Although energy costs and inflation generally have been coming down in recent months -- prices fell by 0.1 percent in September on a seasonally adjusted basis, the government said today -- the annual COLA is based on the consumer price index from July through September, compared with the same in the prior year. Record high oil prices, which touched $140 a barrel over the summer, have been accumulating in price indexes through the year, and are built into the comparison the Social Security Administration used to establish the cost-of-living increase.

The result: the largest increase since 1982, when benefits grew by 7.4 percent in the aftermath of the oil price shock that followed the Iranian revolution.

This year's 5.8 percent increase will take effect in January for about 50 million people who receive Social Security benefits, and at the end of this year for the 7 million recipients of Supplemental Security Income. For the average Social Security recipient that will translate into an extra $63 a month, with benefits rising from $1,090 to $1,153.

The amount of income taxable in 2009 for purposes of Social Security will also increase, from $102,000 to $106,800.

The Social Security COLA forms the basis as well for increases in several federal pension formulas.

For the approximately 1.5 million people who retired under the old Civil Service Retirement System, benefits will rise by the full 5.8 percent. The same increase will apply to roughly 2 million military retirees and about 12,000 retired Foreign Service officers.

Retirees under the more recent Federal Employees Retirement System will receive a 4.8 percent increase, according to information on the Office of Personnel Management Web site.

All FERS retirees receive Social Security benefits, while only some CSRS retirees do.

Last year's COLA of 2.3 percent came on the heels of a period of low inflation and was the smallest since 2004, prompting complaints from some retiree groups.

Although annuities for federal retirees will increase next year by the highest amount in a quarter-century, the president of the National Active and Retired Federal Employees Association (NARFE) remains concerned that rising prices will outstrip the increase in benefits. NARFE also is concerned that the high COLA could cause federal budget makers to consider cutting back retiree benefits.

"Federal retirees should not have to worry that today's COLA could come at the detriment of their future retirement income," NARFE President Margaret L. Baptiste said. "NARFE along with federal employees, retirees, and survivors will be watching the next president and upcoming Congress closely to ensure they honor promises made to those who have and continue to serve our country."

Swiss National Bank Takes $60B in Troubled UBS Assets

Swiss authorities moved to stabilize their storied banking system today, agreeing to take $60 billion in troubled assets off the books of financial giant UBS and put them into a special government-backed fund, in a deal financed at least initially by the U.S. Federal Reserve.

In a forceful example of how dollars from the Fed are being put to work in the global financial system, the Swiss National Bank said it would use up to $54 billion from the Fed to buy "illiquid securities" from UBS.

The Fed announced earlier this week that it would provide dollars on an unlimited basis to a consortium of foreign banks, including Switzerland's, in hopes of freeing up world credit markets that have all but ceased to function. Though the foreign banks post their own currency with the Fed in return, protecting the balance sheet of the U.S. central bank, the Swiss announcement said access to dollars through the Fed allowed them to pursue a major bailout that might have been hard to finance otherwise.
Since the entire operation will be effected in U.S. dollars, it will not affect the National Bank's monetary policy in any way," the Swiss bank said in a news release.

The Swiss deal attempts in a single step to cleanse UBS's balance sheet of the mortgage-backed and other assets that have tangled the global financial system.

UBS will post $6 billion toward the sale, but the Swiss central bank will put up the rest with money obtained through its "swap line" with the Fed. Swiss authorities said they intend to find other financing in the future, to replace the money from the United States.

The Swiss government also announced it was investing $5 billion of public money directly into the bank, a reversal for a country that had taken a more hands-off approach even as its European neighbors moved to shore up or even nationalize their financial institutions.

But given the implications of a UBS failure -- the mega-bank's asset base is four times the size of the Swiss economy -- Swiss officials said they felt compelled to insure against the worst.

"This operation is unprecedented with regard to the reasons for it," Swiss National Bank president Jean-Pierre Roth said in a written statement this morning. Though the financial crisis may be in the process of easing, following action by governments and central banks worldwide, Roth said it was "preferable that we go ahead with this operation now . . . rather than at a later point under potentially more adverse conditions."

A second major Swiss bank, Credit Suisse, announced that it had reached its own agreement with the central bank to increase its capital base with a new investment of roughly $8.8 billion from a consortium of global investors. Credit Suisse said the largest participant is a subsidiary of the Qatar Investment Authority, a sovereign wealth fund controlled by the government of Qatar, an oil-rich Arab emirate on the Persian Gulf. The Qatar Investment Authority is already a major shareholder in Credit Suisse.

The bank, headquartered in Zurich, also reported a third-quarter net loss of about $1.14 billion, reflecting new writedowns of about $2.1 billion.

The Swiss actions are similar in concept to what the United States is doing with part of the recently enacted financial bailout law. But rather than removing troubled assets on a piecemeal basis -- the United States intends to buy them from banks through a still-to-be-defined auction process -- the steps announced today are a "definitive move" to fix the problem, said UBS chief executive Marcel Rohner.

Since 2007 UBS has had to decrease the value of mortgage-backed assets it held by some $47 billion to reflect the declining value of the underlying securities, mostly mortgages on homes and office buildings in the United States.

Under today's action, UBS can sell up to $60 billion worth of troubled assets to the central bank. Though it will contribute $6 billion to underwrite the sale, the central bank will be responsible for any losses beyond that. If the fund turns a profit -- and Swiss authorities say the underlying securities are valuable enough for it to do so -- UBS can buy the securities back, and split any profit with the central bank.

UBS shareholders and customers "now have the certainty that our risks related to these distressed assets have been substantially removed," Rohner said, while still allowing the bank to profit if the original loans and deals prove profitable.

USB has raised $25 billion in private capital this year to bolster its balance sheet. The additional announcement of a $5 billion government investment follows similar European and U.S. moves to put public capital directly into banks.

FINANCIAL MARKET SUMMARY
Symbol Lookup: Companies & Funds

	DJIA 8,577.91  -733.08    NASDAQ 1,628.33  -150.68    SPX 907.84  -90.17    S  3.33 -0.71    LMT  87.47 -8.30    FNM  1.00 -0.10    DJIA 8,577.91  -733.08    NASDAQ 1,628.33  -150.68    SPX 907.84  -90.17    S  3.33 -0.71    LMT  87.47 -8.30    FNM  1.00 -0.10

Personalize Ticker | Updated 4:00 PM, 10/15/2008	Disclaimer | © MarketWatch Inc. Source: Interactive Data Corp

Wall Street staged another massive sell-off today as recession fears gripped the market and Federal Reserve Chairman Ben S. Bernanke confirmed that an economic recovery will take time.

The Dow Jones industrial average fell more than 700 points, giving back nearly all its record gain from Monday.

The Dow closed down 7.9 percent, or 733 points, at 8,578. That follows a loss of 77 points yesterday, which nearly wipes out Monday's 936-point gain. The Standard & Poor's 500-stock index was off 9 percent, with a 90-point decline, and the tech-heavy Nasdaq was down 8.5 percent, losing 151 points.

This was the second-largest point loss in the Dow's more than 100-year history and ninth-largest on a percentage basis. Seven of the Dow's 20 greatest point losses have occurred since the recent financial turmoil began in September. The volatility has raised concerns among some analysts that stocks could slide past the losses of last week.

The markets opened down today as investors reacted to new data showing that consumer spending took an unexpectedly hard fall last month and to earning reports from several banks demonstrating the impact of the financial crisis on corporate balance sheets. But the decline accelerated in the afternoon as Wall Street digested new data from the Federal Reserve showing a slowing economy around the country and Bernanke's speech today.

After a massive rally Monday, analysts were expecting some pull back but had hoped investors found comfort in the latest government efforts to stabilize the financial sector, including making direct capital injections into major banks. Following yesterday's less dramatic declines, Wall Street's attention seems focuses on economic weakness and feeble corporate profits.

Investors' concerns were reinforced by the Federal Reserve's release of its Beige Book, information about the economy from its 12 regional banks, that found economic activity weakening across all its districts and manufacturing slowing in most areas.

That was preceded by a speech by Bernanke, who said that government efforts to rescue the economy will not work immediately.

"Stabilization of the financial markets is a critical first step, but even if they stabilize as we hope they will, broader economic recovery will not happen right away," he said.

The Fed news was exacerbated by a bleak consumer spending report today from the Commerce Department for September, peak back-to-school shopping season, which reinforced fears that the country is slipping into a recession. Consumer spending makes up two-thirds of economic activity.

"People intuitively knew we were in a recession but don't like having it confirmed to us," said Matt McCormick, portfolio manager and banking analyst at Bahl & Gaynor Investment Counsel in Cincinnati.

Retail sales were down 1.2 percent in September, the steepest monthly decline in three years, according to the Commerce Department.

ITHACA, New York (AP) -- The thought of a driverless, computer-guided car transporting people where they want to go on demand is a futuristic notion to some.

Computer-guided electric podcars like these carry small groups of people on their own networks.

To Jacob Roberts, podcars -- or PRTs, for personal rapid transit -- represent an important component in the here-and-now of transportation.

"It's time we design cities for the human, not for the automobile," said Roberts, president of Connect Ithaca, a group of planning and building professionals, activists and students committed to making this upstate New York college town the first podcar community in the United States.

"In the podcar ... it creates the perfect blend between the privacy and autonomy of the automobile with the public transportation aspect and, of course, it uses clean energy," Roberts said.

With the oil crisis reaching a zenith and federal lawmakers ready to begin fashioning a new national transportation bill for 2010, Roberts and his colleagues think the future is now for podcars -- electric, automated, lightweight vehicles that ride on their own network separate from other traffic.

Unlike mass transit, podcars carry two to 10 passengers, giving travelers the freedom and privacy of their own car while reducing the use of fossil fuels, reducing traffic congestion and freeing up space now monopolized by parking.

At stations located every block or every half-mile, depending on the need, a rider enters a destination on a computerized pad, and a car would take the person nonstop to the location. Stations would have slanted pull-in bays so that some cars could stop for passengers, while others could continue unimpeded on the main course.

"It works almost like an elevator, but horizontally," said Roberts, adding podcar travel would be safer than automobile travel.

The podcar is not entirely new. A limited version with larger cars carrying up to 15 passengers was built in 1975 in Morgantown, West Virginia, and still transports West Virginia University students.

Next year, Heathrow Airport outside London will unveil a pilot podcar system to ferry air travelers on the ground. Companies in Sweden, Poland and Korea are already operating full-scale test tracks to demonstrate the feasibility. Designers are planning a podcar network for Masdar City, outside Abu Dhabi, which is being built as the world's first zero-carbon, zero-waste city.

Meanwhile, more than a dozen cities in Sweden are planning podcar systems as part of the country's commitment to be fossil-fuel-free by 2020, said Hans Lindqvist, a councilman from Varmdo, Sweden, and chairman of Kompass, an association of groups and municipalities behind the Swedish initiative.

"Today's transportation system is reaching a dead end," said Lindqvist, a former member of the European parliament.

Cars have dominated the cityscape for nearly a century, taking up valuable space while polluting the air, said Magnus Hunhammar, chief executive officer of the Stockholm-based Institute for Sustainable Transportation, the world's leading center on podcar technology.

"Something has to change," he said. "We aren't talking about replacing the automobile entirely. We are adding something else into the transportation strategy."

Skeptics, however, question whether podcars can ever be more than a novelty mode of transportation, suitable only for limited-area operations, such as airports, colleges and corporate campuses. Detractors, mainly light-rail advocates, say a podcar system would be too complex and expensive.

"It is operationally and economically unfeasible," said Vukan Vuchic, a professor of transportation and engineering at the University of Pennsylvania who has written several books on urban transportation.

"In the city, if you have that much demand, you could build these guideways and afford the millions it would take, but you wouldn't have capacity. In the suburbs, you would have capacity, but the demand would be so thin you couldn't possibly pay for those guideways, elevated stations, control systems and everything else," Vuchic said.

Podcars typically run on an elevated guideway or rails, but they also can run at street level. As a starting point, pilot podcar networks can be built along existing infrastructure, supporters say.

Ithaca Mayor Carol Peterson said a podcar network could be part of her upstate city's long-range transportation plans and its mission of developing urban neighborhoods that are environmentally sustainable and pedestrian-friendly. Ithaca has a long history of progressive achievements -- this summer, it began the first community-wide car sharing program in upstate New York.

In Ithaca, a network could connect the downtown business district and main business boulevard with the campuses of Cornell University and Ithaca College, which sit on hillsides flanking the city. When the two colleges are in session, Ithaca's population balloons from about 30,000 to about 80,000, causing big-city congestion on the city's roads.

Santa Cruz, California, recently hired a contractor to design a small solar-powered podcar system that would loop through the city's downtown and along its beach front.

The Institute for Sustainable Transportation predicts a podcar system will be installed in an American city within the next five years, although it is likely to cost tens of millions of dollars. Because of the huge initial investment, funding would have to come from both public and private sectors, IST officials said.

The capital cost is about $25 million to $40 million per mile, which includes guideways, vehicles and stations, compared with $100 million to $300 million a mile for light-rail or subway systems, according to the IST.

Although the plan for Ithaca is only in the conceptual stages, Roberts sees the city as a logical place for the country's first community-wide podcar network, noting that construction of the Erie Canal across upstate New York in the early 1800s revolutionized commercial transportation in a young America.

"Buffalo, Rochester, Syracuse, Albany are connected along a single line, the Erie Canal. Now, they are connected by the (New York State) Thruway. It would be easy to adapt. You could have a high-speed rail line, or even buses, deliver travelers to the podcar stations, and the podcars take them wherever they want to go in the city," he said.

But podcar developers say they have overcome most technological obstacles and now must overcome the political and cultural barriers that lie ahead, equating it to the mind-set revolution that occurred when Americans hitched up their horses for good to become a nation of motorists.

"We are introducing an alternative to the automobile for the first time in 100 years," said Christopher Perkins, chief executive officer of Unimodal Transport Solutions, a California company that builds podcars that operate on magnetic levitation instead of wheels.