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Beam me up, Nexus One: Google is making a play for the iPhone crowd Robert Galbraith/Reuters

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Google Comes Calling

The long-simmering rivalry between Apple (AAPL) and Google (GOOG) is suddenly boiling over. For years, Silicon Valley's two most successful companies constituted something of a mutual admiration society. Apple employs Google search as the default on the iPhone, while Google Maps and Google's YouTube are among the most popular apps. But on Jan. 5, Google unveiled the Nexus One cell phone and an online store to sell it. With a powerful chip, camera, and availability on Verizon's network later this year, it could appeal to consumers worried about the spotty 3G coverage provided by the iPhone's U.S. carrier, AT&T (T). (AT&T also says it will sell five phones using Google's Android software in coming months.) On the day of the Nexus One launch, Apple bought a mobile advertising firm called Quattro Wireless for around $275 million. The message from Apple's Infinite Loop campus to the Googleplex: Come after our phone business, and we'll come after your ad dollars.

—Edited by Harry Maurer & Cristina Linblad

Dorgan, Dodd Step Down

Senator Byron Dorgan, a North Dakota Democrat, said on Jan. 5 that he won't seek reelection after 30 years in Congress, including 17 in the Senate. Dorgan was one of just eight senators who voted in 1999 against the repeal of Glass-Steagall fire walls between banks, investment banks, and insurance companies, warning that repeal would expose the financial system to too much risk. Coming the day before Senator Chris Dodd (D-Conn.) announced his retirement, Dorgan's move will cause more angst for his party; Dodd is likely to be succeeded by a Democrat, but a Republican may well grab Dorgan's seat, potentially depriving the Dems of their 60-seat supermajority.

—Edited by Harry Maurer & Cristina Linblad

Ben Says It Ain't So

Don't blame the Fed for the crash, said Chairman Ben Bernanke in a speech to the American Economic Assn. on Jan. 3. Bernanke all but absolved the central bank for keeping interest rates low early in the decade, a policy many have targeted as a major factor in pumping up the housing bubble. Bernanke called the link "weak" and said the real culprit was lax regulation. Lawmakers and media pundits pounced on Bernanke's conclusion, with Stanford University economist John Taylor—whose formula Bernanke cited as evidence for his position—saying "overwhelming" evidence linked loose monetary policy to the crisis. Other economists and commentators said Bernanke, who faces a Senate confirmation vote this month to remain chairman, also downplayed the Fed's failures in regulating banks.

—Edited by Harry Maurer & Cristina Linblad

Greece in Hot Water

European Union officials arrived in debt-ridden Greece on Jan. 6 for three days of examining the country's plans to slash its bloated budget deficit, now at 12.7% of GDP. By cutting spending and hiking taxes, Athens aims to chop the deficit to 8.7% this year and to the frequently violated EU maximum of 3% by 2012. The country's woes have roused speculation that the EU will have to stage a bailout, and Greek bonds briefly took a pasting when a European Central Bank official said no rescue was going to happen. Greek Finance Minister George Papaconstantinou did his best to calm the waters, saying in an interview on Bloomberg TV: "We don't expect to be bailed out by anybody....There is no Plan B. Greece will do what it takes."

—Edited by Harry Maurer & Cristina Linblad

Iceland Ices Investors

Another troubled European nation, Iceland, delivered a bombshell on Jan. 5 when President Olafur Grimsson vetoed legislation that would have forced Iceland to repay $5.5 billion to Britain and the Netherlands. The money was meant to cover losses by British and Dutch savers who lost heavily when Iceland's Landsbanki went bust in 2008. It's only the second time since 1944 that the largely ceremonial head of state has issued a veto, and almost three-quarters of Icelanders support the move. A national referendum will now decide whether Iceland should repay the debt. The uncertainty prompted Fitch Ratings to downgrade Iceland's debt rating to BB+ and could jeopardize financial aid promised by the International Monetary Fund.

—Edited by Harry Maurer & Cristina Linblad

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