HONG KONG (AP) -- Most Asian stock markets climbed Tuesday, with oil companies gaining on the back of stronger crude prices, but Japanese shares flirted with a new 26-year low amid ongoing worries about the global slowdown.

Hong Kong stocks led the region's modest advance as reeling banking giant HSBC rebounded after the government said it was probing a massive drop in the company's shares the day before.

Rises across the region followed Europe but ran counter to the U.S., where Wall Street continued to skid on fears about the depth of the recession in the world's largest economy.

Investors, overcome with anxiety about financial companies and the global economy in recent weeks, were still on edge. The region's stocks have fallen along with world equity markets as investors were shaken by the possibility that the magnitude of the slowdown in Asia's export-dependent economies is far greater than expected.

The toll on Asia from the slowdown in industrialized Western economies was underscored by signs of distress in China, where government figures showed Tuesday that trade and consumer prices both fell last month amid the global economic crisis.

"Investors are getting a sense that we're really in worse shape than we originally thought," said Andrew Orchard, Asian strategist for Royal Bank of Scotland in Hong Kong. "People are losing heart that there might not be an effective response and quick recovery."

Japan's Nikkei 225 stock average fell 38.23 points, or 0.5 percent, to 7,047.80. The day before it sank to 7,086.03 -- the lowest closing level since Oct. 6, 1982 when the index finished at 6,974.35. Markets in Malaysia and the Philippines also were lower.

In Hong Kong, the Hang Seng added 341.46, or 3 percent, to 11,686.04, lifted by a 15 percent recovery in HSBC after its 24 percent tumble on Monday. South Korea's Kospi added 1.1 percent to 1,083.79. Australian and Singapore benchmarks also rose.

Overnight in New York, a $41 billion merger between drugmakers Merck & Co. and Schering-Plough failed to generate much enthusiasm among investors fixated on the worst recession in decades.

The Dow fell 79.89, or 1.2 percent, to 6,547.05. The Standard & Poor's 500 index lost 6.85, or 1 percent, to 676.53, while the Nasdaq composite index fell 25.21, or 2 percent, to 1,268.64.

U.S. futures pointed to modest gains on Wall Street.

Among the best performers in Asia were oil issues. Chines upstream producer CNOOC jumped 6.7 percent in Hong Kong.

Oil prices were steady in Asian trade, with benchmark crude for April delivery down 7 cents at $46.96. Overnight, the contract rose $1.55 to settle at $47.07 a barrel on the New York Mercantile Exchange.

In currencies, the dollar inched up to 98.93 yen from 98.90 yen.

WASHINGTON (AP) -- Factory jobs disappeared. Inflation soared. Unemployment climbed to alarming levels. The hungry lined up at soup kitchens.

It wasn't the Great Depression. It was the 1981-82 recession, widely considered America's worst since the depression.

That painful time during Ronald Reagan's presidency is a grim marker of how bad things can get. Yet the current recession could slice deeper into the U.S. economy.

If it lasts into April -- as it almost surely will -- this one will go on record as the longest in the postwar era. The 1981-82 and 1973-75 recessions each lasted 16 months.

Unemployment hasn't reached 1982 levels and the gross domestic product hasn't fallen quite as far. But the hurt from this recession is spread more widely and uncertainty about the country's economic health is worse today than it was in 1982.

Back then, if someone asked if the nation was about to experience something as bad as the Great Depression, the answer was, "Quite clearly, `No,'" said Murray Weidenbaum, chairman of the Council of Economic Advisers in the Reagan White House.

"You don't have that certainty today," he said. "It's not only that the downturn is sharp and widespread, but a lot of people worry that it's going to be a long-lasting, substantial downturn."

For months, headlines have compared this recession with the one that began in July 1981 and ended in November 1982.

--In January, reports showed 207,000 manufacturing jobs vanished in the largest one-month drop since October 1982.

--Major automakers' U.S. sales extended their deep slump in February, putting the industry on track for its worst sales month in more than 27 years.

--Struggling homebuilders have just completed the worst year for new home sales since 1982.

--There are 12.5 million people out of work today, topping the number of jobless in 1982.

"I think most people think it is worse than 1982," said John Steele Gordon, a financial historian. "I don't think many people think it will be 1932 again. Let us pray. But it's probably going to be the worst postwar recession, certainly."

The 1982 downturn was driven primarily by the desire to rid the economy of inflation. To battle a decade-long bout of high inflation, then-Federal Reserve Chairman Paul Volcker, now an economic adviser to President Barack Obama, pushed interest rates up to levels not seen since the Civil War. The approach tamed inflation, but not without suffering.

Hardest hit was the industrial Midwest; the Pacific Northwest, where the logging industry lagged from construction declines; and some states in the South, where the recession hit late.

Frustrated workers fled to the Sunbelt to find work. In Michigan, which led the nation in jobless workers, newspapers offered idled auto workers free "job wanted" ads in the classified section. Mortgages carried double-digit interest rates. When the 1982 recession ended, the national jobless rate had hit 10.8 percent.

Just like today, that recession led to political finger-pointing.

When the government reported a 10.1 percent jobless rate for September 1982, organized labor rallied across the street from the White House. A few protesters chained themselves to an entrance at the Labor Department. The U.S. Chamber of Commerce called it a national tragedy and blamed Democrats. Democrats called it a national tragedy and blamed Reagan.

Even months after the recession officially ended, Reagan was greeted in Pittsburgh by signs that said: "We want jobs, Mr. Hoover" and "Reagan says his economic program is working -- are you?" President Herbert Hoover's term is forever linked in history with the Great Depression.

Those not as badly hurt have fuzzy memories of the 1981-82 recession.

Not Jim O'Connor of Pekin, Ill., who was president of United Auto Workers Local 974 when Caterpillar Tractor Co. was laying off workers in Peoria in the 1980s.

Maybe time has soothed the sting O'Connor felt, but he contends the economic problems facing workers today are worse than during the recession he survived nearly three decades ago.

"The days of walking out of one factory and walking into another one down the street are over," O'Connor said. He retired from Caterpillar in 2001 but thinks he might find part-time job to help pay his health insurance.

"When I hired in at Caterpillar in 1968, we had numerous factories here. Almost all of that has left the country or moved South. The unions don't have any leverage anymore at the bargaining table. So these young people (today) aren't only out of work, you know. They weren't making a living wage when they lost their job," he said.

Like Reagan did then, Obama is dishing up hope. Trouble is, people can't visualize any reward they might get from making it through this recession, said William Niskanen, an economic adviser to Reagan.

There's little hope of any gain from the pain. Falling housing and stock prices have undermined household wealth. People are worried about losing their jobs, their homes and their retirement savings all at a time when health care is weighing down income.

"In the 1980s, it was clear to people that the inflation rate was going to come way down and it did," Niskanen said. "There was a sense that we were going through a tough time for a while as a price of getting inflation down and that things would come back up. Today, they can't see any gain from what's going on."

Consumer confidence is in free fall. Banks are in peril. The overall economy, as measured by the GDP, shrank at a 6.2 percent annual rate in final three months of last year, the worst drop since the first quarter of 1982. The unemployment rate, at 8.1 percent in February, hasn't reached the 10.8 percent reported in November 1982, but the recession is not over.

It's not only blue-collar workers who are feeling the greatest anguish. Americans who are trapped in houses worth less than their mortgages are suffering. So, too, are people whose personal wealth is tied to the stock market. Personal wealth is dwindling in the U.S., and the effects of the financial meltdown have been felt around the world.

"This recession is broader, deeper and more complicated than virtually anything we have ever seen," Wachovia Corp. economist Mark Vitner said. "The whole evolution of the credit markets resulted in all sorts of complex financial instruments that are difficult to unwind. It's like trying to unscramble scrambled eggs. It just can't be done that easily. I don't know if it can be done at all."

He said he sees fear in the eyes of his clients.

"I've had people come up and hug me after a presentation, which is unusual," he said. "I haven't told them anything about how it's going to be better, but they just feel better having a better understanding of what's happening."

NEW YORK (AP) -- The World Bank predicts the global economy will shrink this year for the first time since World War II, and sees trade at its lowest point in 80 years.

The World Bank also said Sunday the growing global financial crisis will create a multibillion-dollar financing shortfall for poor and developing nations.

A group of 129 countries face a shortfall of $270 to $700 billion this year, the World Bank says. It warns international financial institutions will not be able to cover even the low end of that estimate.

The bank said only one-quarter of the vulnerable countries will be able to ease the impact of the economic downturn through job creation or "safety net" programs.

HONG KONG (AP) -- Asian stock markets resumed their downward slide Friday after Wall Street fell to its lowest levels in more than 12 years amid deepening fears about the future of General Motors Corp. and major financial companies.

The region's retreat marked a return to the selling that had gripped global equities markets until a brief rally earlier this week on hopes China would announced major new stimulus measures.

Investors, already deflated after Beijing failed to deliver, were rattled by a warning from General Motors that the struggling automaker may have to file for bankruptcy.

Along with growing uncertainty about the financial system, the news led to yet another rout in U.S. markets with banking stocks suffering some of the steepest drops. Citigroup Inc., stilling reeling despite billions of dollars in government aid, fell below $1 a share.

"You can buy Citi at the 99 cent store now," said Paul Schulte, a chief Asia equity strategist at Nomura International in Hong Kong. "It's nauseating. We keep grasping at straws to find hope, and the markets keep punishing us."

Investors were also holding back ahead of what is expected to be an especially bleak U.S. employment report later Friday.

Every major Asian market traded into the red, though the losses were somewhat more muted than the sharp declines in the U.S.

Japan's Nikkei 225 stock average fell 223.47 points, or 3 percent, to 7,210.02, while Hong Kong's Hang Seng shed 155.25, or 1.3 percent, to 12,055.99. South Korea's Kospi was off 0.3 percent at 1,054.80.

Elsewhere, Shanghai's benchmarks swooned 1.2 percent, Australia's stock measure was 1.5 percent lower and Singapore's key index shed 0.7 percent.

Overnight in the U.S., the Dow fell 281.40, or 4.1 percent, to 6,594.44, its lowest close since April 1997.

Broader indicators also tumbled. The S&P 500 index dropped 30.32, or 4.3 percent, to 682.55, its lowest close since September 1996.

Wall Street was headed for another weak opening as U.S. futures sank. Dow futures were off 15 points, or 0.2 percent, at 6,616 and S&P500 futures fell 1.2, or 0.2 percent, to 684.90.

Oil prices were higher in Asian trade, with benchmark crude for April delivery up 31 cents at $43.92 a barrel by midday in Singapore on the New York Mercantile Exchange. The contract fell $1.77 overnight to settle at $43.61 a barrel

In currencies, the dollar gained to 98.25 yen from 98.20 yen. The euro traded higher at $1.2579 from $1.2548.

WASHINGTON (AP) -- UBS AG now says it had about 47,000 accounts held by Americans who didn't pay U.S. taxes on their assets, but Switzerland's biggest bank is providing the names of only 300 American clients to the U.S. government in a showdown over secrecy.

Lines were drawn in the burgeoning cross-border dispute at a hearing Wednesday by a Senate investigative panel.

A Justice Department official signaled that UBS could still be subject to criminal prosecution if terms aren't met under the bank's recent agreement with the U.S. government. A key senator, meanwhile, noted improving prospects, including the backing of President Barack Obama, for U.S. legislation to fight offshore tax-haven abuses.

"The rest of the world is getting fed up with offshore tax havens that turn a blind eye to tax evasion and allow their financial institutions ... to profit from tax dodging," said Sen. Carl Levin, D-Mich., chairman of the Senate Homeland Security and Governmental Affairs Committee.

Levin also voiced frustration with what he said were evasive answers to his questions from UBS executive Mark Branson, who confirmed the figure of around 47,000 accounts as of Sept. 30. That compares with UBS' estimate in July of 19,000 U.S. clients with accounts in the bank.

UBS last month formally accepted responsibility for helping Americans hide assets from the U.S. government and agreed to pay $780 million in fines and restitution. The bank also turned over the names of about 300 U.S. clients. But UBS is not giving the Internal Revenue Service the names of all U.S. citizens who maintained secret accounts with the bank.

Branson said nearly all the accounts have been closed and that the bank "has now done all that it can do to cooperate" with the IRS request.

"UBS cannot disclose information to the IRS that would put its employees at serious risk of criminal prosecution under Swiss law," said Branson, who is the chief financial officer of the bank's global wealth management and Swiss bank division in Zurich.

IRS Commissioner Douglas Shulman told the hearing the Obama administration is "committed to taking aggressive action on offshore tax abuse."

"We cannot allow an environment to develop where wealthy individuals can go offshore and avoid paying taxes with impunity," Shulman said.

If UBS is found in contempt by a federal judge for refusing to identify the rest of its U.S. clients, the government could proceed with its criminal prosecution of the bank, which has been deferred, said John DiCicco, acting assistant attorney general in the Justice Department's tax division.

UBS, meanwhile, announced that former Swiss President Kaspar Villiger will replace Peter Kurer as chairman of the bank's board next month in an effort to restore its profitability and deal with the growing controversy over the U.S. tax issue.

The bank has been staggering under massive losses stemming from the U.S. subprime mortgage crisis, and the Swiss government has provided it financial support.

The IRS has been trying to pry from UBS the names of wealthy Americans who maintained secret accounts with the bank. UBS maintains that turning over the account names would violate Swiss privacy law and jeopardize its license to stay in business.

The Swiss government refused to send a representative to Wednesday's hearing in protest of the IRS lawsuit against the bank.

Cloak-and-dagger tactics said to have been employed by UBS -- coded language in internal e-mails and memos, foreign shell companies and phony charitable trusts, use of pay phones and foreign area codes and credit cards -- were on display at the hearing.

UBS allegedly staged training sessions so that "client advisers" could travel frequently to the U.S. -- on average 30 days a year each -- to consult with secret U.S. customers without attracting the attention of tax agents or law enforcement officials. The advisers were told to rotate the hotels they stayed in and to "protect the banking secrecy" if they were questioned by any authorities, according to excerpts of UBS internal documents filed in the IRS suit and provided by the subcommittee.

The dispute has prompted heated debate in Switzerland over the country's cherished banking secrecy, a tradition that has helped transform the nation into one of the world's richest.

UBS on Feb. 18 formally acknowledged conspiring to help American citizens violate their country's tax laws by hiding assets -- estimated to be worth at least $14.8 billion -- from the U.S. government. In the deal struck in federal court in Fort Lauderdale, Fla., the Justice Department agreed to defer criminal prosecution of UBS in exchange for the payment of fines and restitution, and the names of up to 300 U.S. clients.

The bank says it has shut down the improper foreign-account business, and taken corrective measures to tighten its compliance and internal control systems.

In its civil suit against UBS, the IRS has asked a federal judge to enforce so-called "John Doe summonses" seeking information about the Americans' accounts. Another federal judge approved the summonses in July 2008, but UBS never complied.

The hearing was the latest in an extensive series by the Senate panel examining offshore tax abuse, which is estimated to cost the U.S. $100 billion a year in lost tax revenue.

Recovering tax revenue has taken on amplified urgency amid the economic crisis, when the federal deficit is expected to balloon to about $1.7 trillion, or nearly four times the highest level in history as hundreds of billions of dollars are spent on the bailout for financial institutions and the economic stimulus plan.

On Tuesday, Treasury Secretary Timothy Geithner said that Obama supported legislation authored by Levin that would tighten U.S. tax laws and close loopholes to fight offshore tax-haven abuses.

WASHINGTON (AP) -- An official of UBS AG on Wednesday will face questions from a Senate panel for the first time since Switzerland's biggest bank formally acknowledged responsibility for helping tens of thousands of American clients hide assets from the U.S. government.

In a cross-border battle, the Internal Revenue Service is trying to pry from UBS the names of as many as 52,000 wealthy Americans who maintain secret accounts with UBS. The bank maintains that turning over the account names would violate Swiss privacy law and jeopardize UBS' license to stay in business.

The Swiss government -- which is providing financial support to UBS as it struggles with massive losses stemming from the U.S. subprime mortgage crisis -- has refused to send a representative to Wednesday's Senate subcommittee hearing, in protest of the IRS lawsuit against the bank.

Cloak-and-dagger tactics said by the U.S. government to have been employed by UBS -- coded language in internal e-mails and memos, foreign shell companies and phony charitable trusts, use of pay phones and foreign area codes and credit cards -- will be on display at the hearing, which starts at 2:30 p.m. EST.

UBS allegedly staged training sessions so that "client advisers" could travel frequently to the U.S. -- on average 30 days a year each -- to consult with secret U.S. customers without attracting the attention of tax agents or law enforcement officials. The advisers were told to rotate the hotels they stayed in and to "protect the banking secrecy" if they were questioned by any authorities, according to excerpts of UBS internal documents filed in the IRS suit and provided by the subcommittee.

The dispute has prompted heated debate in Switzerland over the country's cherished banking secrecy, a tradition that has helped transform the nation into one of the world's richest.

The investigative panel of the Senate Homeland Security and Governmental Affairs Committee, led by Sen. Carl Levin, D-Mich., is voicing outrage at what it says is obstruction of the U.S. government by both UBS and the Swiss.

Levin said Tuesday the panel hopes to learn from UBS official Mark Branson the exact number of American account holders. Branson is the chief financial officer of the bank's global wealth management and Swiss bank division, based in Zurich.

"We've been stymied," Levin told reporters. "These are abuses that are unconscionable."

Now that UBS has acknowledged "participating in a scheme to defraud the United States government and its agency, the IRS," the bank rightfully should turn over the names of American clients, Levin said.

Karina Byrne, a UBS spokeswoman in New York, declined to comment.

UBS on Feb. 18 agreed to pay a hefty $780 million in fines and restitution for conspiring to help American citizens violate their country's tax laws by hiding assets -- estimated to be worth at least $14.8 billion -- from the U.S. government. In the deal struck in federal court in Fort Lauderdale, Fla., the Justice Department agreed to defer criminal prosecution of UBS in exchange for the payment of fines and restitution, and the names of up to 300 U.S. clients.

The bank says it has shut down the improper foreign-account business, and taken corrective measures to tighten its compliance and internal control systems.

The agreement didn't cover the much broader list of as many as 52,000 customer names now sought by the IRS, but both sides knew the U.S. government would ask for them.

In its civil suit against UBS, the IRS has asked a federal judge to enforce so-called "John Doe summonses" seeking information about the Americans' accounts. Another federal judge approved the summonses in July 2008, but UBS never complied.

By providing the 300 or so names, the bank says, it has complied with the summonses as fully as it can without violating Swiss law.

Wednesday's hearing is the latest in an extensive series by the Senate panel examining offshore tax abuse, which is estimated to cost the United States $100 billion a year in lost tax revenue.

Recovering tax revenue has taken on amplified urgency amid the economic crisis, when the federal deficit is expected to balloon to nearly four times the highest level in history as hundreds of billions of dollars are spent on the bailout for financial institutions and the economic stimulus plan.

Also testifying will be IRS Commissioner Douglas Shulman, who has warned U.S. taxpayers hiding money overseas that it was time to come clean with the agency.

"People who have hidden unreported income offshore need to get right with their government. They should come forward and take advantage of our voluntary disclosure process," Shulman said last month.

On Tuesday, Treasury Secretary Timothy Geithner said President Obama supported legislation authored by Levin that would tighten U.S. tax laws and close loopholes to fight offshore tax-haven abuses.

The president's support "greatly improves the chances of an offshore tax bill becoming law this year ... (and) sends a strong signal to tax havens that this administration is not going to tolerate the kind of offshore tax abuses that have been draining" the Treasury, Levin said.

NEW YORK (AP) -- Investors bruised by Wall Street's latest rout found little reason to pile back into the market.

Stocks extended their losses to a fifth straight day Tuesday as investors wrestled with the reality that the economy is still far from recovery. The pessimism that has dominated the markets for months stifled some tentative bargain hunting and in the process unraveled several attempts at a rally.

The selling in the erratic session pushed the Standard & Poor's 500 index to its first close below 700 since Oct. 28, 1996. But the losses were modest compared with Monday, when the Dow Jones industrial average tumbled 300 points and both the Dow and the S&P 500 index registered their lowest finishes in more than a decade.

Tuesday's fluctuations came as Federal Reserve Chairman Ben Bernanke told Congress an economic recovery depends on the government's ability to stabilize weak financial markets. He said the efforts were needed to avoid "a prolonged episode of economic stagnation."

Investors who have been selling for weeks are still worried that Washington won't succeed. On Monday, the government injected $30 billion to troubled insurer American International Group Inc., its fourth attempt to stabilize the company since September. And last Friday, Citigroup Inc. got more help from the government.

"Where is there light at the end of any of these bailout tunnels?" said Linda Duessel, market strategist at Federated Investors in Pittsburgh.

She said the market will continue to slide because investors can't find a reason to rally, even as stocks are at levels that many on the Street regard as bargains.

"The 600 to 660 range looks like a pretty good bet right now," she said, referring to the S&P 500 index, which finished at 696 Tuesday. "There is a dearth of buyers."

In Tuesday's trading, the Dow fell 37.27, or 0.6 percent, to 6,726.02, its lowest close since April 21, 1997. The index is now down more than 52 percent from its record of 14,164.53 set in October 2007.

Broader stock indicators also fell. The S&P 500 index slid 4.49, or 0.6 percent, to 696.33. The Nasdaq composite index fell a modest 1.84, or 0.1 percent, to 1,321.01.

The Russell 2000 index of smaller companies fell 6.79, or 1.9 percent, to 361.01.

Two stocks fell for every one that rose on the New York Stock Exchange, where consolidated volume came to 7.41 billion shares compared with 7.71 billion shares traded Monday.

Bernanke's remarks came as the central bank announced it would begin lending up to $200 billion in an initial move to spur consumer and small business borrowing for autos, education, credit cards and other expenses. The Fed first announced the plan late last year.

That helped curb selling, traders said.

"I think people are just finally happy to see that it's here and that it's going to begin," said Joe Saluzzi, co-head of equity trading at Themis Trading LLC.

Investors showed little reaction to testimony from Treasury Secretary Timothy Geithner, who told the House Ways and Means Committee the added spending in the Obama administration's budget is necessary because the previous administration was unwilling to make long-term investments in health care, energy and education.

President Barack Obama on Tuesday likened the stock market's behavior to the daily tracking polls used during campaigns. He said tracking Wall Street's "fits and starts" too closely could lead to bad long-term policy.

Many investors remain fearful of buying into a market that has dashed investors' hopes that it had hit bottom. Last week, the Dow and the S&P 500 index fell through their November lows and, with their continuing pullback, are touching off fears that a new torrent of selling will take place.

Brian Reynolds, chief market strategist at New York-based WJB Capital Group, said the market's slide means it could be ripe for a bounce but that a lasting recovery won't come until credit market investors begin to put money into riskier debt that is now out of favor. Investors worried about the bad debt hammering banks have been buying the safest types of debt, like government bonds, rather than mortgage and credit card debt and some corporate debt.

"It's just another continuation of what we've seen for the last year and a half," Reynolds said.

He contends the S&P 500 index, which is down 22.9 percent in 2009, will fall to the 600 level. That would be a drop of more than 60 percent from the index's record close of 1,565.15 in October 2007.

Investors are awaiting the Labor Department's February employment report, which is due Friday. The monthly employment figures are one of the most important economic barometers because rising unemployment cuts into how much consumers spend. Consumer spending accounts for more than two-thirds of U.S. economic activity.

Government bonds were mixed Tuesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.89 percent from 2.87 percent late Monday. The yield on the three-month T-bill, considered one of the safest investments, slipped to 0.26 percent from 0.27 percent from Monday.

The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude rose $1.50 to settle at $41.65 a barrel on the New York Mercantile Exchange.

Overseas, Britain's FTSE 100 fell 3.14 percent, Germany's DAX index fell 0.52 percent, and France's CAC-40 fell 1.04 percent. Japan's Nikkei stock average slipped 0.69 percent.

CHARLOTTE, N.C. (AP) -- Struggling insurer American International Group Inc. will receive up to $30 billion in additional federal assistance in the fourth government rescue of the company, a person familiar with the matter told The Associated Press on Sunday.

The new infusion is intended to prop up AIG -- once the world's largest insurer -- as it is expected to announce $60 billion in quarterly losses early Monday, the source said on the condition of anonymity because the discussions are still ongoing.

The company, which is considered too large to fail, previously received about $150 billion in loans from the government, which now has an 80 percent stake in the company.

Under the new deal, the U.S. Treasury and the Federal Reserve would provide about $30 billion in fresh capital to AIG from the government's Troubled Assets Relief Program, or TARP. The money would be provided as a standby line of equity that AIG could tap as its losses mount, the source said.

AIG has already received $40 billion from TARP.

In exchange for the latest infusion, the Federal Reserve would take stakes in two international units, the source said.

Instead of paying back $38 billion in cash with interest that it has used from a Federal Reserve credit line, AIG now will repay that amount with equity stakes Asia-based American International Assurance Co. and American Life Insurance Co., which operates in 50 countries.

Under the plan, another $20 billion from a Federal Reserve credit line remains available for borrowing, the source said.

In order to strengthen the company, AIG also plans to combine its U.S. and foreign property-casualty insurance operations into a new unit, with a new name and separate management, the source said. About 20 percent of the property-casualty business would be taken public.

To further reduce its debt, AIG will turn $5 billion to $10 billion worth of debt into new securities backed by life insurance assets.

AIG spokesman Nick Ashooh declined to comment on the rescue package. The Federal Reserve Bank of New York, which is handling the government loan, did not return requests for comment Sunday evening. Treasury Department spokesman Isaac Baker also declined to comment.

The company's board met Sunday to vote on the revised bailout plan.

Major credit rating agencies have already signed off on the deal, according to media reports. Without the support of the credit rating agencies, AIG would have faced crippling cuts to its ratings.

AIG has been forced to seek more help in part because the ongoing recession and its falling stock price, now well under $1.

Among its biggest problems: It can't sell assets to pay back government loans because the credit crisis is preventing would-be buyers from getting financing to complete such deals.

As of Feb. 13, AIG had sold interests in nine businesses.

In November, the U.S. government restructured previous loans provided to AIG, giving the company about $150 billion in total as part of a rescue package to help the insurer remain in business amid the worsening credit crisis. That package replaced earlier loans, including the original $85 billion lent in September, after it became apparent the insurer needed more funds.

Problems at AIG did not come from its traditional insurance operations, but instead from its financial services units, and primarily its business insuring mortgage-backed securities and other risky debt against default.

Shares of AIG closed at 42 cents on Friday. The stock, which traded at $49.50 a year ago, has lost nearly all of its value since the market meltdown began in September.

Leaders from 12 of the nation's largest unions, along with rival federations AFL-CIO and Change to Win, have held three meetings since January aimed at setting aside differences and taking advantage of the most favorable political climate for unions in 15 years.

"We've had very positive discussions and we've reached some significant agreements," said David Bonior, the former Michigan congressman who is brokering the discussions.

But Bonior stressed that significant hurdles remain as leaders work out how a unified labor federation would be structured and what its goals would be.

Seven unions, led by the Service Employees International Union, bolted from the AFL-CIO in 2005. They complained the federation focused too much on political campaigns and not enough on recruiting new members. The break reflected frustration with steadily declining union membership, from a peak of 35 percent of the work force in the 1950s to about 12 percent today.

But now the political landscape has changed with Democrats taking the White House and control of Congress. Union officials see a window of opportunity to accomplish key goals, including passage of legislation that would make it easier for workers to organize unions.

"There's obvious benefits in terms of efficiency, message delivery, financial savings and a host of other reasons," Bonior said. "You can always be more effective if you're talking in one house as opposed to three."

Talks have included the 3.2 million-member National Education Association, the nation's largest union, which was not previously aligned with either federation but could become part of the new structure.

None of the leaders involved has publicly talked about specifics, but the pace of negotiations has picked up. The issue is prominent on the agenda during the AFL-CIO's annual winter meeting in Miami next week.

"We are still talking," Change to Win chairwoman Anna Burger told reporters recently.

Still, there are major issues to resolve, including who would lead the new federation, how organizing should be done and even what coalition would be called.

Some breakaway unions swore they would never return to the AFL-CIO, so there's talk of changing the name identified with organized labor for more than 50 years.

Leadership is tricky, too, with AFL-CIO president John Sweeney set to step down this year. The federation's secretary-treasurer, Richard Trumka, is a likely successor. But some unions, particularly the Teamsters, would oppose him.

Robert Reich, former labor secretary in the Clinton administration, said the labor split didn't really matter when Republicans ran Washington and unions didn't stand a chance at reforming labor laws.

But with Democrats in charge, unions realize that "strength lies in unity," said Reich. "A divided labor movement is inherently weaker than a united one, especially when it comes to national politics and policy."

Nowhere is unity more important for unions than in efforts to pass the Employee Free Choice Act in Congress this year. The measure would take away the right of employers to demand secret-ballot elections by workers before unions could be recognized. Instead, unions could gain representation if a majority of workers sign cards authorizing it.

Unions believe passage of the bill would spur a renaissance in the labor movement, perhaps doubling union membership with the ranks of workers now discouraged from organizing by employer intimidation. Business groups have railed against the bill for months, saying it would effectively deprive workers of secret ballot voting and subject employees to union bullying.

NEW YORK (AP) -- Wall Street ended another unforgiving month with a steep loss -- one that left the Dow Jones industrial average at less than half its record high.

The day's news unsettled investors. Citigroup Inc. agreed to turn over a big piece of itself to the government, a move that fanned worries that other banks would face crippling trouble with bad debt. General Electric Co. slashed its quarterly dividend by 68 percent. Both companies are part of the Dow Jones industrial average, which fell 119 points.

And the government's gross domestic product report showed that the economy fell at a 6.2 percent annual pace at the end of last year, a much faster than expected pace.

For investors, it all added up to a prolonged and increasingly painful recession.

"I don't think there is the confidence that the recovery is going to happen very quickly. It's going to take time," said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York.

Some analysts said the market's slide could have been worse -- the major indexes finished well above their lows.

Dan Cook, senior market analyst at IG Markets in Chicago, said Wall Street's ability to show some recovery Friday despite the onslaught of bad news is a good sign.

"We have become somewhat callous to these news announcements," he said.

Nonetheless, the market's stats once again showed how troubled Wall Street and the economy are:

-- The Dow, at its lowest close since May 1, 1997, is now down 50.1 percent from its record high of 14,164.53 reached in October 2007. It came within 34 points of 7,000, a level it hasn't fallen below since October 1997.

-- The Standard & Poor's 500 index breached its Nov. 21 trading low of 741.02, which came during the height of the credit crisis. Friday's finish was the lowest for the index since Dec. 18, 1996.

-- The Dow's 11.7 percent loss in February was its worst since 1933, when it fell 15.6 percent, and its sixth straight monthly drop. The half-year slide totals 38.8 percent, the worst since 1932, when it fell 45 percent.

The S&P 500 index fell 11 percent for the month. It was the second-worst February for the index, topped only by an 18.4 percent slide in 1933. It was the index's fifth monthly drop in six months; it managed a slender gain of 0.8 percent in December.

-- The Dow Jones Wilshire 5000 index, which reflects nearly all stocks traded in America, lost 10.3 percent for the month, its worst slump since October. That's a paper loss of $1 trillion. Since its October 2007 peak, the Wilshire 5000 is down 52.7 percent, or $10.4 trillion.

The losses in the final session of the month came as Wall Street had been hoping that stabilizing Citigroup would help ease worries about the beaten-down bank stocks and remove some of their questions about the prospects for the industry.

But analysts said the loss to regular shareholders from the government's move touched off worries that other banks could see their shares hit as well.

Citigroup said before the opening bell that it agreed to a deal in which the U.S. government and private investors including the government of Singapore and Saudi Arabian Prince Alwaleed Bin Talal will convert their preferred stock in the struggling bank to common shares. The plan won't require additional money from the U.S. government, which holds an 8 percent stake in Citigroup and would own 36 percent.

"Citi has been a leading indicator the whole way down and the dilution that shareholders took today is sort of a leading indicator of what could happen to other banks, particularly the weak ones," said Kevin Shacknofsky, co-portfolio manager of the Alpine Dynamic Dividend Fund in Purchase, N.Y.

Some sort of deal with the government had been expected much of the week. But Citi fell 96 cents, or 39 percent, to $1.50 as investors worried about how much their holdings in the company would be diluted by the changes.

GE, meanwhile, said late in the session it would cut its dividend to save $9 billion a year. The conglomerate has a big financing arm, so it often trades like a bank stock. Its shares fell 59 cents, or 6.5 percent, to $8.51.

The Dow fell 119.15, or 1.7 percent, to 7,062.93. The S&P 500 index fell 17.74, or 2.4 percent, to 735.09, and the Nasdaq composite index fell 13.63, or 1 percent, to 1,377.84.

The Russell 2000 index of smaller companies fell 3.93, or 1 percent, to 389.02.

Two stocks fell for every one that advanced on the New York Stock Exchange. Consolidated volume came to a heavy 8.44 billion shares, up from Thursday's 6.48 billion.

Wall Street was also shaken when the government's gross domestic product report showed that the economy fell at a 6.2 percent annual pace at the end of last year, a much faster than expected pace.

The Commerce Department figures on GDP, the worst since an annualized drop of 6.4 percent in the first three months of 1982, cast some doubt that the economy will begin to show signs of improvement by the end of this year, as many analysts have predicted. But the poor showing also could make it that much easier for readings in coming quarters to look by comparison, Cook said. Investors would welcome even a slowing pace of decline.

Health care stocks, normally an area of safety in weak economies, fell for a second straight day Friday after the White House released a budget proposal Thursday that calls for cutting some health care spending.

"This creates a lot of weakness in this market because if the safe-havens are not safe anymore it could convince a lot of people to say 'You know, I don't kneed to be in this market right now. I can just go to cash,'" Shacknofsky said.

Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.02 percent from 3 percent late Thursday. The yield on the three-month T-bill, considered one of the safest investments, was down at 0.25, compared with 0.26 percent from Thursday.

The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude fell 46 cents to settle at $44.76 a barrel on the New York Mercantile Exchange.

Britain's FTSE 100 tumbled 2.2 percent, Germany's DAX index fell 2.5 percent, and France's CAC-40 fell 1.5 percent. Earlier, Japan's Nikkei stock average rose 1.5 percent.

The Dow Jones industrial average closed the week down 302.74, or 4.1 percent, at 7,062.93. The Standard & Poor's 500 index fell 34.96, or 4.5 percent, to 735.09. The Nasdaq composite index fell 63.39, or 4.4 percent, closing at 1,377.84.

The Russell 2000 index, which tracks the performance of small company stocks, declined 21.94, or 5.3 percent, to 389.02.

The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index that measures 5,000 U.S. based companies -- ended at 7,415.60, down 386.67, or 5 percent, for the week. A year ago, the index was at 13,945.130.

(This version CORRECTS Corrects oil price; UPDATES bond quotes, UPDATES volume figure with consolidated volume; ADDS 3 grafs at end with index performance for the week. Moving on general news and financial services.)

NEW YORK (AP) -- Wall Street is down sharply lower as investors second-guess Citigroup Inc.'s plans to turn over a big piece of itself to the government.

Citi shares are down more than 30 percent as investors worry about their holdings in the company being diluted by the move.

Word that the economy, as measured by the gross domestic product, fell at a 6.2 percent annual pace in fourth quarter is adding to investors' worries.

The Standard & Poor's 500 index has breached its Nov. 21 trading low of 741.02, which many investors had hoped would mark the bottom of the market's fall from October 2007.

The Dow Jones industrial average is down 117 at 7,065, while the S&P 500 index is down 16 at 737. The Nasdaq composite index is down 16 at 1,375.

WASHINGTON (AP) -- The Obama administration hopes to restore confidence in the nation's ailing financial sector by subjecting 19 of the largest banks to "stress tests" that will gauge whether each institution has adequate capital to survive a severe downturn.

Banks that need new funds will be given six months to obtain it from the private sector or, failing that, from the federal government's $700 billion bank rescue program, the Treasury Department said Wednesday.

Government officials haven't specifically said which banks will be subject to the tests, but under the government's criteria they would include large nationwide banks such as Citigroup Inc., Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. The 19 largest banks hold two-thirds of the banking industry's assets.

Treasury officials said the new support will be provided through the government's purchase of preferred shares of the banks' stock that are convertible into common shares at a 10 percent discount to their price before Feb. 9. The additional financing will be available immediately if needed, the department said.

The preferred shares will carry a 9 percent dividend and be convertible at the bank's option, subject to regulatory approval. They will automatically convert in 7 years. Banks seeking additional funds will have to demonstrate how they would use the money to support their lending activities. Those plans would be made public.

The option to convert the preferred shares into common shares is a change in the rescue program designed to give the government greater flexibility in managing its assistance. The conversions would give the government larger ownership stakes and dilute current shareholders. That has raised concerns the government could ultimately takeover, or nationalize, ailing banks.

The Treasury Department also provided details of how the new stress tests will function. The tests will be conducted by bank regulators, including the Federal Reserve, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Office of Thrift Supervision.

Government officials hope the tests will boost market confidence in the banks by making it clear the institutions either have the necessary capital to weather a major downturn, or will obtain it from private investors or the government.

Bank regulators said they wouldn't release the tests' results, but the banks will likely make some disclosure of the outcome, particularly if it shows they don't need more capital. Banks that seek private capital likely will indicate how much they need and the government will announce any new investments.

Daniel Alpert, managing director of Westwood Capital LLC, an investment bank, said the stress tests will "force reality to the surface" by demonstrating that many large banks face increasing losses on commercial real estate and other assets. Westwood holds a small stake in Citigroup.

Administration officials did not say whether they expect to request more taxpayer money to fund the next round of investments in banks, beyond general statements that they would provide the capital that banks need.

But in his speech to Congress Tuesday evening, President Barack Obama said more money beyond the $700 billion committed last year would be needed. Saying he understands bank bailouts are unpopular, he insisted it was the only way to get credit moving again to households and businesses.

Scott Talbott, a lobbyist for the Financial Services Roundtable, said the 9 percent dividend would be a "burdensome" cost for most banks. That means only those facing severe difficulties would likely seek new government funds.

That's a contrast from the original bank rescue program, which the Bush administration said was intended for healthy banks. More than 400 financial institutions received about $200 billion in taxpayer money under that program.

Meanwhile, Fed Chairman Ben Bernanke on Wednesday again spurned speculation that the government may nationalize Citigroup or other large financial institutions.

During an appearance before the House Financial Services Committee, Bernanke said nationalization "is when the government seizes the bank and zeros out the shareholders and begins to manage and run the bank. And we don't plan anything like that."

But the Fed chief said it is possible the government could end up with a much bigger ownership stake in Citigroup or other banks. In the case of Citigroup, Bernanke said "we'll see how their test works out and what evolves."

Citigroup has been involved in talks with regulators over ways the government could help strengthen the bank, including use of the stock conversion plan. New York-based Citigroup already has received $45 billion in bailout money, plus guarantees to cover losses on hundreds of billions of dollars in risky investments.

The new stress tests will use two economic scenarios to gauge banks' health and are expected to be completed by the end of April.

The "baseline" scenario envisions the nation's gross domestic product, which is the value of all goods and services produced within the U.S., falling 2 percent this year, unemployment rising to 8.4 percent and home prices dropping 14 percent.

The "adverse" scenario assumes GDP will drop 3.3 percent, unemployment rising to 8.9 percent and home prices falling 22 percent this year.

For all of 2008, GDP rose 1.3 percent, which was the smallest increase since 2001. In the fourth quarter, GDP fell 3.8 percent, the biggest contraction since 1982.

The unemployment rate last month surged to 7.6 percent, the highest in more than 16 years. It was 5.8 percent last year, the highest since 2003.

Median home prices in the U.S. fell 9.5 percent last year, according to the National Association of Realtors, though many big cities like Los Angeles, Las Vegas and Miami showed far larger declines.

The stress tests will consider a typical regulatory measure of a bank's capital reserves, known as "Tier 1 capital," government officials said, but will emphasize tangible items such as shareholders' equity. Investors no longer trust Tier 1 capital, analysts have said, because it includes intangible assets such as operating losses that can be used to reduce future tax liabilities.

AP Business Writers Martin Crutsinger, Jeannine Aversa and Alan Zibel contributed to this report.

WASHINGTON (AP) -- To a nation reeling from recession and facing long-festering problems, President Barack Obama has a simple reminder: "We are not quitters."

Whatever the problems, the new president promised in the first prime-time speech of his term, "We will rebuild, we will recover and the United States of America will emerge stronger than before."

Standing before a joint session of Congress on Tuesday night, Obama optimistically sketched an agenda that began with jobs, then broadened quickly to include a stable credit system, better schools, health care reform, reliable domestic sources of energy and an end to the war in Iraq. Specifics will follow, he said, although he conceded more billions may be necessary to stabilize the banking system.

The president drew loud cheers as he made his way down the center aisle, again when he stood, alone, at the podium to speak, and several more times in an address delivered in a hall packed with lawmakers, members of his administration, Supreme Court justices and diplomats.

Humorous and poignant moments took their turns on a night when virtually the entire government gathered under one heavily secured roof.

As when Obama explained his decision to have Vice President Joe Biden oversee implementation of his stimulus plan by saying, "Nobody messes with Joe."

Or when he urged lawmakers to pass education legislation named in part for Massachusetts' Democratic Sen. Edward M. Kennedy, battling brain cancer. The 77-year-old lawmaker "has never stopped asking what he can do for his country," Obama said, rephrasing an enduring line from President John F. Kennedy's 1960 inaugural address.

Little more than one month into the president's term, the speech followed congressional passage of an $787 billion stimulus bill, coincided with pending proposals to stem an epidemic of mortgage foreclosures and served as prelude to a budget Obama pledged will cut projected deficits in half by the end of his term.

The new president submits his tax and spending plans to Congress on Thursday.

With solid Democratic majorities in both houses, Obama can count on a reliable base of support as he pushes his agenda. But his drive for bipartisanship depends in part on his standing in the polls -- strong so far -- and his speech was aimed at lawmakers as well as the viewing public.

"What is required now is for this country to pull together, confront boldly the challenges we face, and take responsibility for our future once more," he said.

Republicans said they were ready to work with Obama and his Democratic allies in Congress -- up to a point.

"Where we agree, Republicans must be the president's strongest partners. And where we disagree, Republicans have a responsibility to be candid and offer better ideas for a path forward," said Louisiana Gov. Bobby Jindal, tapped by party leaders to deliver the GOP response.

Jindal, the first Indian-American governor in history, also took the opportunity to pledge to voters his party would try to regain their trust after an election in which Democrats not only won, elevating the first African-American to the White House, but strengthened their majorities in Congress.

"We will do so by standing up for the principles that we share," he said.

The president seemed to do a little political positioning of his own.

He said the recently passed stimulus legislation was designed to "put people back to work and put money in their pockets. Not because I believe in bigger government -- I don't." And despite what his critics claim, he said, no family with an income of less than $250,000 would face higher taxes because of his plan.

While Obama's speech was short on specifics, his remarks hinted at legislative battles ahead with Democrats as well as Republicans in Congress.

He said he had already identified $2 trillion in savings to be achieved over the next decade, adding: "We will end education programs that don't work and end direct payments to large agribusinesses that don't need them. We'll eliminate no-bid contracts that have wasted billions in Iraq."

He also pledged to "root out the waste, fraud and abuse in our Medicare program that doesn't make our seniors any healthier," an apparent reference to the subsidies the government pays to private insurance companies offering an alternative to traditional Medicare under a program long nourished by Republicans.

While Obama's speech had the trappings of a State of the Union address, it technically wasn't.

And unlike most such speeches, which mark the beginning of legislative action, this one came after a spurt of activity by Democrats eager to get to work with a new president of their own party.

Already, Obama has signed stimulus legislation, as well as a bill expanding health care for lower-income children and a separate measure giving workers a longer window in which to sue their employers for pay discrimination.

The discrimination bill was named for Lilly Ledbetter, a woman who lost a Supreme Court decision that the bill effectively overturned. She was present for the speech, seated in a part of the gallery reserved for presidential guests.

Another presidential guest was Ty'Sheoma Bethea, an eighth-grader at J.V. Martin Junior High School in Dillon, S.C. "We are not quitters," she wrote in a letter seeking improvements at her rundown school, words that Obama adopted for his own speech.

NEW YORK (AP) -- Wall Street has turned the clock back to 1997. Investors unable to extinguish their worries about a recession that has no end in sight dumped stocks again Monday. The Dow Jones industrial average tumbled 251 points to its lowest close since May 7, 1997, while the Standard & Poor's 500 index logged its lowest finish since April 11, 1997. It's as if the decade's dot-com surge, collapse and subsequent recovery never occurred.

The Dow is just over 100 points from 7,000. Both indexes have lost about half their value since hitting record highs in October 2007.

"People left and right are throwing in the towel," said Keith Springer, president of Capital Financial Advisory Services.

Investors pounded most financial stocks even as government agencies led by the Treasury Department said they would launch a revamped bank rescue program this week. The plan includes the option of increasing government ownership in financial institutions without having to pour more taxpayer money into them.

Although the government has said it doesn't want to nationalize banks, many investors are clearly still concerned that this could be a possibility as banks continue to suffer severe losses because of the recession. They're also worried that banks' losses will keep escalating as the recession sends more borrowers into default.

"The biggest thing I see here is the incredible pessimism," Springer said. "The government is doing a lousy job of alleviating fears."

The Treasury and other agencies issued a statement after The Wall Street Journal reported Citigroup is in talks for the government to boost its stake in the bank to as much as 40 percent. Analysts said the market, which initially rose on the statement, wanted more details of the government's plans.

"It's only a very partial picture of what we may get," said Quincy Krosby, chief investment strategist at The Hartford. "This proverbial lack of clarity is damaging market psychology."

Meanwhile, technology stocks fell after The Journal reported that Yahoo Inc.'s new chief executive plans to reorganize the company. But the selling came across the market as pessimism about the recession and its toll on companies deepened.

"There's no where to hide anymore," said Jim Herrick, director of equity trading at Baird & Co.

The market's decline extends massive losses from last week when the major stock indexes tumbled more than 6 percent. While falling to their 1997 levels, the major indexes plunged through the lows they reached in late November, at the height of the credit crisis.

"There's no main driver of the down day," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "There's just so much skepticism in the overall market and (the question is) is the government doing proper things to get us out of this problem. Obviously the stock market is voting no."

The Dow dropped 250.89, or 3.41 percent, to 7,114.78. It last closed this low on May 7, 1997 when it finished at 7,085.65. The Dow hasn't traded below the 7,000 mark since October 1997. The index is down 14 percent over the past 10 sessions.

The Standard & Poor's 500 index fell 26.72, or 3.47 percent, to 743.33. It was the lowest close since April 11, 1997, when it ended at 737.65.

When the indexes were last at these levels, they were in their ascendancy, climbing amid the dot-com boom. But 1997 was also the year that saw stock prices later plunge amid a growing financial crisis in Asia. Far away from Wall Street, it was the year that the U.S. first heard the name Monica Lewinsky, whose relationship with President Bill Clinton led to his impeachment and trial. And it was the year that the world was stunned by the death of Britain's Princess Diana, on Aug. 31.

On Monday, the S&P 500 did close above its Nov. 21 trading low of 741.02. But the 14-month recession has decimated the major indexes: The Dow is down 49.8 percent from its record highs of October 2007, while the S&P 500 index is down 52.5 percent.

Detrick warned that a move below the S&P's Nov. 21 low could set off "violent selling" as even more confidence drains from the market.

The technology-laden Nasdaq composite index dropped 53.51, or 3.71 percent, to 1,387.72.

Investors looking for a bottom also dumped smaller stocks. The Russell 2000 index of smaller companies fell 16.38 or 3.99 percent, to 394.58.

Declining issues outnumbered advancers by more than 6 to 1 on the New York Stock Exchange, where consolidated volume came to 6.35 billion shares compared with heavy volume of 8.12 billion shares on Friday.

Morgan Smith, investment counselor for Burns Advisory Group, said investors are now pushing out their expectations for a recovery in the industry until after this year.

"Everyone is trying to grasp at some type of bottom," Smith said. "The market is just trying to figure out if it has priced in a worst-case scenario."

Among tech stocks, Hewlett-Packard Co. fell $1.96, or 6.3 percent, to $29.28, and Intel Corp. dove 70 cents, or 5.5 percent, to $12.08.

Other big losers included General Electric Co., which dropped to a 14-year low of $8.80, but ended down 53 cents, or 5.7 percent, at $8.85. Aluminum producer Alcoa Inc. tumbled 48 cents, or 7.6 percent, to $5.81.

Some financial stocks managed to gain, including Citigroup, which rose 19 cents, or 9.7 percent, to $2.14, and Bank of America Corp., which gained 12 cents, or 3.2 percent, to $3.91.

Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.76 percent from 2.79 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.29 percent from 0.26 percent Friday.

The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude fell $1.59 to settle at $38.44 per barrel on the New York Mercantile Exchange.

Overseas, Britain's FTSE 100 fell 0.99 percent, Germany's DAX index fell 1.95 percent, and France's CAC-40 slipped 0.82 percent. Earlier, Japan's Nikkei stock average fell 0.54 percent.

WASHINGTON (AP) -- President Barack Obama plans to announce Monday a former Secret Service agent who helped expose lobbyists' corruption at the Interior Department as his pick to oversee the $787 billion economic stimulus plan.

Obama is set to name Earl Devaney as chairman of the new Recovery Act Transparency and Accountability Board, an administration official said Sunday. Vice President Joe Biden also will be given a role coordinating oversight of stimulus spending.

The official spoke on the condition of anonymity because the White House had not made public the announcement.

Devaney, the inspector general of the Interior Department, helped turn up disgraced lobbyist Jack Abramoff's dealings at the department. The department's No. 2 official, Steven Griles, pleaded guilty to charges he lied during congressional testimony based in part on Devaney's investigation.

Italia Federici, co-founder of the Council of Republicans for Environmental Advocacy, and former Interior Department official Roger Stillwell also pleaded guilty to charges stemming from the Interior investigation.

Obama has pledged the Recovery Act Transparency and Accountability Board to be an at-large body to oversee how the government spends billions allocated to help the flailing U.S. economy. But with dozens of agencies and departments involved, Obama wanted a central group to independently monitor where those funds are going.

Obama also planned to tap Biden to meet regularly with Cabinet members, governors and mayors to make sure their efforts were quick and effective. His reports to Obama are expected to be posted at the administration Web site devoted to the bill, Recovery.gov.

Obama was set to announce Devaney during a Monday meeting with governors, who have largely supported the economic stimulus package because it will direct billions to their states for schools, roads and technology.

In addition to the Abramoff investigation, Devaney led a separate investigation into workers at the Minerals Management Service, part of the Interior Department. His review found a "culture of substance abuse and promiscuity" at the Denver and Washington offices of the service.

He has served as the inspector general -- or in-house auditor -- of the Interior Department since 1999.

Devaney worked as a senior official with the Secret Service, retiring in 1991. He then worked as head of criminal enforcement at the Environmental Protection Agency.

A native of Massachusetts, Devaney earned a degree from Franklin and Marshall College.