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The discussions come just days after Thain was forced on Christmas Eve to sell $4.4bn (£2.2bn) of stock to Singapore investment firm Temasek as part of a wider plan to raise some $7.5bn.

Merrill Lynch has already taken an $8bn hit related to sub-prime investments, but Wall Street fears that the bank’s problems could go far deeper. ‘Thain is desperately seeking an additional infusion of foreign capital to bolster Merrill’s balance sheet,’ said one source. ‘It could be done by selling shares or other assets to raise cash.’

A US observer said: ‘The multi-billion cash injection from Temasek was not enough and Thain is taking calls from a host of other potential saviours, which are understood to include sovereign fund investors from the Gulf and China.’

Analysts believe that Thain needs funds urgently in a bid to thwart future liquidity problems. The bank has already announced plans to lay off 1,600 staff. ‘Thain is raising capital in anticipation of a large fourth quarter write-down,’ said Sanford Bernstein analyst Brad Hintz.

Sources close to Merrill Lynch say that Thain has cancelled New Year leave among his top lieutenants and that his team is working around the clock on various ‘scenarios’ that could be employed to save the bank if problems related to the credit crunch continue to worsen.

‘It is all hands to the pumps here,’ the source said, adding that the possibility of exploring a merger with another banking group had not been ruled out but was considered ‘an extreme scenario’. ‘Everything is on the table,’ he said.

Shortly after midnight on Nov. 8, four armed men broke into the Pelindaba nuclear facility 18 miles west of Pretoria, a site where hundreds of kilograms of weapons-grade uranium are stored. According to the South African Nuclear Energy Corp., the state-owned entity that runs the Pelindaba facility, these four “technically sophisticated criminals” deactivated several layers of security, including a 10,000-volt electrical fence, suggesting insider knowledge of the system. Though their images were captured on closed-circuit television, they were not detected by security officers because nobody was monitoring the cameras at the time.

So, undetected, the four men spent 45 minutes inside one of South Africa’s most heavily guarded “national key points” — defined by the government as “any place or area that is so important that its loss, damage, disruption or immobilization may prejudice the Republic.”

Eventually, the attackers broke into the emergency control center in the middle of the facility, stole a computer (which was ultimately left behind) and breached an electronically sealed control room. After a brief struggle, they shot Anton Gerber, an off-duty emergency services officer. Gerber later explained that he was hanging around because he believed (reasonably, in retrospect) that his fiancée — a site supervisor — was not safe at work. Although badly injured, Gerber triggered the alarm, setting off sirens and lights and alerting police stationed a few miles away.

Nevertheless, the four escaped, leaving the facility the same way they broke in.

Amazingly, at the same time those four men entered Pelindaba from its eastern perimeter, a separate group of intruders failed in an attempt to break in from the west. The timing suggests a coordinated attack against a facility that contains an estimated 25 bombs’ worth of weapons-grade nuclear material. On Nov. 16, local police arrested three suspects, ranging in age from 17 to 28, in connection with this incident.

In response to the successful attack, the South African Nuclear Energy Corp. suspended six Pelindaba security personnel, including the general manager of security, and promised an “internal investigation which will cover culpability, negligence and improvements of Security Systems.” It should be noted that Pelindaba’s security was considered to have been upgraded after a break-in there two years ago (one individual was detained shortly after breaching the security fence).

By 2006, the cost of that same house doubled, to $540,000 — pushed by unbridled speculation fueled by unparalleled access to mortgage capital. But median income rose a paltry 15%. So today that same set of costs come to 60% of gross income.

That might be a manageable burden when home prices are rising at double-digit rates, creating new equity that can be accessed to support spending — but not when prices are flat and the home-equity ATM is closed.

There are “experts” out there who once preached that there was no bubble; they now preach that all real estate is local and that prices in your neighborhood won’t be affected by foreclosures and price declines elsewhere.

The cold, hard truth is that foreclosures are serving only to hasten the painful process of shifting housing prices back to a level the market can sustain. Prices must and will fall. Everywhere. Probably 25% to 30% from their peak.

A nasal spray containing a naturally occurring brain hormone called orexin A reversed the effects of sleep deprivation in monkeys, allowing them to perform like well-rested monkeys on cognitive tests. The discovery’s first application will probably be in treatment of the severe sleep disorder narcolepsy.

The treatment is “a totally new route for increasing arousal, and the new study shows it to be relatively benign,” said Jerome Siegel, a professor of psychiatry at UCLA and a co-author of the paper. “It reduces sleepiness without causing edginess.”

Orexin A is a promising candidate to become a “sleep replacement” drug. For decades, stimulants have been used to combat sleepiness, but they can be addictive and often have side effects, including raising blood pressure or causing mood swings. The military, for example, administers amphetamines to pilots flying long distances, and has funded research into new drugs like the stimulant modafinil (.pdf) and orexin A in an effort to help troops stay awake with the fewest side effects.

The monkeys were deprived of sleep for 30 to 36 hours and then given either orexin A or a saline placebo before taking standard cognitive tests. The monkeys given orexin A in a nasal spray scored about the same as alert monkeys, while the saline-control group was severely impaired.

The study, published in the Dec. 26 edition of The Journal of Neuroscience, found orexin A not only restored monkeys’ cognitive abilities but made their brains look “awake” in PET scans.

Officers from the Secret Intelligence Service staged discussions, known as “jirgas”, with senior insurgents on several occasions over the summer.

An intelligence source said: “The SIS officers were understood to have sought peace directly with the Taliban with them coming across as some sort of armed militia. The British would also provide ‘mentoring’ for the Taliban.”

The disclosure comes only a fortnight after the Prime Minister told the House of Commons: “We will not enter into any negotiations with these people.”

Opposition leaders said that Mr Brown had “some explaining to do”.

The Government was apparently prepared to admit that the talks had taken place but Gordon Brown was thought to have “bottled out” just before Prime Minister’s Questions on Dec 12, when he made his denial instead.

It is thought that the Americans were extremely unhappy with the news becoming public that an ally was negotiating with terrorists who supported the September 11 attackers.

The delicate balance in Afghanistan was underlined as it emerged that two diplomats had been ordered by the Kabul government to leave the country after allegations that they had met Taliban insurgents without the administration’s knowledge.

The pair, a top European Union official and a United Nations staff member, were declared “persona non grata” and said to be “threatening national security”.

They are both Afghan experts who have been working in the country since the 1980s. They are in their forties and cannot be named. One man works as a political adviser to the European Union while the other is employed as a political adviser to the UN mission in Kabul.

One of the men described the charges as “banal and preposterous” and said he hoped the Afghan government would quickly drop its threat to deport them.

MI6’s meetings with the Taliban took place up to half a dozen times at houses on the outskirts of Lashkah Gah and in villages in the Upper Gereshk valley, to the north-east of Helmand’s main town.

The troops, augmented by volunteer scientists from America’s Nuclear Emergency Search Team organisation, are under orders to take control of an estimated 60 warheads dispersed around six to 10 high-security Pakistani military bases.

Military sources say contingency plans have been reviewed over the past three days to prevent any of Pakistan’s atomic weapons falling into the hands of Islamic extremists if the administration of President Pervez Musharraf appears threatened by civil unrest.
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Some of the special forces are already believed to be in neighbouring Afghanistan and on alert for the mission. It is also understood that satellite surveillance of Pakistan has been stepped up to keep track of the possible movement of nuclear weapons and missile delivery systems.

According to a US Congressional report published in November, Pakistan’s nuclear deterrent consists of warheads for missiles and bombs dropped from aircraft.

The report was compiled by the former Prime Minister’s own contacts within the security services and alleged that the Inter-Services Intelligence agency was running the election operation from a safe house in the capital, Islamabad, they said. The operation’s aim was to undermine Ms Bhutto’s Pakistan People’s Party (PPP) and to ensure victory for the Pakistan Muslim League (Q) party, which supports President Musharraf, in the elections scheduled for January 8.

Patrick Kennedy, a Democratic congressman for Rhode Island, and Arlen Specter, a Republican member of the Senate sub-committe on foreign operations, have confirmed that they were planning to have dinner with Ms Bhutto on Thursday evening but were not available for comment yesterday.

Sarfraz Ali Lashari, a senior PPP official who works in its election monitoring cell, told The Times that he had helped to compile a 200-page report on the Government’s efforts to rig the poll, which Ms Bhutto planned to give to the Americans and to the press the day she was killed.

“But there is another report relating to the ISI and she was going to discuss it with them,” said Mr Lashari, an envi-ronmental economist who taught at Cranfield University for several years.

The second report, which Ms Bhutto did not plan to release to the media, alleged that the ISI was using some of the $10 billion (£5 billion) in US military aid that Pakistan has received since 2001 to run a covert election operation from a safe house in G5, a central district of Islamabad, he said.

“The report was done by some people who we’ve got in the services. They directly dealt with Benazir Bhutto,” he continued, adding that Ms Bhutto was planning to share the contents of the report with the British Ambassador as well as the US lawmakers.

Asif Ali Zardari, Ms Bhutto’s widower and the new co-chairman of the PPP, confirmed the existence of the report, its basic contents and Ms Bhutto’s plans to meet the US lawmakers last Thursday. Asked if such a report was in his possession, he said: “Something to that effect.” Asked if Ms Bhutto was planning to share its contents with the American legislators, he said: “I am not in a position to make an answer to that.” Asked if the report contained evidence that the ISI was using US funds to rig the elections, he said: “Possibly so.” He declined to give further details, but said the confidential report could have been one of several motives for killing Ms Bhutto, who died after a suicide-bomb and gun attack on an election rally near Islamabad. “It was a general combination of all of these things. The fact that she’s on the ground exposing everybody, I guess, would have been one reason. There are many views and many reasons one can think of for her assassination.”

The allegation is likely to fuel the already intense speculation surrounding the death, which triggered nationwide riots and raised fears that President Musharraf could reimpose emergency rule and postpone the elections.

Electoral fraud is nothing new in Pakistan, which has been led by military rulers for more than half of its 60-year history, and whose politics is dominated by feudal and tribal loyalties. In 1996 a former army chief called Mirza Aslam Baig alleged in court that he had been aware of a secret ISI political cell that distributed funds to antiPPP candidates in the run-up to the 1990-1991 elections.

Ms Bhutto had often accused President Musharraf, who seized power in a coup in 1999, of rigging elections and there have been reports that foreign financial aid to Pakistan’s Central Election Commission was being used to fix the result of next month’s poll.

However, the report that Ms Bhutto allegedly planned to share with the US politicians made the more serious allegation that the ISI was directly involved in rigging the coming parliamentary elections – and was using American money to do it. The United States has given Pakistan at least $10 billion in military aid since President Musharraf agreed to back the War on Terror after the September 11 attacks.

The money was supposed to be used to help Pakistan’s armed forces to fight al-Qaeda and Taleban militants sheltering in northwestern tribal areas near the porous border with Afghan-istan. But there has been almost no accounting for the funds, most of which have been transferred in cash directly to the Defence Ministry, and critics of President Musharraf say that much has been diverted towards other aims, such as upgrading forces on the border with India, or into private pockets.

This month the US Congress ordered the Government to withhold a portion of military aid to Pakistan until President Musharraf demonstrated progress in the campaign against the militants and in a transition towards civilian, democratic rule.

Mr Lashari, the PPP official, said that Ms Bhutto wanted to share the report with them because she did not entirely trust the US Government, which still regards President Musharraf as a key ally in the War on Terror. “The idea was to discuss it with all the international stakeholders, mainly including Britain and the United States, but we didn’t want to share it with anyone who could use it against us,” he said.

“It would be unwise to do anything that would annoy Musharraf. and the international stakeholders. Everything could collapse if the Army comes to know that there is something substantial against them. It’s dangerous to name people in Pakistan.” Pakistani media reports have alleged the existence of an ISI safe house used to rig the elections and identified Ijaz Hussain Shah, a retired general who heads the civilian Intelligence Bureau, as one of those involved.

“Our assessment is that the Pakistani nuclear arsenal is under control,” said Pentagon spokesman Col. Gary Keck. “At this time, we have no need for concern.”

Bhutto’s assassination on Thursday plunged Pakistan into crisis, triggering violent protests across her native province of Sindh.

It also helped push oil prices higher, drive the dollar lower and send money into less risky assets such as gold due to the additional political uncertainty in the region.

But U.S. military and defense officials have said Pakistan’s nuclear weapons remain securely under the control of the Pakistani military. Those officials have repeatedly called the Pakistani military a responsible steward of the arsenal and said it would remain out of country’s political conflict.

Concern about the security of the arsenal surfaced in November, when Pakistani President Pervez Musharraf declared a state of emergency, prompting protests and arrests.

“Pakistan should be carefully watched because it could prove to be a significant flashpoint in the coming year,” US think tank Strategic Forecasting said in an evaluation of al-Qa’ida’s tactics as the Islamist group comes under mounting pressure in Iraq.

With the “rapid spread of Talibanisation” in Pakistan’s insurgent northwest, the country would become “especially important if the trend in Iraq continues to go against the jihadis and they are driven from Iraq”, the assessment says.

“As the global headquarters for the al-Qa’ida leadership, Pakistan has long been a significant stronghold on the ideological battlefield. If the trend towards radicalisation continues, the country could become the new centre of gravity for the jihadi movement on the physical battlefield.”

The Stratfor assessment coincided with reports from Washington suggesting US Special Forces would expand their presence in Pakistan in the new year.

The boost in US forces was part of an effort to train and support Pakistan’s army in its fight to stem the al-Qa’ida and Taliban-linked insurgency.

The Washington reports reflected Pentagon frustration with the Pakistani counter-insurgency effort, and said the head of the US Special Operations Command, Admiral Eric T. Olson, had made a series of visits to the country for discussions with senior military leaders.

“The first US (Special Forces) personnel could be on the ground in Pakistan early in the new year”, according to the reports.

US Central Command chief Admiral William Fallon said the US forces would provide training and mentoring based on the US experience with the insurgencies in Iraq and Afghanistan.

No immediate independent confirmation of the deployment was available in Islamabad yesterday. But the US reports coincided with the disclosure of an ambitious 15-year “anti-terror investment plan” for Pakistan that has been high on the agenda of US Deputy Secretary of State John Negroponte in recent visits to Islamabad.

According to reports in Pakistan, areas in the North West Frontier Province, the federally administered tribal areas, Baluchistan and Pakistan-controlled Kashmir were earmarked for investment that would boost education and employment in an effort to wean local tribesmen away from their support for the jihadi movement.

The area, seen as crucial in the battle against al-Qa’ida and the Taliban, was the subject of a summit meeting in Islamabad yesterday involving President Pervez Musharraf and his Afghan counterpart, Hamid Karzai.

The two leaders held what sources described as “unusually cordial and friendly” meetings on how to boost co-operation in the war against the jihadis. They agreed to intensify their exchanges of intelligence, something Mr Musharraf described as “the key to fighting and enhancing our capability against terrorists and extremists”.

Mr Karzai said: “Afghanistan and Pakistan are twins. More than that, they are joined at thebody.”

Bhutto, a two-time former prime minister, had just addressed a campaign rally for next month’s parliamentary elections when a suicide bomber blew himself up outside the venue, killing her and at least 10 other people.

There were unconfirmed reports that the attacker had also opened fire on her with a weapon before the explosion.

“It may have been pellets packed into the suicide bomber’s vest that hit her,” interior ministry spokesman Javed Cheema told AFP.

It was the second suicide attack at a Bhutto event since she had returned from exile in October, aiming to contest the elections, and comes amid an unprecedented wave of violence in the country.

The deadliest terror attack in Pakistan’s history targetted her homecoming rally just hours after her return, leaving 139 people dead.

After that attack, authorities repeatedly warned her they had information that Islamic militants were trying to killer her.

Government officials said President Pervez Musharraf had been privately told of her death.

The killing will deepen the political crisis in Pakistan, where Islamic militants have vowed to disrupt the vote and Musharraf’s opponents — including Bhutto — accused him of planning to rig the result.

There have been more than 40 suicide attacks in Pakistan this year that have left at least 770 people dead.

Bhutto, educated at Oxford and Harvard, became the first female prime minister of a Muslim country when she took the helm in Pakistan in 1988. Her father, also a Pakistani prime minister, was also assassinated, in 1979.

For reference, Medicare is the government agency responsible for the maintenance of Australia’s universal health care system, Centrelink is responsible for the dispersement of social security payments, the Child Support Agency is responsible for the collection of child support from each parent in the event of a separation or divorce. Veterans’ Affairs appears to be at least somewhat analogous to its US counterpart, minus the provisions for medical treatment.

The New York Police Department will begin road testing four of the plug-in Vectrix scooters early next month — part of a broader campaign to make the nation’s largest police department a greener one as well.

The 36,000-officer NYPD has been looking for ways to retool its massive motor fleet to guzzle less gas and inflict less harm on the environment. A handful of NYPD hybrid cars and so-called flex-fuel vehicles, which can run on both gasoline and ethanol, are already on the road.

“Police effectiveness comes first, but where we can combine environmentally friendly vehicles without compromising the mission, we do,” said Police Commissioner Raymond Kelly.

Vectrix recently approached several big city police departments with the sleek, two-wheel scooters, but the NYPD was the first to take a serious look, said Andrew MacGowen, president of the Rhode Island-based company.

“The New York environment is going to be very true test,” he said.

MacGowen said the Vectrix scooters, assembled in Poland, are the first all-electric vehicles to be government-certified to travel on any highway, street or road.

The NYPD uses 329 Piaggio scooters — which have roughly the same dimensions as the Vectrix — and 104 smaller Yamaha scooters that run on regular fuel, said Capt. Vincent LoRusso, commanding officer of the Fleet Services Division. Officers often ride them while patrolling city parks, policing street demonstrations or directing traffic.

The Vectrix, which has a battery pack, is heavier than the Piaggio, but with a top speed of more than 60 mph, it’s nearly as fast. And riders cruise past the fuel pump: The scooters can be recharged simply by plugging into a standard outlet for two hours. MacGowen said recharging costs a fraction of refueling — a savings he says would quickly cover the difference in price with Piaggios, which cost the NYPD about half as much.

The Vectrix can only travel 40 to 60 miles per charge, but police officials said they may be willing to sacrifice some range for zero emissions.

Plus, the scooters would have the dual benefit of “reducing air pollution and noise pollution,” said Robert Martinez, the NYPD fleet director.

Detective Derek Siconola, who will train riders, suggested the quiet engines also offer a side benefit: the element of surprise.