government envisioned under a power-sharing agreement.

Speaking to reporters at a U.N. forum on migration in Manila, the Philippines, Ban said the power-sharing process "has been taking too long." He added: "I sincerely hope that President Mugabe will no longer disappoint the international community," Ban said. Mr. Mugabe "should meet" international expectations.

His comments came after the Southern African Development Community's committee or troika on politics, security and defense failed Monday despite 13 hours of talks to bring Mr. Mugabe and Tsvangirai together on the allocation of key cabinets - in particular the Home Affairs Ministry which controls the highly politicized national police force.

The SADC troika referred the matter to a full summit of the 14-nation regional grouping, to take place within the next fortnight at a location as yet not specified.

"Now that the SADC has decided to convene their full summit meeting, I hope these leaders -- considering their responsibility to see peace and stability maintained in their region -- should take very decisive measures to help resolve this crisis," Ban said.

Meanwhile, Secretary General Tendai Biti of Tsvangirai's formation of the Movement for Democratic Change said Tsvangirai might not show up at the regional summit if by that time he has not been provided a passport by the Harare government.

Tsvangirai submitted his passport to the office of the registrar general, which also falls under the Ministry of Home Affairs, to have more pages added but the government has not returned the document to him. He failed to travel to a scheduled SADC summit in Swaziland, saying the emergency travel document issued to him was inadequate.

The government has said it lacks special passport paper due to Western sanctions, but ordinary citizens can obtain passports in 24 hours for a payment of US$250.

SADC Executive Secretary Tomaz Salamao said regional leaders won't get involved in the passport dispute, adding that the summit is likely to be held in South Africa, which now holds the revolving SADC chair, Swaziland, a member of the troika, or Gaborone, Botswana, where the organization has its headquarters.

Sources in Mr. Mugabe's ZANU-PF party said its politburo met Wednesday and urged the president not to give in to MDC demands, saying the offer to Tsvangirai - control of the Finance Ministry along with the economic and service ministries - is sufficient

Political analyst Charles Mangongera told reporter Blessing Zulu of VOA's Studio 7 for Zimbabwe that Ban’s comments put Harare back under the international spotlight.

China vows penalties as melamine eggs scare spreads

BEIJING (Reuters) - Authorities in a northeastern Chinese city on Wednesday vowed severe punishment for those responsible for melamine-tainted eggs turning up in Hong Kong, as the health scare spread to another city in eastern China.

At least four children have died and tens of thousands were made ill amid the melamine scandal, the latest in a series of health scares to sully the "made in China" label.

Chinese products ranging from chocolate to milk powder have been recalled throughout the world due to contamination fears. Melamine, used in making plastic chairs among other things, is often added to cheat nutrition tests.

Chinese eggs have now come under the spotlight, after Hong Kong food safety authorities over the weekend found melamine-tainted eggs produced by Hanwei Group in the northeastern port city of Dalian on local shelves.

Problem eggs have now been found in Hangzhou, capital of the eastern province of Zhejiang, the official Xinhua news agency said on Wednesday, citing quality authorities there who had ordered a city-wide recall of all "Ciyunxiang"-brand eggs.

The tested batch of "Ciyunxiang" eggs, produced by Green Living Beings Development Center based in China's northern Shanxi province, contained 3.5 mg in every kg, Xinhua said.

Calls to the company went unanswered.

China currently has no standard for acceptable amounts of melamine in eggs, but allows only 2.5 mg per kg in most milk products.

There had been no reports of people being made ill from the eggs in Hangzhou, Xinhua said, but the government-led recall -- the first for eggs in China -- suggests the problem may be widespread and could usher in a round of checks nationwide.

Authorities in Dalian on Wednesday blamed tainted chicken feed for the high levels of melamine found in Hanwei Group eggs exported to Hong Kong.

The municipal government promised harsh punishment in a notice posted on its website.

Hanwei apologized to consumers and distributors on Tuesday. Its chairman, Han Wei, said the company had never bought melamine, or added the compound to feed or products.

Han is a member of the Chinese People's Political Consultative Conference, an advisory body to parliament, and has been a leading advocate of food safety in China.

It was not immediately clear how the Hanwei eggs passed tests, if any, in Dalian. Chinese officials this month said the melamine health scare was over.

Conservationists Warn of Ecological Credit Crunch

A report by a number of leading conservation groups warns that unless prompt corrective measures are taken, the planet is heading toward an ecological credit crunch. For VOA, Tom Rivers reports from London.
The report is simple and stark. Our demands on natural resources overreach what the Earth can sustain by almost a third.

The World Wildlife Fund, the Zoological Society of London and Global Footprint Network all worked jointly on what is called the Living Planet Report. And these groups conclude that more than three-quarters of the world's population lives in countries where consumption levels are simply outstripping environmental renewal. They say that we collectively are taking more out of the environment than we are replacing.

"What the report shows is that there are quite stable wildlife populations in western Europe and other temperate zones. But in the countries we are consuming most from, in the tropics, those are where there are quite rapid collapses. So we have got to take responsibility for our own consumption because that is impacting on some of the most vulnerable and diverse ecosystems on the planet," said David Norman, the director of British campaigns at the World Wildlife Fund.

In practical terms, Norman says the environmental damage being done in the developing world is tied to the wants and needs of the developed world.

"We are seeing massive forest clearances for example. Still in the Amazon, it is under great pressure and often that is to produce the kinds of goods and services that we need, that we consume in the richer world," added Norman.

For the first time, the report includes a section on what is being called our water footprint. That is a way of estimating not only the water we use everyday, but also the water that is required to make many of the products we use, like for instance, a cotton shirt. Norman says the water footprint takes into account, in this case, the water required to grow the cotton for the shirt.

"We need to manage that water more carefully to ensure that everyone has their fair share," continued Norman.

Overall, the report concludes that if our demands on the planet continue to increase at the same rate, then in just 25 years, we would need the equivalent of two Earths to maintain our present lifestyles.

The WWF's international president says that while about $2 trillion may have been lost recently in the global credit crunch, each year more than twice that figure is lost forever in resources that are taken globally and not renewed.

Pakistan quake kills 170, leaves thousands homeless

WAM, Pakistan (AFP) — Thousands of people in mountainous southwest Pakistan on Wednesday bedded down for a freezing night in the open, after a powerful earthquake destroyed their homes and killed at least 170.

The 6.4-magnitude pre-dawn quake flattened mud houses and triggered landslides in the impoverished province of Baluchistan, killing or injuring their occupants as they slept.

Survivors were sent screaming into the streets in panic, eyewitnesses said.

At least eight villages were badly hit by the massive tremors, local police and officials said, voicing fears that some 46,000 people living in the wider region could now be in need of shelter and other assistance.

An AFP correspondent in one of the worst-affected villages, Wam, said emergency tents had not yet arrived and exhausted villagers had hunkered down in the ruined shells of their homes as temperatures plunged below zero.

They spent the day in a desperate search for loved ones or burying the dead in mass graves, as aftershocks nearly as big as the initial quake pounded the landscape, sending rocks spewing from nearby peaks and sparking fresh panic.

"The local graveyard has been devastated and we have no alternative. We have to bury them in mass graves," said local teacher Malik Abdul Hamid, 35. He said he had lost 15 family members.

"We have so far buried 140 bodies in two mass graves. The dead were mostly women and children."

Dilawar Kakar, mayor of the historic hill town of Ziarat, about 50 kilometres (30 miles) north of the provincial capital Quetta, told AFP the death toll stood at 170, while about 400 people in the area were injured.

Virtually all houses were reduced to rubble either in the initial quake or by aftershocks. Schools and hospitals were also damaged, he added.

Earlier Khushal Khan, spokesman for the provincial revenue minister Zamarak Khan, said local people had told him about 6,000 people have been made homeless and in one case, 29 members of the same family died.

Pakistani President Asif Ali Zardari and Prime Minister Yousuf Raza Gilani both expressed their condolences to relatives of those killed and injured, the state-run Associated Press of Pakistan said.

The World Health Organisation (WHO) said it would send enough medical aid and supplies for 50,000 people for three months in the wake of the disaster, while the United States offered an unspecified humanitarian relief package.

"We are currently working with the Pakistani government, the UN (United Nations) and other potential donors to assess the damage," US State Department spokesman Sean McCormack told reporters.

"Once we are able to make that assessment and also talk to the Pakistani government about what their needs might be, we will stand ready to provide an assistance package," McCormack said.

Neighbour and rival India quickly offered any help that might be required, along with Turkey's Red Crescent.

Two teams from the International Committee of the Red Cross have already arrived in the area and are assessing the situation and the needs of the survivors, the humanitarian body said from Geneva.

The first official government figures from the National Disaster Management Authority (NDMA) put the death toll at 115 so far, with nearly 300 injured, its chairman, retired Lieutenant General Farooq Ahmed, told a news conference.

Most of the victims were from outlying villages, but buildings collapsed in Ziarat and communications were cut while the main road to Quetta was also hit, with wide cracks and boulders blocking the way, an AFP reporter said.

Soldiers, helicopters, tents, blankets, food and medical help have been sent from Quetta to Ziarat and an aerial assessment of the damage has begun, the Pakistani military said.

"We have asked the government to send at least 10,000 tents as the temperature in the mountainous town is sub-zero and people need shelter during the night," said Kakar, Ziarat's mayor.

There were no immediate reports of casualties or structural damage in neighbouring Afghanistan, which borders the province, police there said.

Ziarat is a historic hill resort famed for its juniper forests. It receives visitors from all over Pakistan in summer who come to see the holiday home of the country's founder, Mohammed Ali Jinnah.

A 7.6-magnitude earthquake in northwest Pakistan and Kashmir killed 74,000 people and displaced 3.5 million in October 2005.

In 1935 a massive quake killed around 30,000 people in Quetta, which at the time was part of British-ruled India.