US debt ceiling impasse? Fed's 'loathsome' game plan for the 'unthinkable'

By Ann Saphir

(Reuters) -Treasury Secretary Janet Yellen says failure to raise the U.S. debt limit could lead to the unthinkable: a default on government payment obligations. That's an outcome the White House on Friday warned could plunge the economy into recession.

If the impasse in Congress over the $28.5 trillion debt limit isn't resolved before an October deadline, what would the Federal Reserve - the backstop for U.S. financial markets as the lender of last resort - be prepared to do?

As it turns out, Fed Chair Jerome Powell may already have something of a game plan. The country faced a similar crisis over the debt limit in 2011 and again two years later, and at an unscheduled October 2013 meeting, Fed policymakers - including Powell, who was then a Fed governor, and Yellen, who was the Fed's vice chair - debated possible actions in response.

'Loathsome' was how Powell described some of the most aggressive options contemplated, transcripts show, though he was among those who said they might be needed in the face of what could be a drastic market catastrophe.

'COME OUT SWINGING'

The plan included a process for managing government payments, given the Fed's expectation that Treasury would prioritize principal and interest but would make day-by-day decisions on whether to cover other obligations.

Changes to the Fed's supervision of banks were also planned. Banks would be allowed to count defaulted Treasuries toward risk-capital requirements, and supervisors would work directly with any bank experiencing a "temporary drop in its regulatory capital ratio." The U.S. central bank would also direct lenders to give leeway to stressed borrowers.

Policymakers also mapped out approaches to managing market strains and financial stability risks stemming from a technical default.

They readily agreed to some measures, including expanding ongoing bond purchases to include defaulted Treasuries, lending against defaulted securities and through the Fed's emergency lending window, and conducting repurchase operations to stabilize short-term financial markets.

Other actions sketched out in briefing notes and during the meeting were more controversial, including providing direct support to financial markets buying defaulted Treasury securities, or simultaneously selling Treasuries that are not in default and buying ones that are.

It was those last actions that Powell described as "loathsome," while others referred to them as "repugnant" and "beyond the pale." The issue, transcripts suggest, was the worry that such purchases could be seen as crossing a line into direct financing of government.

"The economics of it are right, but you'd be stepping into this difficult political world and looking like you are making the problem go away," Powell said at the time.

A larger number of policymakers, including Yellen and John Williams, who at the time was San Francisco Fed president and is now head of the New York Fed, felt that such an intervention ought to be part of the U.S. central bank's response if needed. Even Powell agreed it might need to be "under certain circumstances."

Congress resolved the debt limit impasse in 2013 and the Fed never had to activate its game plan. Since then it has managed through a number of crises, including the coronavirus pandemic, to which it responded aggressively and with never-before-used tools like purchases of municipal debt. "We crossed a lot of red lines that had not been crossed before," Powell said in an interview in May 2020.

Analysts say that the Fed helped stave off a financial crisis and an even worse economic downturn.

Christopher Russo, a post-graduate research fellow at the Mercatus Center at George Mason University, says the Fed's experience may color how it responds to future crises.

"The lesson learned is: if they are going to do something, come out swinging," he said.

(Reporting by Ann SaphirEditing by Paul Simao)

Pentagon says Kabul drone strike killed 10 civilians in 'tragic mistake'

(Refiles to remove superfluous "it" from lede)

WASHINGTON (Reuters) - The U.S. military said on Friday that a drone strike in Kabul last month killed as many 10 civilians, including seven children, and it apologized for what the Pentagon said was a tragic mistake.

Senior U.S. officers had said the Aug. 29 strike that took place as foreign forces completed the last stages of their withdrawal from Afghanistan targeted an Islamic States suicide bomber who posed an imminent threat to Kabul airport.

"At the time of the strike, I was confident that the strike had averted an imminent threat to our forces at the airport," U.S. General Frank McKenzie, the head of U.S. Central Command, told reporters. "Our investigation now concludes that the strike was a tragic mistake."

He said he now believed it unlikely that those who died were Islamic State militants or posed a direct threat to U.S. forces. The Pentagon was considering reparations for the civilians killed, McKenzie said.

Reports had emerged almost immediately that the drone strike had killed civilians including children. A spokesman for Afghanistan's new Taliban rulers, Zabihullah Mujahid, had said at the time that strike had killed seven people.

(Reporting by Phil Stewart and Idrees Ali; Additional reporting by Patricia Zengerle; Editing by Daniel Wallis)

As California fire nears, crews protect world's largest tree in special wrap

By Fred Greaves

THREE RIVERS, Calif. (Reuters) -Fire crews in California have resorted to wrapping the bases of some giant sequoias in fire-resistant coverings in a desperate effort to save the towering specimens, including the General Sherman, the world's largest tree, the National Park Service said on Friday.

The blaze, one of dozens to erupt across several western states in a fire season that got off to an early start, forced the closing earlier this week of Sequoia National Park and left a dense layer of smoke in the area early on Friday.

The so-called KNP Complex fire, near the small town of Three Rivers, about midway between Los Angeles and San Francisco,

grew to more than 11,000 acres (4,450 hectares) on Friday, according to the federal Inciweb fire information system.

It was burning about a mile (1.6 km) from Sequoia National Park's Giant Forest, home to the General Sherman, the largest tree on Earth by volume, park service spokesman Mark Garrett said.

Giant sequoias, many of which are more than 3,000 years old, grow only in the high elevations of the western slopes of California's Sierra Nevada mountains. With their thick bark, they can withstand most fires and even thrive on them.

Still, Garrett said, the park service was taking no chances with the General Sherman and a few of the other big trees.

“Even though they're fire-adapted ... we cannot lose that tree," Garrett said by phone.

The wraps are made of a fire-resistant, heat-reflecting material that firefighters carry for protection, he said.

The General Sherman tree towers over 2,000 other giant sequoias in the park at 275 feet (83 m) and is over 36 feet (11 m) in diameter at its base, according to the park service, about as high as the Capitol Dome in Washington, D.C., above its east front.

Crews of 482 firefighters, aided by aircraft, are battling the week-old blaze, which was started by lightning and is burning in difficult-to-reach steep canyons, fueled by dry timber and chaparral, the Inciweb system said.

Maximum wind gusts of about 40 miles per hour (65 kph) have been hampering firefighters, but a predicted cooling trend is expected to aid their battle, it said.

The KNP Complex is one of at least 28 fires in California and 129 across several western states that have erupted since June in a fire season that traditionally begins in late summer, according to Inciweb data.

Other steps the park service said it has taken to protect the sequoias are prescribed burns, which would reduce the amount of available fuel in case KNP complex reaches them.

(Writing and addtional reporting by Peter Szekely in New YorkEditing by Aurora Ellis and Matthew Lewis)

R. Kelly witness says she saw singer's sexual activity, was also pressed to write apology letter

(Corrects second paragraph to show witness testified about a woman massaging Kelly, not Kelly massaging the woman; changes headline)

By Tyler Clifford

NEW YORK (Reuters) -A former assistant to R. Kelly testified on Friday she once saw him engage in sexual activity with one of the women he is charged with abusing, as prosecutors neared the end of presenting their sex trafficking case against the R&B singer.

On the 18th day of testimony at Kelly's trial in federal court in Brooklyn, Cheryl Mack, the mother of music producer London on da Track, said she saw the woman begin to massage Kelly while backstage at a Connecticut concert where he was performing.

"That was kind of my cue to leave," Mack said. "I was very uncomfortable." She said that as she left the room she caught a glimpse of the woman moving her head toward Kelly's groin.

Mack also said Kelly lost his temper in 2015 after she supposedly ruined a surprise birthday party for former stylist Kash Howard, and had her sign an "apology letter" that included false claims she accepted kickbacks from booking agents.

"I apologized out of fear," Mack said.

Several witnesses have testified that Kelly made them write apology letters, purportedly to absolve him of misconduct, but which prosecutors could use to illustrate the tight control that witnesses have said Kelly demanded over those around him.

Kelly, 54, has pleaded not guilty to charges over his alleged grooming and preying on women and girls as far back as the mid-1990s, when he shot to stardom with music including the 1996 smash "I Believe I Can Fly."

The singer, whose full name is Robert Sylvester Kelly, faces one count of racketeering and eight counts of illegally transporting people across state lines for prostitution.

Kelly's indictment said he abused six women and underage girls including the singer Aaliyah, who Kelly married illegally in 1994 when she was 15. Aaliyah died in a 2001 plane crash.

Prosecution witnesses have said Kelly instilled fear as he demanded they follow his stringent rules, including by having women and girls call him "Daddy," and punished those who disobeyed, including by demanding unwanted sex.

Kelly's lawyers have tried to portray his accusers as fans who once hoped to capitalize on the singer's fame but felt jilted, and questioned why they and former employees failed to leave Kelly sooner or go to the police.

Deveraux Cannick, one of Kelly's lawyers, tried while cross-examining Mack to show jurors she should have known not to sign an apology letter, given that she was in her late 40s and had many years of music industry experience.

"I wasn't thinking at all," Mack told him.

The trial began on Aug. 18.

Kelly has faced sexual abuse accusations for nearly two decades.

Scrutiny increased after the #MeToo movement began in late 2017, and Lifetime aired the documentary "Surviving R. Kelly" in January 2019.

Kelly also faces sex-related charges in Illinois and Minnesota.

(Reporting by Tyler Clifford in New York; editing by Grant McCool)

L.A. jury convicts real estate heir Robert Durst of murder

By Daniel Trotta

(Reuters) - A California jury on Friday found multimillionaire real estate heir Robert Durst guilty of murdering his best friend Susan Berman in 2000, the first homicide conviction for a man suspected of killing three people in three states over the past 39 years.

Durst, 78, will likely die in prison as the jury also found him guilty of the special circumstances of lying in wait and killing a witness, which carry a mandatory life sentence. Superior Court Judge Mark Windham, who oversaw the trial, set a sentencing hearing for Oct. 18.

The nine-woman, three-man jury had deliberated for seven and a half hours over three days. Durst, who has been in jail for the duration of the trial, was not present for the reading of the verdict because he was in isolation after having been exposed to somebody with COVID-19.

Windham decided to have the verdict read in Durst's absence.

Los Angeles County prosecutors called Durst a "narcissistic psychopath" who killed Berman in an attempt to cover up the disappearance of his wife, Kathleen McCormack Durst, in New York in 1982.

Durst was only on trial for killing Berman in California, but prosecutors argued he murdered three people: his missing wife, Berman and a neighbor in Texas who discovered his identity at a time when Durst was hiding from the law.

Despite long being a suspect in the disappearance of his wife, a 29-year-old medical student, Durst was never charged. Prosecutors said he killed her then decided to kill Berman 18 years later because she had told others that she helped Durst cover up the crime. Berman, 55, was shot in the back of her head inside her Beverly Hills home.

Defense lawyers in turn portrayed Durst, a frail cancer survivor who uses a wheelchair, as a "sick old man." But he withstood 15 days as a witness, nine of them under cross examination.

The trial came six years after Durst's apparent confession in the HBO television documentary series "The Jinx," in which Durst was caught on a hot microphone in the bathroom saying to himself, "What the hell did I do? ... Killed them all, of course."

In 58 days spread over a year and a half, including a one-year suspension after the trial began due to the coronavirus pandemic, prosecutors presented mountains of circumstantial evidence pointing toward Durst, who testified that he discovered Berman's murdered body when he went to visit her but did not call police.

The prosecution also delved into the 2001 death and dismemberment of Morris Black, who was Durst's neighbor in Galveston, Texas. A Galveston jury acquitted Durst of murder, even though Durst admitted he chopped up Black's body and dumped it in Galveston Bay.

In Texas, and again in the Los Angeles trial, Durst testified that Black pulled a gun on him and was shot accidentally when the two men wrestled over the firearm in Durst's apartment.

The California prosecutors argued that Durst murdered Black because Black discovered Durst's identity, and Durst feared Black would turn him in. At the time Durst was using an assumed name and disguising himself as a mute woman because he feared he might be arrested by New York investigators who had reopened the case of his missing wife.

Black's death marked the second time Durst had a dead body at his feet, according to his own testimony.

In the deaths of both Black and Berman, Durst said he at first tried to call the 911 emergency number but later decided against it, fearing nobody would believe he was not guilty.

Durst testified from a wheelchair, usually in a jail uniform but also wearing a baggy suit jacket that would have fit properly in his younger, more robust days. His voice weakened by esophageal cancer, he sounded different from the man with a confident New York accent that jurors saw in "The Jinx."

Besides "The Jinx" audio, two other pieces of evidence appeared to damage Durst's defense. One was the recorded 2017 testimony of Nick Chavin, a mutual friend who said Durst admitted to him in 2014 that he had killed Berman.

"I had to. It was her or me. I had no choice," Chavin recounted Durst telling him one night after dinner at a New York City restaurant.

Durst also admitted he authored a handwritten letter to Beverly Hills police with the word "cadaver" and Berman's address, directing them to her undiscovered body. Durst had denied writing the note for 20 years but relented before testimony began, faced with evidence the note was his.

Durst is the grandson of Joseph Durst and son of Seymour Durst, who built The Durst Organization into one of New York City's premier real estate companies which has developed some of Manhattan's signature skyscrapers.

Robert Durst long ago left the company, now run by his estranged brother Douglas Durst, who testified at trial and said of his sibling: "He'd like to murder me."

(Reporting by Daniel Trotta; Editing by Cynthia Osterman and Sonya Hepinstall)

The case for, and against, COVID-19 vaccine boosters

NEW YORK (Reuters) - The U.S. government aims to begin offering COVID-19 vaccine booster shots widely next week to Americans age 16 and up. A panel of outside advisers to the Food and Drug Administration voted against such broad coverage on Friday but backed a shot for people 65 and older, which the agency may or may not follow.

President Joe Biden's administration faces criticism within the scientific community over whether the additional shots are needed for the general population.

WHAT DO THE DATA SAY ABOUT THE NEED FOR BOOSTERS?

Pfizer Inc and its German partner BioNTech SE <BNTX.O), as well as rival vaccine maker Moderna Inc have each presented analyses of clinical trial data showing that the effectiveness of their shots, initially estimated at over 90% against symptomatic COVID-19 infection, wanes over time.

As a result, they say, people who were vaccinated earlier on in the pandemic are now more vulnerable to so-called breakthrough infections, particularly in the face of the fast-spreading Delta variant of coronavirus. Booster doses help restore the waning levels of antibodies produced by the original inoculation, the drugmakers have said.

Data from Pfizer's clinical trial of 30,000 people suggest that the vaccine's efficacy diminished by around 6% every two months after the second dose. In a second trial testing booster shots in 300 participants, a third dose generated a better immune response than the second, according to Pfizer.

Moderna this week said it found higher rates of breakthrough infection among participants in its clinical trial who received its two-dose vaccine roughly 13 months ago compared with those vaccinated roughly eight months ago. The study period was from July and August, when the highly-contagious Delta variant was the predominant strain.

U.S. health regulators are also closely watching real-world data on vaccine effectiveness and boosters from Israel, where a majority of the population has received the Pfizer/BioNTech vaccine. Israel is offering booster shots to everyone age 12 and up.

Israel's Health Ministry this week reported data showing that more than 1.1 million people aged 60 and older received a booster dose of Pfizer, resulting in a decline in overall infections as well as severe illness from COVID-19 in that group. The authors said their study suggests that a booster dose can restore vaccine efficacy among booster recipients to 95%.

In addition to preventing severe illness, some health officials in the United States and Israel say booster doses may help reduce transmission of the coronavirus at a time of rising infection rates in many countries.

WHAT IS THE CRITIQUE?

Many vaccine experts say the data so far only suggest a need for boosters in older adults and people with compromised immune systems. The critics include two FDA scientists who resigned as the United States government announced its booster shot plans.

For example, a report from Israel's Health Ministry shows a much higher risk of severe breakthrough infection among vaccinated people over the age of 60 compared with people aged 50-59 and 40-49, even though the younger groups include people who were vaccinated more than six months ago.

Other studies in the United States show that the vaccines remain highly protective against severe disease and death in adults under the age of 65.

Several other countries, including the UK, France and Germany, have so far limited booster plans to older adults and other high-risk groups.

The World Health Organization has repeatedly implored the United States and other wealthy countries to hold off on offering booster shots and to use those doses to help inoculate the many people worldwide who have yet to receive their first doses.

Scientists also say that there are confounding factors in analyzing waning vaccine effectiveness and the impact of boosters, including whether Delta may have a harsher impact on older adults and whether a return to mask-wearing in some places, rather than booster shots, is helping contain the spread.

They also say that randomized trials provide the best estimates of effectiveness in the real world, but most of the data so far is from observational studies or from small clinical trials.

(Reporting by Caroline Humer, Michael Erman, Julie Steenhuysen, Josephine Mason and Alistair Smout in London; Editing by Michele Gershberg and Grant McCool)

Over 10,000 mostly Haitian migrants sleeping under Texas bridge, more expected

By Alexandra Ulmer

CIUDAD ACUÑA, Mexico (Reuters) -Haitians made up most of the over 10,000 migrants sleeping on the ground and desperate for food in a squalid camp under a bridge in southern Texas on Friday, in a growing humanitarian and political challenge for U.S. President Joe Biden.

The Haitians were joined by Cubans, Venezuelans and Nicaraguans under the Del Rio International Bridge connecting Mexico to south Texas. They slept under light blankets, while a few pitched small tents, with temperatures forecast to go above 100 degrees Fahrenheit (38 Celsius) in coming days.

Officials on both sides of the U.S.-Mexico border said most of the migrants were Haitians and more are expected to arrive. Most of the migrants Reuters spoke to had not come direct from Haiti but had made long and harrowing journeys through Mexico and Central and South America.

Several of them told Reuters they followed routes shared https://www.reuters.com/world/whatsapp-instructions-mexican-struggles-how-haitians-ended-up-texas-camp-2021-09-17 amongst each other on WhatsApp.

Del Rio Mayor Bruno Lozano said the number of migrants under the bridge that crosses into Mexico had jumped from 8,200 Thursday morning to 10,503 by Thursday evening. He said Friday he was ordering the bridge closed, but it was unclear if he had the authority to do so and traffic across the bridge continued.

In Ciudad Acuña in Mexico, across from Del Rio, two workers at the main bus terminal said at least two dozen buses full of Haitians had arrived Friday, with one putting the estimate of individual arrivals at around 1,100.

Reuters saw dozens of mostly Haitian migrants arriving at the terminal, carrying jugs of water, tightly-packed backpacks and folders where they had carefully stored travel documents, with many saying they soon planned to head across the shallow Rio Grande, which divides the United States and Mexico.

Most of the migrants at the Texas camp were men, but women nursing or carrying children also could be seen.

Ali Sajous, 29, a Haitian migrant, said U.S. officials were handing out numbers for immigration processing and she, her husband and two-year-old daughter who arrived Monday were No. 910 in the families line. Authorities were processing No. 685 at the time, she said.

Haiti, the poorest country in the Western Hemisphere, has a troubled history. In July, the president was assassinated amidst a rise in gang violence and in August a 7.2 magnitude earthquake and a powerful storm hit the country.

Many of the Haitians interviewed by Reuters said they used to live in South America, often Brazil or Chile, but decided to head north because they could not attain legal status or struggled to secure decent jobs. Some Haitians also said they were encouraged by videos they saw on social media about obtaining asylum in the United States.

HUNDREDS WADE THROUGH RIO GRANDE

Reuters witnessed hundreds of migrants wading through the knee-high Rio Grande back into Mexico to stock up on essentials they say they are not receiving on the American side.

Two Haitian migrants said a hot meal was provided by U.S. officials on Thursday night. Paul Marie-Samise, 32, said he missed it.

The U.S. Border Patrol said Thursday it was increasing staffing in Del Rio and providing drinking water, towels and portable toilets.

Biden, a Democrat who took office in January, has pledged a more humane approach to immigration than that of former President Donald Trump. The situation in Del Rio is giving ammunition to critics who say Biden's policies have encouraged migrants.

Republican Texas Governor Greg Abbott, whose administration has arrested migrants for trespassing and is planning to build its own border wall after Biden halted Trump's signature project, said Thursday he would sign a law to increase border security funding in the state to $3 billion.

"We're trying to fix Biden's failure," he wrote in a tweet.

U.S. authorities arrested https://www.reuters.com/world/us/us-arrests-nearly-200000-migrants-us-mexico-border-august-2021-09-15 more than 195,000 migrants at the southwest border in August, according to government data released on Wednesday, a slight dip from the previous month but still around 20-year-highs.

While Biden rolled back many of Trump's immigration actions early in his presidency, he left in place a sweeping pandemic-era expulsion policy, called Title 42, under which most migrants caught crossing the U.S.-Mexico border are quickly turned back.

The policy issued by the U.S. Centers for Disease Control and Prevention has been criticized by pro-migrant groups and some Democrats as cutting off legal access to asylum. On Thursday, a U.S. federal judge ruled https://www.reuters.com/world/us/us-judge-blocks-expulsions-migrant-families-under-title-42-order-2021-09-16 the policy could no longer be applied to families.

The Biden administration on Friday appealed the judge's order https://www.reuters.com/world/us/biden-admin-looks-revive-trump-era-order-migrant-expulsion-2021-09-17, which had been set to take effect in two weeks.

While more than 90% of all single adults caught at the border from Mexico and Central America were quickly expelled under Title 42, less than 40% of single adults from other countries were expelled, according to U.S. Customs and Border Protection data from this fiscal year, which began last October.

Many of those who are not expelled hope to be released into the United States so they can apply for asylum, a long process due to a backlogged immigration court system.

(Reporting by Alexandra Ulmer in Del Rio, Texas and Ciudad Acuña, Mexico; Writing by Mica Rosenberg; Editing by Donna Bryson, Howard Goller and Rosalba O'Brien)

Boyfriend of missing Florida woman has disappeared

By Dan Whitcomb

(Reuters) - Florida police and the FBI were searching for the boyfriend of missing Florida woman Gabby Petito on Friday, CNN and local media reported, after his family said they had not seen him in three days.

The disappearance of Brian Laundrie, 23, may further complicate the search for Gabby Petito, who was reported missing on Sept. 11. The couple had left on a cross-country road trip in June. Laundrie returned home alone to North Port, Florida.

The family "called us there this evening. They are now claiming they have not seen their son since Tuesday," North Port Police spokesman Josh Taylor told CNN. "We've been trying all week to talk to his family, talk to Brian."

A Florida attorney representing Laundrie told local broadcaster WSPA-TV that his whereabouts were unknown and that police and FBI agents were looking for him.

Laundrie, who lived with Petito, 22, in North Port, 70 miles (110 miles) south of St. Petersburg on Florida's west coast, has refused to speak with investigators.

Police have labeled him a "person of interest https://www.reuters.com/world/us/florida-police-name-missing-womans-boyfriend-person-interest-2021-09-15," not a suspect, in the high-profile disappearance, which has made nationwide headlines even as police say they have no solid evidence that a crime has been committed.

Several police officers and two FBI agents were seen at the Laundrie home on Friday, at one point searching a silver Ford Mustang parked in the driveway.

Petito and Laundrie had driven west from New York with the intention of visiting national parks across the nation. They posted pictures and videos on social media as they traveled.

Petito's family said they lost contact with Gabby in late August, possibly while she was visiting Grand Teton National Park in Wyoming. Laundrie returned to North Port without her on Sept. 1.

Petito's parents in Suffolk County on New York City's Long Island, reported her missing 10 days later.

Laundrie's attorney has defended his client's silence, saying that anything he told police could be used against him later, "regardless of whether my client had anything to do with Ms. Petito's disappearance."

(Reporting by Dan Whitcomb; Editing by Leslie Adler and William Mallard)

Japan PM candidates differ on same-sex, women rights issues

TOKYO (Reuters) - Candidates to become Japan's next prime minister all said they would have better policies to fight the pandemic and reduce the income gap during television debates on Friday, but they were split on diversity issues from same-sex marriage to married couples having separate surnames.

Whoever wins the Liberal Democratic Party presidency on Sept. 29 will become prime minister because of the LDP's majority in the lower house of parliament, and campaigning began in earnest on Friday with a series of televised debates.

Widely seen as the leading contender, vaccine minister Taro Kono (https://www.reuters.com/world/asia-pacific/self-belief-strategy-japans-taro-kono-upends-race-next-premier-2021-09-13), 58, recently veered from mainstream thinking in the conservative party by saying he favours the introduction of same-sex marriage, and during a debate broadcast by TV Asahi, he asked his main contender about his stance on the issue.

Former foreign minister Fumio Kishida, 64, answered by saying he had "not reach to the point of accepting same-sex marriage".

The two other candidates (https://www.reuters.com/world/asia-pacific/potential-candidates-become-japans-next-prime-minister-2021-09-03) in the race are both women; Seiko Noda, a 61-year-old former gender equality minister, and Sanae Takaichi, 60, an ultra-conservative former internal affairs minister.

While they are not seen as frontrunners the contest is still regarded as unpredictable, and if either were to pull off a surprise win they would become Japan's first female prime minister.

The four candidates will line up for another televised debate on Saturday as they battle to expand support in a party that has suffered a sharp drop in approval ratings due to the handling of the pandemic under Prime Minister Yoshihide Suga's leadership.

Among the more divisive issues separating the candidates is whether to allow married couples to have separate surnames.

Advocates for women, including lawmakers across the political spectrum want women to be able to choose which name they use, but it is not possible under Japanese law.

Takaichi, the more conservative of the two female candidates, said in a debate on Fuji TV that the country should continue the existing system in order to avoid confusion among couples, and their children, with different family names.

The two male candidates adopted a different stance. Kono supports allowing married couples to have different surnames, while Kishida said the public's opinion should be understood before parliament decides.

(Reporting by Ju-min Park; Editing by Simon Cameron-Moore)

California gunman pleads guilty to hate crimes in synagogue murder, mosque arson

LOS ANGELES (Reuters) - A man accused of killing one worshiper and wounding three others in a shooting spree inside a California synagogue about a month after setting fire to a nearby mosque pleaded guilty on Friday to federal hate crimes contained in a 113-count indictment.

Under the terms of his plea agreement with federal prosecutors, attorneys for John T. Earnest and the government will jointly recommend that he receive a life term in prison when he is sentenced on Dec. 28, the U.S. Department of Justice said in a statement.

Earnest, now 22, was arrested shortly after he opened fire at the Chabad of Poway synagogue north of San Diego on April 27, 2019, during Sabbath prayers on the last day of the weeklong Jewish Passover holiday. He was 19 at the time.

A 60-year-old member of the congregation, Lori Gilbert-Kaye, was killed and three others were wounded in the attack, including the rabbi, who was shot in the hand and lost an index finger.

The gunman, whose assault-style rifle apparently jammed, was chased out of the temple by a former Army sergeant in the congregation and sped away in a car, escaping an off-duty U.S. Border Patrol agent who shot at the getaway vehicle but missed the suspect. Earnest pulled over and surrendered to police soon afterward.

Authorities later identified Earnest as the author of a rambling, violently anti-Semitic, anti-Muslim "manifesto" found posted on the Internet under his name.

In it, he claimed responsibility for a pre-dawn arson attack about a month earlier that damaged the Islamic Center of Escondido, a town about 15 miles north of Poway, and he professed to have drawn his inspiration from the gunman who killed 50 people at two mosques in New Zealand around that time.

Authorities said Earnest had entered the synagogue with a weapon fully loaded with a 10-round magazine and was carrying five additional magazines.

"There is no place in American society for this type of hate-fueled violence," Deputy U.S. Attorney General Lisa Monaco said in a statement.

(Reporting by Steve Gorman in Los Angeles; Editing by Simon Cameron-Moore)

Five congressional Republicans targeted by Trump's revenge endorsements

WASHINGTON (Reuters) -Former President Donald Trump has endorsed challengers to five congressional Republicans, part of his effort to assert dominance over the party after losing his re-election bid last year to Democrat Joe Biden.

Trump's fire has been focused on the handful of Republican lawmakers who voted to impeach him on a charge of inciting the Jan. 6 U.S. Capitol riot, or to convict him on that charge in a Senate trial that ultimately ended in his acquittal.

Below are notable Republicans whom Trump has targeted through his endorsements.

REPRESENTATIVE ANTHONY GONZALEZ

Gonzalez, a two-term U.S. representative from Ohio who voted to impeach Trump for inciting supporters to launch a deadly assault on the Capitol, on Thursday became the first of Trump's targets to withdraw https://www.reuters.com/world/us/republican-congressman-who-voted-impeach-trump-wont-seek-re-election-2021-09-17 from a re-election bid after the former president endorsed a Republican challenger.

Gonzalez' impeachment vote had drawn rebuke from the Ohio Republican Party, which in May called on him to resign his seat in Congress. In a statement, Gonzalez said "the toxic dynamics inside our own party" played a role in his withdrawal. Trump has endorsed former White House aide Max Miller for Gonzalez's seat.

REPRESENTATIVE LIZ CHENEY

Cheney was the highest-profile lawmaker of the 10 Republicans in the House of Representatives who voted to impeach Trump. A U.S. representative for Wyoming since 2017, she was ousted from her role as the No. 3 House Republican following the impeachment vote. A scion of a storied Republican family, Cheney's father Dick Cheney served as U.S. vice president from 2001 to 2009. In a Sept. 9 statement endorsing Wyoming attorney Harriet Hageman https://www.reuters.com/world/us/trump-endorses-challenger-republican-cheney-wyoming-house-race-2021-09-09, who is challenging Cheney, Trump called Cheney "disloyal."

SENATOR LISA MURKOWSKI

The U.S. senator for Alaska was one of seven Republican Senators who voted to convict Trump and remove him from office. The vote failed and Trump was acquitted. Murkowski, known for her long independent streak, is the only one of the seven Republicans up for re-election this year. Trump has endorsed Kelly Tshibaka, a former state administration commissioner, to challenge Murkowski for her seat.

REPRESENTATIVE JAIME HERRERA BEUTLER

The U.S. representative from Washington state not only voted to impeach Trump, she submitted evidence in his Senate trial against the former president. Herrera Beutler said in a statement that the top House Republican, Kevin McCarthy, had told her about a call he had with Trump on Jan. 6, during the riot when hundreds of Trump supporters stormed the Capitol, in which Trump said, "Well, Kevin, I guess these people are more upset about the election than you are." Trump has endorsed Army veteran Joe Kent's bid to unseat Herrera Beutler, who has been in Congress since 2011.

REPRESENTATIVE FRED UPTON

Upton, who has represented Michigan in the House since 1987, was an early critic of Trump's false claims that he lost the November presidential election due to widespread fraud. Upton said in January his vote for impeachment was to "send a clear message" that the country will not tolerate a president impeding the peaceful transfer of power. Trump has endorsed Michigan state lawmaker Steve Carra's bid to challenge Upton.

(Reporting by Jason Lange; Editing by Scott Malone, Jonathan Oatis and Dan Grebler)

Google, Apple remove Navalny app from stores as Russian elections begin

MOSCOW (Reuters) - Alphabet's Google and Apple have removed jailed Kremlin critic Alexei Navalny's tactical voting app from their stores, his team said on Friday, after Russia accused the U.S. tech firms of meddling in its internal affairs.

Russia goes to the polls on Friday to elect a new parliament in a three-day vote that the ruling United Russia party is expected to win despite a ratings slump after the biggest crackdown on the Kremlin's critics in years.

Allies of Navalny, President Vladimir Putin's fiercest domestic opponent, planned to use the mobile app to organise a tactical voting campaign to deal a blow to United Russia.

Russia demanded this month that Apple and Google remove the app from their stores, saying a refusal to do so would be treated as meddling in its parliamentary election.

Apple and Google did not immediately respond to requests for comment.

On Thursday, Russia said official approaches had been made to the two companies' chief executives.

Ivan Zhdanov, a Navalny ally based abroad, said on Friday the removal amounted to political censorship.

(Reporting by Anton Zverev and Alexander Marrow; Writing by Maria Kiselyova; Editing by Robert Birsel)

US judge sets back Prince Andrew's bid to avoid accuser's lawsuit

By Jonathan Stempel

NEW YORK (Reuters) - A woman who accused Britain's Prince Andrew of hiding from her sexual assault lawsuit can try an alternative means of serving her legal papers so Queen Elizabeth's second son can address her claims, a U.S. judge ruled on Thursday night.

U.S. District Judge Lewis Kaplan in Manhattan said Virginia Giuffre's plan to deliver her lawsuit to Andrew's Los Angeles-based lawyer was "reasonably calculated to bring the papers served to the defendant's attention," regardless of whether the prince "authorized" the lawyer to accept it.

The lawyer, Andrew Brettler, had no immediate comment.

"We are grateful that the Court has granted alternative service on Prince Andrew. This moves the case forward", Sigrid McCawley, a lawyer for Giuffre, said in an emailed statement.

Andrew, the 61-year-old Duke of York, was sued by Giuffre last month, accusing him of battery and intentional infliction of emotional distress over alleged misconduct from about two decades ago.

Giuffre, 38, was underage at the time of Andrew's alleged abuse, which she said occurred around the time his friend, the financier Jeffrey Epstein, was sexually abusing her.

The civil lawsuit seeks unspecified damages.

Andrew has denied Giuffre's accusations, and Brettler at a Monday court hearing called Giuffre's case a "baseless, nonviable, potentially unlawful lawsuit."

The prince stepped down from royal duties as details emerged over the last two years about his relationship with Epstein, a registered sex offender who killed himself in a Manhattan jail in August 2019 while awaiting trial on sex trafficking charges.

Kaplan ruled barely six hours after Giuffre formally requested his intervention, saying "service is not intended to be a game of hide and seek behind palace walls."

The judge issued his order one day after London's High Court said it would arrange for Andrew to be served if the parties failed to work out their own arrangement.

Lawyers for Giuffre have argued they already properly served Andrew in England, when a copy of the lawsuit was left with a police officer guarding the prince's home in Windsor.

In her lawsuit, Giuffre accused Andrew of forcing her to have sexual intercourse at the London home of Epstein's longtime associate Ghislaine Maxwell.

Giuffre also said Andrew abused her at Epstein's mansion in Manhattan and on Epstein's private island in the U.S. Virgin Islands.

Maxwell faces a Nov. 29 trial on charges she helped recruit and groom underage girls for Epstein to sexually abuse. She has pleaded not guilty. Andrew has not been charged with crimes.

(Reporting by Jonathan Stempel in New York; additional reporting by Kanishka Singh in Bengaluru; Editing by Cynthia Osterman and Grant McCool)

U.S. State Department approves potential $500 million Saudi maintenance deal

WASHINGTON (Reuters) - - The U.S. State Department has approved a potential agreement covering up to $500 million in military support services for Saudi Arabia, and has sent the agreement to Congress for review, the Pentagon said on Thursday.

It was the first major defense agreement for Saudi Arabia sent to Congress since President Joe Biden took office on Jan. 20. It comes after criticism of U.S. ties to the kingdom over its human rights record and involvement in the civil war in Yemen.

The package would provide continued maintenance support services for a wide range of helicopters, including a future fleet of CH-47D Chinook helicopters. The announcement said the vendor was not yet known.

"This proposed sale will support U.S. foreign policy and national security objectives by helping to improve the security of a friendly country that continues to be an important force for political stability and economic growth in the Middle East," the State Department said in a statement.

(Reporting by Patricia Zengerle and Mike Stone; Editing by Karishma Singh)

Banks beware, outsiders are cracking the code for finance

By Anna Irrera and Iain Withers

LONDON (Reuters) - Anyone can be a banker these days, you just need the right code.

Global brands from Mercedes and Amazon to IKEA and Walmart are cutting out the traditional financial middleman and plugging in software from tech startups to offer customers everything from banking and credit to insurance.

For established financial institutions, the warning signs are flashing.

So-called embedded finance - a fancy term for companies integrating software to offer financial services - means Amazon can let customers "buy now pay later" when they check out and Mercedes drivers can get their cars to pay for their fuel.

To be sure, banks are still behind most of the transactions but investors and analysts say the risk for traditional lenders is that they will get pushed further away from the front end of the finance chain.

And that means they'll be further away from the mountains of data others are hoovering up about the preferences and behaviours of their customers - data that could be crucial in giving them an edge over banks in financial services.

"Embedded financial services takes the cross-sell concept to new heights. It's predicated on a deep software-based ongoing data relationship with the consumer and business," said Matt Harris, a partner at investor Bain Capital Ventures.

"That is why this revolution is so important," he said. "It means that all the good risk is going to go to these embedded companies that know so much about their customers and what is left over will go to banks and insurance companies."

WHERE DO YOU WANT TO PLAY?

For now, many areas of embedded finance are barely denting the dominance of banks and even though some upstarts have licences to offer regulated services such as lending, they lack the scale and deep funding pools of the biggest banks.

But if financial technology firms, or fintechs, can match their success in grabbing a chunk of digital payments from banks - and boosting their valuations in the process - lenders may have to respond, analysts say.

Stripe, for example, the payments platform behind many sites with clients including Amazon and Alphabet's Google, was valued at $95 billion in March.

Accenture estimated in 2019 that new entrants to the payments market had amassed 8% of revenues globally - and that share has risen over the past year as the pandemic boosted digital payments and hit traditional payments, Alan McIntyre, senior banking industry director at Accenture, said.

Now the focus is turning to lending, as well as complete off-the-shelf digital lenders with a variety of products businesses can pick and choose to embed in their processes.

"The vast majority of consumer centric companies will be able to launch financial products that will allow them to significantly improve their customer experience," said Luca Bocchio, partner at venture capital firm Accel.

"That is why we feel excited about this space."

So far this year, investors have poured $4.25 billion into embedded finance startups, almost three times the amount in 2020, data provided to Reuters by PitchBook shows.

Leading the way is Swedish buy now pay later (BNPL) firm Klarna which raised $1.9 billion.

DriveWealth, which sells technology allowing companies to offer fractional share trading, attracted $459 million while investors put $229 million into Solarisbank, a licensed German digital bank which offers an array of banking services software.

Shares in Affirm, meanwhile, surged last month when it teamed up with Amazon to offer BNPL products while rival U.S. fintech Square said last month it was buying Australian BNPL firm Afterpay for $29 billion.

Square is now worth $113 billion, more than Europe's most valuable bank, HSBC, on $105 billion.

"Big banks and insurers will lose out if they don't act quickly and work out where to play in this market," said Simon Torrance, founder of Embedded Finance & Super App Strategies.

Graphic: Venture capital investment in embedded finance leaps - https://graphics.reuters.com/FINTECH-EMBEDDEDFINANCE/jnvweemkgvw/chart.png

YOU NEED A LOAN!

Several other retailers have announced plans this year to expand in financial services.

Walmart launched a fintech startup with investment firm Ribbit Capital in January to develop financial products for its employees and customers while IKEA took a minority stake in BNPL firm Jifiti last month.

Automakers such as Volkswagen's Audi and Tata's Jaguar Land Rover have experimented with embedding payment technology in their vehicles to take the hassle out of paying, besides Daimler's Mercedes.

"Customers expect services, including financial services, to be directly integrated at the point of consumption, and to be convenient, digital, and immediately accessible," said Roland Folz, chief executive of Solarisbank which provides banking services to more than 50 companies including Samsung.

It's not just end consumers being targeted by embedded finance startups. Businesses themselves are being tapped on the shoulder as their digital data is crunched by fintechs such as Canada's Shopify.

It provides software for merchants and its Shopify Capital division also offers cash advances, based on an analysis of more than 70 million data points across its platform.

"No merchant comes to us and says, I would like a loan. We go to merchants and say, we think it's time for funding for you," said Kaz Nejatian, vice president, product, merchant services at Shopify.

"We don't ask for business plans, we don't ask for tax statements, we don't ask for income statements, and we don't ask for personal guarantees. Not because we are benevolent but because we think those are bad signals into the odds of success on the internet," he said.

A Shopify spokesperson said funding goes from $200 to $2 million. It has provided $2.3 billion in cumulative capital advances and is valued at $184 billion, well above Royal Bank of Canada, the country's biggest traditional lender.

CONNECTED FUTURE?

Shopify's lending business is, however, still dwarfed by the big banks. JPMorgan Chase & Co, for example, had a consumer and community loan book worth $435 billion at the end of June.

Major advances into finance by companies from other sectors could also be limited by regulators.

Officials from the Bank for International Settlements, a consortium of central banks and financial regulators, warned watchdogs last month to get to grips with the growing influence of technology firms in finance.

Bain's Harris said financial regulators were taking the approach that because they don't know how to regulate tech firms they are insisting there's a bank behind every transaction - but that did not mean banks would prevent fintechs encroaching.

"They are right that the banks will always have a role but it's not a very remunerative role and it involves very little ownership of the customer," he said.

Forrester analyst Jacob Morgan said banks had to decide where they want to be in the finance chain.

"Can they afford to fight for customer primacy, or do they actually see a more profitable route to market to become the rails that other people run on top of?" he said. "Some banks will choose to do both."

And some are already fighting back.

Citigroup has teamed up with Google on bank accounts, Goldman Sachs is providing credit cards for Apple and JPMorgan is buying 75% of Volkswagen's payments business and plans to expand to other industries. 06:00:00

"Connectivity between different systems is the future," said Shahrokh Moinian, head of wholesale payments, EMEA, at JPMorgan. "We want to be the leader."

(Reporting by Anna Irrera and Iain Withers; Editing by Rachel Armstrong and David Clarke)

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