Stephanie Ditta

The World Health Organization could raise its pandemic alert level to phase 4 or 5 as a deadly swine flu outbreak shows no signs of slowing.

What does this mean?

The WHO designates six phases of pandemic alert for informing the world of the seriousness of the threat and the need to launch more intense preparations and measures.

We're currently at phase 3. A full-blown pandemic, level 6, denotes sustained, human-to-human spread over many countries of a new and serious virus.

Here are details of the six phases, along with the possible impact on financial markets:

PHASE 1: Low risk of human cases

PHASE 2: Higher risk of human cases

PHASE 3: No or very limited human-to-human transmission

• Market impact limited to short-term swings lasting a few days though further jolts to financial asset prices could be seen if governments or major forecasters cut growth predictions.
• Global equity markets suffer moderate setback, with underperformance in particular sectors (transport, travel, leisure, and commodity shares) that are seen most vulnerable to further deterioration in trade flows, travel.
• Minor flows into the most liquid bond markets, causing moderate declines in yields in these markets.

PHASE 4: Evidence of increased human-to-human transmission

• Concern about the impact on global economic activity starts to weigh on the wider equity market. Mark Bon, fund manager at Canada Life in London, estimates an upgrade to level 4 would see stock markets suffer a sudden sharp drop of 7 percent. Relative performance of stock markets could be determined by their economies' exposure to infected countries and by their stock piles of relevant drugs and vaccines.
• Further flight to the most liquid bond markets, with curve steepening seen on the cards as investors are expected to favour the front end and cash-like short-term bills. David Keeble, head of fixed income research at Calyon in London, says any WHO upgrade of the alert level could see 10-year Bund and Treasury yields fall about 20-30 basis points within days of such move.
• Yen and dollar expected to continue to strengthen, particularly against higher-yielding currencies as above. Any concern about renewed stress in the financial sector will stoke speculation cash could be pulled back to the United States to bolster balance sheets in a rerun of what happened during the financial crisis.

PHASE 5: Evidence of significant human-to-human transmission

• Further sharp and broad-based drop in equity markets. Canada Life's Bon estimates an escalation to levels 5 and 6 could swiftly knock 15-20 percent off world shares.
• Market trading volumes could start to dip, especially if swine flu were to become more widespread in the United States. However, most banks have disaster recovery programmes so they can continue trading in other locations.
• Stronger move into cash. Shorter end of yield curve also continuing to outperform. Still, expectations that central banks will embark on quantitative easing or pursue such strategies for longer will also push down yields at longer end.

PHASE 6: Efficient and sustained human-to-human transmission

• The World Bank estimated in 2008 that a flu pandemic could cost $3 trillion and result in a nearly 5 percent drop in world gross domestic product.
• Sharp falls in market trading volumes and illiquid market conditions, especially in affected regions.
• Sharp, broad-based decline in stock market indexes
• Flight to cash becomes even more pronounced. Investors demand big premiums to hold all but the most liquid sovereign debt, markets risk seizing up.

Are you worried about the swine flu? Let us know in the comments section if you're doing anything differently in light of the threat.

David Kellermann, acting chief financial officer of troubled U.S. mortgage giant Freddie Mac, was found dead in his suburban Virginia home after apparently committing suicide.

Kellermann, 41, was named Freddie Mac's acting CFO last September after the Treasury Department seized the company, and its sibling mortgage agency Fannie Mae, as the agencies faced deep losses on a crashing U.S. housing market that was rapidly engulfing other financial institutions.

The death of Freddie's acting finance chief follows several high-profile suicides that have been linked to the global financial collapse. German billionaire businessman Adolf Merckle threw himself in front of a train in January after heavy losses on the stock market. In December, Frenchman Thierry Magon de la Villehuchet, 65, co-founder of money manager Access International, was found dead in a New York office building, reportedly distraught over losing up to $1.4 billion in client money to Bernard Madoff's fraud.

Unanswered questions
In March, Freddie Mac said that it was cooperating with the Securities and Exchange Commission in an investigation and that employees have been interviewed by investigators.

A 16-year veteran of Freddie Mac, Kellermann had played a key role in helping the firm navigate accounting scandals and answer questions from regulators and investors who put the company under intense scrutiny as the U.S. housing market ended a five-year boom in 2006.

"Freddie Mac knows of no connections between this terrible personal tragedy and the ongoing regulatory inquiries discussed in our SEC filings," said David Palombi, the executive communications officer for the mortgage finance company.

Attorney General Eric Holder said he had no idea whether the apparent suicide of a senior official at Freddie Mac was related to investigations of the troubled mortgage giant.

Bonuses and private security
According to the neighbors and company officials who spoke to the New York Times, Kellermann had received a bonus of about $800,000 a few weeks back, on the heels of a public outcry over executive compensation. According to neighbors, Kellermann hired a private security firm after reporters approached his house to ask about his bonus.

Why?
The question behind every suicide and the hardest one to answer. While details remain sketchy as to the reason behind Kellermann's death, Charlie Gasparino at the Daily Beast writes that his death is seemingly a tragic trend that "underscores the tragic personal cost of the financial meltdown."

While the pressure of his job and the deep impact of the crisis may be an obvious motive, Megan McArdle from The Atlantic writes that "you don't commit suicide because you're mad at regulators. You commit suicide because you have deep mental health issues."

As the U.S. government prepares to reveal the results of stress tests to asses the ability of the nation's largest 19 banks to cope with worse-than-expected financial conditions, worries continue about the sustainability of recent better-than-expected results from banks.

Bank of America reported a big increase in troubled loans, and shares of Citigroup tumbled after analysts at Goldman Sachs said credit losses at the bank continued to grow at a rapid rate.

Regulators closed banks on Friday in Missouri and Nevada, bringing the total of U.S. bank failures this year to 25 and matching the number that failed throughout all of 2008, as the struggling economy and falling home prices take their toll on financial institutions.

The following is a list of U.S. bank failures so far this year, according to the Federal Deposit Insurance Corp.

Details about each bank closure are posted at the FDIC website.

U.S. BANK FAILURES IN 2009*
(assets, deposits in millions of dollars)

* Table does not include two corporate credit unions that were placed into conservatorship on March 20. The U.S. Central Federal Credit Union in Kansas and the Western Corporate Federal Credit Union in California, which provide products to the overall credit union system, are insured by the National Credit Union Administration.

** FDIC estimated the cost to its insurance fund at between $120 million and $145 million

President Barack Obama's much-anticipated plan to deal with the U.S. housing crisis aims to help as many as 9 million families avoid foreclosure on their homes, one of the root causes of the global financial meltdown.

The Obama plan will involve government subsidies to mortgage servicers and lenders to encourage them to lower payments for borrowers in distress.

The aim is to bring mortgage payments to a more affordable range of around 31 percent of borrowers' incomes.

At the end of last year, just over 9 percent of all home loans in the United States were in arrears or already in foreclosure, the Mortgage Bankers Association has said.

A total of 8.1 million U.S. homes, or 16 percent of all households with mortgages, could fall into foreclosure by 2012, according to a report by Credit Suisse.

Is Obama's rescue plan enough to curb the tide of soaring foreclosures? Share your thoughts.

Would you spend $87,000 on an area rug? Absolutely, if you are John Thain, the former CEO of Merrill Lynch.

Thain refurbished his office at Merrill to tune of $1.22 million in company money, according to a Daily Beast/CNBC report.

Pictures of the rug are as yet unavailable, but in the words of the Big Lebowski, we bet it really tied the room together.

It was a rough day for Thain. Hours after the rug story came out, he was ousted from Bank of America, just three weeks after the Merrill merger closed.

Other extravagant purchases reportedly included:

• A "mahogany pedestal table" ($25,000)
• A "19th Century Credenza" ($68,000)
• A "George IV Desk" ($18,000)
• A chandelier in the private dining room ($13,000)
• A "parchment waste can" ($1,400)

At an inauguration event at the Canadian Embassy in Washington D.C., actor Michael J. Fox spoke with Reuters reporter John McCrank about his hopes for the Obama administration.

Fox, afflicted with Parkinson's Disease, expects a very productive "four-to-eight years", saying Obama "is a fan of science and intellectual curiosity" and is committed to moving forward with research.

For more Reuters political news, please click here.

Former House Speaker Newt Gingrich spoke with Reuters reporter John McCrank at an inauguration event at the Canadian Embassy in Washington. Gingrich discusses whether the financial system needs more regulation and how long it will take for the economy to recover: "It's like having a big tummy-ache and long a stretch of indigestion."

He also weighs in on Obama's stimulus plan: "Ironically he ran on change you can count on and his stimulus is basically Bush plus."

With oil plunging to record lows, and the average retail price for gas sinking to less than $2, will Americans rekindle their love affair with trucks and SUVs?

Falling gasoline prices are putting extra money in the pockets of consumers, but there is also some concern that drivers may return to their gas-guzzling vehicles.

Are you taking advantage of cheaper gas prices? Could this be the second coming of gas-guzzling vehicles, or is this simply a brief reprieve? Share you cheap gas strategies.

As Congress debates legislation to help struggling automakers, many Americans say they are uneasy with the plan, arguing that while it may save jobs, it would reward companies for pursuing bad business practices. Some even question whether automakers will be viable, even with support.

"They need to restructure. If they get bailed out they are not going to do it," said Eric Smith, a paint contractor interviewed in Chamblee, Georgia, on the outskirts of Atlanta.

U.S. automakers say federal aid is vital to their survival, and there could be devastating ramifications for the broader economy if the sector is not stabilized.

"This is an issue of the whole auto industry, if that becomes under severe pressure, the impact on the whole U.S. economy will be devastating," GM Chief Executive Rick Wagoner said in an appearance on a NBC-affiliated television station in Detroit.

Retired Gen. Wesley Clark says that a rescue of U.S. automakers is important both economically and for national security. In a New York Times opinion piece, Clark wrote that the U.S. auto industry has played an important role in successive military campaigns, from World War II to today, and its ability to continue to develop new technologies is imperative for national security.

Some are calling for executive shake-ups if it would ensure congressional backing for a bailout. "If it was the difference between getting this kind of support or not, obviously the management should consider resigning," Carl Levin, a staunch industry ally, said on NBC's "Meet the Press."

As Democrats finalize a rescue plan, the question remains: should U.S. automakers be bailed out?

(Pictured above: G. Richard Wagoner (R), chairman and CEO of General Motors, testifies next to Robert Nardelli (2nd R), chairman and CEO of Chrysler, Alan Mulally (2nd L), President and CEO of Ford Motor Company, and Ron Gettelfinger (L), President of the United Auto Workers union, before the Senate Banking, Housing and Urban Affairs in a hearing on "Examining the State of the Domestic Automobile Industry," on Capitol Hill in Washington, November 18, 2008.  REUTERS/Molly Riley)

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Sen. Hillary Clinton has emerged as a candidate to be U.S. secretary of state for Barack Obama, months after he defeated her in an intense contest for the Democratic presidential nomination.

NBC News and The Washington Post reported that Clinton was under consideration for the top U.S. diplomatic position.

Clinton was described by her office as having flown to Chicago on Thursday on personal business.

Should Obama select his former rival for the top U.S. envoy post?