Rupert Murdoch’s News Corp. withdrew its bid for BSkyB Wednesday as the fallout from the phone-hacking cases continued. Anthony Faiola reports:

As the phone-hacking scandal continued to roil British politics, News Corp. announced that it was giving up its $12 billion takeover bid for full control of British Sky Broadcasting. It already owns 39 percent of the broadcaster.

In a statement, Chase Carey, deputy chairman, president and chief operating officer of News Corp., said: “We believed that the proposed acquisition of BSkyB by News Corporation would benefit both companies but it has become clear that it is too difficult to progress in this climate. News Corporation remains a committed long-term shareholder in BSkyB. We are proud of the success it has achieved and our contribution to it.”

The criticism of Cameron grew even as he outlined an extraordinary independent inquiry that could redefine the cozy relationships among the press, the police and politicians here.

During a grilling in Parliament, Cameron additionally pledged a probe into whether the phones of victims of the Sept. 11, 2001, terrorist attacks in the United States were among the thousands now believed to have been hacked by News of the World.

He also vowed to support an opposition motion to be voted on later Wednesday demanding that News Corp. give up its BSkyB takeover bid.

The U.S. has now begun an investigation into allegations that journalists at the News of the World tabloid sought to hack the phones of victims of the 9/11 attacks. Greg Sargent examines whether New York politicians will now take on Murdoch:

New Jersey Senator Frank Lautenberg has already called for an SEC probe into the general conduct of Murdoch’s media empire. But now we’ve got actual 9/11 families demanding an investigation into the specific — and incendiary — allegation that News of the World reporters tried to hack the phones of the 9/11 dead.

We don’t yet know a lot about these allegations, and it’s unclear what sort of probe could or should be launched or who would have juristiction. But the immediate question is this: If this latest chapter gains traction, how will New York’s leading politicians respond? First off, there are the local politicians with a national voice, like Mayor Michael Bloomberg and Governor Andrew Cuomo, both of whom have enjoyed good relationships with Murdoch’s influential New York Post. The paper beat up on Bloomberg’s “nanny state” initiatives and tax hikes, but it has been broadly supportive of the Mayor, and even more so of Cuomo. Now that there’s a highly emotional local angle, will they join in calls for a probe or generally comment on the allegations?

What about Congress? What will senators Chuck Schumer and Kirsten Gillibrand say? And how about Rudy “noun verb 9/11” Giuliani? Murdoch long served as one of Rudy’s most loyal and influential allies. But now one of his papers is accused of violating the rights of those who perished on 9/11, which Rudy has treated as a defining, life-altering event. Will Rudy say something about this?

These folks are now in a very interesting position, and this story may have just gotten a whole lot bigger.

On Tuesday, former British prime minister Gordon Brown charged that Murdoch’s newspapers hired “known criminals” to obtain information about him, and said he was sure his phone was hacked.  Anthony Faiola and William Branigin report:

Amid a steady stream of fresh allegations against the media mogul’s newspapers, Parliament summoned Murdoch for questioning next week along with top executives overseeing his British subsidiary: his son James Murdoch, 38, and Rebekah Brooks, 43, a former editor of two of his papers.

In an interview Tuesday with the BBC, Brown charged that the Sunday Times had paid “elements of the criminal underworld” to do “the most disgusting of work,” not only against him but against “completely defenseless” people. Brown also suggested that the Sun had illegally obtained medical records showing that his son had cystic fibrosis, leading to a story in the tabloid disclosing the illness. News International responded Tuesday that the Sun obtained the information from a legitimate source and asked Brown to provide “all information concerning these allegations” so that it could “investigate these matters further.”

His voice trembling with emotion at times, Brown told the BBC: “My tax returns went missing at one point. Medical records have been broken into. I don’t know how all this happened but I do know ... that in two of these instances there is absolute proof that News International was involved in hiring people to get this information. ... And I do know also that the people that they work with are criminals, criminals with records, criminals who sometimes have records of violence as well as records of fraud.”

In a separate BBC interview, Prime Minister David Cameron said the story about Brown’s son appeared to be another example of an “appalling invasion of privacy.”

The assistant police commissioner at Scotland Yard, John Yates, told Parliament meanwhile that he was “99 percent certain my phone was hacked during the period of up to 2005-06.” He said he did not know who was responsible, and he emphatically denied that the hacking had anything to do with his 2009 decision to drop a three-year-old criminal investigation of alleged phone hacking by News of the World. Yates rejected as “despicable” suggestions that he killed the probe because he feared that the tabloid would publish details about his personal life.

Yates also strongly denied that journalists had ever paid him for information but conceded it was “highly probable” that some of his officers received such payments.