Pranab rules out military action: Rice arrives Wednesday

India has said it was not contemplating military action against Pakistan in the wake of the Mumbai terror attack. “Nobody is talking of military action,” external affairs minister Pranab Mukherjee told reporters. Mukherjee’s statement comes on the eve of the arrival of US secretary of state Condoleezza Rice in New Delhi on Wednesday.

Rice has expressed confidence that there will not be any conflict between the two neighbours. But she told reporters a day earlier that the US government wants Pakistan to ensure total transparency in sharing any details on the 26/11 attacks with India. Pakistan has now offered India a joint team to probe the Mumbai attacks and underlined that it would “frame a response” to New Delhi’s demand for handing over 20 of India’s most wanted men.

“The international community is behind us, including the newly-elected US president, Barack Obama,” Mukherjee said. In response to a query on US President-elect Barack Obama’s remarks that every country had the sovereign right to “protect” its citizens from such terror attacks, Mukherjee said, “What will be done, time will show.”

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Fearing meltdown, Fed bails out American International Group Inc with $85-billion package

The US government took control of American International Group Inc (AIG) in an $85-billion bailout to prevent the bankruptcy of that nation's biggest insurer and the worst financial collapse in history. The Federal Reserve will provide a two-year loan, take 79.9% of the New York-based company's stock and replace its management because " a disorderly failure of AIG could add to already significant levels of financial market fragility",according to a statement by the US central bank late on Tuesday.

The dollar fell against the yen as the Fed's bailout of AIG failed to quell concern that credit losses will deepen. AIG unravelled as the worst housing crisis since the Great Depression led to more than $18 billion in losses over the past year. A meltdown could have cost the financial industry $180 billion, according to RBC Capital Markets, because AIG provided insurance on more than $441 billion of fixed-income investments held by the world's biggest institutions, including $57.8billion in securities tied to sub prime mortgages.

The government is lending AIG the money at 8.5 percentage points above the three month Libor, or a current rate of about 11.5%.

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