House approves bill authorizing $633 billion in defense spending

By David Alexander

WASHINGTON | Thu Dec 20, 2012 9:22pm EST

WASHINGTON (Reuters) - The U.S. House of Representatives approved the final version of the annual defense policy bill on Thursday, authorizing $633.3 billion in defense spending for 2013, easing limits on satellite exports and providing more Marines for embassy security.

The Republican-controlled House approved the 2013 National Defense Authorization Act by a vote of 315-107. The measure must still be approved by the Senate before it can go to President Barack Obama to be signed into law.

The measure authorizes a Pentagon base budget of $527.5 billion, plus $88.5 billion for overseas operations, primarily the war in Afghanistan. The base budget includes $17.4 billion for defense-related nuclear programs at the Energy Department.

The NDAA sets defense policy for the year. While it authorizes spending levels for different military programs, it does not appropriate the money. That is done under separate legislation in the House and Senate.

In addition to authorizing the size of the military budget, the bill approved a 1.7 pay increase for military personnel and blocked a Pentagon effort to offset rising healthcare costs for retirees by raising some health insurance fees.

The measure eases restrictions on the export of satellites to help U.S. manufacturers, who have seen their global share of the market shrink to less than 25 percent from 65 percent 15 years ago, said Representative Adam Smith, the top Democrat on the House Armed Services Committee.

"The cumbersome nature of that regime has significantly harmed U.S. satellite industry," Smith said during debate on the measure. "Getting back to a competitive place with that industry is critical to our national security."

The measure directs Defense Secretary Leon Panetta to develop and implement a plan to increase the number of Marines assigned to embassy and consulate security by up to 1,000.

The move aims to bolster diplomatic security following the death of U.S. Ambassador Christopher Stevens in an attack on the consulate in Benghazi, Libya.

The final bill also allows the Pentagon to continue its efforts to develop biofuels, rejecting a House attempt to prevent the purchase of fuels that are more expensive than petroleum and to place limits on military assistance to companies trying to build commercial scale biofuel refineries.

(Reporting By David Alexander; Editing by Sandra Maler and Stacey Joyce)

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UBS admits fraud in $1.5 billion Libor rigging deal

1 of 2. A logo of Swiss bank UBS is seen on a building in Zurich December 18, 2012.

Credit: Reuters/Michael Buholzer

By Katharina Bart and Tom Miles

ZURICH | Wed Dec 19, 2012 2:34am EST

ZURICH (Reuters) - Swiss bank UBS was hit with a $1.5 billion fine on Wednesday, admitting to fraud, paying bribes to brokers and "pervasive" manipulation of global benchmark interest rates by dozens of staff in a deal with international authorities.

The penalty agreed with U.S., UK and Swiss regulators is more than three times the $450 million fine levied on Britain's Barclays in June, also for rigging the Libor benchmark rate used to price financial contracts around the globe.

It is the second-largest fine paid by a bank and comes a week after Britain's HSBC agreed to pay the biggest ever penalty - $1.92 billion - to settle a probe in the United States into laundering money for drug cartels.

The revelations are another blow to UBS, which has had a tough 18 months after suffering a $2.3 billion loss in a rogue trading scandal, management upheaval and thousands of job cuts.

"We deeply regret this inappropriate and unethical behavior. No amount of profit is more important than the reputation of this firm, and we are committed to doing business with integrity," UBS Chief Executive Sergio Ermotti said in a statement disclosing the extent of the wrongdoing, which took place over six years from 2005 to 2010.

UBS said it will pay $1.2 billion to the U.S. Department of Justice (DoJ) and the Commodity Futures Trading Commission (CFTC), 160 million pounds to the UK's Financial Services Authority and 59 million Swiss francs from its estimated profit to Swiss regulator Finma.

"The core thing is it compares very poorly with Barclays' fine as it's three times the scale. It suggests there's more egregious behavior," said Chris Wheeler, analyst at Mediobanca in London

The bank said the fines would widen its fourth quarter net loss but said it would not need to raise new capital as a result and traders said the fines were largely priced into the bank's shares, which were expected to open slightly higher in Zurich.

OPEN AND PERVASIVE

Britain's financial regulator said at least 45 people were involved in the rigging across three continents, which took place across a range of Libor currencies. It involved senior managers at UBS directing traders to keep Libor submissions low in order to give the impression that the bank was able to borrow more cheaply than it would actually have been able to do so.

The British FSA said that after August 2007, when the U.S. sub-prime crisis raised doubts about the financial health of banks, UBS told its staff to "protect our franchise in these sensitive markets".

The extent of the wrongdoing was highlighted in documents released by the FSA which showed that in January 2007, a trader asked a manager who supervised the submitter for Yen Libor and asked him to "...try to keep 6m and 3m libors up".

The manager responded: "standing order, sir".

The FSA said "the manipulation was conducted openly and was considered to be a normal and acceptable business practice by a large pool of individuals".

The Libor benchmarks are used for trillions of dollars worth of loans around the world, ranging from home loans to credit cards to complex derivatives.

Tiny shifts in the rate, compiled from daily polls of bankers, could benefit banks by millions of dollars. But every dollar a bank benefited meant an equal loss by a bank, hedge fund or other investor on the other side of the trade - raising the threat of a raft of civil lawsuits.

In a memo to staff on Wednesday, Ermotti said it was too early to determine whether or how clients were affected, pending further regulatory probing of the rate fixing.

The steep fine for UBS is despite the bank, since 2011, cooperating with law-enforcement agencies in their probes. The bank said it received conditional immunity from some regulators.

A similar admission by Barclays in June touched off a political firestorm that forced its chairman and chief executive to quit. Ermotti said around 40 people had left UBS or been asked to leave the bank as a result of the investigation.

(Additional reporting by Martin de Sa'Pinto, Huw Jones, Blaise Robinson, Sarah White; Steve Slater; Writing by Alexander Smith; Editing by Carmel Crimmins)

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