Today's Papers

Priming the Pump

Economic jitters dominate the front pages for the second day running, amid continuing unease over the state of the US credit market. The Washington Post and the New York Times lead, and the Wall Street Journal tops its business newsbox, on central banks’ attempts to shore up the world economy by pouring money into the global financial system. The LA Times goes below the fold with the global economic news, leading instead on the decision to revoke federal funding for King-Harbor hospital, forcing the iconic South LA institution to close.

The WSJ tops its worldwide newsbox, and the NYT and the Post go inside, with news that the Security Council approved a widening of the UN’s mandate in Iraq, with a greater role in promoting national reconciliation and resolving border disputes. In Baghdad, during a day of relative calm, the news was greeted warily. Meanwhile, the Post reports that Bush’s top military adviser said yesterday that it “makes sense” to consider bringing back the draft; the comment came despite the army meeting recruitment targets for July, after falling short during the two preceding months.

After an early sell-off saw the Dow fall by 200 points, the Fed injected $38 billion into the financial system yesterday, in its biggest one-day infusion since September 2001. The European Central Bank also kept the spigots open, lending $83 billion to financial institutions and bringing its two-day total to $213 billion; the Japanese, Canadian, Swiss and Australian central banks likewise poured billions of dollars into the system. The central banks’ show of strength helped steady the markets, at least in the US, and won praise from some analysts; others saw the pay-outs as an admission of the financial system’s continuing vulnerability. Predictably, the WSJ gives acres of space to the story, doing a good job of explaining the underlying problems in the U.S. mortgage market and the wider financial system. The NYT predicts that the markets will stay choppy for some time, as information trickles out from struggling hedge funds and mortgage companies.

The WSJ notes that the zig-zagging stock market can in large part be blamed on “quants” - quantitative hedge funds, which rely on computer models to determine which stocks to bet on. This week’s stock-market spasms left some traders questioning the validity of their models, after their computer-generated strategies led to a wave of losses. “Events that models only predicted would happen once in 10,000 years happened every day for three days,” says one rueful analyst. Post columnist Steven Pearlstein translates the implications of the crisis for the regular consumer: pension and property values will fall, while debts will get more expensive. “Order of magnitude: something approximating the recent tech and telecom bust, only a bit worse,” he writes.

The NYT fronts a look at the dilemma facing Fed chief Ben Bernanke as he ponders bailing out the traders whose taste for high-risk mortgages triggered the current crisis. The WSJ calls for Bernanke to stay calm and allow the market to run its course: “The biggest favor he could do for himself and the markets is not to give in to the temptation to do favors for Wall Street or anyone else.” Meanwhile, the government refused to loosen constraints on Fannie Mae and Freddie Mac; the companies had argued that they should be allowed to buy more mortgage-related investments to help struggling lenders and borrowers. The Post notes that the tiff allowed the companies - often criticized by regulators - to “cast themselves as willing to ride to the rescue while their nemeses in the government stood in the way”.

Elsewhere, the Bush administration yesterday unveiled an array of strategies intended to make it harder for illegal immigrants to find work, primarily by strengthening enforcement and introducing tougher penalties for employers. The LAT off-leads on an interview with homeland security chief Michael Chertoff, who acknowledges that the plan will have “unhappy consequences for the economy”. The Post fronts a look at the move’s lukewarm reception on the Hill; the NYT passes the story by altogether.

The NYT gives some important background on the decision to extend the administration’s authority to eavesdrop on terror suspects without court oversight: in the buildup to the vote, intelligence officials privately briefed lawmakers that surveillance rates had dropped to a quarter of levels a year previously.

The NYT fronts a look at efforts to reform the way states assign their electoral college votes, while the Post reports inside on the states’ continuing game of leapfrog as they vie to hold the earliest primary vote. Meanwhile, the Republican candidates are preparing for today’s key straw poll in Iowa; the LAT notes that Mitt Romney probably has the most at stake. Fortunately, the NYT reports, he has almost a hundred cousins, nieces and grandchildren on hand to help get his “family values” message across.

Bush speechwriter Michael Gerson comes under fire on the front page of the Post, after a former colleague penned a magazine article accusing him of being a glory hog who stole the credit for many of Bush’s best lines.

The NYT fronts news that Lance Armstrong’s cycling team, having won this year’s Tour de France, is set to disband after failing to find a sponsor, raising questions about the future of a sport plagued by doping scandals.

According to the Post, China is set to bar more than a million cars from the streets of Beijing next week in a dry run for the 2008 Olympics. The LAT has a similar piece profiling the government’s frantic smog-busting efforts in the buildup to the games.