Officials Continue Sparring Over Pa.'s Gay-Marriage Ban

Pennsylvania Attorney General Kathleen Kane has swung back at the Office of General Counsel after getting official word from the OGC that it would take up the defense of the state's law banning same-sex marriage since Kane had announced last month that she wouldn't.

Wall Street Closes Lower on Uncertainty After Fed Officials’ Views

Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, told Market News International in an interview that the Fed could begin trimming the size of the stimulus program as soon as September, but might wait longer if the expected economic growth in the year's second half fails to materialize.

Later in the session, Chicago Fed President Charles Evans echoed the sentiment when he said the central bank will probably decrease the program later this year and could do so as early as next month, depending on the economic data.

Fed officials "are all hedging themselves, which is why the market continues to just be a little bit confused and why it is going to churn," said Ken Polcari, director of the NYSE floor division at O'Neil Securities in New York.

"There is really no reason at the moment for the market to go higher because it is still too unclear."

One catalyst for Monday's downturn in the Dow and the S&P 500 was provided by Richard Fisher, president of the Federal Reserve Bank of Dallas. He said he supported scaling back the central bank's stimulus next month unless economic data takes a turn for the worse.

The S&P 500's decline on Tuesday was its biggest fall since June 24 as investors continued to take profits from the recent rally that drove the Dow Jones industrial average and the benchmark S&P to back-to-back record closing highs late last week.

The Dow Jones industrial average fell 93.39 points or 0.60 percent, to end at 15,518.74. The S&P 500 declined 9.77 points or 0.57 percent, to 1,697.37. The Nasdaq Composite dropped 27.182 points or 0.74 percent, to 3,665.77.

Earlier, the Dow fell as low as 15,473.40, while the S&P 500 touched a session low of 1,693.29, and the Nasdaq hit an intraday low of 3,654.672.

The S&P 500 has risen for five of the past six weeks, gaining more than 7 percent over that period.

Volume was light for the second straight day, with about 5.5 billion shares traded on the New York Stock Exchange, NYSE MKT and Nasdaq, below the daily average of 6.36 billion. The thin volume exaggerated the market's swings.

Monday marked the lowest volume for a full-day session so far this year. With major U.S. economic data like the nonfarm payrolls report and earnings from bellwethers out of the way, volume is expected to be light throughout the week.

Walt Disney Co posted a slightly higher quarterly profit that beat Wall Street's expectations, even though its movie studio earnings declined, in results released after the closing bell. Disney's stock fell 1 percent to $66.35 in extended-hours trading. The stock ended regular trading at $67.05, up 1.6 percent.

During the regular session, the biggest drag on the Dow was International Business Machines Corp. The stock dropped 2.3 percent to $190.99 after Credit Suisse cut its rating to "underperform" from "neutral," saying growth would be a challenge for IBM in the future. Credit Suisse also cut its price target on the Dow component by $25 to $175. IBM topped the list of the Dow's 10 worst-performing stocks.

Bank of America shares declined 1.1 percent to close at $14.64 after the U.S. Justice Department and the Securities and Exchange Commission filed civil lawsuits against the bank for what government lawyers said was a fraud on investors involving $850 million of residential mortgage-backed securities. The stock was among the Dow's 10 bottom performers.

The S&P financial index lost 0.9 percent.

Retailers' shares were among the day's biggest losers. American Eagle Outfitters shares tumbled 12 percent to $17.57 a day after the retailer said its second-quarter profit would be hurt by weak sales and margins. A number of analysts downgraded the stock. The S&P retail index slipped 0.4 percent.

Of the 418 companies in the S&P 500 that had reported earnings for the second quarter through Tuesday morning, Thomson Reuters data showed that 67.5 percent have topped analysts' expectations, in line with the average beat over the past four quarters. On the revenue side, the data showed that 54 percent have reported revenue above estimates, more than in the past four quarters but below the historical average.

Declining stocks outnumbered advancing ones on the NYSE by a ratio of about 3 to 1, while on the Nasdaq, more than two stocks fell for every one that rose.

(Editing by Jan Paschal)

New Computer Attacks Come From Iran, Officials Say

The targets have included several American oil, gas and electricity companies, which government officials have refused to identify. The goal is not espionage, they say, but sabotage. Government officials describe the attacks as probes looking for ways to seize control of critical processing systems.

Investigators began looking at the attacks several months ago, and when the Department of Homeland Security issued a vaguely worded warning this month, a government official told The New York Times that “most everything we have seen is coming from the Middle East.”

Government officials and outside experts on Friday confirmed a report in The Wall Street Journal that the source of the attacks had been narrowed to Iran. They said the evidence was not specific enough to conclude with confidence that the attacks were state-sponsored, but control over the Internet is so centralized in Iran that they said it was hard to imagine the attacks being done without government knowledge.

While the attackers have been unsuccessful to date, they have made enough progress to prompt the Homeland Security warning, which compared the latest threat to the computer virus that hit Saudi Aramco, the world’s largest oil producer, last year. After investigations, American officials concluded that the Aramco attack, and a subsequent one at RasGas, the Qatari energy company, were the work of Iran.

Taken together, officials say, the attacks suggest that Iran’s hacking skills have improved over the past 18 months. The Obama administration has been focused on Iran because the attacks have given the Iranian government a way to retaliate for tightened economic sanctions against it, and for the American and Israeli program that aimed similar attacks, using a virus known as Stuxnet, on the Natanz nuclear enrichment plant.

That effort, code-named Olympic Games, slowed Iran’s progress for months, but also prompted it to create what Iran’s Islamic Revolutionary Guards Corps calls a cyber corps to defend the country.

This week Iran denied being the source of any attacks, and said it had been a victim of American sabotage. In a letter to the editor of The Times, responding to a May 12 article that reported on the new attacks’ similarity to the Saudi Aramco episode, Alireza Miryousefi, the head of the press office of the Iranian mission to the United Nations, wrote that Iran “never engaged in such attacks against its Persian Gulf neighbors, with which Iran has maintained good neighborly relations.”

“Unfortunately, wrongful acts such as authorizing the 2010 Stuxnet attack against Iran have set a bad, and dangerous, precedent in breach of certain principles of international law,” he wrote.

American officials have not offered any technical evidence to back up their assertions of Iranian authorship of the latest attacks, but they describe the recent campaign as different from most attacks against American companies — particularly those from China — which quietly siphon off intellectual property for competitive purposes.

The new attacks, officials say, were devised to destroy data and manipulate the machinery that operates critical control systems, like oil pipelines. One official described them as “probes that suggest someone is looking at how to take control of these systems.”

The White House would not confirm that Iran was the source, but Laura Lucas, a spokeswoman for the National Security Council, said that “mitigating threats in cyberspace, whether theft of intellectual property or intrusions against our critical infrastructure” was a governmentwide initiative and that the United States would consider “all of the measures at its disposal — from diplomatic to law enforcement to economic — when determining how to protect our nation, allies, partners, and interests in cyberspace.”

In the past, government officials have privately warned companies under threat. But Homeland Security was able to issue a broader warning because of an executive order, signed in February, promoting greater information sharing about such threats between the government and private companies that oversee the nation’s critical infrastructure.

An agency called ICS-Cert, which monitors attacks on computer systems that run industrial processes, issued the warning. It said the government was “highly concerned about hostility against critical infrastructure organizations,” and included a link to a previous warning about Shamoon, the virus used in the Saudi Aramco attack last year.

That attack prompted Leon E. Panetta, then defense secretary, to warn of a “cyber-Pearl Harbor” if the United States did not take the threat seriously.

Saudi Aramco and RasGas both said that the attackers had failed in their efforts to infiltrate their oil production systems.

Government officials also say Iran was the source of a separate continuing campaign of attacks on American financial institutions that began last September and has since taken dozens of American banks intermittently offline, costing millions of dollars. But that attack was a less sophisticated “denial of service” effort.

Jeff Moss, chief security officer at the Internet Corporation for Assigned Names and Numbers, the private body that oversees the basic design of the Internet, said: “For the last year, Iran has been focused on disrupting financial institutions’ Web sites. If they are going after energy, and opening a multiprong front, at what point does it cross from annoyance to a threshold?”

German Officials Welcome Offshore Tax Havens Leak

“I am pleased about these reports,” Finance Minister Wolfgang Schäuble said on German radio.

Berlin is hoping the disclosures will provide some leverage in the country’s efforts to drum up support for its long-running fight against international financial systems that make it easy for the wealthy to hide their money.

Germany has lobbied for years within international organizations, including the Group of 20 and the Organization for Economic Cooperation and Development, to clearly define tax havens in an effort to pressure such jurisdictions to fight tax avoidance and comply with money-laundering statutes and other measures aimed at dirty money. But the efforts have been hampered by reluctance among some of its international partners, including some within the European Union, that do not share the German sense of outrage.

“I think that such things as have been made known will increase the pressure internationally, and we will be able to increase the cooperation with those who have been more reticent,” Mr. Schäuble said in an interview with Deutschlandfunk radio.

He was among those who made sure that Cyprus, the tax haven that received a bailout last month, would impose levies on its largest depositors in exchange for the European Union’s support. “We don’t like this business model, and we hope it is not successful,” Mr. Schäuble said. “And when it becomes insolvent, as in Cyprus, they can’t expect it to keep being financed.”

But the information that has trickled out has also tarnished German banks, and clearly the German authorities hoped to use the leak to gain ground in their own struggle to bring tax evaders to justice. Many Germans are listed among the wealthy in the data dump that was obtained by the International Consortium of Investigative Journalists, based in Washington, and shared with select news media outlets around the globe, including two in Germany.

Economic justice has been a hot topic in Germany. The nation’s sense of social justice is strong, and the government has gone to great lengths to obtain information about its wealthiest residents who sneak money into Switzerland or Liechtenstein in order to avoid the country’s hefty income tax, which can be as high as 45 percent.

German banks, too, may feel the pressure from the release of the information, which states that international financial institutions have “aggressively worked” to help wealthy clients use offshore banking facilities in places like the British Virgin Islands. Deutsche Bank, Germany’s largest lender, vigorously defended the legality of its management services and insisted that clients were advised to properly report all of their taxes.

Mr. Schäuble conceded that the information in the report was not necessarily evidence of wrongdoing. He nevertheless called for the German news outlets with access to the information to make it available to the authorities.

The leaked records reported on Thursday include data mainly from the British Virgin Islands, the Cook Islands and Singapore. Not all of those named necessarily have secret bank accounts. Some only conducted business through companies they control that are registered offshore.

Immigration officials want RI lawsuit dismissed

PROVIDENCE, R.I. (AP) - Federal and state officials are asking a federal judge to dismiss a lawsuit by a North Providence woman who says she was illegally detained as a possible illegal immigrant.

Fed Officials Debate Bank’s Losses Once Economy Mends

When the economy grows stronger, the Fed plans to sell some of its vast holdings of Treasury and mortgage-backed securities. The Fed also plans to pay banks to leave some money on deposit with it to limit the pace of new lending.

And that could prove an awkward combination. The Fed faces the possibility of large losses as it sells off securities, which could force the central bank to suspend annual payments to the Treasury Department for the first time since the 1930s, even as it would be increasing the amounts paid to the banking industry for its cash holdings at the Fed to control inflation.

“That sounds like a recipe for political problems,” said James Bullard, president of the Federal Reserve Bank of St. Louis. He described the predicament as one reason the Fed might consider limiting its plans for additional asset purchases.

But Eric S. Rosengren, president of the Federal Reserve Bank of Boston, said that concerns about potential losses needed to be weighed against the benefits of asset purchases. The Fed holds almost $3 trillion in Treasuries and mortgage bonds, and it is adding about $85 billion a month in an effort to cut unemployment.

Mr. Rosengren, a leading advocate of the purchases, said Boston Fed research showed asset purchases this year could help create about 400,000 new jobs.

“That’s what the Federal Reserve should really be caring about, what’s happening with the dual mandate with and without” the asset purchases, Mr. Rosengren said. “When I think about the costs, I have to weigh that against the benefits,” he said at the US Monetary Policy Forum in New York on Friday.

By law, the Fed sends most of its profits to the Treasury, and in recent years those profits have soared as the Fed has collected interest on its investments. Last year, the central bank contributed $89 billion to the public coffers — essentially refunding a significant portion of the federal government’s annual borrowing costs.

The purpose of the investment portfolio is to hold down borrowing costs for businesses and consumers. As the economy revives, the Fed has said it will begin selling some of those holdings. But it faces potential losses on those sales because interest rates would be rising. Security prices, which move inversely to rates, would be falling, and the government would be issuing new debt at the higher rates, making the low-yield bonds that the Fed holds less valuable.

Estimating the potential losses requires a wide range of assumptions on Fed policy, economic growth and interest rates. A Fed analysis published last month, which assumed that interest rates rose to 3.8 percent later this decade, estimated that the central bank might record losses of $40 billion and suspend contributions to the Treasury for four years beginning in 2017. If rates rose by another percentage point, however, the analysis estimated that losses would triple. An independent analysis published on Friday foresaw losses of around $20 billion and a suspension of payments for only three years.

The Fed can afford to lose money because it can simply print more. It would record a liability, and pay down the debt as profits rebounded.

But there are signs that the Fed’s political opponents would seize on any losses as evidence of economic malpractice. And such that criticism could come at a vulnerable moment: central banks are never popular when they are raising interest rates.

Representative Jim Jordan, an Ohio Republican, cited the potential losses in an open letter this week to the Fed chief, Ben S. Bernanke, requesting more information on what he called “the potentially devastating consequences from any unwind.”

Jerome H. Powell, a Fed governor, insisted Friday that the central bank would not allow its course to be influenced by such political pressure.

“We’re independent for a reason,” he said. “Congress has given us a job to do.”

Some supporters of current Fed policy also argue that an economic revival would inoculate the central bank against criticism, in part because the government’s coffers would be filling even without the Fed’s contributions.

But Frederic S. Mishkin, a Columbia economist and one of the authors of the independent analysis of the Fed’s potential losses, said that was wishful thinking.

“Politicians have very short memories,” said Professor Mishkin, a former Fed governor. “They’re going to focus very much on the fact that the Fed is no longer pulling its weight in terms of producing remittances for the federal government.”

Philadelphia Officials Preparing for 'Messy' Election Day

As Pennsylvania?s voter identification law goes into effect Tuesday ? without enforcement of its key provision after a Commonwealth Court decision last month ? Philadelphia city officials put out the message that while judges of election can ask for photo IDs, non-first-time voters can?t be required to present IDs in order to vote.

DealBook: 2 More Officials Plan to Leave the S.E.C.

Mark Wilson/Getty ImagesRobert W. Cook, the S.E.C.’s director of trading and markets, at a Senate panel earlier this year.

The exodus at the Securities and Exchange Commission is continuing.

Two top S.E.C. officials — Mark D. Cahn, the general counsel, and Robert W. Cook, the director of trading and markets — plan to leave, the agency said on Wednesday. The two join Meredith Cross, the S.E.C’s director of corporate finance, whose departure was announced on Tuesday.

The departures come after Mary L. Schapiro announced her resignation as chairwoman last week, after four years leading the agency. Elisse B. Walter, a Democratic commissioner at the agency, will take the reins, but her successor is expected to be named in the near future.

Under Mr. Cahn’s watch, the S.E.C. developed a program to reward whistle-blowers who provided useful information. Mr. Cahn, who has served in his position since February 2011, also advised on the rules that the agency had to write under the Dodd-Frank Act. He plans to leave at the end of the year and return to the private sector.

Mr. Cook, who has been the director of trading and markets since January 2010, oversaw the new rules for Wall Street stemming from Dodd-Frank and the JOBS Act. He also directed the agency’s response to the “flash crash” of May 6, 2010, leading an effort to strengthen circuit breakers and other controls.

“Robert provided extraordinary counsel and worked tirelessly as we put in place measures that have helped to bolster our markets,” Ms. Schapiro said in a statement.

Additional departures may follow after a new leader is named. Robert Khuzami, the S.E.C. enforcement director, is considered a long-shot contender to take over from Ms. Walter as chairman. Some agency officials expect him to leave if he is not named to the top post, according to people with knowledge of the matter who spoke on the condition of anonymity.

The personnel changes come as the agency has regained some of its footing since the financial crisis, but is still enmeshed in its share of battles. While the S.E.C. has claimed some significant enforcement victories over the last few years, it is still criticized by consumer advocates as not being tough enough on Wall Street.

It also has plenty of work to do, as it completes new regulations and considers fresh challenges, like how to police the high-speed trading that dominates the stock market.

“It has been a unique privilege to have worked at the commission during such an extraordinary period of change in the financial and regulatory arena,” Mr. Cahn, the general counsel, said in a statement.

Ben Protess contributed reporting.