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Investors turned to the safety of gold, which hit a record in euro terms in early trade, and to U.S. government bonds after Standard & Poor's put Portugal's credit rating on review for a possible downgrade, saying the country may have to turn to the EU and IMF for funding.

Although Lisbon, much like Ireland earlier, denies Portugal needs aid, markets are already discounting an eventual Portuguese emergency financial rescue.

While rescuing Portugal would be manageable, assistance for Spain would sorely test the European Union's resources, raising deeper questions about the integrity of its 12-year-old currency and possible contagion beyond Europe.

The euro fell to around $1.2969 in early Asia trade, lows not seen since mid-September, and experts said it could fall further unless there was strong action. <FRX/>

"You really need some aggressive action from the authorities in Europe to try and calm nerves and that's really the key at this stage," Greg Gibbs, a strategist at RBS in Sydney, said.

The euro has fallen some 9 percent from a November high around $1.4281 and was down about 7 percent in November, the biggest monthly fall since May.

CHINA DATA

Stock markets have tracked the euro zone's rolling debt crisis closely, and on Wednesday the MSCI index of shares outside of Japan .MIAPJ0000PUS drifted 0.16 percent lower, despite data from China that showed it had revved up production in November more than expected, with the official purchasing managers' index (PMI) rising to a seven-month high.

Shanghai stocks .SSEC were down 0.2 percent in early trade and Japan's Nikkei's share average .N225 also inched lower, brought down by constant concern over Europe's debt problems. The Nikkei fell nearly 2 percent the previous day, pulled down by tumbling China stocks following a liquidity squeeze in the share market. On Wednesday, it was 0.2 percent lower. .T

"Investors were worried over interest hikes in China and the euro zone yesterday and are now waiting for this Friday's U.S. employment figures and Christmas sales figures to trade on," said Fumiyuki Takahashi, equity strategist for Barclays Capital Japan.

Oil was steady near $84 a barrel while cash gold priced in euros hit a record at 1,068.70 euros an ounce, reflecting the worries Europe. <O/R> <GOL/>

(Editing by Alex Richardson)

The findings, which must be revealed in accordance with a deadline set by a wide-ranging rewrite of U.S. financial rules enacted in July, could shed light on who benefited most from central bank's controversial efforts to support financial institutions and credit markets.

The results might also reignite debate about whether some bailouts, such as the support for insurer AIG (AIG.N), were appropriate.

As the financial crisis that began in the summer of 2007 spread beyond the housing sector to the nation's biggest banks, the Fed, under the leadership of Chairman Ben Bernanke, devised increasingly complex facilities to help restore confidence.

Among these were loans to broker-dealers made outside the Fed's usual discount lending window for troubled institutions, which is reserved for deposit-taking commercial banks.

Investors are curious to see how much money the likes of Goldman Sachs (GS.N), Morgan Stanley (MS.N) and Merrill Lynch, now part of Bank of America (BAC.N), took from the central bank.

"I suspect a lot of institutions might have had their hand out," said Kim Rupert, a managing director at Action Economics in San Francisco. "I expect we'll see some fairly significant borrowings from some of the major financial institutions. It will be interesting to see what foreign institutions were very active."

Other key emergency lending measures included an attempt to revive commercial paper markets with funding from the Fed, as well as a program aimed at securitization markets that also tapped central bank money as an incentive for new deals.

CRYPTIC CLARITY

Arguably, the Fed's most contentious and politically costly decision was the rescue of insurance giant American International Group. Criticism of the Fed grew after it emerged that AIG executives were paying themselves multimillion dollar bonuses.

The Fed-sponsored purchase by JPMorgan of troubled investment firm Bear Stearns in March 2008 also drew heavy scrutiny.

That bailout temporarily quelled market fears about contagion, though Lehman Brothers' failure in September of that year touched off the most virulent phase of the crisis.

Questions linger as to why the Fed and U.S. Treasury decided to let Lehman go after they had acted to save Bear Stearns. The Fed has argued it could not extend a loan to Lehman because the firm was insolvent.

Through it all, the Fed was criticized for being too close to the banking sector, while not doing enough to support the broader economy. In recent months the financial sector has recovered smartly but that rebound has failed to translate into a vigorous economic expansion.

The controversy led to efforts, eventually thwarted, to curtail the central bank's regulatory authority and regularly audit its emergency lending. The one-time disclosure emerged as a compromise.

Some analysts worry that despite the broad nature of the data being released, it would be disclosed in such a way as to make it difficult to make immediate sense of the information.

"My sense is they're going to give us the disclosure in the same grotty fashion (as before)," said Christopher Whalen, managing director at Institutional Risk Analytics, a bank research firm. "It's not going to be well organized so you'll have to sort through it."

The Senate Banking Committee is holding a hearing on problems in the mortgage servicing industry and whether they pose a broader risk to the economy or amount to an isolated if nettlesome problem.

The issues facing the still-struggling housing market have been exacerbated by allegations that banks have used "robo-signers" to sign hundreds of foreclosure documents a day without proper legal review.

Regulators have been criticized for not catching the widespread flaws, which have reignited public anger with banks that received billions of dollars in taxpayer aid during the financial crisis.

Federal bank regulators and all 50 state attorneys general are probing Bank of America (BAC.N), JPMorgan (JPM.N), and other major mortgage servicers, many of whom temporarily halted foreclosures to examine their practices, only to then resume them.

These regulators, including Federal Deposit Insurance Corp Chairman Sheila Bair and Federal Reserve Governor Daniel Tarullo, are expected to provide an update on the probe and how big a threat the documentation problems could pose to the banks and housing market recovery.

Representatives from mortgages finance companies Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) have also been summoned to appear.

Fannie Mae and Freddie Mac officials will likely be questioned on their recent decision to resume sales of foreclosed properties.

"I want to hear why they feel that they have corrected policies that have allowed the foreclosures to take place without the rubber stamping and all the excesses that took place in the foreclosure practices," Robert Menendez, chairman of the Senate banking panel's housing subcommittee, told Reuters.

AG PROBE TALKS IN FLORIDA

Much of the action pertaining to foreclosures is taking place outside Washington, with state attorneys general taking a prominent role in investigating the servicing problems.

Officials from Bank of America and JP Morgan Chase have said they would like to have a settlement with states soon, but so far a deal remains elusive and it could be months before one is reached.

The attorneys general are gathering in Florida this week for the winter meeting of their national association. Among their guests will be Elizabeth Warren, President Barack Obama's top adviser on consumer issues.

Warren was scheduled to attend a reception Tuesday night to hear where the attorneys general foreclosure investigation stands and to provide state officials with an update on efforts to stand up the new Consumer Financial Protection Bureau.

Attorneys general and lawmakers have taken aim at the so-called "dual track" practice in which mortgage servicers go ahead with foreclosure proceedings even as they negotiate possible loan modifications aimed at keeping struggling borrowers in their homes. They have derided the process as confusing for borrowers.

Minneapolis Fed President Narayana Kocherlakota said the Fed's controversial bond purchase program was needed given a "troubling" slowdown in U.S. economic growth and too low inflation and employment.

The Fed said earlier this month it would buy $600 billion in Treasury bonds to support a weak economy. Core inflation has averaged well below the Fed's informal target of about 2 percent and the jobless rate remains stubbornly high.

"There are obviously very severe economic and social consequences from this level of unemployment," Bernanke said at Ohio State University. "So getting new jobs, getting unemployment down is of an incredible importance."

The Fed's purchase program has elicited an unusual amount of criticism both at home and abroad, including that it is deliberately pushing down the dollar and fueling asset bubbles. Some U.S. Republicans have warned the policy will lead to runaway inflation.

Jeffrey Lacker, president of the Richmond Federal Reserve Bank and known as an inflation hawk, said the Fed faces a delicate task of timing the eventual withdrawal of easy money to avoid a run-up in inflation, but that he doesn't yet know when that time will be.

"We've increased the monetary base tremendously, and there is a lot of people that just look at that and jump to the conclusion that hyperinflation is a threat," Lacker told a panel in New York.

"I think there's a little bit of overreaction, a little bit of hysteria out there" on inflation.

WORRYING LONG-TERM UNEMPLOYMENT

Bernanke repeated his argument that action was called for even though the economy has been growing for a year and a half, but he steered clear of any direct comments on U.S. monetary policy.

The high share of workers who have been out of work for six months or longer is troubling, he said, because those workers face a particularly high bar to reentering the labor force both because they lose skills and because employers may question their suitability for employment.

Bernanke also said the elevated jobless rate makes businesses and households reluctant to spend because they are uncertain of future income.

Kocherlakota, for his part, told a symposium in St. Paul, Minnesota, that the Fed's decision to buy more longer-term assets should help reduce real interest rates and "lead to less unemployment and upward pressure on prices" albeit only modestly.

Kocherlakota, who next year rotates into a voting seat on the Fed's policy-setting committee, said the purchases are unlikely to fuel future inflation because the central bank has the tools and the commitment to keep inflation low.

Peter Diamond, whose nomination to the Fed's Board of Governors is awaiting Senate approval, told Reuters Insider in an interview that the Fed's plan was an insurance policy at a time the global economy faces risks.

A deal, reported by several media including the New York Times on Tuesday, would give Google an important window into a fast-growing $91 billion local advertising market.

But Google's shares fell 4.5 percent, partly on concern it may shell out too much for a business likely to face increasing competition. Reports of the deal came as the European Union announced plans to investigate Google's search practices.

"Investors think that might be overpaying," Kaufman Brothers analyst Mayuresh Masurekar said of the reported $5 billion-plus deal.

"There are no barriers to entry. There is nothing unique to what they're doing," he said of Groupon, "so there is a risk that Google overpays for Groupon at this point."

But he added that buying Groupon could help Google make further inroads into a local advertising market that analytics firm Borrell Associates estimates will be worth $91.1 billion in 2010.

Groupon sends its members daily e-mails with about 200 discounts for goods and services. The deals are activated only when a minimum number of people agree to make a purchase, giving Groupon clout to negotiate steep group discounts on products and services.

Wedbush Securities analyst Lou Kerner said that daily-deals service dovetails with Google's search advertising business, with both focused on helping merchants acquire customers.

"Google is building a mosaic of marketing solutions for businesses," said Kerner. "So having this kind of flash-sale side of the business, which will all be automated, just makes a ton of sense."

A Google spokesman said the company does not comment on rumor or speculation. A spokeswoman for Groupon declined comment.

A WEB PHENOM

Groupon -- called the fastest-growing Internet start-up in history -- does not disclose financial figures, though analysts estimates for the two-year old company's annual revenue run rate range from $400 million to $600 million.

The company founded by music graduate Andrew Mason, who lives in Chicago with his girlfriend and 20 cats, has been on a tear. Its subscriber base is expected to grow to 25 million in 2011 from 13 million this year.

Its backers include Digital Sky Technologies, which is also invested in Facebook.

"It's been one of the fastest growing companies in history and that growth is going to be accelerated being part of the Google platform," Kerner said.