By Eric Lipton

Restaurant chains like McDonald's want to keep their lucrative tax credit for hiring veterans. Altria, the tobacco giant, wants to cut the corporate tax rate. And Sapphire Energy, a small alternative energy company, is determined to protect a tax incentive it believes could turn algae into a popular motor fuel.

To make their case as Congress prepares to debate a rewrite of the nation's tax code, this diverse set of businesses has at least one strategy in common: they have retained firms that employ lobbyists who are former aides to Max Baucus, the chairman of the Senate Finance Committee, which will have a crucial role in shaping any legislation.

No other lawmaker on Capitol Hill has such a sizable constellation of former aides working as tax lobbyists, representing blue-chip clients that include telecommunications businesses, oil companies, retailers and financial firms, according to an analysis by LegiStorm, an online database that tracks Congressional staff members and lobbying. At least 28 aides who have worked for Mr. Baucus, Democrat of Montana, since he became the committee chairman in 2001 have lobbied on tax issues during the Obama administration -- more than any other current member of Congress, according to the analysis of lobbying filings performed for The New York Times.

''K Street is literally littered with former Baucus staffers,'' said Jade West, an executive at a wholesalers' trade association that relies on a former finance panel aide, Mary Burke Baker. ''It opens doors that allow you to make the case.''

More From the NY Times:
Rev Up the Jet: Executive Perks Are Back
Out of the Spotlight, a Lucrative Payday
If Shareholders Say 'Enough Already,' Boards May Listen

Like Ms. Baker, many of those lobbyists have already saved their clients millions — in some cases, billions — of dollars after Mr. Baucus backed their requests to extend certain corporate tax perks, provisions that were adopted as part of the so-called fiscal cliff legislation in January. Baucus aides who later became lobbyists helped financial firms save $11.2 billion in tax deferments and helped secure a $222 million tax benefit that is shared with the liquor industry.

Sean Neary, a spokesman for Mr. Baucus, said the senator had regularly rejected requests from those lobbyists for provisions benefiting their clients, like an appeal from one former aide, Pat Bousliman, now working as a wind industry lobbyist, to extend an alternative energy loan guarantee program that expired in 2011.

Mr. Baucus's decisions are based on the merits of the policies, Mr. Neary said, not on who is advocating for them. ''The fact is, oftentimes good policy can indirectly benefit someone,'' he said. ''That doesn't mean it shouldn't be done.''

The debate over the tax code — which has emerged as part of the two-year effort to stimulate the economy and reduce the deficit — could turn into a battle royal. While many members of Congress talk about lowering the corporate tax rate, replacing that lost revenue would require eliminating many tax loopholes that legions of lobbyists, including many who had worked for other prominent lawmakers, make a living laboring to expand or defend.

Mr. Baucus, 71, the son of a wealthy Montana rancher, is somewhat of a wild card in the tax debate: he is the top Democrat in what arguably is the Senate's most powerful committee seat. The finance panel helps dictate how the government raises almost all of its money, and spends nearly half of it.

But he often bucks his party's leadership. Last month, for example, he voted against the Democrats' budget proposal for 2014, which included nearly $1 trillion in new revenues. He also favored the Bush administration's tax cuts in 2001 for Americans including the wealthy, putting him at odds with many Democrats.

Mr. Baucus, who has spent nearly his entire professional career in Congress, declined a request for an interview. But Mr. Neary said that every action the senator takes is motivated by his commitment to voters.

''Every vote has to answer one question for him and that is: How is it impacting Montanans?'' Mr. Neary said.

Several veteran Capitol Hill aides said it was naïve to suggest that former aides could extract special favors from their one-time bosses — unless what they were pushing for had broad support. But the former aides still bring an advantage to the corporations that hire them.

''It does mean you will have someone who knows how the levers of power are pushed or how to push the levers, and who can describe to you how situations are going to play out based on their years of experience,'' said Jim Manley, a former aide to Senator Harry Reid, the majority leader. Mr. Manley now works at a Washington lobbying and communications firm, QGA Public Affairs.

In recent interviews, four former aides to Mr. Baucus said that their ties to him heightened their appeal to potential clients. The link also helped justify their salaries, in some cases $500,000 or higher, more than double or triple their Capitol Hill paychecks.

Former Senate aides who become lobbyists must wait a year before they can contact Mr. Baucus or his staff on behalf of a client, according to Senate ethics rules.

Staying active in their circle, one former aide said, also requires that they help Mr. Baucus's political career, through fund-raising and other assistance.

Several of the lobbyists regularly fly to Big Sky, Mont., for weekend fund-raising retreats that Mr. Baucus hosts, or attend more intimate events in Washington like a gathering last month near the Capitol, where Paul Wilkins, Mr. Baucus's chief of staff, talked about the millions of dollars Mr. Baucus will need to raise for his re-election campaign next year.

Among them, the top givers include Jeffrey A. Forbes, Mr. Baucus's former Finance Committee staff director, who has donated a total of at least $25,000 to Mr. Baucus, his political action committee or the Montana Democratic Party. He attended the retreat in February at the Big Sky resort, which included skiing, snowmobiling and a big family dinner at Buck's T-4 Lodge. The totals grow much bigger — to hundreds of thousands of dollars — when donations from Mr. Forbes's clients, including Verizon and Altria, and other partners at his lobbying firm, are counted.

Mr. Wilkins said that the donations and fund-raising had been vital, noting that the nearly $4.6 million expected in hand by the end of this month would rank Mr. Baucus's campaign chest among the top 10 in the Senate.

''It allows us to scare off opponents,'' Mr. Wilkins told the group, which included former Baucus aides turned lobbyists, at a Capitol Hill townhouse owned by Federal Express. ''It is the basis of everything that we do. So thank you for your support and everything you have done for Senator Baucus.'' A New York Times reporter in attendance was asked to leave the private event.

Asked later about his comments, Mr. Wilkins said, ''There is no expectation that former staffers do anything related to the office. They are private individuals, if they want to donate fine. If they don't want to donate, that is fine, too.''

Mr. Baucus's office points out that the former aides who now work as tax lobbyists are a small fraction of those whose who have worked for him over the years. Still, several colleagues who have served more than two decades on the finance panel -- including Orrin G. Hatch, Republican of Utah, and Charles E. Grassley, Republican of Iowa, both as ranking Republican or chairman — have much smaller networks of former aides who are tax lobbyists, according to the data collected by LegiStorm and the Center for Responsive Politics.

Republicans, though, imposed term limits on committee leadership posts more than a decade ago to help deter the creation of a so-called iron triangle among the chairman, federal officials and corporate lobbyists.

Mr. Baucus is viewed as an important ally when it comes to including corporate tax priorities into legislation. Last year, he introduced a plan — most of which was eventually passed into law as part of the fiscal cliff deal in January — that contained more than a dozen tax breaks, some of them pushed by clients who had retained Washington lobbying firms that employ his former aides or political advisers.Shannon Finley, who served as a political consultant and fund-raiser for Mr. Baucus before joining a lobbying firm in Washington, was hired in late 2011 by Beam, the liquor industry giant, to protect a federal tax break that it gets a cut of for producing its Cruzan rum in the United States Virgin Islands. Despite protests from fiscal conservatives that it was a giveaway, the provision was included in Mr. Baucus's package, costing $222 million over the coming decade. Ms. Finley declined to comment.

The National Restaurant Association, whose board includes a senior McDonald's executive, had three former aides to Mr. Baucus working on tax-related matters, including Patrick Heck, who once held the post of chief tax counsel to Mr. Baucus. The association helped secure three provisions in the January deal, worth an estimated $5.9 billion over the next decade to restaurants and other companies. Elizabeth Garner, a Restaurant Association lobbyist, said Mr. Heck had expertise and relationships that proved helpful in their push.

With a debate on rewriting the tax code to streamline and simplify it expected to start this year — leaders in both the House and the Senate are working on their own drafts — lobbying could reach levels like that of the 2009 debate over health care, which also was overseen in part by the Senate Finance Committee, with Mr. Baucus at the gavel. His staff is already hosting meetings with industry lobbyists, academics and outside parties to get advice on the tax package that the Senate Finance Committee is trying to create.

Mr. Baucus's former aides will almost certainly be pushing competing plans. Some large corporations with relatively high corporate tax rates, like Verizon and Altria, have retained Mr. Forbes to help push for the overall cut in the tax rate, while others, like General Electric, which pays a relatively low rate, have a team of lobbyists including Ms. Finley to try to protect their various federal tax advantages.

Mr. Baucus's office said the senator's actions on the tax rewriting effort would be based on the bipartisan consensus that he was trying to build among the committee's members, not any special favors that individual industries wanted, even if they were represented by his former aides.

Bob Packwood, the former Republican senator from Oregon who was the chairman of the Senate Finance Committee in 1986 — the last time Congress passed broad legislation rewriting the tax code -- said in an interview that former aides tended to have access to lawmakers, though he questioned how much influence they really had.

But one thing is certain: they will try.

''The lobbying will be tremendous,'' he said. ''As it was last time.''

China warned against "troublemaking" on its doorstep, in an apparent rebuke to North Korea, and the United States said it was postponing a missile test to help calm high tension on the divided Korean peninsula.

The North, led by 30-year-old Kim Jong-un, has been issuing vitriolic threats of war against the United States and U.S.-backed South Korea since the United Nations imposed sanctions in response to its third nuclear weapon test in February.
Pyongyang's anger appears heightened by U.S.-South Korean joint military exercises. But most analysts say it has no intention of starting a conflict that would bring its own destruction and instead is out to wring concessions from a nervous international community.
The North told diplomats late last week to consider leaving Pyongyang because of the tension, but embassies appeared to view the appeal as more rhetoric and staff have stayed put.
South Korea said it was ready for any kind of action that the North's unpredictable leaders might make — including a possible missile launch — by Wednesday, after which the North said it could not guarantee diplomats' safety.
China, North Korea's sole financial and diplomatic backer, has shown growing irritation with Pyongyang's warnings of nuclear war.
Chinese President Xi Jinping, addressing a forum on the southern island of Hainan, did not name North Korea but said no country "should be allowed to throw a region and even the whole world into chaos for selfish gain".
Stability in Asia, he said, "faces new challenges, as hot spot issues keep emerging and both traditional and non-traditional security threats exist."
Chinese Foreign Minister Wang Yi expressed similar frustration in a statement late on Saturday, relating a telephone conversation with U.N. Secretary-General Ban Ki-moon.
"We oppose provocative words and actions from any party in the region and do not allow trouble making on China's doorstep," Wang said, according to a ministry statement on its website.
On Sunday, the ministry expressed "grave concern" at rising tension and said China had asked North Korea to "ensure the safety of Chinese diplomats in North Korea, in accordance with the Vienna Convention and international laws and norms".
China's embassy, it said, was "understood" to be operating normally in Pyongyang.
Australian Prime Minister Julia Gillard, addressing the Hainan forum, said avoiding conflict on the peninsula was vital. "There, any aggression is a threat to the interests of every country in the region," she said.
British Foreign Minister William Hague said North Korea's nuclear ambitions had to be taken seriously.
Interviewed by Sky News, he said the international response "should also be very clear, very united and calm at all times because it's important not to feed that frenetic rhetoric that we've seen over the last few weeks".
Switzerland's Foreign Ministry offered to mediate, saying it was "always willing to help find a solution, if this is the wish of the parties, such as hosting meetings between them".
Kim, the third member of his dynasty to rule North Korea, is thought to have spent several years in Switzerland being educated under a pseudonym. He took over in December 2011 after the death of his father Kim Jong-il, who confronted South Korea and the United States throughout his 17-year rule.
Fear of 'Miscalculation'
In Washington, a defense official said a long-scheduled test of the Minuteman III intercontinental missile, due to take place at the Vandenberg Air Force Base in California, would be postponed.
"This test ... has been delayed to avoid any misperception or miscalculation in light of recent tensions on the Korean peninsula," the official said on Saturday. "This is the logical, prudent and responsible course of action to take."
He said the test had been unconnected to "anything related to North Korea" and added that another test launch could be expected next month.
The United States remained fully prepared to respond to any North Korean threat, the official said.
The South Korean president's office said the country had a "firm military readiness" for any eventuality. It described as "planned behaviour" the North's call for South Korean workers to leave the Kaesong joint industrial park, just inside North Korea, and for diplomats to evacuate Pyongyang by Wednesday.
"Ahead of that time, a situation like a North Korean missile launch could occur," Kim Haing, a spokeswoman for the presidential Blue House, quoted the chief of the National Security office as saying. "As of now, there are no signs of all-out war, but if a local conflict breaks out, North Korea should be aware that it will pay the price."
South Korean media said on Friday the North had moved two medium-range missiles to the country's east coast, but there has been no confirmation of such a move.
The North has always condemned joint exercises off the South Korean coast, but its rhetoric has been especially furious this year as the United States sent nuclear-capable stealth bombers from their home bases.
North Korean state television showed a military training session, with soldiers putting dogs through their paces, including one seen tearing to pieces an effigy of South Korean Defence Minister Kim Kwan-jin.
Soldiers were shown firing at pictures of the minister and a depiction of a U.S. serviceman.
"As you all know, on the Korean peninsula, it is not a matter of whether we will have a war or not, but whether it will take place today or tomorrow," an unidentified soldier said.
"This is a situation like being on the eve of a big explosion. Every minute, every second counts. We are right now set to march, once the order is given."
There was no evidence of any tension in the South Korean capital, Seoul, with residents strolling in the city centre on a chilly spring day.

When suburban Atlanta accountant Priscilla Diggs-Costen met the police at her office after the alarm company called in December, she thought it might have been a false alarm.

"When I first got here, it looked like there was no robbery. And then I looked at my desk."

Her computer and monitor were gone—a computer containing all of her clients' personal information, prior years' returns, and their Social Security numbers.

"I was devastated," she said.

The thieves had struck with surgical precision. At 10:32 on a Saturday night, just when the local police department was changing shifts, they had gotten in through the window closest to Diggs-Costen's desk, barely making a mark.

"There were no signs of forced entry on the outside but the inside of the window was partially broken," said the police report. These crooks knew exactly what they were after.

Diggs-Costen said it took a couple weeks after the break-in for her to understand what was going on, but then the first of her clients' returns were rejected by the IRS because someone else had already filed under their Social Security numbers—which clearly had come from Diggs-Costen's stolen computer.

Stolen identity tax refund fraud was a $5 billion problem last year according to the U.S. Treasury Inspector General for Tax Administration. That is the amount of fraudulent tax refunds the IRS paid out. The IRS and law enforcement have made the issue a top priority, but Diggs-Costen thought she was presenting them a golden opportunity to catch a crime before it occurred.

She contacted the IRS identity theft unit.

"I asked them, I said, hey, look, these returns are being filed. Can I give you a list of my clients to flag those accounts? And they said no."

She also alerted her clients about the breach. Vincent and Darlene, who asked us not to use their last names to protect what is left of their privacy, jumped into action as well. Or at least they tried.

"I called the IRS and was really trying to encourage them to close the gate, the barn door is open, they're going to do this, close the gate," she said. "They said I'm sorry, we can't do anything until they file a false return."

Nothing I could tell them could convince them to issue any kind of PIN, flag our account in any way, no matter how many times I told them my tax accountant's computer was stolen and that it was probably going to happen to many other people, they just seem to not care."

(Read More: How Identity Thieves Snatch Billions in Phony Tax Refunds)

An IRS spokesperson insists the agency does care.

"Our hearts go out to the victims of this terrible crime," she said.

But the IRS employees appear to have followed proper procedures, even though an enrolled agent and her clients were alerting them to what seemed to be a clear and imminent threat—complete with a police report to document the crime. That is because identity thieves have become so sophisticated, some have been known to contact the IRS themselves posing as victims, to buy more time to get their fraudulent returns in first.

The IRS has guidelines for taxpayers on a special web site. Taxpayers who suspect they were victims of identity theft are told to contact the agency's Identity Protection Unit at 1-800-908-4490. Typically, they will be told to file Form 14039, the Identity Theft Affidavit, which will help expedite their case if a fraudulent return is filed.

Diggs-Costen said she did all of that after receiving powers-of-attorney from her clients, but nearly all of them subsequently had fraudulent returns filed under their Social Security numbers.

"Every person that I've spoken to in the IRS identity theft unit gives me the spiel about ' you need to fill out this form or you need to this.' I already know what you need to do. What I'm trying to do is prevent more of the refunds from being issued," she said.

The IRS spokesperson said just because identity thieves filed a fraudulent return does not mean a refund was issued, because of "filters" designed to catch the fraud. Still, the legitimate taxpayer still might have to wait months—or longer—before they get their refund.

The IRS also issues special personal identification numbers to victims of identity theft, but those PINs are only issued once a year—in December—too soon to do the Georgia victims any good.

Why not issue every taxpayer a PIN?

The IRS said that would not be practical. With only about one percent of the nation's 140 million tax filers affected by identity theft, the spokesperson said the PINs would be an "unnecessary burden" for most taxpayers. Presumably for the IRS too, since many taxpayers lose their PINs and have to contact the IRS for a new one.

Nonetheless, the IRS says some 770,000 filers received PINs this year, the program's third year of operation. That is up from just 25,000 in the first year.

Victims of identity theft often find their federal return is just the start of their tax problems.

"I didn't even think of our Georgia state return," Darlene said.

The states are a potential gold mine, experts say, because with a single Social Security number a thief can file returns—and collect refunds—across the country.

"What's scary about the states is that they're not centralized," said Harwood Talcove, CEO of LexisNexis' Government and Special Services division, which is trying to market filtering services to the states. "What the fraudsters are doing is they're using those identities to file in 42 or 43 other states, stealing hundreds of billions of dollars from taxpayers."

Because states generally do not share much tax information with one another, and because taxpayers would not know if a fraudster had filed in a faraway state, the state version of this crime is much harder to detect.

Georgia is one of four states to contract with LexisNexis, which runs every return through its vast database of personal identifying information such as home mortgages, auto registrations and employment. If something does not quite add up, the filer may be asked some additional questions.

"For example, 'Here's four addresses. Which didn't you live at?' 'Here's four cars. Which didn't you own,'" Talcove said.

Talcove said in the system's first year of operation last year, many filers chose not to answer the questions, which he said is an indication they probably were trying to commit fraud. As for the legitimate taxpayers caught in the filters, he said the screening might add an additional two or three days to their wait for a refund.

"The advantage to the individual is that if your identity is stolen, it will take you 12 to 18 months to get your refund and recoup your identity, but by using this it only takes two or three days to prevent it from happening in the first place."

Privacy advocates are keeping a wary eye on the system, which puts more information in the hands of the government than it would normally have, and filters individuals' personal information through a private database.

Georgia Commissioner of Revenue Doug MacGinnitie calls the issue a balancing act, which the state does not take lightly.

"We have a very serious obligation that we have keep here at the department to keep peoples tax information private, so what we send to the vendor is no tax information, just limited personal information so they can tell us if this is the same person, they don't need to know how much the person is paying in taxes or how much they're making," MacGinnitie said.

He also sympathizes with the IRS's concern about "burdening" taxpayers by requiring extra screening, but said it is a small price to pay—and taxpayers agree.

"All the feedback I've gotten is positive, even the folks that have had to answer the quiz and go online, they do appreciate what we're trying to do," MacGinnitie said.

Between the LexisNexis filtering and the state's own stepped up enforcement efforts, MacGinnitie said Georgia managed to stop around $99 million in fraudulent refunds.

But there are always some that get away, like an identity theft case his first year in office in 2011.

"Someone got a hold of my wife's Social Security and name," he said. "They filed a tax return in her name, with her Social Security number, made up some W-2 information, and it got processed through the IRS and the state of Georgia, and we sent out a check to the person who did it."

"If it can happen to my wife, it can happen to anybody," MacGinnite said.

U.S. consumer credit in February recorded its biggest increase in half a year as consumers borrowed money for cars and student loans, Federal Reserve data showed on Friday.

Total consumer credit expanded by $18.14 billion to $2.799 trillion. Economists polled by Reuters had expected consumer credit to rise $15 billion in February.

Nonrevolving credit, which includes auto loans as well as student loans made by the government, rose $17.6 billion in February, following a downwardly revised $11.1 billion rise in January.

Revolving credit, which mostly measures credit-card use, nudged higher by $532.8 million after rebounding a revised $1.65 billion in January.

By Brian Womack & Douglas MacMillan

Facebook Inc. (FB) (FB), with newly released software that embeds social-networking features more deeply into smartphones, is ratcheting up efforts to keep users engaged and lure marketers to advertise on small screens.

The software, which the company calls Home, makes it easier to access Facebook features -- such as friends’ photos, messages and status updates -- on a mobile device’s home screen, Chief Executive Officer Mark Zuckerberg said at an event yesterday in Menlo Park, California. The application is available starting April 12 on Samsung Electronics Co. (005930) and HTC Corp. (2498) phones that run Google Inc. (GOOG)’s Android operating system.

Now that the majority of users access Facebook via mobile devices, Zuckerberg needs ways to keep them engaged longer while coaxing advertisers to pay to place promotions. While the new software may appeal to some dedicated users, it may do little to help Facebook get a broad set of consumers to change the way they interact with smartphones, according to Charles Golvin, an analyst at Forrester Research Inc. (FORR)

“It’s clear that Facebook wants to be at the center of their customers’ mobile experience,” Golvin said. “It’s not clear that their customers want that.”

At the event, HTC executives announced the HTC First, a device that will prominently feature Facebook’s Home application and become available next week. Ralph De La Vega, head of AT&T Inc. (T)’s mobile business, said HTC First will run on his company’s most advanced wireless network and sell for $99.99.

Apple, Google

Home will have monthly updates, can be installed from Google Play, Google’s online app store, and will be available on tablets in the coming months, Facebook said.

While the program will not initially have advertising, Zuckerberg said promotions will be included in future updates.

“There are no ads on this yet,” Zuckerberg said. “I’m sure at some point there will be.”

A messaging feature called Chat Heads will let users interact with friends while any app is on their screen. It combines SMS text messages with Facebook’s own messaging service.

Facebook advanced 3.1 percent to $27.07 at yesterday’s close in New York, leaving the stock up 1.7 percent so far this year, compared with a 6.8 percent gain in the Nasdaq Composite Index.

Hardware Solution

Facebook isn’t building a smartphone or creating an operating system, Zuckerberg said.

Amazon.com Inc. (AMZN) uses a version of Android in the Kindle Fire tablet. In Amazon’s case, that means bypassing Google’s preloaded applications, such as Gmail, Google Maps and YouTube, which generate revenue for Google.

While the iPhone operating system is controlled exclusively by Apple, Google provides more flexibility with Android. Companies can take older versions of the software and customize it for their own services and preferences.

“This latest collaboration demonstrates the openness and flexibility that has made Android so popular,” Christopher Katsaros, a spokesman for Mountain View, California-based Google, said in an e-mailed statement. “It’s a win for users who want a customized Facebook experience from Google Play -- the heart of the Android ecosystem.”

Some apps already available in the Google Play store, such as GO Launcher EX and Apex Launcher, let users customize the content that appears on their phones when the screen is locked.

Google Challenge

Widespread adoption of Home could challenge Google in the long run even if it boosts Android adoption early on. Facebook’s bigger emphasis on its own features means users won’t be as inclined to go to Google’s services on mobile phones, said Brian Wieser, an analyst at Pivotal Research Group LLC.

“If you’re Google, you feel a little threatened,” Wieser said. “They’ve gone from a monogamous relationship with the user to a bit more of an open one.”

Eventually, Facebook’s new service could prompt Google to roll out new mobile tools of its own that take on some of Home’s features, he said.

Zuckerberg has said he sees opportunities to push the company’s features deeper into mobile devices. Facebook and Twitter Inc. features have already been incorporated into the latest version of Apple’s software, enabling users to post easily to the social services.

“One of the most important things that we do as people is stay connected with what’s going on in the world around us,” Zuckerberg said at the event. “Home is designed specifically to help you do this.”

Smartphone Integration

A new Facebook-enabled handset follows earlier forays into mobile devices for the social-networking service.

HTC began selling “ChaCha,” an Android-based phone with a dedicated Facebook button to share music, photos and messages, in 2011. INQ Mobile Ltd. and Facebook that year also unveiled a phone with close integration of services, such as wall postings and photos.

While those devices have won over some die-hard Facebook fans, widespread adoption has been limited, according to Carolina Milanesi, an analyst at Gartner Inc.

“I don’t think that Facebook as a brand will necessarily get consumers -- that are your average Facebook users -- to pick out that phone over a Galaxy or an iPhone,” she said.

After a 29 percent decline in Facebook’s shares since an initial public offering in May, investors are looking for signs that the company can extract more ad dollars from promotions on mobile phones. The number of daily Facebook users on desktops and laptops fell in the fourth quarter as the portion of members on mobile devices increased, regulatory filings show.

Facebook’s nascent mobile-ad service, started in March 2012, isn’t helping the company gain market share in the U.S., according to EMarketer Inc. Facebook is projected to grab 12 percent of the market in 2015, down from 13 percent this year, EMarketer said. Over the same period, Google’s stake will climb about two percentage points to 57 percent.

To contact the reporters on this story: Brian Womack in San Francisco at This e-mail address is being protected from spambots. You need JavaScript enabled to view it ; Douglas MacMillan in San Francisco at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

By Isolde Raftery

When it comes to getting engaged, most brides report that their men got down on bended knee and produced a diamond ring to profess their enduring love.

But what if Mr. Hopeful displayed six different mock rings—sterling silver rather than gold, cubic zirconia instead of diamond—and said, "Pick one, sweetheart"?

Ocappi, an online diamond company that will announce its launch Wednesday in New York, aims to equip that man with those rings. Each ring will require a $75 deposit and must be returned within five days.

By Jessica Bruder

Most college dormitories are a mixture of unmade beds, fireproof carpeting, beer pong, ramen noodles and that poster of John Belushi in "Animal House." Investors want to add two more ingredients: successful start-ups and budding venture capitalists.

"We're trying to help students feel what it is to run a start-up, to take an idea that starts in a dorm room with a bunch of friends and move it out to the market, into the hands of real customers, and hopefully learn what it feels like to build something people really love," said Phin Barnes, a partner at the venture firm First Round Capital, which is based in Philadelphia.

In September, First Round started the Dorm Room Fund, putting $500,000 in the hands of an 11-member investment team of college students from the University of Pennsylvania and Drexel University. The board has already considered some 200 student-led ventures in the Philadelphia area and selected six for investments averaging $20,000 apiece. The recipients include Firefly, a developer of co-browsing customer support software, and Dagne Dover, a handbag and accessories brand. And starting this spring, First Round is taking the Dorm Room Fund nationwide.

"When we launched in Philadelphia, we asked students to reach out to us if they wanted Dorm Room Fund to come to their cities or schools," said CeCe Cheng, the fund's director. "The New York universities had an overwhelming response."

(Read more: NYC Tech Boom: Not Just Mini Silicon Valley East)

Applications for a new student-led investment team in New York City closed on March 11. Slots were limited to candidates from Columbia University, Cornell Tech Campus, New York University and Princeton University, though students at any college in the region will be eligible for funding.

New York City's Dorm Room Fund will follow the model established in Philadelphia, Mr. Barnes said. Student investors will seek out promising ventures among their peers and present the most exciting projects to the investment team. Though partners from First Round Capital will offer advice, students will lead the decision-making process. First Round does retain a veto right, Mr. Barnes said, but "we would not use it unless we were legally or ethically required to do so."

The Dorm Room Fund also plans to create an outpost in the Bay Area, with two or three additional cities to follow later this year. If all goes according to plan, members of each investment group will eventually pick their own successors. But for now, it's up to the folks at First Round to assemble the teams.

"One of the things that we look for in interviews is people who are really curious about start-ups and technology," Mr. Barnes said. Advanced knowledge of finance is not required, but experience starting new ventures or developing other independent projects is an asset. Team members are expected to keep building their skills through coaching and experience. First Round also wants each investment team to represent a range of fields and include students from both graduate and undergraduate programs.

The "by students, for students" idea has seen a recent surge in popularity. A few months after First Round Capital started the Dorm Room Fund, the investment firm General Catalyst announced Rough Draft Ventures, a student-run investment fund in Boston making $5,000 to $25,000 investments in college entrepreneurs. And the Boston region already had something similar: The Experiment Fund — capitalized by Accel Partners, New Enterprise Associates and Polaris Venture Partners — which set up shop in Cambridge early last year and included a Harvard graduate student on its investment team.

(Read more: Actor Turned Grocer Wendell Pierce Focuses on the Big Easy)

Student-run funds have been popular for more than a decade, but most have been hosted by individual universities to finance a range of start-ups, rather than investing exclusively in student-led ventures. The University of Michigan's $5.5 million Wolverine Venture Fund started in 1999 and calls itself the nation's first student-run venture capital fund; the University of North Dakota's Dakota Venture Group, founded in 2006, lays a similar claim. At Cornell University's Johnson School of Management, M.B.A. students have been running BR Ventures – the letters stand for "Big Red" and refer to Cornell's sports teams – since 2001, when alumni donated $1.2 million to endow the fund.

Does Higher Education Matter?

The current wave of student venture financing comes at a time when higher education skeptics are urging teenage dreamers to skip college altogether and head straight for Silicon Valley. Since 2011, their most prominent figurehead – Peter Thiel, the libertarian billionaire and co-founder of PayPal – has awarded $100,000 to 40 ambitious young entrepreneurs to do just that.

(Read more: 20 Under 20 With Peter Thiel)

The Dorm Room Fund does not require recipients to drop out of school. "I think part of this whole mentality is people watch 'The Social Network' and they think, 'I'll drop out and raise a bunch of money, move to Silicon Valley and spend two years building a start-up. It'll get really big, then I'll exit and just sit around,'" said Dan Shipper, 21, a University of Pennsylvania junior who — along with co-founders Patrick Leahy and Justin Meltzer — started Firefly, the inaugural Dorm Room Fund company.

"That's not how we think," he added. "We're going to be doing this for a really long time. This is how we want to spend our lives. We've always had a mentality of concentrating on revenue and getting paying customers first, then thinking about raising money later."

The Dorm Room Fund's $20,000 investment, he said, was the right size for Firefly – "not so much money that we get fat and lazy" – but enough to hire a summer intern, run more servers and do some marketing.

And staying in college has its perks. "I'm a philosophy major," Mr. Shipper said, laughing. "I'm not in school because I'm going to get high-paying work in philosophy. But I find it valuable and it's meaningful to my life."

The Federal Reserve may be able to reduce its bond-buying stimulus plan before the end of this year if economic growth continues to pick up and employment improves further, a top central bank official said.

Dennis Lockhart, president of the Atlanta Fed, said on Tuesday he expects the U.S. economy to expand a bit over 2 percent this year, though he does see some chance that the expansion could prove even stronger.

At the same time, Lockhart flagged short-term budget cuts from Washington as a risk to near-term economic performance. He also noted that the U.S. labor market, while better, remains only a shadow of its pre-recession self.

"Conditions in the broad labor market are quite mixed," he said, adding that he was still cautious about recent signs of economic strength.

The U.S. economy added 236,000 jobs in February, well above forecasts, while the jobless rate fell to 7.7 percent.

"We saw strong data in the early months of 2012 followed by a mid-year swoon," Lockhart told the Kiwanis Club of Birmingham. "So I think it is appropriate to be a bit cautious in extrapolating these recent employment trends. More evidence is needed."

Lockhart said inflation remains contained as do inflation expectations, giving the central bank room to maneuver. Still, he acknowledged there are potential costs from the Fed's expanded balance sheet which, at around $3.2 trillion, is around four times its pre-crisis size.

With official interest rates already at zero for the last four years, the Fed is currently purchasing $85 billion in mortgage and Treasury bonds per month in an effort to keep long-term rates down to spur investment and consumption.

Critics of the policy say it could spur future inflation, though there is little evidence to date to support such concerns. Indeed, the Fed's preferred inflation measure is forecast to run below the central bank's 2 percent target for the foreseeable future.