DealBook: 3 Men Arrested in Rate-Rigging Inquiry

10:24 a.m. | Updated LONDON – British authorities made the first arrests in the global investigation into interest-rate manipulation, an inquiry that has ensnared the world’s biggest banks.

The Serious Fraud Office of Britain said on Tuesday that it had arrested three people in connection with rate rigging. Three men, British citizens aged 33 to 47, were taken into custody by the police in early morning raids at their houses on the outskirts of London.

One of the people is Thomas Hayes, a 33-year-old former trader at Citigroup and UBS, according to people with knowledge of the matter. At least one of the other two men worked for R P Martin, a British brokerage firm that previously surfaced in the Canadian investigation into rate manipulation, another person briefed on the matter said.

British criminal authorities typically make arrests at the early stages of an inquiry, and the actions do not necessarily mean the individuals will be charged with wrongdoing. A Citigroup spokeswoman declined to comment. A UBS spokesman declined to comment. A lawyer for Mr. Hayes could not immediately be identified.

The arrests signal a new phase of the sprawling rate-rigging investigation.

Regulators around the world are investigating more than a dozen big banks that help set benchmarks like the London interbank offered rate, or Libor. Such benchmark rates are used to determine the borrowing costs for trillions of dollars of financial products, including credit cards, student loans and mortgages.

In June, the British bank Barclays agreed to pay $450 million to settle charges that some of its traders attempted to manipulate Libor to bolster profits. Authorities also accused Barclays of submitting low rates to deflect concerns about its health during the financial crisis. The scandal prompted the resignations of top bank officials, including the chief executive, Robert E. Diamond Jr.

Libor Explained

Regulators are now pursuing a number of criminal and civil cases.

The Royal Bank of Scotland, which is holding talks with regulators, said it would probably disclose fines before its next earnings report in February.

The Swiss bank UBS is close to finalizing a settlement deal with American and British authorities. The bank is expected to pay more than $450 million to settle claims that some employees reported false rates to increase its profit. When American authorities announce their case against UBS in the coming days, Mr. Hayes is expected to figure prominently, one of the officials said.

Mr. Hayes built his reputation as a trader at UBS. He worked at the Swiss bank from about 2006 to 2009, before departing for Citigroup.

But his career at Citigroup was short-lived. In 2010, the bank suspended him after he approached a London trading desk about improperly influencing the yen-denominated Libor rates, a person briefed on the matter said. He was fired in September 2010, and the bank reported his suspected actions to authorities.

UBS also implicated Mr. Hayes to authorities, according to another person briefed on the matter. The Swiss bank discovered that Mr. Hayes had worked with traders at other banks to influence rates, according to officials and court documents.

Mr. Hayes emerged in court documents filed this year by Canadian authorities. The documents – collected by Canada’s Competition Bureau, the country’s antitrust authority – highlight an alleged scheme in which Mr. Hayes and other traders colluded to push yen Libor rates up and down. The Canadian investigation, which covers conduct from 2007 to 2010, also referenced traders at JPMorgan Chase, HSBC, Deutsche Bank and the Royal Bank of Scotland.

The traders, the documents said, at times corresponded using instant messages on Bloomberg machines. While the flurry of activity took place outside Canada, the trading affected financial contracts in the country that were pegged to yen Libor.

“Traders at participants banks communicated with each other their desire to see a higher or lower yen Libor to aid their trading positions,” the Canadian documents said.

The traders also relied on middlemen at brokerage firms “to use their influence” on other banks that set Libor, according to the documents. The brokers included employees at R P Martin, a person briefed on the matter said.

Under British law, Mr. Hayes and the other men can be held for 24 hours. The authorities can then apply for an extension if they need more time for questioning.

The Serious Fraud Office started a criminal investigation into Libor manipulation in July, in response to the furor over the rate-rigging scandal at Barclays. The criminal investigations by the British authorities and their counterparts at the Justice Department parallel similar civil inquiries by international authorities, including the Commodity Futures Trading Commission and the Financial Services Authority, the British regulator.

The arrests come as the agency tries to repair its reputation. In April, the new director of the Serious Fraud Office, David Green, pledged to overhaul the office after a series of mistakes by the organization.

Legal professionals say the appointment is a step toward rejuvenating the agency, which has lacked significant firepower to police London’s financial services sector. The Serious Fraud Office has been given extra resources by the British government to pursue a criminal investigation related to Libor.

“The S.F.O. works incredibly slowly,” said a defense lawyer representing individuals implicated in the Libor inquiry, who spoke on the condition of anonymity because of the continuing investigation. “It’s not surprising that people have been arrested. But how long it will take to lead to criminal charges is another matter.”

Azam Ahmed contributed reporting.

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Rate of Childhood Obesity Falls in Several Cities

Jessica Kourkounis for The New York Times

At William H. Ziegler Elementary in Northeast Philadelphia, students are getting acquainted with vegetables and healthy snacks.

PHILADELPHIA — After decades of rising childhood obesity rates, several American cities are reporting their first declines.

The trend has emerged in big cities like New York and Los Angeles, as well as smaller places like Anchorage, Alaska, and Kearney, Neb. The state of Mississippi has also registered a drop, but only among white students.

“It’s been nothing but bad news for 30 years, so the fact that we have any good news is a big story,” said Dr. Thomas Farley, the health commissioner in New York City, which reported a 5.5 percent decline in the number of obese schoolchildren from 2007 to 2011.

The drops are small, just 5 percent here in Philadelphia and 3 percent in Los Angeles. But experts say they are significant because they offer the first indication that the obesity epidemic, one of the nation’s most intractable health problems, may actually be reversing course.

The first dips — noted in a September report by the Robert Wood Johnson Foundation — were so surprising that some researchers did not believe them.

Deanna M. Hoelscher, a researcher at the University of Texas, who in 2010 recorded one of the earliest declines — among mostly poor Hispanic fourth graders in the El Paso area — did a double-take. “We reran the numbers a couple of times,” she said. “I kept saying, ‘Will you please check that again for me?’ ”

Researchers say they are not sure what is behind the declines. They may be an early sign of a national shift that is visible only in cities that routinely measure the height and weight of schoolchildren. The decline in Los Angeles, for instance, was for fifth, seventh and ninth graders — the grades that are measured each year — between 2005 and 2010. Nor is it clear whether the drops have more to do with fewer obese children entering school or currently enrolled children losing weight. But researchers note that declines occurred in cities that have had obesity reduction policies in place for a number of years.

Though obesity is now part of the national conversation, with aggressive advertising campaigns in major cities and a push by Michelle Obama, many scientists doubt that anti-obesity programs actually work. Individual efforts like one-time exercise programs have rarely produced results. Researchers say that it will take a broad set of policies applied systematically to effectively reverse the trend, a conclusion underscored by an Institute of Medicine report released in May.

Philadelphia has undertaken a broad assault on childhood obesity for years. Sugary drinks like sweetened iced tea, fruit punch and sports drinks started to disappear from school vending machines in 2004. A year later, new snack guidelines set calorie and fat limits, which reduced the size of snack foods like potato chips to single servings. By 2009, deep fryers were gone from cafeterias and whole milk had been replaced by one percent and skim.

Change has been slow. Schools made money on sugary drinks, and some set up rogue drink machines that had to be hunted down. Deep fat fryers, favored by school administrators who did not want to lose popular items like French fries, were unplugged only after Wayne T. Grasela, the head of food services for the school district, stopped buying oil to fill them.

But the message seems to be getting through, even if acting on it is daunting. Josh Monserrat, an eighth grader at John Welsh Elementary, uses words like “carbs,” and “portion size.” He is part of a student group that promotes healthy eating. He has even dressed as an orange to try to get other children to eat better. Still, he struggles with his own weight. He is 5-foot-3 but weighed nearly 200 pounds at his last doctor’s visit.

“I was thinking, ‘Wow, I’m obese for my age,’ ” said Josh, who is 13. “I set a goal for myself to lose 50 pounds.”

Nationally, about 17 percent of children under 20 are obese, or about 12.5 million people, according to the Centers for Disease Control and Prevention, which defines childhood obesity as a body mass index at or above the 95th percentile for children of the same age and sex. That rate, which has tripled since 1980, has leveled off in recent years but has remained at historical highs, and public health experts warn that it could bring long-term health risks.

Obese children are more likely to be obese as adults, creating a higher risk of heart disease and stroke. The American Cancer Society says that being overweight or obese is the culprit in one of seven cancer deaths. Diabetes in children is up by a fifth since 2000, according to federal data.

“I’m deeply worried about it,” said Francis S. Collins, the director of the National Institutes of Health, who added that obesity is “almost certain to result in a serious downturn in longevity based on the risks people are taking on.”

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Rate of Childhood Obesity Falls in Several Cities

Jessica Kourkounis for The New York Times

At William H. Ziegler Elementary in Northeast Philadelphia, students are getting acquainted with vegetables and healthy snacks.

PHILADELPHIA — After decades of rising childhood obesity rates, several American cities are reporting their first declines.

The trend has emerged in big cities like New York and Los Angeles, as well as smaller places like Anchorage, Alaska, and Kearney, Neb. The state of Mississippi has also registered a drop, but only among white students.

“It’s been nothing but bad news for 30 years, so the fact that we have any good news is a big story,” said Dr. Thomas Farley, the health commissioner in New York City, which reported a 5.5 percent decline in the number of obese schoolchildren from 2007 to 2011.

The drops are small, just 5 percent here in Philadelphia and 3 percent in Los Angeles. But experts say they are significant because they offer the first indication that the obesity epidemic, one of the nation’s most intractable health problems, may actually be reversing course.

The first dips — noted in a September report by the Robert Wood Johnson Foundation — were so surprising that some researchers did not believe them.

Deanna M. Hoelscher, a researcher at the University of Texas, who in 2010 recorded one of the earliest declines — among mostly poor Hispanic fourth graders in the El Paso area — did a double-take. “We reran the numbers a couple of times,” she said. “I kept saying, ‘Will you please check that again for me?’ ”

Researchers say they are not sure what is behind the declines. They may be an early sign of a national shift that is visible only in cities that routinely measure the height and weight of schoolchildren. The decline in Los Angeles, for instance, was for fifth, seventh and ninth graders — the grades that are measured each year — between 2005 and 2010. Nor is it clear whether the drops have more to do with fewer obese children entering school or currently enrolled children losing weight. But researchers note that declines occurred in cities that have had obesity reduction policies in place for a number of years.

Though obesity is now part of the national conversation, with aggressive advertising campaigns in major cities and a push by Michelle Obama, many scientists doubt that anti-obesity programs actually work. Individual efforts like one-time exercise programs have rarely produced results. Researchers say that it will take a broad set of policies applied systematically to effectively reverse the trend, a conclusion underscored by an Institute of Medicine report released in May.

Philadelphia has undertaken a broad assault on childhood obesity for years. Sugary drinks like sweetened iced tea, fruit punch and sports drinks started to disappear from school vending machines in 2004. A year later, new snack guidelines set calorie and fat limits, which reduced the size of snack foods like potato chips to single servings. By 2009, deep fryers were gone from cafeterias and whole milk had been replaced by one percent and skim.

Change has been slow. Schools made money on sugary drinks, and some set up rogue drink machines that had to be hunted down. Deep fat fryers, favored by school administrators who did not want to lose popular items like French fries, were unplugged only after Wayne T. Grasela, the head of food services for the school district, stopped buying oil to fill them.

But the message seems to be getting through, even if acting on it is daunting. Josh Monserrat, an eighth grader at John Welsh Elementary, uses words like “carbs,” and “portion size.” He is part of a student group that promotes healthy eating. He has even dressed as an orange to try to get other children to eat better. Still, he struggles with his own weight. He is 5-foot-3 but weighed nearly 200 pounds at his last doctor’s visit.

“I was thinking, ‘Wow, I’m obese for my age,’ ” said Josh, who is 13. “I set a goal for myself to lose 50 pounds.”

Nationally, about 17 percent of children under 20 are obese, or about 12.5 million people, according to the Centers for Disease Control and Prevention, which defines childhood obesity as a body mass index at or above the 95th percentile for children of the same age and sex. That rate, which has tripled since 1980, has leveled off in recent years but has remained at historical highs, and public health experts warn that it could bring long-term health risks.

Obese children are more likely to be obese as adults, creating a higher risk of heart disease and stroke. The American Cancer Society says that being overweight or obese is the culprit in one of seven cancer deaths. Diabetes in children is up by a fifth since 2000, according to federal data.

“I’m deeply worried about it,” said Francis S. Collins, the director of the National Institutes of Health, who added that obesity is “almost certain to result in a serious downturn in longevity based on the risks people are taking on.”

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John Silva, Maker of ‘Telecopter’ Camera, Dies at 92

Helicopter news footage is common today. But until myriad problems in sending live pictures from a moving aircraft were solved, television broadcasters could not show an eagle’s-eye view of a forest fire, or contemplate aerial coverage of, say, a famous man fleeing the police in a white Ford Bronco.

John Silva made that now-familiar vantage possible in 1958, when he converted a small helicopter into the first airborne virtual television studio.

The KTLA “Telecopter,” as it was called by the Los Angeles station where Mr. Silva was the chief engineer, became the basic tool of live television traffic reporting, disaster coverage and that most famous glued-to-the-tube moment in the modern era of celebrity-gawking, the 1994 broadcast of O. J. Simpson leading a motorcade of pursuers on Los Angeles freeways after his former wife and a friend of hers were killed.

Mr. Silva, who later earned two Emmy Awards for his pioneering technical work, died in Camarillo, Calif., on Nov. 27. His death was confirmed by a spokesman for KTLA-TV, where he worked from 1946 until leaving to become an electronics design consultant in 1978. He was 92.

Mr. Silva, an electronics engineer trained in radar science during World War II, faced three main roadblocks to transmitting black-and-white images live from helicopters. Rotor vibrations distorted the pictures, and sometimes even cracked the transmitter’s vacuum tubes. Directional antennas went haywire when helicopters changed direction suddenly, as helicopters sometimes do. And the camera equipment weighed a ton.

With help from fellow KTLA engineers, though mainly working alone to keep the project secret from competitors, Mr. Silva stabilized onboard cameras with a system of shock absorbers and cushions, designed aluminum parts to replace heavier metals in his equipment and commissioned an antenna that would extend below the chopper and rotate to maintain uninterrupted contact with KTLA’s mountaintop transmitter. By paring and remachining a basic set of broadcast equipment, he reduced it to 368 pounds from 2,000 pounds and distributed the load with precise symmetry throughout the tiny Bell 47G2 chopper leased for the project to prevent listing.

KTLA, the first commercially licensed television station west of the Rockies, faced growing competition in the late ’50s. New network-affiliated stations were scoring scoops with mobile broadcast units like ones Mr. Silva had pioneered, and everyone was fighting to get through increasingly clogged Los Angeles freeways.

The Telecopter was intended to kill the competition.

“If we could build a news mobile unit in a helicopter,” Mr. Silva recalled in a 2002 interview for the Archive of American Television, “we could get over it all, get there first, avoid the traffic and get to all the stories before anybody in the competition.”

“It’d be a wonderful thing,” he said.

By the time he began work on his airborne live television, Mr. Silva had already achieved a landmark in ground-level television history. In 1949, he was the technical director at KTLA who rigged the electronic connections — using duct-tape ingenuity and a borrowed generator — that carried what historians consider the first live television broadcast of a breaking news event.

The 27-hour rescue operation in San Marino, Calif., to save Kathy Fiscus, a 3-year-old trapped in an abandoned water pipe 94 feet below ground, was unsuccessful; but the station’s coverage was the precursor to every wall-to-wall television event broadcast since.

The Telecopter’s first flight took place at Los Angeles City Hall on July 24, 1958. It re-established KTLA’s dominance (until competitors put their own helicopters up). And for better and worse, it brought a Hollywood-style excitement to television news.

In the archive interview, Mr. Silva was asked what the first live helicopter pictures showed. They were panning shots, he said — zooming in and out of the L.A. landscape between the station’s Sunset Boulevard studio and City Hall.

Most of what they showed, he added, “was the freeway.”

John Daniel Silva was born in San Diego on Feb. 20, 1920, the youngest of three children of a commercial fisherman, Guy Silva, and his wife, Lottie, a homemaker. He attended M.I.T. for two years, and graduated with a bachelor’s degree after two years more at Stanford.

During World War II, he was a Naval officer who positioned radar defenses in the Pacific.

After the war, he worked for Paramount Pictures as an engineer for an experimental television station, W6XYZ, that later became KTLA.

Mr. Silva’s survivors include his wife, Mary Lou Steinkraus-Silva; three daughters, Patricia Vawter, Kathleen Silva and Karen Samaha; and a granddaughter.

The Telecopter had its greatest moments, predictably, at news events of Cecil B. DeMille dimensions: The 1963 dam break at the Baldwin Hills Reservoir in Los Angeles that sent 250 million gallons of water into surrounding neighborhoods, destroying many homes and claiming five lives. The 1965 Watts riots. The 1961 brush fire that swept through Bel Air, sending Hollywood stars scrambling to their roofs with garden hoses.

In his three-hour interview with the television archive, Mr. Silva never mentioned the 1994 O. J. Simpson freeway pursuit footage he made possible. But in answering a question about the future of helicopter reporting, he made clear that he had no regrets about the Telecopter’s role in creating an increasingly graphic television sensibility.

He would just like the lenses to get longer and the close-ups tighter, he said.

“When they’re doing freeway chases, they need to have a system that can come down in front, and be able to get pictures of suspects in the front windshield,” he said, describing one improvement he hoped to see.

Smiling, he added, “To fill the screen with their wonderful faces.”

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U.S. Designates Syrian Al Nusra Front as Terrorist Group

Manu Brabo/Associated Press

Syrian Army defectors were detained by Syrian rebel fighters while their identities were investigated Monday in the village of Azaz, near the Turkish border.

WASHINGTON — The United States has formally designated the Al Nusra Front, the militant Syrian rebel group, as a foreign terrorist organization.

The move, which was expected, is aimed at building Western support for the rebellion against the government of President Bashar al-Assad by quelling fears that money and arms meant for the rebels would flow to a jihadi group.

The designation was disclosed on Monday in the Federal Register, just before an important diplomatic meeting Wednesday in Morocco on the political transition if Mr. Assad is driven from power. The notice in the register lists the Al Nusra front as one of the “aliases” of Al Qaeda in Iraq.

In practical terms, the designation makes it illegal for Americans to have financial dealings with the group. It is intended to prompt similar sanctions by other nations, and to address concerns about a group that could further destabilize Syria and harm Western interests.

France, Britain, Turkey and the Gulf Cooperation Council have formally recognized the Syrian opposition. European Union foreign ministers met Monday with the head of the Syrian opposition coalition, Ahmed Mouaz al-Khatib, in Brussels.

British Foreign Secretary William Hague said that he hoped the European Union would soon grant the group full recognition.

The Al Nusra Front comprises only a small minority of the Syrian rebels, but it includes some of the rebellion’s most battle-hardened and effective fighters.

“Extremist groups like Jabhat al-Nusra are a problem, an obstacle to finding the political solution that Syria’s going to need,” the American ambassador to Syria, Robert Ford, said last week in an appearance hosted by the Foundation for the Defense of Democracies, a nongovernmental group.

But a growing number of anti-government groups — including fighters in the loose-knit Free Syrian Army that the United States is trying to bolster — have signed petitions or posted statements online in recent days expressing support for the Nusra Front. In keeping with a tradition throughout the uprising of choosing themes for Friday protests, the biggest day for demonstrations because it coincides with Friday Prayer, many called for this Friday’s title to be “No to American intervention — we are all Jabhet al-Nusra.”

Many Syrian fighters consider the Nusra Front a key ally because of its fighters’ bravery and reliable supply of money and arms. It has never come under the banner of the Free Syrian Army, shunning the Western aid and input that other groups have sought, but it coordinates closely with many who do.

Adding to the complication is that some groups in the Free Syrian Army have similar ideologies, follow the strict Salafist interpretation of Islam, and count among them fighters who joined the insurgency in Iraq — though they are not known to share the Nusra Front’s direct organizational connections to Al Qaeda in Iraq.

The Nusra Front celebrated another apparent battlefield achievement on Monday, declaring it had captured part of a large base outside the commercial hub of Aleppo. Activist groups and video posted online said that it had fought alongside other Islamic battalions including the Mujahedeen Shura Council and the Muhajireen Group.

The Syrian Observatory for Human Rights, a British-based group that tracks events in Syria through a network of activists in the country, said that the rebels had taken control of the command center of the sprawling base and that many soldiers had fled. Videos showed gunmen taking possession of tanks and anti-aircraft weapons.

The decision to designate the group, the register noted, was made by Secretary of State Hillary Rodham Clinton on Nov. 20, in consultation with Attorney General Eric H. Holder Jr., and Treasury Secretary Timothy F. Geithner.

The State Department appeared to delay the publication of the decision to synchronize it with the expected announcement in Morocco that the United States will formally recognize the Syrian opposition. The United States closed its embassy in Damascus in February because of escalating violence in the capital.

Because Mrs. Clinton is not feeling well, she will not travel to North Africa and the Middle East this week as planned. Deputy Secretary of State William J. Burns will lead the United States delegation at the Morocco meeting, an aide to Mrs. Clinton said Monday.

Michael R. Gordon reported from Washington and Anne Barnard from Beirut, Lebanon.

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Fed Likely to Sustain Bond-Buying Program to Stimulate Growth

WASHINGTON — The Federal Reserve is widely expected to announce on Wednesday that it will continue buying Treasury securities to stimulate growth in the new year.

The Fed’s public declaration in September that it would buy bonds until the outlook for the labor market “improved substantially” has cleared away much of the uncertainty and controversy that usually precedes such announcements.

The economic recovery remains lackluster and millions are looking for work. But while some analysts question the central bank’s ability to improve the situation, few doubt that the Fed, under its chairman, Ben S. Bernanke, is determined to keep trying.

Indeed, while Fed officials continue to warn that a failure to avert scheduled tax increases and spending cuts next year would overwhelm their efforts and plunge the economy back into recession, they have also said that even if Congress and the White House negotiate a compromise, the Fed’s efforts would continue.

“I am not prepared to say we are remotely close to substantial improvement on the employment front,” Dennis P. Lockhart, president of the Federal Reserve Bank of Atlanta, said in a recent speech. “I expect that continued aggressive use of balance sheet monetary tools will be appropriate and justified by economic conditions for some time, even if fiscal cliff issues are properly addressed.”

The remarks were particularly significant because Mr. Lockhart is among the moderate members of the Federal Open Market Committee whose support Mr. Bernanke invested months in winning before starting the new policy.

With the direction of policy clearly set, debate has turned to the details. The Fed, whose policy-making committee is meeting on Tuesday and Wednesday, still must determine what to buy and how much to spend, and officials continue to debate the best way to describe when the agency is likely to stop buying.

In making those decisions, the Fed must balance its conviction that buying bonds reduces borrowing costs for businesses and consumers against concerns the purchases might disrupt financial markets or inhibit its control of inflation.

Analysts say the immediate answer is likely to be more of the same. The Fed currently buys $40 billion of mortgage-backed securities and $45 billion of Treasury securities a month. Officials highlighted that $85 billion figure in September, and have indicated since that it remained their rough target.

“It would be odd for them to disappoint the expectations that they have created themselves,” Kris Dawsey of Goldman Sachs wrote in a note to clients predicting that the Fed would maintain both the dollar amount and the division. Other analysts have suggested the Fed might slightly decrease the total amount of purchases, to $80 billion, or increase the share of mortgage securities.

The Fed is unlikely to announce a new timetable this week, analysts said. The committee has said that it does not plan to raise interest rates before the middle of 2015, and that it will stop buying bonds before it starts raising rates.

Many officials on the 12-member committee — perhaps even the majority — would prefer to substitute economic objectives for guidance set by the calendar. The Fed’s ability to reduce borrowing costs derives in part from persuading investors that interest rates will remain low. Telling investors how the economic situation must change in order to warrant a change in policy could be more convincing, and therefore more potent, than simply publishing an estimated endpoint, these officials say.

But an account of the committee’s previous meeting, in late October, showed that officials remained divided about which economic objectives to use.

The most vocal proponent of focusing on economic goals, Charles L. Evans, president of the Federal Reserve Bank of Chicago, said last month that the Fed should declare its intent to keep short-term interest rates near zero until the unemployment rate fell below 6.5 percent, provided that the rate of inflation did not exceed 2.5 percent.

“I believe we have the ability to go even further in reassuring financial markets and the general public that policy will stay appropriately accommodative,” Mr. Evans said in advocating the change during a speech in Toronto.

Other officials have misgivings about placing such emphasis on any single economic indicator, or on the unemployment rate in particular.

The discussions are moving slowly, in part because it is not clear the changes being contemplated would have significant benefits. The targets the Fed is considering closely resemble its own past practice, meaning the new thresholds would tend to reinforce rather than shift expectations.

Lou Crandall, chief economist at the research firm Wrightson ICAP, noted in a recent analysis that the unemployment rate exceeded 7 percent in the mid-1980s and again in the early 1990s, and in both cases the Fed waited until the rate fell well into the 6 percent range before it began to raise interest rates.

The relative complacency of Fed officials also reflects their judgment that the mortgage-bond purchases announced in September are working. Average interest rates on 30-year mortgages are at the lowest levels on record, averaging 3.35 percent in November, according to Freddie Mac’s regular survey.

“This is solid evidence that our policy has been and continues to be effective — though it is certainly not all-powerful in current circumstances,” William C. Dudley, president of the Federal Reserve Bank of New York, said last week.

To continue the companion purchases of Treasury securities, the Fed will need to change its approach. It is now buying long-term securities with proceeds from the sale of short-term securities, but it is running out of inventory to sell.

The most likely alternative is to create money by crediting the accounts of banks that sell bonds to the Fed, the same method now being used to buy mortgage bonds and also to finance earlier rounds of the Fed’s so-called quantitative easing.

The Fed has repeatedly overestimated the health of the economy and the impact of its efforts. This time, officials have promised to maintain their efforts even as the economy shows signs of improvement. But they are once again sounding notes of cautious optimism about the coming year — if Washington does not interfere.

A budget deal reducing deficits in the long term, Mr. Bernanke said in November, “could help make the new year a very good one for the American economy.”

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A Breakthrough Against Leukemia Using Altered T-Cells

PHILIPSBURG, Pa. — Emma Whitehead has been bounding around the house lately, practicing somersaults and rugby-style tumbles that make her parents wince.

It is hard to believe, but last spring Emma, then 6, was near death from leukemia. She had relapsed twice after chemotherapy, and doctors had run out of options.

Desperate to save her, her parents sought an experimental treatment at the Children’s Hospital of Philadelphia, one that had never before been tried in a child, or in anyone with the type of leukemia Emma had. The experiment, in April, used a disabled form of the virus that causes AIDS to reprogram Emma’s immune system genetically to kill cancer cells.

The treatment very nearly killed her. But she emerged from it cancer-free, and about seven months later is still in complete remission. She is the first child and one of the first humans ever in whom new techniques have achieved a long-sought goal — giving a patient’s own immune system the lasting ability to fight cancer.

Emma had been ill with acute lymphoblastic leukemia since 2010, when she was 5, said her parents, Kari and Tom. She is their only child.

She is among just a dozen patients with advanced leukemia to have received the experimental treatment, which was developed at the University of Pennsylvania. Similar approaches are also being tried at other centers, including the National Cancer Institute and Memorial Sloan-Kettering Cancer Center in New York.

“Our goal is to have a cure, but we can’t say that word,” said Dr. Carl June, who leads the research team at the University of Pennsylvania. He hopes the new treatment will eventually replace bone-marrow transplantation, an even more arduous, risky and expensive procedure that is now the last hope when other treatments fail in leukemia and related diseases.

Three adults with chronic leukemia treated at the University of Pennsylvania have also had complete remissions, with no signs of disease; two of them have been well for more than two years, said Dr. David Porter. Four adults improved but did not have full remissions, and one was treated too recently to evaluate. A child improved and then relapsed. In two adults, the treatment did not work at all. The Pennsylvania researchers were presenting their results on Sunday and Monday in Atlanta at a meeting of the American Society of Hematology.

Despite the mixed results, cancer experts not involved with the research say it has tremendous promise, because even in this early phase of testing it has worked in seemingly hopeless cases. “I think this is a major breakthrough,” said Dr. Ivan Borrello, a cancer expert and associate professor of medicine at the Johns Hopkins University School of Medicine.

Dr. John Wagner, the director of pediatric blood and marrow transplantation at the University of Minnesota, called the Pennsylvania results “phenomenal” and said they were “what we’ve all been working and hoping for but not seeing to this extent.”

A major drug company, Novartis, is betting on the Pennsylvania team and has committed $20 million to building a research center on the university’s campus to bring the treatment to market.

Hervé Hoppenot, the president of Novartis Oncology, called the research “fantastic” and said it had the potential — if the early results held up — to revolutionize the treatment of leukemia and related blood cancers. Researchers say the same approach, reprogramming the patient’s immune system, may also eventually be used against tumors like breast and prostate cancer.

To perform the treatment, doctors remove millions of the patient’s T-cells — a type of white blood cell — and insert new genes that enable the T-cells to kill cancer cells. The technique employs a disabled form of H.I.V. because it is very good at carrying genetic material into T-cells. The new genes program the T-cells to attack B-cells, a normal part of the immune system that turn malignant in leukemia.

The altered T-cells — called chimeric antigen receptor cells — are then dripped back into the patient’s veins, and if all goes well they multiply and start destroying the cancer.

The T-cells home in on a protein called CD-19 that is found on the surface of most B-cells, whether they are healthy or malignant.

A sign that the treatment is working is that the patient becomes terribly ill, with raging fevers and chills — a reaction that oncologists call “shake and bake,” Dr. June said. Its medical name is cytokine-release syndrome, or cytokine storm, referring to the natural chemicals that pour out of cells in the immune system as they are being activated, causing fevers and other symptoms. The storm can also flood the lungs and cause perilous drops in blood pressure — effects that nearly killed Emma.

Steroids sometimes ease the reaction, but they did not help Emma. Her temperature hit 105. She wound up on a ventilator, unconscious and swollen almost beyond recognition, surrounded by friends and family who had come to say goodbye.

But at the 11th hour, a battery of blood tests gave the researchers a clue as to what might help save Emma: her level of one of the cytokines, interleukin-6 or IL-6, had shot up a thousandfold. Doctors had never seen such a spike before and thought it might be what was making her so sick.

Dr. June knew that a drug could lower IL-6 — his daughter takes it for rheumatoid arthritis. It had never been used for a crisis like Emma’s, but there was little to lose. Her oncologist, Dr. Stephan A. Grupp, ordered the drug. The response, he said, was “amazing.”

Within hours, Emma began to stabilize. She woke up a week later, on May 2, the day she turned 7; the intensive-care staff sang “Happy Birthday.”

Since then, the research team has used the same drug, tocilizumab, in several other patients.

In patients with lasting remissions after the treatment, the altered T-cells persist in the bloodstream, though in smaller numbers than when they were fighting the disease. Some patients have had the cells for years.

Dr. Michel Sadelain, who conducts similar studies at the Sloan-Kettering Institute, said: “These T-cells are living drugs. With a pill, you take it, it’s eliminated from your body and you have to take it again.” But T-cells, he said, “could potentially be given only once, maybe only once or twice or three times.”

The Pennsylvania researchers said they were surprised to find any big drug company interested in their work, because a new batch of T-cells must be created for each patient — a far cry from the familiar commercial strategy of developing products like Viagra or cholesterol medicines, in which millions of people take the same drug.

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A Breakthrough Against Leukemia Using Altered T-Cells

PHILIPSBURG, Pa. — Emma Whitehead has been bounding around the house lately, practicing somersaults and rugby-style tumbles that make her parents wince.

It is hard to believe, but last spring Emma, then 6, was near death from leukemia. She had relapsed twice after chemotherapy, and doctors had run out of options.

Desperate to save her, her parents sought an experimental treatment at the Children’s Hospital of Philadelphia, one that had never before been tried in a child, or in anyone with the type of leukemia Emma had. The experiment, in April, used a disabled form of the virus that causes AIDS to reprogram Emma’s immune system genetically to kill cancer cells.

The treatment very nearly killed her. But she emerged from it cancer-free, and about seven months later is still in complete remission. She is the first child and one of the first humans ever in whom new techniques have achieved a long-sought goal — giving a patient’s own immune system the lasting ability to fight cancer.

Emma had been ill with acute lymphoblastic leukemia since 2010, when she was 5, said her parents, Kari and Tom. She is their only child.

She is among just a dozen patients with advanced leukemia to have received the experimental treatment, which was developed at the University of Pennsylvania. Similar approaches are also being tried at other centers, including the National Cancer Institute and Memorial Sloan-Kettering Cancer Center in New York.

“Our goal is to have a cure, but we can’t say that word,” said Dr. Carl June, who leads the research team at the University of Pennsylvania. He hopes the new treatment will eventually replace bone-marrow transplantation, an even more arduous, risky and expensive procedure that is now the last hope when other treatments fail in leukemia and related diseases.

Three adults with chronic leukemia treated at the University of Pennsylvania have also had complete remissions, with no signs of disease; two of them have been well for more than two years, said Dr. David Porter. Four adults improved but did not have full remissions, and one was treated too recently to evaluate. A child improved and then relapsed. In two adults, the treatment did not work at all. The Pennsylvania researchers were presenting their results on Sunday and Monday in Atlanta at a meeting of the American Society of Hematology.

Despite the mixed results, cancer experts not involved with the research say it has tremendous promise, because even in this early phase of testing it has worked in seemingly hopeless cases. “I think this is a major breakthrough,” said Dr. Ivan Borrello, a cancer expert and associate professor of medicine at the Johns Hopkins University School of Medicine.

Dr. John Wagner, the director of pediatric blood and marrow transplantation at the University of Minnesota, called the Pennsylvania results “phenomenal” and said they were “what we’ve all been working and hoping for but not seeing to this extent.”

A major drug company, Novartis, is betting on the Pennsylvania team and has committed $20 million to building a research center on the university’s campus to bring the treatment to market.

Hervé Hoppenot, the president of Novartis Oncology, called the research “fantastic” and said it had the potential — if the early results held up — to revolutionize the treatment of leukemia and related blood cancers. Researchers say the same approach, reprogramming the patient’s immune system, may also eventually be used against tumors like breast and prostate cancer.

To perform the treatment, doctors remove millions of the patient’s T-cells — a type of white blood cell — and insert new genes that enable the T-cells to kill cancer cells. The technique employs a disabled form of H.I.V. because it is very good at carrying genetic material into T-cells. The new genes program the T-cells to attack B-cells, a normal part of the immune system that turn malignant in leukemia.

The altered T-cells — called chimeric antigen receptor cells — are then dripped back into the patient’s veins, and if all goes well they multiply and start destroying the cancer.

The T-cells home in on a protein called CD-19 that is found on the surface of most B-cells, whether they are healthy or malignant.

A sign that the treatment is working is that the patient becomes terribly ill, with raging fevers and chills — a reaction that oncologists call “shake and bake,” Dr. June said. Its medical name is cytokine-release syndrome, or cytokine storm, referring to the natural chemicals that pour out of cells in the immune system as they are being activated, causing fevers and other symptoms. The storm can also flood the lungs and cause perilous drops in blood pressure — effects that nearly killed Emma.

Steroids sometimes ease the reaction, but they did not help Emma. Her temperature hit 105. She wound up on a ventilator, unconscious and swollen almost beyond recognition, surrounded by friends and family who had come to say goodbye.

But at the 11th hour, a battery of blood tests gave the researchers a clue as to what might help save Emma: her level of one of the cytokines, interleukin-6 or IL-6, had shot up a thousandfold. Doctors had never seen such a spike before and thought it might be what was making her so sick.

Dr. June knew that a drug could lower IL-6 — his daughter takes it for rheumatoid arthritis. It had never been used for a crisis like Emma’s, but there was little to lose. Her oncologist, Dr. Stephan A. Grupp, ordered the drug. The response, he said, was “amazing.”

Within hours, Emma began to stabilize. She woke up a week later, on May 2, the day she turned 7; the intensive-care staff sang “Happy Birthday.”

Since then, the research team has used the same drug, tocilizumab, in several other patients.

In patients with lasting remissions after the treatment, the altered T-cells persist in the bloodstream, though in smaller numbers than when they were fighting the disease. Some patients have had the cells for years.

Dr. Michel Sadelain, who conducts similar studies at the Sloan-Kettering Institute, said: “These T-cells are living drugs. With a pill, you take it, it’s eliminated from your body and you have to take it again.” But T-cells, he said, “could potentially be given only once, maybe only once or twice or three times.”

The Pennsylvania researchers said they were surprised to find any big drug company interested in their work, because a new batch of T-cells must be created for each patient — a far cry from the familiar commercial strategy of developing products like Viagra or cholesterol medicines, in which millions of people take the same drug.

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Damascus Is Tested as Clashes Draw Near

Muzaffar Salman/Reuters

A member of Syria's symphony orchestra ahead of a concert in Damascus in November.

DAMASCUS, Syria — Business has been terrible for Abu Tareq, a taxi driver, so last week, without telling his wife, he agreed to drive a man to the Damascus airport for 10 times the usual rate. But, he said later, he will not be doing that again.

On the airport road, he could hear the crash of artillery and the whiz of sniper fire. Dead rebels and soldiers lay on the roadsides. Abu Tareq saw a dog eating the body of a soldier.

“I will never forget this sight,” said Abu Tareq, 50, who gave only a nickname for safety reasons. “It is the road of the dead.”

Damascus, Syria’s capital, is one of the world’s oldest continuously inhabited cities, a touchstone of history and culture.

Through decades of political repression, the city preserved, at least on the surface, an atmosphere of tranquillity, from its wide downtown avenues to the spacious, smooth-stoned courtyard of the Umayyad Mosque and the vine-draped alleys of the Old City, where restaurants and bars tucked between the storehouses of medieval merchants hummed with quiet conversation.

Now, though, the rumble of distant artillery echoes through the city, and its residents are afraid to leave their neighborhoods. Cocooned behind rows of concrete blocks that close off routes to the center, they huddle in fear of a prolonged battle that could bring destruction and division to a place where secular and religious Syrians from many sects — Sunni, Shiite, Alawite, Christian and others — have long lived peacefully.

For more than a week, Syrian rebels and government forces have fought for the airport road, as the military tries to seal off the capital city, the core of President Bashar al-Assad’s power, from a semicircle of rebellious suburbs. Rebels have now kept the pressure on the government for as long as they did during their previous big push toward Damascus last summer. This time, improved supply lines and tactics, some rebels and observers say, may provide a more secure foothold.

But the security forces wield overwhelming firepower, and while they have been unable to subdue the suburbs, some rebel fighters say they lack the intelligence information, arms and communication to advance. That raises the specter of a destructive standoff like the one that has devastated the commercial hub of Aleppo.

“Damascus was the city of jasmine,” Mahmoud, 40, a public-school teacher, said in an interview in the capital. “It is not the city I knew just a few weeks ago.”

Car bombs have ripped through neighborhoods, the targets and attackers only guessed at. Checkpoints choke traffic, turning 20-minute jaunts into three-hour ordeals. Wealthy residents find it quicker and safer to drive to Beirut, Lebanon, for a weekend trip than to the Old City.

Shells have been fired from Mount Qasioun overlooking Damascus, a favorite destination from which to admire the city’s sparkling lights. West of downtown, where the presidential palace stands on a plateau, things are relatively quiet.

Mahmoud, unable to find heating oil and medicine for his sick wife, said his grocer has lectured him daily on shortages and soaring prices. The once-ubiquitous government, he said, now appears to have no role beyond flooding streets with soldiers and security officers, “who are sometimes good and sometimes rude.”

People with roots in other towns have left, he said, “but what about me, who is a Damascene, and has no other city?”

The sense of claustrophobia has grown as rebels have declared the airport a legitimate target and the government has blocked Baghdad Street, a main avenue out of the city. On Sunday, it blocked the highway to Dara’a.

In some outlying neighborhoods and nearby suburbs, the front lines seem to be hardening.

On the route into Qaboun, a neighborhood less than two miles from the center of Damascus, the last government checkpoint in recent days was near the municipal building. Less than a quarter-mile on, rebels controlled the area around the Grand Mosque.

An employee of The New York Times reported from Damascus, and Anne Barnard from Beirut, Lebanon. Neil MacFarquhar contributed reporting from Beirut.

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Changes to Agriculture Highlight Cuba’s Problems

HAVANA — Cuba’s liveliest experiment with capitalism unfolds every night in a dirt lot on the edge of the capital, where Truman-era trucks lugging fresh produce meet up with hundreds of buyers on creaking bicycle carts clutching wads of cash.

“This place, it feeds all of Havana,” said Misael Toledo, 37, who owns three small food stores in the city. “Before, you could only buy or sell in the markets of Fidel.”

The agriculture exchange, which sprang up last year after the Cuban government legalized a broader range of small businesses, is a vivid sign of both how much the country has changed, and of all the political and practical limitations that continue to hold it back.

President Raúl Castro has made agriculture priority No. 1 in his attempt to remake the country. He used his first major presidential address in 2007 to zero in on farming, describing weeds conquering fallow fields and the need to ensure that “anyone who wants can drink a glass of milk.”

No other industry has seen as much liberalization, with a steady rollout of incentives for farmers. And Mr. Castro has been explicit about his reasoning: increasing efficiency and food production to replace imports that cost Cuba hundreds of millions of dollars a year is a matter “of national security.”

Yet at this point, by most measures, the project has failed. Because of waste, poor management, policy constraints, transportation limits, theft and other problems, overall efficiency has dropped: many Cubans are actually seeing less food at private markets. That is the case despite an increase in the number of farmers and production gains for certain items. A recent study from the University of Havana showed that market prices jumped by nearly 20 percent in 2011 alone. And food imports increased to an estimated $1.7 billion last year, up from $1.4 billion in 2006.

“It’s the first instance of Cuba’s leader not being able to get done what he said he would,” said Jorge I. Domínguez, vice provost for international affairs at Harvard, who left Cuba as a boy. “The published statistical results are really very discouraging.”

A major cause: poor transportation, as trucks are in short supply, and the aging ones that exist often break down.

In 2009, hundreds of tons of tomatoes, part of a bumper crop that year, rotted because of a lack of transportation by the government agency charged with bringing food to processing centers.

“It’s worse when it rains,” said Javier González, 27, a farmer in Artemisa Province who described often seeing crops wilt and rot because they were not picked up.

Behind him were the 33 fertile, rent-free acres he had been granted as part of a program Mr. Castro introduced in 2008 to encourage rural residents to work the land. After clearing it himself and planting a variety of crops, Mr. Gonzalez said, he was doing relatively well and earned more last year than his father, who is a doctor, did.

But Cuba’s inefficiencies gnawed at him. Smart, strong, and ambitious, he had expansion plans in mind, even as in his hand he held a wrench. He was repairing a tractor part meant to be grading land. It was broken. Again.

The 1980s Soviet model tractor he bought from another farmer was as about good as it gets in Cuba. The Cuban government maintains a monopoly on selling anything new, and there simply is not enough of anything — fertilizer, or sometimes even machetes — to go around.

Government economists are aware of the problem. “If you give people land and no resources, it doesn’t matter what happens on the land,” said Joaquin Infante of the Havana-based Cuban National Association of Economists.

But Mr. Castro has refused to allow what many farmers and experts see as an obvious solution to the shortages of transportation and equipment: Let people import supplies on their own. “It’s about control,” said Philip Peters, a Cuba analyst with the Lexington Institute, a Virginia-based research group.

Other analysts agree, noting that though the agricultural reforms have gone farther than other changes — like those that allow for self-employment — they remain constrained by politics.

“The government is not ready to let go,” said Ted Henken, a Latin American studies professor at Baruch College. “They are sending the message that they want to let go, or are trying to let go, but what they have is still a mechanism of control.”

For many farmers, that explains why land leases last for 10 years with a chance to renew, not indefinitely or the 99 years offered to foreign developers. It is also why many farmers say they will not build homes on the land they lease, despite a concession this year to allow doing so.

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