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China Exports Up More Than Expected

BEIJING — China’s exports rose more than expected in August, data showed Sunday, bolstered by improving demand for the country’s goods in major markets.

The Customs Administration said Sunday that exports had risen 7.2 percent in August from the level of a year earlier and that imports had risen 7 percent, leaving the country with a trade surplus of $28.6 billion for the month.

The figures compared with market expectations in a Reuters poll of an increase of 6 percent in exports, an 11.3 percent rise in imports and a trade surplus of $20 billion.

“China’s August trade sustained the upward trend seen since July, in line with accelerating growth momentum and improving market sentiment, pointing to an upside bias” in third quarter growth in gross domestic product, the ANZ economists Liu Li-Gang and Zhou Hao said in a note after the data appeared.

After slowing in nine of the past 10 quarters, the Chinese economy has shown signs of stabilization, with surprisingly firm rebounds in trade in July and surveys in the past week showing manufacturing regaining momentum and growth in the services sector at a five-month high.

Investors had as recently as a month ago worried that China’s economy was slipping into a deeper-than-expected downturn, especially after its money market suffered an unprecedented cash crunch in June.

But policy makers have stepped in with measures to steady the economy, like quicker railroad investment and public housing construction and introduction of policies to help smaller companies with financing needs.

Attention now turns to other data for August due in the next two days, with investors looking to figures for industrial output, inflation, money supply and investment to further gauge the impact of those measures. G.D.P. data for the third quarter are due in October.

A Reuters poll shows factory output is expected to have grown an annual 9.9 percent in August, matching the January/February figure as the biggest increase of 2013, while investment should tick up and inflation stay muted.

The trade figures on Sunday showed exports of electronics, textiles and machinery rose in the month. Exports to members of the Association of Southeast Asian Nations jumped 30.8 percent in August, outpacing the July gains, while exports to the United States rose 6.1 percent, faster than the 5.3 percent gains seen in July.

Exports to the European Union rose 2.5 percent, little changed from July’s figure, while exports to Japan contracted for the seventh consecutive month.

“There is no doubt that the external demand is improving, especially in developed countries,” said Lu Zhengwei, chief economist at Industrial Bank in Shanghai. But “Emerging market economies are struggling even though advanced economies are on the mend. Many Chinese companies, such as steel firms, are exporting at losses.”

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U.S. Housing Starts and Permits Rise Less Than Expected

The data on Friday suggested that a recent spike in interest rates, in anticipation of the Federal Reserve tapering its massive bond purchases as early as next month, was starting to have an impact on households.

The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment slipped to 80.0 from July's six-year high of 85.1. August's reading was the lowest in four months.

"People have been shocked by how much mortgage rates have risen in the past couple of months," said Christopher Low, chief economist at FTN Financial in New York. "I think we will see an increasingly cautious consumer in the second half."

Against the backdrop of higher mortgage rates, consumers were less upbeat about housing in August, the survey showed.

Rising borrowing costs also appear to be making builders cautious about breaking ground on new projects.

Housing starts rose 5.9 percent to a seasonally adjusted annual rate of 896,000 units, the Commerce Department said in a separate report. While that was a recovery from June's decline, it was below economists' forecasts for a 900,000-unit rate.

"I think we are looking at a situation where some air is coming out of the housing recovery given the higher mortgage rates," said Michael Hanson, senior economist with Bank of America Merrill Lynch in New York.

Long-term interest rates have risen by more than a full percentage point over the last three months on the view that the Fed will soon start trimming the $85 billion in monthly bond purchases that it has been making to keep borrowing costs low and stimulate the economy.

That in turn has prompted a rise in mortgage rates, which threatens to sap some of the strength from a housing recovery that has been pushing prices higher for more than a year.

Economists expect the U.S. central bank to make an announcement on tapering at its policy meeting next month.

LABOR, SUPPLY CONSTRAINTS

U.S. government bond yields pushed to two-year highs in anticipation of the Fed action, while the dollar rose against a basket of currencies. U.S. stocks were little changed after taking a beating on Thursday.

In July, permits for future home construction jumped 2.7 percent in July to a 943,000-unit pace. The increase was a touch below economists' expectations for a 945,000-unit pace.

Daniel Silver, an economist at JPMorgan in New York, said the July housing starts data made it less likely residential investment would reach the 17-percent annual pace that the investment bank expects for the third quarter.

Hitting that target is one of the assumptions underpinning JPMorgan's 2.5 percent GDP growth estimate for that quarter.

July data on industrial production, residential construction and employment have missed market forecasts. The economy grew at a 1.7 percent pace in the second quarter.

Aside from higher mortgage rates, the residential construction figures last month could also be a reflection of supply constraints. Builders have been complaining about a shortage of labor and materials.

Still, the fundamentals for housing remain favorable. With permits outpacing starts, economists expect residential construction to continue rising and again contribute to economic growth this year.

A report on Thursday showed confidence among single-family homebuilders neared an eight-year high in August, with builders fairly upbeat about sales prospects over the next six months.

"As anecdotal evidence suggests, builders may be holding back on new construction in part to reap the benefits of higher prices," said Guy Berger, an economist at RBS in Stamford, Connecticut.

"Eventually, though, the dynamics at play in the housing market will likely lead builders to boost groundbreaking activity further from its current pace."

Last month, groundbreaking for single-family homes, the largest segment of the market, fell 2.2 percent to the lowest level since November last year. Starts for multi-family homes jumped 26 percent, reversing the prior month's decline.

Permits for multi-family homes rose 12.6 percent, but approvals for single-family homes fell 1.9 percent.

(Reporting by Lucia Mutikani, additional reporting by Richard Leong and Steven C Johnson in New York; Editing by Paul Simao)

Nuclear Plants, Old and Uncompetitive, Are Closing Earlier Than Expected

The nuclear industry is wrestling with that question as it tries to determine whether problems at reactors, all designed in the 1960s and 1970s, are middle-aged aches and pains or end-of-life crises.

This year, utilities have announced the retirement of four reactors, bringing the number remaining in the United States to 100. Three had expensive mechanical problems but one, Kewaunee in Wisconsin, was running well, and its owner, Dominion, had secured permission to run it an additional 20 years. But it was losing money, because of the low wholesale price of electricity.

“That’s the one that’s probably most ominous,” said Peter A. Bradford, a former member of the Nuclear Regulatory Commission and a former head of the Public Service Commission in New York. “It’s as much a function of the cost of the alternatives as it is the reactor itself.”

While the other three, San Onofre 2 and 3 near San Diego and Crystal River 3 in Florida, faced expensive repair bills because of botched maintenance projects, “Kewaunee not only didn’t have a major screw-up in repair work, it didn’t even seem to be confronting a major capital investment,” he said.

This is a turnaround because until recently, the life expectancy of reactors was growing. When the Nuclear Regulatory Commission began routinely authorizing reactors to run 20 years beyond their initial 40-year licenses, people in the electricity business began thinking that 60 was the new 40. But after the last few weeks, 40 is looking old again, at least in reactor years, with implications for the power plants still running, and for several new ones being built.

“They were intended to last for as long as they were commercially feasible,” said Robert E. Curry Jr., who was a member of the New York Public Service Commission from 2006 to 2012. But with low gas prices, additional costs imposed after the Fukushima Daiichi accident of March 2011, and “the general mistrust of nuclear by anyone who saw ‘The China Syndrome,’ ” commercial feasibility now is evidently shorter, he said.

Even if the economics do not result in retirements, they do mean setbacks. Exelon, the nation’s largest nuclear operator, set out a few years ago to invest $2.3 billion in its existing reactors and raise their generating capacity by 1,300 megawatts, a little more than one new reactor would generate. But after completing about a quarter of the plan, it dropped the rest, and said it would pay its suppliers $100 million in penalties for the cancellation, because the economics were no longer favorable.

Christopher M. Crane, the chief executive, said that Exelon had no plans now to retire any reactors but that the company would continue to review conditions, including low wholesale prices for electricity, to see if early shutdowns were needed.

Oyster Creek, an Exelon reactor in Forked River, N.J., is the oldest in the country, having opened in 1969. It received a 20-year license extension in 2010, but Exelon promised to shut it by the end of 2019 in exchange for an exemption from some rules governing the discharge of hot water from the plant. It might not make it to 2019, though. At San Onofre, the owners were faced with the need for a big new investment for repair, and calculated not only the price but the number of years of life remaining over which they could recoup their investment. The same could happen at Oyster Creek.

Two to watch are Vermont Yankee, in Vernon, just north of the Massachusetts border, and Indian Point, in Buchanan, N.Y., 30 miles up the Hudson River from New York City. The states of Vermont and New York are seeking to close them. If they remain profitable, the owner of all three units, Entergy, seems likely to fight tooth and nail to keep them open, but Vermont Yankee’s profitability does not seem certain. It could join plants like Maine Yankee, or Zion, near Chicago, in retirement and decommissioning.

Such is the fate of all old power plants. As the Nuclear Energy Institute, the industry’s main trade association, pointed out when San Onofre closed, of the power plant retirements since 2010, 41 percent were coal and 33 percent were natural gas. Ten percent were nuclear. Old power plants lead conditional existences; they may not survive new environmental rules or other circumstances that require expensive retrofits.

The difference is that gas plants continue to be built, and so do a few coal plants. There was a gap of 30 years in new nuclear plant construction, which ended this year, but only four plants, two twin-reactor installations, have broken ground. A fifth, left for dead in the 1980s, is being revived. While utilities in the last few years have announced plans for more than a dozen new reactors, beyond the five now under construction only another four or so seem possible in the next few years.

And all the others are getting older.

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H.P. Earnings Are Higher Than Expected

H.P. reported that net income fell 31 percent to $1 billion, or 55 cents a share, from the year-ago quarter. Revenue fell 10 percent, to $27.6 billion, H.P. said.

“We beat the upper end” of company projections for the quarter, Meg Whitman, H.P.'s chief executive, said in a statement accompanying the earnings. “I feel good about the rest of the year.”

The net income was above the expectations of Wall Street analysts, who mark their revenue and earnings projections based on nonstandard accounting. By those measures, H.P. had net income of 87 cents a share.

Analysts had projected H.P. would make 81 cents a share, on revenue of $28.12 billion, according to a survey of analysts by Thomson Reuters.

H.P., the world’s largest maker of personal computers and printers, has struggled for years with a declining market for PCs, less printer demand and turmoil in its executive ranks.

Ms. Whitman, who took over in September 2011, has said that fixing the company will be a five-year process and has described 2013 as a year of rebuilding before growth accelerates in 2014.

Euro Area Recession Is Expected to Deepen

The new forecasts stood in stark contrast with figures from the United States on Friday that showed that more new jobs were created in April than expected, which pushed the unemployment rate to a four-year low. While American job creation is still slower than in a typical recovery, the new data could ease concerns of a sharp slowdown in the U.S. economy.

In Europe, far from delivering relief, the outlook presented by Olli Rehn, the Union’s commissioner for economic and monetary affairs, stoked further concerns that unemployment risked becoming endemic and could eventually cause social upheaval.

Unemployment is expected to reach 11.1 percent across the European Union this year and hit 12.2 percent in the euro zone. It is expected to remain at those levels for much of 2014, according to the Union’s spring forecast, which was released Friday. That picture is distinctly worse compared with 2012, when 10.5 percent were without jobs across the Union and 11.4 percent in the euro area.

Given the fragmented structure of the 27-nation Union, economists and analysts say there are few real policy options for easing the situation any time soon.

“We are living through a very difficult process of adjustment following the financial crisis” and that “is having very unfortunate toll on employment,” Mr. Rehn said during a news conference. “In view of the protracted recession,” he said, “we must do whatever it takes to overcome the unemployment crisis in Europe.”

Mr. Rehn offered to give some countries longer to meet their budget targets. He also urged a quicker pace of economic liberalization in countries like France and said it was necessary to get credit flowing to households and businesses, especially in Southern Europe.

But analysts say remedies may be hard to find.

Unless the euro zone countries are willing to pool their debt and finances and engage in uniform economic policies — which is politically unlikely — the most effective medicine for the euro zone would be for Germany to stimulate its own economy to raise consumer demand for more of the goods sold by beleaguered nations in Southern Europe, said John Springford, a research fellow at the Center for European Reform, a research organization in London.

Another effective measure, he said, might be for Germany to drop its opposition to more direct lending by the European Central Bank to small and midsize companies in those countries.

“Relying less on exports, and more on domestic demand, would also be good for Germany as it’s starting to feel recessionary effects from the south,” Mr. Springford said. But, he acknowledged, “those steps would be very difficult politically for the government in Berlin to take.”

Nicolas Véron, a visiting fellow at the Peterson Institute for International Economics in Washington and a senior fellow at Bruegel, a research organization in Brussels, said he did not expect European banks to significantly regain confidence to start lending to small and midsize businesses until late 2014 at the earliest, when the E.C.B. is expected to take over supervision of the European Union’s biggest lenders.

“Credit allocation in Europe is clearly dysfunctional,” Mr. Véron said, “and that’s hugely serious because lending in Europe is so reliant on banks compared to the United States, where there are far more diverse sources of capital, like bond markets and nonbank intermediaries.”

On Thursday, the E.C.B. cut rates to a record low to do what it could to spur growth. Bond markets responded favorably, with Spanish 10-year yields falling below 4 percent Friday for the first time in a couple years, and Italian 2-year yields below 1 percent for the first time ever.

Haruhiko Kuroda Expected to Be Named Head of Bank of Japan

Haruhiko Kuroda, the current head of the Asian Development Bank, will be nominated to take over next month as the Japanese central bank’s governor, according to a governing-party lawmaker with knowledge of the plans.

Prime Minister Shinzo Abe has instructed officials of the governing Liberal Democratic Party to start negotiating with opposition parties to clear the way for Mr. Kuroda’s appointment, which must be approved by a divided Parliament, the lawmaker said. Mr. Abe is expected to submit his nomination to Parliament by the end of the week.

“This is a critical time for Japan’s economy, and we must avoid, at all costs, a failure to gain parliamentary approval for this appointment,” Mr. Abe told executives of the governing party Monday morning, according to NHK, the public broadcaster.

With Mr. Kuroda at its helm, the bank could take much bolder steps to kick-start economic growth. Mr. Kuroda, 68, has for years publicly criticized the Bank of Japan, saying it has not gone far enough to fight deflation and has urged the bank to adopt inflation targets and expand an asset-buying program to pump more funds into the economy.

Mr. Abe argues that aggressive monetary easing could make all the difference for Japan, which has struggled to grow amid persistent deflation, the damaging across-the-board decline in prices that has eroded profits, incomes, investment and consumption for almost two decades.

Expectations of moderate inflation — the government and the Bank of Japan have already made a joint commitment to aim for 2 percent — could encourage businesses to invest and consumers to spend, instead of hoarding cash. Mr. Abe’s government has also promised to promote growth through heavy government spending on infrastructure and other public works projects.

Mr. Kuroda would agree. In an interview with NHK this month, Mr. Kuroda blamed lack of an effective monetary policy for much of the country’s recent economic trouble.

“Japan alone has experienced deflation for 15 years, and whatever the causes, the main responsibility lies with the central bank,” Mr. Kuroda said. “It is not good for the global economy for Japan to remain mired in deflation and stagnation. It is imperative that we beat deflation and bolster economic growth.”

Still, the biggest fallout by far from adding money to the Japanese economy could be its effect on the yen. The currency has weakened more than 10 percent in the past three months as Mr. Abe has laid out his monetary agenda, prompting cries from some nations of currency manipulation.

Mr. Kuroda’s global experience could help Tokyo navigate that foreign criticism. From 1999 to 2003, Mr. Kuroda was Japan’s top currency diplomat as vice minister for international affairs at the powerful Japanese Finance Ministry. Since 2005, he has been president of the Asian Development Bank, an organization based in Manila with functions similar to those of the International Monetary Fund.

After news of Mr. Kuroda’s likely nomination, the yen again weakened and Tokyo stocks surged to their highest levels in more than four years, led by shares in export-focused companies.

Mr. Abe received a strong mandate to push a new economic agenda for Japan with a big electoral victory in December, which returned his party to power and gave him a second shot at the office of prime minister after a stint in 2006-7. Since then, his government has twisted the central bank’s arm to get it to set an inflation target and expand its purchases of assets from banks and other financial institutions.

The departing central bank governor, Masaaki Shirakawa, had argued that such policies would drive up government spending and exacerbate Japan’s public debt burden; the debt already amounts to more than twice the size of the economy. But Mr. Shirakawa and his supporters have been largely silenced by Mr. Abe’s electoral mandate. This month, Mr. Shirakawa said he would leave his post three weeks early, on March 19.

For economists and historians, Mr. Shirakawa leaves behind a less-than-noble legacy.

“Tolerating damaging deflation for so long was a crime,” Nicholas Smith, Japan strategist for CLSA Asia-Pacific Markets, said in a note.

Mr. Kuroda, a graduate of Tokyo University’s department of law, a training ground for top Japanese politicians and bureaucrats, has a master’s degree in economics from Oxford University and speaks fluent English. Despite his being a lifetime bureaucrat, he has been unusual in publicly voicing criticism of Japanese monetary policies, much which he lays out in his 2005 book, “Success and Failure in Fiscal and Monetary Policy.”

He beat out a fellow former senior Finance Ministry official, Toshiro Muto, who had strong backing among both bureaucrats and local politicians but lacks Mr. Kuroda’s top-level global contacts. Mr. Muto was also viewed as being more cautious than Mr. Kuroda on monetary policy.

Kikuo Iwata, a professor at Gakushuin University in Tokyo and another vocal critic of the central bank, is set to be tapped for one of the two deputy governor spots, according to local news reports. Mr. Iwata is also the author of several books criticizing the central bank, including “Stop Deflation, Now” and “Is the Bank of Japan Really Trustworthy?”

Hiroshi Nakaso, currently the Bank of Japan’s executive director for international affairs, is set to be promoted to the second deputy governor spot, according to NHK. Mr. Nakaso, who worked with his counterparts in other countries on contingency plans like currency swap agreements during the global financial crisis, has since maintained that the yen is overvalued.

Media Decoder Blog: Tribune, Bankruptcy Over, Is Expected to Sell Assets

 6:12 p.m. | Updated

Analysts and prospective buyers are preparing for horse trading to begin over the Tribune Company’s newspapers now that the company, whose holdings include The Los Angeles Times and The Chicago Tribune, has emerged from bankruptcy protection.

Tribune, which completed its bankruptcy paperwork on Monday, has not announced the sale of any assets, but it is likely to do so in the next several months so it can streamline its business, said Reed Phillips, managing partner of DeSilva & Phillips, a media banking firm.

The troubled state of the newspaper industry makes those assets most likely to be sold, he added. Less clear, however, is whether the company will sell them all at once or by region, for example selling The Chicago Tribune with Chicago magazine.

“The company is too large and complex right now, coming out of bankruptcy,” Mr. Phillips said. “What’s needed is a more focused strategy.”

Aaron Kushner, chief executive of Freedom Communications and publisher of The Orange County Register in California, confirmed on Monday that he was eager to buy Tribune’s newspapers. He would not say whether he had had any specific conversations with Tribune Company executives.

He said that from what he had gleaned from bankruptcy court filings and public pension documents, it seemed likely that Tribune would sell its newspapers as a group. That is because the company has such enormous and complex pension obligations and corporate overhead that it would be difficult to untangle them and sell properties individually.

“We’re interested in all of the papers, though obviously, from an outside perspective, we have not seen the numbers,” Mr. Kushner. “If papers are sold, someone has to be responsible for the pensions.”

The company’s reorganization plan was approved in July by the United States Bankruptcy Court in Delaware. It received final approval from the Federal Communications Commission in November.

The announcement on Monday ended a four-year process for the company. Its assets were tied up in court while the media industry continued its digital transformation. In a letter to employees, Eddy Hartenstein, the company’s chief executive, acknowledged that the last four years “have been a challenging period.”

“You have been resilient, dedicated to serving the company, our customers and your fellow employees,” he said. ”You are what sets Tribune apart from our competitors.”

The company also announced a seven-member board. The directors include Mr. Hartenstein and Peter Liguori, a former chief operating officer of Discovery Communications, who is expected to be named chief executive. Bruce Karsh, a founder of Oaktree Capital Management, which is a major shareholder in the company, also sits on the board, as does Ross Levinsohn, a former interim chief at Yahoo.

Tribune said it expected to resolve details about board members’ responsibilities at its first meeting in the next few weeks. The company is emerging from bankruptcy protection with a $300 million loan to finance its continuing operations, as well as a $1.1 billion loan to finance its reorganization. According to a company statement, Tribune plans to give former creditors 100 million shares of new class A common stock and new class B common stock.

The end of the bankruptcy has led to plenty of speculation about who might buy Tribune’s newspapers, with names like Rupert Murdoch and David Geffen floated as contenders. Mr. Phillips said he was skeptical that Mr. Murdoch would be a serious bidder because his company had so much else on its plate.

“I would think they would take a look,” said Mr. Phillips. “But when it comes to stepping up and making a substantial offer, I would be surprised. They’re already splitting off the publishing business from the entertainment business.”

He said that Mr. Geffen, too, would probably not acquire Tribune properties “unless the price is really attractive, because he’s not someone who has run a newspaper company previously. So I think it will be more of a challenge. The price he’s probably willing to pay based on advice from his advisers is going to be lower than what someone else is willing to pay.”

Mr. Kushner praised Tribune’s board and said he expected that “one of the first things that they’ll be trying to figure out is how the different parts of the Tribune company really work well together or separately.”

Mr. Kushner, who bought The Orange County Register last summer, said he was focused on buying large metropolitan newspapers. He said that while Tribune newspapers appeared to be profitable, how they would remain profitable was unclear, as with many newspapers.
At The Register, Mr. Kushner said, he tried to increase revenue by strengthening relationships with subscribers.

For example, he said, the newspaper gave its readers more value by increasing its pages 40 percent in the last year. It also spent $12.4 million sending $100 checks to its subscribers that they could in turn make payable to favorite local nonprofit groups. He said enhancing a paper’s relationship with subscribers would help drive subscriptions and, ultimately, advertising.

“Our basic view is that we add more value,” said Mr. Kushner. “This is the only path that we can have revenue grow.”

Settlement Expected With Banks Over Home Loans

Under the settlement, a significant amount of the money, $3.75 billion, would go to people who have already lost their homes, making it potentially more generous to former homeowners than a broad-reaching pact in February between state attorneys general and five large banks. That set aside $1.5 billion in cash relief for Americans.

Most of the relief in both agreements is meant for people who are struggling to stay in their homes and need the banks to reduce their payments or lower the amount of principal they owe.

The $10 billion pact would be the latest in a series of settlements that regulators and law enforcement officials have reached with banks to hold them accountable for their role in the 2008 financial crisis that sent the housing market into the deepest slump since the Great Depression. As of early 2012, four million Americans had been foreclosed upon since the beginning of 2007, and a huge amount of abandoned homes swamped many states, including California, Florida and Arizona.

Federal agencies like the Securities and Exchange Commission and the Justice Department are continuing to pursue the banks for their packaging and sale of troubled mortgage securities that imploded during the financial crisis.

Housing advocates were largely unaware of the latest rounds of secret talks, which have been occurring for roughly a month. But some have criticized the government for not dealing more harshly with bankers in light of their lax standards for making loans and packaging them as investments, as well as their problems with modifying troubled loans and processing foreclosures.

A deal could be reached by the end of the week between the 14 banks and the nation’s top banking regulators, led by the Office of the Comptroller of the Currency, four people with knowledge of the negotiations said. It was unclear how many current and former homeowners would receive money or when it would be distributed.

Told on Sunday night of the imminent settlement, Lynn Drysdale, a lawyer at Jacksonville Area Legal Aid and a former co-chairwoman of the National Association of Consumer Advocates, said: “It’s certainly a victory for consumers and could help entire neighborhoods. But the devil, as they say, is in the details, and for those people who have had to totally uproot their lives because of eviction it may still not be enough.”

In recent weeks within the upper echelons of the comptroller’s office, pressure was mounting to negotiate a banner settlement with the banks, according to people with knowledge of the matter. The reason was that some within the agency had started to realize that a mandatory review of millions of bank loans was not yielding meaningful examples of the banks’ wrongfully evicting homeowners who were current on their payments or making partial payments, according to the people.

Representative of banking regulators did not return calls for comment on Sunday.

The biggest action against the banks for foreclosure-related abuses has been the $26 billion settlement between the five largest mortgage servicers and the state attorneys general, Justice Department and the Department of Housing and Urban Development after allegations arose in 2010 that bank employees were churning daily through hundreds of documents used in foreclosure proceedings without properly reviewing them for accuracy.

The same banks in that settlement — JPMorgan Chase, Bank of America, Wells Fargo, Citigroup and Ally Financial — are included in the current negotiations.

Under the terms of the settlement being negotiated, $6 billion would come from banks to be used for relief for homeowners, including reducing their principal, helping them refinance and donating abandoned homes, the people said.

The proposed settlement would also halt a separate sweeping review of more than four million loan files that the comptroller’s office and the Federal Reserve required the banks undertake as part of a consent order in April 2011.

Under the terms of the order, the 14 banks had to hire independent consultants to pore through the loan records to determine whether the banks illegally charged fees, forced homeowners to take out costly insurance or miscalculated loan payment amounts. Consultants initially estimated that each loan would take about eight hours, at a cost of up to $250 an hour, to go through.

The costs of the reviews have ballooned, though, according to people with knowledge of the reviews, in part because each loan file is taking up to 20 hours to review. Since its inception, the reviews have cost the banks about $1.5 billion, according to those people.

Pressure to reach a settlement with the banks has been building, particularly within the Office of the Comptroller of the Currency, amid widespread frustration that the banks’ mandatory review of loan files was arduous and expensive, and would not yield promised relief to homeowners, according to five former and current banking regulators.

In private meetings with top bank executives, these people said, regulators have admitted that the reviews had gone awry. At one point this month, an official from the comptroller’s office said the agency had “miscalculated” the scope and requirements of the reviews, according to the people with knowledge of the negotiations.

When the settlement discussions heated up this month, some banking executives said they felt they would be vindicated by the regulators. These executives said that they had raised objections to the reviews early on, but those concerns were largely dismissed by regulatory officials, according to the people with knowledge of the negotiations.

Instead, officials from the comptroller’s office, these people said, have used the loan reviews as a negotiating tool, telling banks that they can either sign on to a large settlement or be forced to pay billions over several more years until the consultants finish the reviews.

When regulators approached the banks to broach a settlement this month, they met first with Wells Fargo and proposed that the banks pay $15 billion, according to the people familiar with the discussions. After negotiations, though, the regulators agreed to $10 billion.

All of the 14 banks are expected to sign on.

DealBook: UBS Expected to Pay At Least $1 Billion to Settle Libor Case

Michael Buholzer/ReutersAxel Weber, the chairman of UBS, which is in final negotiations with American, British and Swiss authorities.

10:00 p.m. | Updated

Federal prosecutors are close to securing a guilty plea from a UBS subsidiary at the center of a global investigation into interest rate manipulation, the first big bank to agree to criminal charges in more than a decade.

UBS is in final negotiations with American, British and Swiss authorities to settle accusations that its employees reported false rates, a deal in which the bank’s Japanese unit is expected to plead guilty to a criminal charge, according to people briefed on the matter who spoke of private discussions on the condition of anonymity. Along with the rare admission of criminal wrongdoing at the subsidiary, UBS could face about $1 billion in fines and regulatory sanctions, the people said.

The steep penalty, a surprise given the bank’s cooperation in the case, would represent the largest fine to date in the rate-rigging investigation. In June, the British bank Barclays agreed to pay $450 million to settle accusations that it influenced crucial benchmarks.

The settlement with UBS, which is based in Switzerland, could come as soon as Monday, the people briefed on the matter said. These people cautioned that the bank’s board had not yet approved the deal and it could still fall apart.

By pushing for a guilty plea, the Justice Department may be signaling a new aggressive stance.

Authorities have been reluctant to indict big banks, fearful of the potential for job losses and the ripple effect through the broader economy. If a bank pleads guilty to a crime, the case can be tantamount to a death sentence because the institution may lose its charter to operate.

With UBS, federal prosecutors are trying to strike a balance. By levying a charge against the subsidiary, authorities send a powerful message, but stop far short of putting the company out of business.

Prosecutors decided against indicting HSBC over money laundering, concerned over the repercussions to the financial system. Instead, HSBC, the British bank, agreed on Monday to pay a record $1.9 billion in penalties.

On Thursday, Senator Charles E. Grassley of Iowa, the top Republican on the Senate Judiciary Committee, sent a letter to Eric H. Holder Jr., the attorney general, criticizing the Justice Department for an “inexplicable unwillingness to prosecute and convict those responsible for aiding and abetting drug lords and terrorists,” referring in part to the HSBC case. Mr. Grassley called the fine “hardly even a slap on the wrist,” given HSBC’s profit.

But the UBS case offers authorities a long-awaited moment to criminally punish a big bank. While the public is still simmering over the lack of prosecutions stemming from the financial crisis, the actions against UBS could help damp concerns that the world’s largest and most interconnected banks are too big to indict.

The Justice Department’s criminal division, which arranged the guilty plea with the Japanese subsidiary, could also strike a nonprosecution agreement with the parent company, the people briefed on the matter said. The deal will force UBS to continue cooperating with the wider rate manipulation case.

In a statement, a UBS spokeswoman said the bank continued “to work closely with various regulatory authorities to resolve issues relating to the setting of certain global benchmark interest rates. As we are in active discussions with these authorities, we cannot comment further.” The authorities leading the case — the Justice Department, the Commodity Futures Trading Commission, the Financial Services Authority of Britain and the Swiss Financial Market Supervisory Authority — declined to comment.

As the UBS investigation comes to a close, global authorities are fast-tracking several civil and criminal cases in connection to the manipulation of important benchmarks, including the London interbank offered rate, or Libor. Regulators and prosecutors have uncovered evidence that points to a systemic problem with the rate-setting process, which underpins trillions of dollars of financial products like mortgages, student loans and credit cards.

Authorities contend that some bank employees reported false rates to squeeze out extra trading profits and deflect concerns about their health during the financial crisis.

The fallout from the Libor case could be significant. The Royal Bank of Scotland has indicated that it could announce penalties before its next earnings release in a couple of months. Deutsche Bank also has set aside money to cover potential fines. In all, the investigation has ensnared more than a dozen big banks.

The push for criminal charges at UBS caught the bank off guard.

After settling a tax evasion case in 2009, the bank was eager to cooperate with authorities and gain leniency in the Libor case. UBS, for example, reached a conditional immunity deal with the antitrust arm of the Justice Department, which was supposed to protect the bank from criminal prosecution under certain conditions. But the deal did not extend to the Justice Department’s criminal division, giving authorities some leeway to take action.

With its reputation and profits on the line, the bank moved to dissuade the criminal division from pursuing charges. Bank officials have been meeting with authorities in Washington in a last-ditch effort to influence the outcome, according to the people briefed on the matter.

Eventually, the bank agreed to the broad contours of a settlement that included a guilty plea by the Japanese subsidiary. The bank is still negotiating the final elements of the deal.

Prosecutors are also expected to charge a former UBS trader who featured prominently in the investigation. On Tuesday, Britain’s Serious Fraud Office arrested three men in connection with the Libor case, including Thomas Hayes, a 33-year-old former trader at UBS and Citigroup, according to people with knowledge of the matter. The three men, which also included two people who worked at the British brokerage firm R P Martin, were released on bail the same day.

A lawyer for Mr. Hayes could not be located.

Mr. Hayes is expected to be a central figure in the case against UBS. The UBS settlement is likely to include accusations that Mr. Hayes and other employees colluded with traders at other banks to influence the direction of interest rates, as part of a broader scheme to increase their profits. Some UBS traders have been suspended or fired over the matter.

Mr. Hayes built his reputation as an interest rates trader at UBS. He worked at the Tokyo office of UBS from about 2006 to 2009 before departing for Citigroup. Citigroup fired Mr. Hayes the next year, for approaching a trading desk about influencing the yen-denominated Libor rates, and the bank reported his actions to regulators.

The role of Japanese operations came to the forefront last December when the country’s regulator sanctioned both UBS and Citigroup. Local regulators discovered that traders at the banks had tried to manipulate the Tokyo interbank offered rate, or Tibor, a main benchmark for borrowing in Japan.

The efforts to rig the rate were “unjust and malicious, and could undermine the fairness of the markets,” the Securities and Exchange Surveillance Commission of Japan said in a statement when recommending the nonfinancial penalties against UBS.

UBS has a big presence in Japan. The bank has more than 1,100 employees in the country, spread across its major business lines.

The guilty plea could have collateral consequences for the unit. For one, the guilty plea delivers a painful blow to its reputation, securities experts say. Depending on the details of the case, the group could also be subjected to an independent monitor and face some limitations on its business.

Charlie Savage and Hiroko Tabuchi contributed reporting.

Your Money: Medicare Expected to Pay More Costs of Chronic Conditions

It didn’t, for many years. But after the settlement of a landmark class-action lawsuit this week, Medicare will soon begin paying more often for physical, occupational and other therapies for large numbers of people with certain disabilities and chronic conditions like Alzheimer’s disease, multiple sclerosis and Parkinson’s disease.

The two questions patient advocates were left with this week were just how many people may benefit from the clarification of the regulations and how quickly.

The settlement, if approved by a federal judge, would end a lawsuit that accused Medicare of allowing the contractors that process its claims to use a so-called improvement standard over the last few decades. To the Center for Medicare Advocacy and the many other organizations that joined the suit, that standard seemed to call for cutting off physical, occupational and speech therapy and some inpatient skilled nursing for many people who had reached a plateau in their treatment.

Medicare is supposed to pay for reasonable treatment of an illness or injury as long as a doctor has prescribed it. For the sort of in-home care that this week’s settlement may affect the most, a doctor must have certified that you are, in fact, homebound and have prescribed treatment that only a skilled practitioner can provide. (The “skilled practitioner” rule keeps Medicare from paying for assistance with everyday activities like bathing and dressing.)

But for people who advocate for patients with particular diseases, having treatment cut off for lack of improvement was intensely frustrating.

“The idea that you would have to show improvement when you have a degenerative disease is blatantly absurd,” said Amy Comstock Rick, chief executive of the Parkinson’s Action Network. In her world, holding steady or degenerating more slowly than you might otherwise is often the definition of success.

Over the years, however, the Medicare contractors that process claims started to see things differently than patients and many health care professionals. And for family members of the sick, the denial could be quite abrupt.

“It was like falling off a cliff in that there was no longer any access to Medicare to help with even small, maintenance types of things, like range of motion,” said Maureen Conte, a Falmouth, Mass., scientist, recalling the six years her father lived after having a stroke. “Multiple times he was back in the hospital for things that I thought were preventable.”

Many other patients, however, may not have even received certain kinds of treatment because their doctors figured that prescribing it would be pointless. “Once it becomes clear what Medicare will and will not pay for, you end up changing your practice pattern based on what it covers,” said Peter Thomas, a lawyer in private practice who is the outside counsel for the American Academy of Physical Medicine and Rehabilitation.

The settlement agreement takes pains not to describe itself as an expansion of Medicare coverage. But it does promise that the Centers for Medicare and Medicaid Services will revise the manuals their contractors use to make clear that coverage “does not turn on the presence or absence of a beneficiary’s potential for improvement from the therapy but rather on the beneficiary’s need for skilled care.”

Moreover, the settlement specifies that skilled care can qualify for Medicare coverage even if it merely maintains someone’s current condition or prevents or slows further deterioration. Certain patients who have had claims rejected will be able to resubmit them.

Representatives of several patient advocacy groups expressed hope this week that Medicare would soon pay for many forms of therapy that it did not always cover before.

For people with cerebral palsy, physical therapy to maintain muscle mass is one possibility. For multiple sclerosis patients, there may be more approval for treatments for spasticity and gait training to prevent falls.

Samsung Expected to Reach End of Record Run

SEOUL — Samsung Electronics reported a record quarterly profit of 8.1 trillion South Korean won, nearly double the figure of last year, as strong sales of high-end televisions and Galaxy smartphones more than offset reduced orders for chips and screens from Apple, its main rival and leading customer.

Most analysts, however, expect a run of four record quarters — the most recent worth $7.3 billion — to end in December, as the South Korean group, one of the world’s leading makers of smartphones, televisions and memory chips, increases its marketing, countering the new Apple iPhone 5 and other products in a crowded smartphone market, valued at $200 billion globally.

Credit Suisse Group, an international financial services company, estimated that Samsung might have spent about $2.7 billion on marketing in July to September alone during the Olympic Games in London and on Galaxy promotions.

The expected record profit of 28 trillion won would mean higher payouts for performance to many of Samsung’s 206,000 staff members early next year. And Samsung may have to set money aside this quarter if it fails to overturn an appeal of a U.S. court verdict that awarded more than $1 billion in damages to Apple on Aug. 24 for patent infringements by Samsung.

“Fourth-quarter profit will be pressured by one-off expenses: performance payouts and some $1 billion in legal provisioning relating to the Apple litigation,” said Lee Sun-tae, an analyst at NH Investment & Securities.

“Excluding those, core earnings will remain solid, and a swing factor is how much Samsung spends on marketing.”

Analysts expect earnings to decline until the second quarter of next year as a slump in computer sales and a weak global economy sap demand for chips and electronics products.

“The biggest risk for Samsung is competitive product lineups from its rivals, such as the iPhone 5,” said Byun Han-joon, an analyst at KB Investment & Securities.

“Because handsets drive most of its profits, one misstep in handsets could result in losses for the whole Samsung group,” Mr. Byun said.

Profit at Samsung’s mobile division is likely to have more than doubled in the July-to-September period to about 5 trillion won as smartphone shipments topped 58 million, including as many as 20 million of the Galaxy S III.

Ahead of full quarterly results due Oct. 26, Samsung estimated that its July to September operating profit jumped to 8.1 trillion won from a year ago, beating an average forecast of 7.6 trillion won in a survey of analysts.

Strong handset sales made up for reduced profits from its chip business. Prices of dynamic random access memory, or DRAM, chips — used in computers and mobile phones — dropped 14 percent in the September quarter. Such chips now trade below what it costs most contract manufacturers to make them and will squeeze near-term earnings, analysts say. Tablets and smartphones, the real growth areas, use far smaller memory storage.

Samsung is expected to invest less in chips next year because of the drop in demand, which could be bad news for equipment manufacturers. Kwon Oh-hyun, who became chief executive of Samsung in June, said late last month that the group had yet to complete its 2013 investment plans.

Samsung is strengthening its product lineup, with its latest phone-tablet, the Galaxy Note, expected to go on sale in the United States this month; its ATIV smartphones, which run on Microsoft’s new Windows system, will compete with Nokia’s Lumia series.