Carl Icahn buys nearly 13% stake in Herbalife as battle heats up

NEW YORK — It's no longer just a war of words.

Corporate raider Carl Icahn has thrown $214 million behind Herbalife Ltd., the Los Angeles-based maker of health foods and nutritional supplements accused of being a pyramid scheme by Icahn's foe, fellow Wall Street tycoon Bill Ackman.

Documents filed with the Securities and Exchange Commission on Thursday reveal that Icahn purchased more than 14 million shares and options in Herbalife, a nearly 13% stake that would make him the company's second-largest investor. Icahn said he would pursue talks with executives about possibly recapitalizing the company or even taking it private.

Icahn and Ackman have been engaged in a rare public battle for the last month, hurling insults at each other about past dealings and their respective positions in Herbalife. The two foes have bad blood stemming from a business dispute.

Ackman launched his assault on the company Dec. 20 by unveiling a $1-billion short position, or bet, against Herbalife. That same day, Icahn began snapping up the company's stock, according to the SEC filing.

"It's pretty obvious Icahn really wants to turn the screws on Ackman," said Chris Stuart, chief executive of Shortzilla, a Boston-area research firm. "He's put his money where his mouth is, for sure."

Investors saw Icahn's disclosure as reassuring that Herbalife was not going to collapse, as Ackman has predicted. Its shares surged more than 24% in after-hours trading after closing up $1.87, or 5.1%, at $38.27 on Thursday.

"I think he is definitely trying to hammer his good buddy Ackman, but he could also make a lot of money in this," said Timothy Ramey, an analyst with D.A. Davidson & Co. "It's an undervalued stock."

Ackman, who heads the hedge fund Pershing Square Capital Management, says that Herbalife defrauds its low-income distributors. His wager against the company pays off if its stock falls.

Herbalife hit back by saying the hedge fund manager was misinformed about the company and made an irresponsible bet with his investors' money. The company pointed to its 32 years in business as evidence that it is not a pyramid scheme.

Icahn sees Herbalife as undervalued and believes that the company has a "legitimate business model, with favorable long-term opportunities for growth," the filing says.

This is just the latest chapter in a long history of Icahn trying to exert influence on companies and their boards of directors in hopes of either motivating a merger or having his stake bought out at a premium.

In the 1980s, he famously took over airline TWA and immediately liquidated most of its assets. Since then, he's taken big stakes or controlling positions in companies including RJR Nabisco, Viacom, Marvel Comics, Blockbuster and Netflix.

Neither Icahn nor Ackman responded to requests for comment. Herbalife also declined to comment.

The battle over Herbalife is becoming a Wall Street spectacle, with money managers supporting either team Ackman or team Icahn.

Robert L. Chapman Jr., managing member of Chapman Capital in Manhattan Beach, who said he has invested in Herbalife, wrote in an email: "Carl Icahn just delivered Bill Ackman a Valentine he'll never forget."

andrew.tangel@latimes.com,

stuart.pfeifer@latimes.com

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Federal appeals court weighs overturning Barry Bonds' conviction

SAN FRANCISCO —A federal appeals court wrestled Wednesday with whether to overturn slugger Barry Bonds' felony conviction for obstruction of justice.

The three-judge panel of the U.S. 9th Circuit Court of Appeals weighed whether Bonds broke the law by being evasive in a 52-word answer he gave a federal grand jury in 2003. The grand jury was investigating illegal distribution of performance-enhancing drugs.

Bonds was asked in the grand jury session whether his personal trainer had ever given him a substance that required a syringe to inject. In his response, Bonds rambled on about his childhood and his friendship with the trainer before finally telling the grand jury that he had not received an injectable substance.

The grand jury eventually indicted Bonds, and he was tried in 2011 on three counts of perjury and one count of obstruction. The trial jury convicted him of obstruction of justice, based on that meandering answer, but it deadlocked on the perjury charges.

How the three-judge panel was leaning after Wednesday's hearing was nearly as difficult to parse as Bonds' answer. Judge Michael Daly Hawkins appeared troubled by the fact that Bonds eventually answered the grand jury query: "Can a grand jury witness obstruct justice by giving a series of evasive answers and then giving a direct answer that is not evasive?" Hawkins asked.

Assistant U.S. Atty. Merry Jean Chan, however, said Bond's rambling response was intended to deceive. She argued that the obstruction conviction was not limited to those 52 words but reflected evasion throughout Bonds' testimony.

Hawkins then questioned why prosecutors, if they thought Bonds was being evasive, did not go before a judge to ask that Bonds be ordered to answer the grand jury's questions.

Dennis Riordan, an attorney for Bonds, told the court that the grand jury was not troubled by the 52-word passage that led to the trial jury's conviction years later.

"There is one thing we know for sure," Riordan said. "This grand jury did not consider those 52 words were criminal activity.... That is a dagger in the heart of this conviction."

Chan countered that Bonds' testimony was "littered with multiple examples" of misleading testimony.

Bonds' conviction came at the end of a 12-day trial. He was sentenced to two years probation, 250 hours of community service, a $4,000 fine and a month of monitored home confinement, all of which have been put on hold pending his appeal.

The 9th Circuit panel, which included Judges Mary Schroeder and Mary Murguia, did not indicate when it might rule.

maura.dolan@latimes.com

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Miss America pageant returns to Atlantic City, NJ

ATLANTIC CITY, N.J. (AP) — There she is, Miss America, headed back to Atlantic City.

The Miss America pageant, a staple in Atlantic City for decades before it was moved to Las Vegas in 2006, is making a return, Gov. Chris Christie's spokesman Michael Drewniak confirmed Wednesday. Lt. Gov. Kim Guadagno was scheduled to make a formal announcement Thursday at Atlantic City's Boardwalk Hall.

The Miss America pageant started as little more than a bathing suit revue. It broke viewership records in its heyday and bills itself as one of the world's largest scholarship programs for women. But, like other pageants, it has struggled to stay relevant as national attitudes regarding women's rights have changed.

The news of the pageant's return to Atlantic City came as a surprise to the Las Vegas Convention and Visitors Authority, which sponsored the pageant on the Las Vegas Strip in January, spokeswoman Courtney Fitzgerald said in a telephone interview. In a subsequent statement, she said the tourism organization wished the pageant well in its new home.

"Las Vegas is honored to have hosted the Miss America pageant for the past seven years," she said. "We understand that moving the televised event to various cities showcases America's diverse destinations which represent our great country."

Pageant officials didn't immediately respond to after-hours phone and email messages seeking comment Wednesday.

Many details remained unclear, including whether the pageant would return to the elaborate show it had been for decades at Boardwalk Hall or continue as more of the reality show it became with its move to Las Vegas. Also unknown was where it would be broadcast and whether it is returning permanently or for a limited run.

According to the Miss America Organization's website, the contest originated in 1920 as the Fall Frolic, which became the Inter-City Beauty Contest the following year. In 1921, a high school junior named Margaret Gorman was one of approximately 1,000 entrants in a photo contest held by the Washington Herald. She was chosen as the first Miss Washington, D.C., and her prize was a trip to Atlantic City, where she won the top prize: the Golden Mermaid Trophy.

The next year, Gorman was expected to defend her title. But when the Washington Herald selected a new Miss Washington, D.C., Atlantic City pageant officials didn't know what new title to award Gorman. Since both titles she won in 1921 — Inter-City Beauty, Amateur and The Most Beautiful Bathing Girl in America — were considered somewhat awkward, it was decided to call her Miss America.

The pageant was conceived by the Businessmen's League of Atlantic City as a way to extend the summer tourism season in Atlantic City for another week, being held the weekend after Labor Day weekend, when temperatures were generally still warm.

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Associated Press writer Hannah Dreier in Las Vegas contributed to this story.

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Wayne Parry can be reached at http://twitter.com/WayneParryAC

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To Lower Suicide Rates, New Focus Turns to Guns

Larry Mayer for The New York Times

Craig and Cara Reichert and their daughter, Kassidy, in Dayton, Wyo. “I will always believe in guns,” Mr. Reichert said. Kameron Reichert killed himself with a family heirloom.

DAYTON, Wyo. — Craig Reichert found his son’s body on a winter morning, lying on the floor as if he were napping with his great-uncle’s pistol under his knee. The 911 dispatcher told him to administer CPR, but Mr. Reichert, who has had emergency training, told her it was too late. His son, Kameron, 17, was already cold to the touch.

Guns are like a grandmother’s diamonds in the Reichert family, heirlooms that carry memory and tradition. They are used on the occasional hunting trip, but most days they are stored, forgotten, under a bed. So when Kameron used one on himself, his parents were as shocked as they were heartbroken.

“I beat myself up quite a bit over not having a gun safe or something to put them in,” Mr. Reichert said. But he said even if he had had one, “There would have been two people in the house with the combination, him and me.”

The gun debate has focused on mass shootings and assault weapons since the schoolhouse massacre in Newtown, Conn., but far more Americans die by turning guns on themselves. Nearly 20,000 of the 30,000 deaths from guns in the United States in 2010 were suicides, according to the most recent figures from the Centers for Disease Control and Prevention. The national suicide rate has climbed by 12 percent since 2003, and suicide is the third-leading cause of death for teenagers.

Guns are particularly lethal. Suicidal acts with guns are fatal in 85 percent of cases, while those with pills are fatal in just 2 percent of cases, according to the Harvard Injury Control Research Center.

The national map of suicide lights up in states with the highest gun ownership rates. Wyoming, Montana and Alaska, the states with the three highest suicide rates, are also the top gun-owning states, according to the Harvard center. The state-level data are too broad to tell whether the deaths were in homes with guns, but a series of individual-level studies since the early 1990s found a direct link. Most researchers say the weight of evidence from multiple studies is that guns in the home increase the risk of suicide.

“The literature suggests that having a gun in your home to protect your family is like bringing a time bomb into your house,” said Dr. Mark Rosenberg, an epidemiologist who helped establish the C.D.C.’s National Center for Injury Prevention and Control. “Instead of protecting you, it’s more likely to blow up.”

Still, some dispute the link, saying that it does not prove cause and effect, and that other factors, like alcoholism and drug abuse, may be driving the association. Gary Kleck, a professor of criminology at Florida State University in Tallahassee, contends that gun owners may have qualities that make them more susceptible to suicide. They may be more likely to see the world as a hostile place, or to blame themselves when things go wrong, a dark side of self-reliance.

Health officials in a number of states are trying to persuade families to keep guns away from troubled relatives or to lock the weapons up so teenagers cannot get them. Some of those same officials say the inflamed national gun control debate is actually making progress harder because the politics put gun owners on the defensive.

“You just bump up against that glass wall, and barriers go up and the conversations break down,” said B. J. Ayers, a suicide prevention specialist in southeast Wyoming.

Seeking to lower death rates, health departments in Missouri, Wyoming and North Carolina are giving out gunlocks. In New Hampshire, about half the gun shops put up posters and give out fliers alerting gun owners to the warning signs for suicide and suggesting ways to keep guns from loved ones at risk of harming themselves. A coalition of firearm dealers in Maryland is now planning a similar program.

“This is an issue whose time has come,” said Keith Hotle, state suicide prevention team leader for Wyoming, the state with the highest suicide rate. A state advisory council recently bumped firearms safety to the top priority in a new report to the governor on suicide prevention. But Mr. Hotle cautioned that in Wyoming, where guns are like cars — just about everybody has one — direct arguments against them simply will not work.

“The framing is important,” he said. “It’s not about taking away people’s guns. It’s about how to deal with folks in a temporary crisis.”

Kameron’s crisis was, by all accounts, temporary. He was a popular football player with adoring parents and no history of depression. He worked after school at the only corner grocery store in Dayton, a tiny town in northeastern Wyoming with tidy, tree-lined streets and a park at the base of Bighorn National Forest. He liked to drive students around in his Pontiac Grand Prix, and he always bought multipacks of gum at Costco so he could give out sticks in pretty blue wrappers to girls at school.

“If someone had a hankering for a hamburger, he’d be off,” said his mother, Cara Reichert, an administrator in the local school system.

The event that preceded his death in 2008 seems like the mischievous scrape of a teenage boy. Out one night in the town park, he was caught with a package of cigars by local police officers.

His parents are still tormented over the bad luck that followed. The officers searched him because they were training a new colleague. Then a clerk at the local court told him — incorrectly — that his parents had to be present to pay the fine. His parents punished him by taking away his cellphone, though they left him his car.

“If just one little piece of this story would not have fallen into place,” Mr. Reichert said, his voice breaking.

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American, US Airways approve merger

A long-anticipated merger of American Airlines and US Airways is expected to be announced Thursday after weeks of closed-door negotiations, according to people briefed on the deal. The transaction would create the nation's largest carrier and cap an era of consolidation in a troubled industry.

The marriage of American, based in Fort Worth, and its smaller competitor based in Tempe, Ariz., would form an airline valued at $11 billion. The union would be the latest in a string of mergers and acquisitions in an industry struggling to stay airborne amid fluctuating fuel costs, labor strife and economic turbulence.

The new airline would retain the name American, have its headquarters in Fort Worth and be the biggest carrier in eight of the nation's largest airports including Los Angeles, according to the sources, who were not authorized to speak publicly. The airline is expected to surpass its competitors in revenue, passengers served and fleet size. In the first few years, the merger could generate savings and increased revenue of up to $1.2 billion, according to Robert Herbst, an industry consultant.

Quiz: Test your knowledge about airport security

But critics say another airline merger would only hurt passengers.

With newly merged airlines eliminating overlapping service, fares are certain to rise and carriers will probably stop serving less-profitable markets, some critics argue. Since 2007, the average domestic airfare has increased 15%, according to federal statistics.

"You don't have to be an economics professor to understand that less competition in the market is going to result in consumers paying more, and airfares are certainly not immune from this simple fact," said Brandon M. Macsata, executive director of the Assn. for Airline Passenger Rights advocacy group.

But industry experts predict the merger of American and US Airways won't lead to significant fare increases because the two airlines rarely compete head to head, and because there are enough other airline competitors in the market.

"Out of all of the major airline mergers we've had in the last decade, this merger has the least amount of overlapping of flights and routes," Herbst said.

In fact, the airlines seem to complement each other in several ways.

US Airways now has a large presence in mid-size markets such as Charlotte, N.C., Philadelphia and Phoenix, while American Airlines dominates in some of the nation's largest airports, with more international destinations.

"American likes to be a presence in big markets, and US Airways likes to be No. 1 in small markets," said Seth Kaplan, a managing partner at Airline Weekly, a trade magazine.

The merger must still be approved by federal regulators, but industry experts don't expect opposition.

The deal would mark the latest in a series of mergers and acquisitions that has narrowed the industry to a handful of mega-airlines and several smaller, regional carriers.

In the last five years, Delta has merged with Northwest Airlines, United has merged with Continental and Southwest has acquired AirTran — resulting in a 10% drop in passenger capacity, according to a study by the International Air Transport Assn., an industry trade group.

The odds of a merger increased when American's parent company, AMR, filed for bankruptcy in November 2011. Many analysts and AMR creditors argued that American could compete against other big airlines only by joining forces with another carrier to reduce costs and expand its service area.

For months, US Airways pushed for the merger, with American's top executive initially resisting until it became clear that the carrier's unions and many of its creditors supported a deal.

Another thorny issue that may have delayed a merger announcement was deciding who would run the new company. Board members for the two airlines have reportedly agreed to name US Airways Chief Executive Doug Parker as CEO of the merged airline. AMR's chief executive, Thomas Horton, will be non-executive board chairman.

The ownership of the new airline will be split 72% for AMR creditors and 28% for US Airways shareholders.

One of the toughest parts about pushing through a merger — the integration of unions and their often conflicting contracts — has been already largely ironed out. The merger must still be approved by the Bankruptcy Court.

hugo.martin@latimes.com

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Christopher Dorner shootout: Body found in burned cabin

There were conflicting reports tonight about whether a body was located inside the burned-out cabin Tuesday night where Christopher Jordan Dorner was believed to have kept law enforcement authorities at bay.

Several sources told The Times and many other news organizations that a body was located in the rubble. But LAPD officials just said that the cabin is still too hot to search and no body has been found.

Another update is expected within the next hour from law enforcement officers near the scene, and officials said they might have an update clarifying the confusion.

PHOTOS: Manhunt for ex-LAPD officer

As authorities moved into the cabin earlier Tuesday, they heard a single gunshot.

According to a law enforcement source, police had broken down windows, fired tear gas into the cabin and blasted over a loud speaker, urging Dorner to surrender. When they got no response, police deployed a vehicle to rip down the walls of the cabin "one by one, like peeling an onion," a law enforcement official said.

By the time they got to the last wall, authorities heard a single gunshot, the source said. Then flames began to spread through the structure, and gunshots, probably set off by the fire, were heard. 

PHOTOS: Manhunt for ex-LAPD officer

As darkness descended on the mountainside, Dorner's body had not been found, authorities said. Police were planning to focus their search in the basement area, the source said.

Earlier Tuesday, a tall plume of smoke was rising as flames consumed the wood-paneled cabin. Hundreds of law enforcement personnel had swooped down on the site near Big Bear after the gun battles between Dorner and officers that broke out in the snow-covered mountains where the fugitive had been eluding a massive manhunt since his truck was found burning in the area late last week.

Law enforcement personnel in military-style gear and armed with high-powered weapons took up positions in the heavily forested area as the tense standoff progressed. 

One San Bernardino County sheriff's deputy died after he and another deputy were wounded in an exchange of gunfire outside the cabin in which hundreds of rounds were fired, sources told The Times. The deputy was airlifted to Loma Linda University Medical Center, where he died of his wounds.

The afternoon gun battle was part of a quickly changing situation that began after Dorner allegedly broke into a home, tied up a couple and held them hostage. He then stole a silver pickup truck, sources said.

Then Dorner was allegedly spotted by a state Fish and Wildlife officer in the pickup truck, sources said. A vehicle-to-vehicle shootout ensued. The officer's vehicle was peppered with multiple rounds, according to authorities.

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Beyonce joined by Oprah at documentary premiere

NEW YORK (AP) — Oprah Winfrey made a surprise appearance Tuesday night at the premiere of Beyonce's HBO documentary, 'Life is But a Dream,' posing with the star and speaking of the candor she showed in making it.

The film takes a no-holds-barred look at moments in the 31-year old singer's life, including her miscarriage, reports of faking her pregnancy, and firing her father as her manager.

While the revelations Beyonce makes about herself in the film are comparable to the results Winfrey usually gets from her tough style of interviewing, the talk show host gave kudos to the singer.

Winfrey said Beyonce did a "much better job" of telling her own story. "I wouldn't have been in the bedroom and in the closet and in the car and on vacation," she said.

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Well: Getting the Right Dose of Exercise

Phys Ed

Gretchen Reynolds on the science of fitness.

A common concern about exercise is that if you don’t do it almost every day, you won’t achieve much health benefit. But a commendable new study suggests otherwise, showing that a fairly leisurely approach to scheduling workouts may actually be more beneficial than working out almost daily.

For the new study, published this month in Exercise & Science in Sports & Medicine, researchers at the University of Alabama at Birmingham gathered 72 older, sedentary women and randomly assigned them to one of three exercise groups.

One group began lifting weights once a week and performing an endurance-style workout, like jogging or bike riding, on another day.

Another group lifted weights twice a week and jogged or rode an exercise bike twice a week.

The final group, as you may have guessed, completed three weight-lifting and three endurance sessions, or six weekly workouts.

The exercise, which was supervised by researchers, was easy at first and meant to elicit changes in both muscles and endurance. Over the course of four months, the intensity and duration gradually increased, until the women were jogging moderately for 40 minutes and lifting weights for about the same amount of time.

The researchers were hoping to find out which number of weekly workouts would be, Goldilocks-like, just right for increasing the women’s fitness and overall weekly energy expenditure.

Some previous studies had suggested that working out only once or twice a week produced few gains in fitness, while exercising vigorously almost every day sometimes led people to become less physically active, over all, than those formally exercising less. Researchers theorized that the more grueling workout schedule caused the central nervous system to respond as if people were overdoing things, sending out physiological signals that, in an unconscious internal reaction, prompted them to feel tired or lethargic and stop moving so much.

To determine if either of these possibilities held true among their volunteers, the researchers in the current study tracked the women’s blood levels of cytokines, a substance related to stress that is thought to be one of the signals the nervous system uses to determine if someone is overdoing things physically. They also measured the women’s changing aerobic capacities, muscle strength, body fat, moods and, using sophisticated calorimetry techniques, energy expenditure over the course of each week.

By the end of the four-month experiment, all of the women had gained endurance and strength and shed body fat, although weight loss was not the point of the study. The scientists had not asked the women to change their eating habits.

There were, remarkably, almost no differences in fitness gains among the groups. The women working out twice a week had become as powerful and aerobically fit as those who had worked out six times a week. There were no discernible differences in cytokine levels among the groups, either.

However, the women exercising four times per week were now expending far more energy, over all, than the women in either of the other two groups. They were burning about 225 additional calories each day, beyond what they expended while exercising, compared to their calorie burning at the start of the experiment.

The twice-a-week exercisers also were using more energy each day than they had been at first, burning almost 100 calories more daily, in addition to the calories used during workouts.

But the women who had been assigned to exercise six times per week were now expending considerably less daily energy than they had been at the experiment’s start, the equivalent of almost 200 fewer calories each day, even though they were exercising so assiduously.

“We think that the women in the twice-a-week and four-times-a-week groups felt more energized and physically capable” after several months of training than they had at the start of the study, says Gary Hunter, a U.A.B. professor who led the experiment. Based on conversations with the women, he says he thinks they began opting for stairs over escalators and walking for pleasure.

The women working out six times a week, though, reacted very differently. “They complained to us that working out six times a week took too much time,” Dr. Hunter says. They did not report feeling fatigued or physically droopy. Their bodies were not producing excessive levels of cytokines, sending invisible messages to the body to slow down.

Rather, they felt pressed for time and reacted, it seems, by making choices like driving instead of walking and impatiently avoiding the stairs.

Despite the cautionary note, those who insist on working out six times per week need not feel discouraged. As long as you consciously monitor your activity level, the findings suggest, you won’t necessarily and unconsciously wind up moving less over all.

But the more fundamental finding of this study, Dr. Hunter says, is that “less may be more,” a message that most likely resonates with far more of us. The women exercising four times a week “had the greatest overall increase in energy expenditure,” he says. But those working out only twice a week “weren’t far behind.”

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Gov. Brown, BofA chief offer no easy answers for housing woes

Millions of Californians remain stuck in the state's increasingly expensive rental markets, unable to buy homes as they deal with tight credit markets and damage to their finances from the Great Recession.

Sounds like a mess fit for two of the nation's most prominent turnaround specialists — California Gov. Jerry Brown, fresh off his state budget-balancing act, and Bank of America Corp. Chief Executive Brian Moynihan, still engaged in resurrecting that institution from the mortgage meltdown.

But neither Brown nor Moynihan offered any easy answers Tuesday at a UC Berkeley summit on the future of residential housing.

Brown, the government man, said the free market needs to handle this one. Moynihan, the banker, said it will take maybe a decade before the housing finance system can wean itself from government life support.

Having accomplished his quixotic quest to raise taxes and balance the state budget, Brown seemed disinclined to tackle thorny housing issues. They are important, he said, but less so than dealing with public education and health.

"Essentially the housing market is banks, developers and individuals," Brown told the audience at a state office building in Oakland. "In this instance, I think the complexity is such that our efforts ought to be relatively restrained."

Moynihan — who has spent much of his tenure on problems stemming from Bank of America's takeover of failed Calabasas home lender Countrywide Financial Corp. — also offered little in the way of solutions.

Homeowners, he said, must again regard homes as a place to raise children rather than as an investment and ATM. His bank — which has retreated from many parts of the mortgage business — may offer some help as its recovery makes it able to extend more credit.

"I think we've got the balance a little too tight now, and we'll loosen it," said Moynihan, who joined Bank of America three years ago.

Meanwhile, Californians still struggle with the state's recovering housing market on a number of fronts. Prices are increasing — dramatically so in some areas — but that's driven in large part by an influx of cash buyers who are triggering bidding wars. That often leaves renters who wanted to buy at the bottom of the market unable to compete.

And, despite rising prices, many owners who bought during the housing bubble remained trapped paying mortgages totaling more than their homes are worth.

The mortgage market's almost total dependence on the federal government — the housing market's biggest problem — will probably take five to 10 years of work by a Congress that has shown little recent interest in addressing the issue, Moynihan said.

The problem is twofold, Moynihan said. First, private investment must replace the government as the provider of prime mortgages, a role filled largely since the financial crisis by the bailed-out firms Fannie Mae and Freddie Mac.

And the third leg propping up the mortgage business — the Federal Housing Administration's loan-insurance program — needs to resume its traditional role of helping first-time buyers obtain mortgages they can afford, Moynihan said. That role appears unlikely any time soon as the FHA, which has skirted insolvency, addresses its heavy losses by tightening its own lending policies.

Moynihan and Brown were a curious pair, two battered survivors discussing a third — California's housing market.

The governor reminded Moynihan that, as California's attorney general, Brown had filed a lawsuit accusing Countrywide of creating a foreclosure wave by deceptively marketing risky loans. The payments would ultimately "explode" on unsuspecting borrowers, he said.

The suit was filed in late June 2008, just before Bank of America shareholders voted to ratify the acquisition of Countrywide by Moynihan's predecessor, Ken Lewis. BofA later settled the suit by agreeing to provide as much as $8.7 billion in assistance to troubled borrowers — one in a seemingly never-ending series of mortgage-related settlements totaling tens of billions of dollars.

"We've put all that behind us, governor," Moynihan said. "I won't remember it if you don't."

California's housing ups and downs have mirrored the nation's but are far more exaggerated, noted Ken Rosen of the Fisher Center for Real Estate and Urban Economics at UC Berkeley, who also spoke at the housing summit. Propelled by government programs, homeownership rose nationally rose from 62% of householders in the 1960s to 69.2% during the housing boom, as lending standards grew ever looser.

The homeownership rate nationally has since fallen back to 65.5%, Rosen said. But in California, only 55.6% of households are homeowners, with even lower levels in urban areas: 48.8% in Los Angeles County, 42% in Oakland and 37% in San Francisco.

With home prices down 25% from their peak nationally and mortgage rates at record lows, "affordability is the best it's been in 50 years," Rosen said. "A lot of people on Wall Street say we should have a boom."

But much of the support for the California home-purchase market has been from cash-laden private investors, seeking bargain prices on homes they can rent out.

Many normal homeowners "can't get credit," Rosen said. "That's why we haven't had a boom in the for-sale market."

scott.reckard@latimes.com

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Pope Benedict faced worldwide challenges

In announcing his decision to resign the papacy, Benedict XVI said Monday that he no longer had the energy to confront the global challenges facing the massive Roman Catholic Church.

Those challenges have only multiplied during his eight-year reign, which he had pledged as a mission to return the troubled church to its traditional core, to "purify" worship and revitalize the faith.

If that meant church membership was to shrink, he often said, then that was the price to be paid. During Benedict's tenure, the church has continued to grow in parts of the world, especially in Africa and Asia, despite threats and competition from Islam or evangelical sectors. Yet numerous followers have also turned their backs on an institution they find, at best, irrelevant and, at worst, morally hypocritical and implicated in evil.

His primary focus has been Europe, although he made significant trips to Brazil, Mexico and Cuba — his last transatlantic voyage nearly a year ago and one that, according to one report, convinced him he was too old to continue on the throne of St. Peter. In Latin America especially, the Catholic Church has lost ground to Pentecostal and other Protestant groups.

From his first official Mass as pope, Benedict vowed to unify Catholics and close divisions. But his hard-line orthodoxy, while appealing to traditionalists, alienated others and drove wedges ever deeper.

Among a liberal generation — especially in the Americas, home to nearly half the world's Catholics — that was raised on the reforms of the Second Vatican Council of the 1960s, the church under Benedict often seemed far out of step with modern times.

"He catered to the concerns of the right and moved to bring in the far right" in an ultimately unsuccessful effort to heal those schisms, Jesuit Father Drew Christiansen, visiting scholar in the theology department of Boston College, said in a telephone interview.

"He showed no sensitivity to the so-called Vatican II Catholics … in terms of the internal affairs of the church: more participation, accountability of bishops and so forth. That was a major flaw."

Where the church has emerged especially strong under Benedict is in its intellectual discourse, elevated by a professorial pope who dedicated considerable time and energy to a series of highly regarded encyclicals and three books on the life of Jesus. He also encouraged more formality, reviving the old Latin Mass (although the Vatican had to adjust one prayer that called for the conversion of Jews).

Benedict "turned the church definitively toward the New Evangelization — the evangelical Catholicism of the future," papal biographer George Weigel, a senior fellow at the Washington-based Ethics and Public Policy Center, said via email, referring to the promotion of Catholic teachings in the modern world.

But in a crisis that dogged Benedict's papacy, today's church continues to reel under its most serious scandal in centuries: the sexual abuse of parishioners, primarily children, by members of the clergy, and persistent efforts to conceal the truth.

Benedict, like most of the church leadership, failed to grasp the gravity of the problem and acted slowly to weed out and punish abusers. Recent revelations indicated that in the 1970s he protected at least one priest alleged to have assaulted a child, and as head of the office that enforces doctrine, the Congregation for the Doctrine of the Faith, he would have been familiar with widespread allegations.

As pope, Benedict took a number of actions, including meeting with victims and ordering guidelines to hold priests accountable. But victims and their advocates contend that much more needs to be done and argue that the church has yet to adequately atone.

Many American Catholics were also dismayed by Benedict's decision to crack down on the organization that oversees the leading U.S. orders of nuns, which the Vatican accused of straying from orthodox doctrine, and to censure liberal female theologians.

"That has done so much to alienate women and harm the future of the church," Christiansen said.

Despite growth in Africa and Asia, the Vatican hierarchy remains dominated by Europeans who have kept a tight hold on major theological decisions. Europeans also dominate the College of Cardinals, all of whose members have been appointed by either Benedict or John Paul II, and are likely to have the greatest say in choosing Benedict's successor.

But the leadership under Benedict has not been impervious to the problems of the Third World. One encyclical, Caritas in Veritate, contained demands for economic reform to alleviate poverty, a stand that many Catholics found enormously progressive.

Still, the developing world was also the scene of some of Benedict's numerous gaffes that complicated the church's mission. In Brazil in 2007, he seemed to suggest that the Spanish conquest of indigenous populations was what they wanted all along; en route to Africa in 2009, he suggested that the use of condoms exacerbates the spread of AIDS. At one time or another, he managed to offend both Jews and Muslims — the latter with deadly consequence, including attacks on churches in Muslim areas and the slaying of an Italian nun in Somalia.

In an attempt to repair any lasting damage to the church's image, he apologized to both groups and, in 2006, made a historic trip to Turkey, where he prayed in a mosque.

The missteps and scandals — the most recent involving a butler who leaked secrets that exposed vicious backbiting and politicking within the Vatican — have often seemed a distraction to the church's work and to Benedict's legacy.

"He promoted the Gospel and taught us to reflect profoundly on theology and to better understand our faith," Father Raul Vera, bishop of the Mexican city of Saltillo, said in an interview. "Unfortunately, we are facing a world with tremendous challenges, and as we try to confront those ... we are left with a weakened church."

wilkinson@latimes.com

Wilkinson, now stationed in Mexico City, served as The Times' Rome bureau chief from 2003 to 2008, covering the last papal transition.

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