NEW YORK: The transfer of risk was supposed to be the great advance brought to the world by financial engineers. They developed exotic derivative products that enabled risks to be sliced and diced in all manner of ways.

Central banks and bank regulators cheered on the process. The transfers of risk meant that those who were comfortable with a given risk would wind up with it.

The apparent triumph of that process came after the tech stock bubble burst and the American economy went into recession in 2001. A lot of money was lost due to massive overinvestment in such things as fiber optic cable, but the losses were dispersed. No significant banks failed or even got into trouble.

The system had worked, the regulators told themselves as they praised the financial advances brought on by the derivative revolution.

Sometimes those regulators did wonder just where the risk was. If it was no longer the banks who would suffer when a financial crisis came around, who would? Could it be the insurance companies? Perhaps pension plans? Would hedge funds that gambled and lost be unable to meet their obligations and bring on a systemic failure?

In this financial crisis, the one that started with subprime loans, we are learning the answer to that question. The risks that banks would have taken on under the old system, when banks made loans and profited only as they were paid back, had been transferred through a bewildering wilderness of options, swaps, swaptions, specialized investment vehicles, collateralized debt obligations, variable interest entities and who-knows-how-many other instruments.

And when the whole daisy chain was through, a lot of the risk seems to have ended just where it used to end. The banks had it.

There were differences, of course. For one, the banks are ending up taking losses from loans that others made.

A suit filed this week in U.S. Bankruptcy Court in Manhattan sheds light on one way this happened. American Home Mortgage Holdings, a subprime lender that went broke in August, sued Bank of America, claiming it had reneged on a deal to take the losses if mortgages were sold for less than face value. The bank claims that some of the loans shouldnt have been made at all, but American Home says that is irrelevant.

Heres how it worked, in a simplified explanation that does not come close to capturing all the complexities that the financial engineers inserted:

American made subprime loans and sold them to special purpose entities it set up. Those entities, in turn, financed themselves by borrowing, mostly through the short-term commercial paper market.

To reassure investors, the special purpose entities entered into swap agreements with Bank of America and other big banks, in which the banks promised to make up the difference if the loans had to be sold and fetched less than par value. The chances of such a sale presumably seemed slight when the deal was made in 2004, but lots of unexpected things are cropping up these days.

In late September, American auctioned off the loans. Note that these appear to be loans made in 2004 or earlier, before lending standards are supposed to have crumbled.

We now have a market value for such loans. Packages of mortgages that were classified as performing - meaning the homeowner is mailing in a check every month - sold for as little as 80 percent of face value, and none went for more than 92 percent. The nonperforming loans sold in a range of 54 percent to 59 percent.

American says it sent out bills to its swap partners, and all but Bank of America agreed to pay.

The amount in dispute is just $25 million, an insignificant amount for the bank. But its refusal to pay may indicate an effort to find ways to shed what now seem to be foolish risks. The man in charge of that area of the bank was pushed out this week. The bank would not comment on the lawsuit.

There are other ways that banks may come to lose a lot of money. Jonathan Weil of Bloomberg News points out that Citigroup has no legal obligation to make up losses in the Specialized Investment Vehicles it set up, but some think it will do so to avoid a hit to its reputation. If it does put up cash, that will call into question the accuracy of Citis financial statements. If not, some of Citis customers will be very upset.

(12-07) 07:43 PST , (AP) —

Navigation gadgets are now so widely available no one needs to worry about getting lost anymore Д except when they’re trying to choose the right device.

All global positioning system devices for cars give turn-by-turn voice directions, estimate travel times and list points of interest such as gas stations, banks, hotels and restaurants. GPS models geared for outdoor pursuits emphasize other features.

For all models, the prices rise with the number of bells and whistles.

Once you balance price against the features you want, the biggest differences you’ll see will be in how the devices present maps, how their navigation interfaces work, the number of points of interest they include and the quality and size of their screens.

Here’s a wide sampling:

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Mio Digiwalker C230

The Mio Digiwalker C230 is a compact, affordable and easy-to-use basic model. It comes ready for action, preloaded with maps of the United States and 1 million points of interest, which is the minimum for a decent system. It also gives text-to-speech directions. The helpful function, likely to be a standard GPS feature soon, means the voice prompt can name streets, as in “right turn on Main Street” instead of “right turn in 200 yards.” The 3.5-inch display is on the small side but does the job. (MSRP: $249.95)

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Garmin nuvi 760

The Garmin nuvi 760 lands on the high-end. It’s a Bluetooth speaker phone and transfers the contacts from your cell phone so you can make calls directly from its brilliant, 4.3-inch touch screen. At night, there’s no annoying white glare because the display automatically switches to a black background. With more than 6 million points of interest, and the capacity to add your own, the 760 has one of the biggest directories available. It also includes an MP3 player and an FM transmitter so you can listen through your car stereo. Slim enough to fit into a pocket, the device will even remember where you parked and lead you there with text-to-speech directions. (MSRP: $749.99)

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TomTom GO 720

A unique feature of the mid-range TomTom GO 720 is its “MapShare” technology, which allows you to modify maps, adding street names or construction projects, and then upload them to the Internet to share. It also has popular extras such as Bluetooth calling, the ability to work with iPod music players (so you can select songs from its 4.3-inch screen) and branded point-of-interest icons so maps might show what restaurant you’re nearing, not just a fork-and-knife symbol, for example. It also can record your voice to give directions. (MSRP: $399.95 after a manufacturer rebate)

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Magellan Triton

Garmin’s GPSMAP 60CSx is still widely considered one of the best GPS devices for hikers, backpackers or fans of geocaching Д a popular treasure hunt game played using geographic coordinates. But aficionados are anxiously awaiting Magellan’s high-end Triton models, to hit the market within weeks. The Triton 1500 and 2000 have bigger displays than the lower-end models such as the 200, plus sleeker design and more frills. The 1500 is waterproof and has a flashlight and voice recorder. The 2000 adds a 2-megapixel-camera. (MSRP: $129 for the 200 model to $499 for the 2000 model.)

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Delorme Earthmate PN-20

Delorme Earthmate PN-20 represents a new breed of handhelds. Besides the usual terrain maps, compass and readings, it displays aerial satellite imagery much like Google Earth’s. But those cool maps hog storage space, so you may want to download selected regions onto a removable card. The waterproof device comes with a Topo USA map on DVD and a coupon for $100 worth of aerial map downloads. But don’t expect speed: the PN-20 is sluggish when panning images, switching map types and downloading maps. The 2.2-inch color screen feels small given the mapping detail. (MSRP: $369.95)

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Garmin Forerunner 305

GPS technology isn’t just for motorists, boaters, pilots and outdoor adventurers. A sports watch like the Garmin Forerunner 305 uses it to calculate pace and distance, and pairs it with a heart rate monitor to track your workout. You can transfer the data to a computer for analysis, and you can set up a virtual running partner with whom you’d like to keep pace. A bread-crumb feature remembers your starting point and can show the path back. The 205, without the heart rate monitor, costs about $100 less. (MSRP: $299.99)

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Microsoft Streets & Trips software

This is not a gadget, but laptop-bearing map geeks will like it, and it could be handy for an alpha trip planner. Streets & Trips can be purchased with a small GPS receiver, however, so it can provide directions based on your location. Otherwise, the software can help plan multiple destinations and routes Д down to the point, if desired, of telling you where along the way to stop for gas. It’ll even estimate travel costs. But the computing interface has different window panes, similar to Yahoo’s online maps, so if you’re driving, a passenger should help with any data input. (MSRP: $39.95 or $99.95 bundled with GPS Locator)

Former cabinet minister Clare Short sparked fresh controversy today, claiming Gordon Brown had sent Lady Amos to the EU-Africa summit simply because she was black.

Brown and other cabinet ministers are staying away from the summit in protest to the presence of Zimbabwean dictator Robert Mugabe, but Amos is going as an “advocate” for the UK.

Short, who like Amos is a former international development secretary, branded the peer a “pseudo-minister”.

“I don’t see any reason to send a kind of pseudo-minister and I think that it’s not right to send her because she’s black,” she told BBC Radio 4’s The World at One. “I don’t see any other reason for sending her.”

But the foreign secretary, David Miliband, hit back on the same programme, saying Amos knew the issues involved well and would be an effective representative for Britain.

“I think that is a bit insulting to Baroness Amos,” he said.

“She is a former secretary of state for international development, she is a former leader of the House of Lords, she has got a lot of knowledge about Africa as a whole, not just Zimbabwe.

“I think she will be a very good advocate for the UK and also for the sort of relationship between the EU and Africa that we very much want to see.”

Miliband also defended Brown’s decision to stay away in the face of criticism from the president of the European commission, Josй Manuel Barroso.

“It would have been absurd for the prime minister or myself to sit next to Robert Mugabe through a discussion of good governance and human rights and pretend that there wasn’t absolute meltdown going on in Zimbabwe,” he said.

“The use that would have been put by our presence by Robert Mugabe would have been quite counterproductive.”

Barroso said last night that he had made clear to Brown that world leaders must be prepared to sometimes meet people they did not approve of.

“If you are an international leader then you are going to have to be prepared to meet some people your mother would not like you to meet.

“That is what we have to do from time to time,” he said.

Short resigned the Labour whip in October 2006, denouncing Tony Blair’s “half-truths” and his “arrogant, error-prone government”.

She had already resigned from the cabinet in May 2003 in protest over the Iraq war.