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Denmark’s finance minister says she and her European Union counterparts are close to a deal to force banks to build up bigger capital cushions against financial shocks.

Early Thursday, after more than 15 hours of debate, Margrethe Vestager said only a few “technical issues” needed to be ironed out before the ministers’ next meeting in two weeks.

The EU is in the process of writing an international agreement on capital defenses for banks into European law that regulators hope will prevent a repeat of the 2008 financial crisis.

The so-called Basel III deal would force lenders to increase their highest-quality capital gradually from 2 percent of the risky assets they hold to 7 percent by 2019. An additional 2.5 percent would have to be built up during good times.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

BRUSSELS (AP) _ European finance ministers were divided Wednesday on how the region’s banks can protect themselves from future financial shocks.

The European Union is in the process to writing an international agreement on capital defences for banks into European law. This would determine the level of risk Europe’s banks can take and what regulators can do to ensure that financial crises like the one brought on by the collapse of U.S. investment bank Lehman Brothers in 2008 do not happen again.

The so-called Basel III deal would force banks gradually to increase their highest-quality capital _ such as equity and reserves _ from 2 percent of the risky assets they hold to 7 percent by 2019. An additional 2.5 percent would have to be built up during good times.

But several countries, including the U.K. and Sweden, want to require their banks to build up even higher defenses without having to go to the European Commission, the EU’s executive arm in Brussels, for approval. There was also some disagreement over what should count as capital. Some countries are warning that Europe could be seen as softening banking rules at a time when it is already under close scrutiny from international investors.

“If we duck the challenge of implementing Basel we could face very important challenges to confidence in Europe this year,” warned George Osborne, the U.K.’s Treasury chief.

Basel III was agreed by the world’s leading economies after the 2008 financial crisis demonstrated that many banks did not have enough of a capital cushion to absorb sudden losses on loans and other risky activities. Once agreed, the new rules would apply to more than 8,300 banks in Europe, forcing them to build up billions in extra capital by selling shares or assets or reining in bonuses and dividends.

The 2008 financial panic that followed Lehman’s collapse hit Europe hard. Between 2008 and 2010, governments across the 27-country-bloc spent (EURO)4.6 trillion ($6.1 trillion) propping up struggling banks instant credit report.

What complicated efforts even more was that the open borders in the EU allow banks to operate freely across the bloc, but when lenders ran into trouble it was national governments _ and taxpayers _ who had to foot the bill. While the EU is now striving for a single set of banking rules, there is still no pan-European bank resolution fund that could relieve national governments.

The U.K., which had to save three major banks, has seen its debt load almost double since 2007. Meanwhile much smaller Ireland had to seek an international bailout to help stem the losses of its domestic lenders. And many economists fear that the economic recession in Spain may soon reveal massive bank losses there.

Now, the U.K. is leading a group of countries that want to be able to force their own banks to have bigger defenses than the ones prescribed by the pan-European rules without first getting approval from Brussels.

“We should make it clear that the crisis did not originate exclusively from weak fiscal policy. It originated also from insufficiently strong banks,” said Polish Finance Minister Jacek Rostowski. “So therefore a group of countries including Poland, the Czech Republic, Sweden and the United Kingdom are very determined to see that banking systems in the future should be as healthy as we expect the fiscal side, the budgetary side, to be kept.”

That demand is opposed by France and the Commission, which fear that jacking up capital requirements in one country could force banks based there to cut down lending by their foreign subsidiaries. That, they argue, could hurt small states that don’t have a big domestic banking system.

To bridge the divide between the two camps, Denmark, which currently holds the EU presidency, has proposed a compromise that would allow national regulators to require an extra capital buffer of 3 percent. Anything beyond that would have to be approved by the Commission in Brussels, which would examine not only the level of risk in the home state but also the potential impact in neighboring countries.

After several hours of public discussion, finance ministers retreated into bilateral talks. A possible compromise could include requiring not the Commission, but another European supervisor _ the European Systemic Risk Board, which is led by the European Central Bank President Mario Draghi _ to approve higher national buffers.

If they cannot find agreement Wednesday, several ministers said they hoped a deal could be struck at their next meeting in two weeks. Once finance ministers have struck a deal, they have to negotiate a final agreement with the European Parliament.

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Don Melvin contributed to this story.

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Therefore, the best way for you on how to get free credit reports online is to go to the AnnualCreditReport.com; this is the official web site.

Consumer prices rose the most in 10 months in February as the cost of gasoline spiked, but there was little sign that underlying inflation pressures were building up.

Surging gasoline prices put a small dent in consumer confidence early this month, other data showed on Friday. Still, Americans do not believe the sharp run up in prices will last.

The Labor Department said the Consumer Price Index rose 0.4 percent in February after advancing 0.2 percent in January. Gasoline accounted for more than 80 percent of the rise.

Stripping out volatile food and energy costs, the so-called core CPI edged up just 0.1 percent.

“Consumer purchasing power, at least for the next few months, is going to remain pressured by rising gasoline prices,” said Sam Bullard, a senior economist at Well Fargo Securities in Charlotte, North Carolina. However, he said a trend toward lower inflation was still in place.

Consumer prices rose 2.9 percent last month from a year-ago, unchanged from January but down from a peak of 3.9 percent in September. The core index was up 2.2 percent over the 12 months through February, down from 2.3 percent in January.

The Federal Reserve said on Tuesday the recent spike in energy costs would likely lift inflation only temporarily. Over a longer horizon, it said inflation was poised to run at or below its 2 percent target.

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Graphic - consumer prices: link.reuters.com/cam27s

Graphic - core CPI: link.reuters.com/mam27s

Graphic - industrial output: link.reuters.com/fem27s

Graphic - consumer sentiment: link.reuters.com/xem27s

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GASOLINE HURTS SENTIMENT

Gasoline prices have increased 53 cents since the start of the year to an average of $3.88 a gallon in the week to Monday.

That helped pull the Thomson Reuters/University of Michigan index on consumer sentiment down to 74.3 early this month from 75.3 in February.

Consumer expectations for inflation one year ahead jumped to 4 percent from 3.3 percent, but the five-year reading rose only slightly to 3 percent and the survey’s director said Americans do not expect the steep climb in gasoline costs to last.

“Overall, the data indicate that $4 gasoline has lost its shock value, although the drain on discretionary income will still affect spending, mostly among lower-income households,” survey director Richard Curtin said.

Inflation expectations among investors, as signaled by spreads in the bond market, have also been on the rise, supported by a stream of relatively upbeat economic data. However, they fell back a bit after the CPI report.

Tensions over Iran’s nuclear program have kept alive fears of oil supply disruptions and have pushed prices higher.

With gasoline weighing on the economy’s recovery, President Barack Obama, who faces re-election in November, has been considering tapping strategic oil stocks to ease the price pressure.

Other data on Friday showed the economy continues to expand moderately. Production at the nation’s mines, factories and utilities held steady last month after a 0.4 percent gain in January, the Fed said.

Manufacturing output rose 0.3 percent, even as automakers cut production by 1.1 percent after two big monthly gains. Carmakers had raised production to meet pent up demand for popular models in short supply.

“While higher energy prices and the euro zone recession are headwinds for manufacturers, an expanding U.S. economy, propelled by strengthening job market gains, should keep factory activity strong this year,” said Paul Edelstein, an economist at IHS Global Insight in Lexington, Massachusetts.

INFLATION OUT PACES WAGES

Stocks on Wall Street were little changed after hefty gains this week. Prices for U.S. Treasury debt fell, while the dollar weakened broadly.

The CPI report showed gasoline prices soared 6 percent last month, the largest increase since December 2010. They had risen 0.9 percent in January. While the strengthening jobs market is providing some cushion against rising gas prices at the pump, salaries are not keeping up.

Average weekly earnings, adjusted for inflation, fell 0.3 percent last month after slipping 0.1 percent in January, the Labor Department said. Compared with February last year, weekly earnings were down 0.4 percent.

But there was some price relief for households. Food costs held steady in February, marking the first time in 1-1/2 years they had not risen, and apparel prices dropped by the most since July 2006.

There were also declines in the prices of tobacco, airline tickets and used cars and trucks. Recreation costs also fell. But new motor vehicle prices recorded their first increase in nine months, reflecting rising domestic demand for autos.

A measure of the amount homeowners would pay to rent or would earn from renting their property - one of the largest single components of the CPI - rose at the slowest pace since April. Rents have risen as Americans have moved away from ownership in the face of persistent declines in house prices.

“The downward trajectory for consumer price inflation remains largely intact,” said Millan Mulraine, a senior macro strategist at TD Securities in New York.

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It affects everything from mortgages to credit cards to student loans, and now some of the world’s biggest banks are at the center of a criminal investigation into whether they manipulated it for their own benefit.

The London Interbank Offered Rate, or Libor, is a measure of the cost of borrowing between banks that serves as a benchmark for over $350 trillion worth of financial products worldwide.

Higher Libor rates translate into higher borrowing costs for businesses and consumers, while lower rates could make lenders reluctant to lend since they can’t charge as much in interest. In addition to consumer loans, certain bonds and interest rate swaps also use it as a benchmark.

With all the different loans and investments tied to Libor, there are serious consequences if the process is tampered with.

"If you move it even a little bit, it can cause massive redistribution of resources because it’s so extensively used," said Rosa Abrantes-Metz, a professor at New York University’s Stern School of Business and a former economist with the Federal Trade Commission.

Last week, the Justice Department said in a letter to a federal judge that it was conducting a criminal investigation of alleged Libor manipulation. Officials in Switzerland, Canada and the United Kingdom are also looking into the issue, according to disclosures in several banks’ public filings.

In addition, a number of banks, including Bank of America (, Fortune 500), Citigroup (, Fortune 500), HSBC, JPMorgan (, Fortune 500) and Credit Suisse (), are defendants in a U.S. civil case brought by investors — ranging from mutual funds to individual traders to the city of Baltimore — who say they lost profits due to Libor distortion as far back as 2006.

Law enforcement officials and the banks targeted in the suit either declined to comment or did not respond to requests for comment.

How Libor works: Libor rates are set each business day through a process overseen by the British Bankers’ Association.

Between seven and 18 large banks are asked what interest rate they would have to pay to borrow money for a certain period of time and in a certain currency. In all, the process generates rates for 10 currencies across 15 different time periods, ranging from one day to one year.

The responses are collected by Thomson Reuters, which removes a certain percentage of the highest and lowest figures before calculating the averages and creating the Libor quotes.

BofA to slash mortgage balances

Banks trying to appear stronger and more creditworthy may have been tempted to submit lower numbers, particularly during the financial crisis.

In addition, if the banks coordinated their submissions, they could adjust trading positions tied to Libor in order to profit from their advanced knowledge of its movements.

"The banks involved in this were largely trusted by the public to be setting these rates in a fair way — it was supposed to be a transparent measure of the cost of borrowing," said Arun Subramanian, a lawyer representing plaintiffs involved in the civil litigation. "To the extent that the banks were colluding to manipulate these rates, everyone was harmed and the public trust was violated."

Key Wall Street reform rule under fire

No banks have been formally accused of wrongdoing in the United States.

However, Japanese regulators temporarily suspended some transactions by UBS () and Citi in December after it was revealed that traders at both banks attempted to influence yen Libor rates and the related Tokyo Interbank Offered Rate, or Tibor.

UBS also recently revealed in public documents that it was providing information to U.S. and Swiss officials investigating possible Libor manipulation in exchange for leniency and conditional immunity, depending on the jurisdiction.

There’s no telling how long all the various probes will take to resolve, but if the allegations are proven, liabilities could be in the billions, said Jonathan Macey, a professor at Yale Law School. There’s also the possibility of criminal charges should conspiracy among traders be established, as well as the potential for more lawsuits from private plaintiffs.

"It’s a very serious issue when you’re talking about banks manipulating these rates across the globe," Subramanian said. "I think the liability for the banks is going to be staggering." 

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China set a 2012 target for inflation that

He predicted the tech-stock collapse. He foresaw the housing bust.

So naturally, everyone wants to know what Robert Shiller thinks of today’s stock prices, now perched at a four-year high. Or about the direction of home prices.

Keep your hopes in check. Shiller is disinclined these days to offer specific predictions about the direction of stocks, home prices or any other asset whose prices can surge or plunge before we can fully grasp what’s going on.

In his 2000 book “Irrational Exuberance,” Shiller warned of a stock-market bubble. Five years later, Shiller detected a bubble in home prices and argued that it posed a grave threat.

Shiller, a Yale economist, is co-creator of the widely followed Standard & Poor’s/Case-Shiller home price index. He has been widely ranked among the most influential economists in the world.

Despite his accurate past warnings, Shiller, 65, is generally skeptical of his profession’s ability to foresee shifts in the economy. Much of his recent work focuses on behavioral economics _ how psychology drives financial decision-making.

He believes home or stock prices flow from the confidence of consumers or investors. Confidence, in turn, reflects the story lines people invent to frame their memories of events _ from stock crashes to housing booms. Ultimately, he says, our financial decisions reflect our emotions and memories more than the state of the economy.

Shiller thinks home prices nationally could fall further. But he isn’t certain.

He doesn’t think the rising stock market has formed a bubble. Shiller doesn’t detect the kind of investor overconfidence that he associates with dangerously high stock prices.

In an interview with The Associated Press, Shiller spoke about the housing market, the stock market, the economy and human behavior. Excerpts appear below, edited for length and clarity.

Q: A lot of housing market experts think home prices have bottomed. You’ve been more bearish.

A. It’s not so much that I’m forecasting falling home prices as that I question whether anyone is able to forecast them right now. They won’t fall forever, but they can fall for a long time. I don’t know where home prices will be in 10 or 20 years.

Q: If prices do fall further, does it follow that many homeowners will feel less wealthy, and they’ll reduce spending and that will slow the economy?

A. Yes, we find that the “wealth effect” is stronger for housing than it is for the stock market. Many stocks are held in retirement portfolios, so people are not as likely to respond to a decline in value there as they would if it were something more immediate. In recent years, the home-equity loan has become very important as a way of sustaining consumption. Now that home prices have fallen, those loans are not so available. It seems pretty obvious that it’s going to affect consumption.

Q: What trends would you need to see for a strengthening of prices and then a sustained rise in home prices?

A: One thing that has been encouraging: The National Association of Home Builders’ housing market index has been shooting up. Builders are seeing signs of increasing demand. But it remains at a low level. So it’s ambiguous evidence. But that might be taken as a sign that the market is improving.

Q: If you were a national housing czar with unilateral authority to do whatever you deemed necessary to help the markets and restore faith, what steps would you take?

A: This crisis was caused substantially by a failure to manage real estate risk properly. And so we should be thinking like financiers about that risk, and how it should be managed. The mortgage institution we have is traditional. There’s no reason why we shouldn’t rethink it completely. The Dodd-Frank Act called for a study of shared appreciation mortgages. Those are mortgages where the risk of loss and gain on the house is shared with the lender. So if home prices go down, it’s not all on the shoulders of the homeowners.

Q: Do you see more rentals and apartments over the next decade? Do you think single-family homeownership will continue on maybe a slow but steady decline?

A: After the Great Stock Market Crash of 1929, people soured on stocks as investments. And I could see that happening with housing. The assumptions people have been making that buying a house is the American dream and that that’s what you have to do _ that kind of assumption is not ringing so true anymore.

Q: Will the foreclosure settlement for about $25 billion between states and the five biggest mortgage lenders strengthen the housing market?

A: The problem is that the decline in the housing market dwarfs this agreement. The total decline of the housing market has been in the trillions, and negative equity in housing, by one estimate, was about $700 billion. So this is too small to be very effective. It all helps, I suppose, but it’s not big.

Q: Do you think there’s a bubble forming in the U.S. stock market or in any other asset?

A: It doesn’t seem to me that we’re in a bubble situation as we were, say, in the 1990s. In the 1990s, there was just a general mood that we’re entering a new millennium, with Internet technology and advanced technology and America soaring. It was a bubble all over the world, really. I don’t know that we’re in that state of confidence now.

Q: Do you think any asset bubbles are forming in China?

A: China had what looks like a bubble, but the government has taken steps against it. This is another reason not to expect bubbles so much. The stock market bubble of the 1990s and the housing bubble of the 2000s were still at a time when central bankers and government authorities believed much more in free-market efficiency than they do now. The authorities are now thinking that it’s their responsibility to choke off bubbles.

Q: If you had to put all your money for the next decade in either stocks or super-safe, inflation-protected securities from the U.S. Treasury (TIPS), what would you do?

A: Stocks. They’re highly priced, and they’re risky, but they’ve had a good historic record. And last time I looked, inflation index bonds have a negative real yield.

Q: Is there any recent good book on consumer psychology or a non-econ subject that you’ve read?

A: Well, I like Danny Kahneman’s new book, “Thinking, Fast and Slow.” This reflects a psychological literature that the human mind is designed to build memories around narratives, especially human interest stories. Our mind stores memories as sequences of events with an ending. The story of the Great Depression is a story that’s in our memories. Another story is the patriotic one of the greatness of our country that may resonate more at some times than at others. And when it does resonate, it encourages people to be spending and investing in an optimistic way.

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Europe’s leaders are traveling to Brussels hoping to chart the continent’s way back to growth.

The two-day summit of EU leaders is for once taking place amid relative calm in financial markets, after the European Central Bank’s latest massive injection of cash into fragile banks.

Investors have also been relieved that Greece looks likely to avoid imminent bankruptcy.

Finance ministers from the eurozone are also in the Belgian capital on Thursday to check on Athens’ progress on reforms and cuts it has to implement before receiving a euro130 billion ($173 billion) bailout.

Heads of state and government, meanwhile, will scrutinize each others efforts to boost growth and limit deficits amid a shrinking economy and high unemployment.

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Iraqi lawmakers are reconsidering buying pricey armored cars for themselves with government money, after bitter criticism from a largely poor and unprotected public.

The decision to spend $50 million on 350 armored cars was included in the $100 billion budget for 2012 that parliament approved late last week.

Since then, the subject of the cars has infuriated Iraqis who believe they have little say or influence in the government.

Some lawmakers agreed on Wednesday with a plea by parliament speaker, Osama al-Nujaifi, to give up the cars and instead spend the money on what he described as “more important” issues.

Violence has dropped dramatically across Iraq but deadly bombings and shootings are still common. Six people were killed Wednesday in bombings in two Iraqi cities.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

BAGHDAD (AP) _ Iraqi officials say a car bomb on a main street in a shopping area in southeastern Baghdad has killed four people.

Police officials say the explosion during rush hour Wednesday morning also wounded nine other passers-by and damaged storefronts. Hospital officials confirmed the casualties. All officials spoke on condition of anonymity because they were not authorized to release the information.

Violence has dropped dramatically across Iraq from just five years ago when the country teetered on the brink of civil war. But deadly bombs and shootings still happen nearly every day as militants try to undermine public confidence in Iraqi’s government and security officials.

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Poor you. You slave over your taxes, hating every minute of it, but knowing you’ll get a nice reward at the end when you see how big your refund will be.

Then what happens? No refund. The Internal Revenue Service wants YOU to pay THEM. The nerve.

Worse: You don’t have the money.

There are lots of ways this could happen. Suppose you were laid off and collected unemployment insurance. That’s taxable, and Missouri doesn’t automatically deduct the taxes.

You might have raided your 401(k) plan to pay the rent. The withdrawals are taxable, and there’s a 10 percent penalty if you’re under 59 ½ years old.

“That’s really bad. Not only do you lose your job, but you owe taxes,” says Serita Eldridge, president of the Missouri Society of Enrolled Agents - people approved by the IRS to represent citizens in tax cases.

Or suppose you had some big wins at the slots. Uncle Sam wants his cut.

People who start small businesses sometimes misunderstand the law and get nailed come April. Workers cobbling together a living out of several part-time jobs sometimes discover that too little money was withheld for taxes.

No matter why, you may have to stiff the IRS come April.

So, let’s look at ways to fend off the tax man until you can pay up. We’ll also review ways to beg for mercy if you owe so much that you can’t possibly pay ever. (Good luck with that.)

First, file your tax return even if you can’t pay. The penalty for not filing is much bigger than that for not paying. If you don’t file, the IRS will fine you 5 percent per month, compounded monthly, plus interest at 6 percent per year, also compounded monthly on your unpaid taxes.

If you file but don’t pay, the IRS will want a one-time penalty of 5 percent, plus six percent annual interest compounded monthly.

So, send in whatever money you can spare to keep the cost down.

You can set up an installment plan by filling out an IRS form. Suggest a payment you can afford - defaulting on the IRS is a bad idea.

If you can pay it all off within 120 days, the plan is free. Need longer and you’ll pay a $52 set-up fee if you let the government tap your bank account for the payments, or $105 if you don’t. There’s a lower fee for low-income people.

The IRS does have a heart, albeit a small and stony one. If you’ve been knocked flat by life, you can file for an “Extension of Time for Payment of Tax Due to Undue Hardship.” You’ll have to list your assets and expenses, and explain the personal disaster that befell you. Death often counts. Serious illness might.

If you appear pitiful enough, the IRS may waive penalties, although interest will still run.

If you are extremely and hopelessly pitiful, you can make an “Offer in Compromise.” You offer to pay part of what you owe, if the IRS forgives the rest.

Forgiveness is limited among tax collectors. The IRS rejects three out of four compromise applications.

The program works best for people in dire straits - those too sick to work or needing expensive medical care. The IRS calculates how much it can squeeze out of you over the next few years if you sell what you own and subsist on a spartan budget dictated by the government. If you offer that amount, the IRS may take it.

The IRS doesn’t give a hoot about your other debts. It costs $150 to apply, and the taxpayer must make a partial tax payment with the application.

“If you have to owe money, the IRS is not the person you want to owe money too,” says Mark Luscombe, tax analyst at CCH Inc., the tax analysis and software company.

If your IRS debt is three years old, you might be able to dump it by going bankrupt, says Luscombe.

There’s no reason for panic if you can’t pay on time. “The IRS doesn’t come after you with full force,” says Eldridge. “They’ll tell you exactly what they’re going to do before they do it.”

Above all, the IRS doesn’t like to be ignored. Answer their letters promptly. If you’re attempting to pay, they are much less likely to get nasty and file liens and garnishments.

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In a letter to investors included in Facebook’s IPO filing, CEO Mark Zuckerberg outlined his philosophy for running what has become a multi-billion-dollar business. At core of that philosophy: Love your hackers.

"We have cultivated a unique culture and management approach that we call the Hacker Way," Zuckerberg wrote in the filing. "There’s a hacker mantra that you’ll hear a lot around Facebook offices: ‘Code wins arguments.’"

It’s a line that captures the spirit of the company’s engineering-driven culture, where all-night coding sessions and "hackathons" are popular.

"The best idea and implementation should always win — not the person who is best at lobbying for an idea or the person who manages the most people," Zuckerberg wrote.

It’s become common for tech entrepreneurs to include these kinds of missives in their IPO filings. The documents are half-warning, half-plea: ‘Hey shareholders, here’s the culture you’re about to buy into. Please don’t break it.’

Groupon’s () quirky founder Andrew Mason opened his company’s filing with a note on his management views: "Life is too short to be a boring company."

In 2004, Google (, Fortune 500) co-founders Larry Page and Sergey Brin cautioned shareholders that they would manage for the long haul, not the short term, and laid out their now-famous "Don’t be evil" mission.

"We aspire to make Google an institution that makes the world a better place," they wrote.

Zuckerberg struck some of the same notes in his own letter. "We don’t build services to make money; we make money to build better services," he wrote.

Zuckerberg’s stake is worth at least $16 billion

But the founder who built Facebook’s prototype from his dorm room at Harvard mainly stuck with the notion that code conquers all.

"Instead of debating for days whether a new idea is possible or what the best way to build something is, hackers would rather just prototype something and see what works," he wrote.

It’s an approach that explains both Facebook’s constant upgrades, and its equally routine privacy kerfuffles. Especially in its early years, Facebook tended to launch new features and then hash through all of their implications after the fact.

It’s an approach that’s literally built into the company’s foundation.

As Zuckerberg put it: ‘We have the words ‘Done is better than perfect’ painted on our walls to remind ourselves to always keep shipping."  

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