Today's Papers

A Cutting Surprise

All the papers lead with the Federal Reserve cutting its key interest rate by half a percentage point to try to prevent the troubles in the housing and financial markets from  spreading to the rest of the economy. Most analysts were expecting a more modest cut of a quarter point, and the move was warmly received in the stock markets. The Dow Jones average increased 335 points, or 2.5 percent, the biggest percentage gain since 2003. “I think they’re trying to shock the patient back to life,” an  economist  tells the Washington Post.

Although most were quick to cheer the cut, the Los Angeles Timesand New York Timesemphasize some worried the move could fuel inflation, not to mention send a sign that problems in the economy are worse than previously thought. The Fed seemed to acknowledge continuing worries about inflation and was careful not to imply that more cuts are coming. The Wall Street Journal says the move shows Federal Reserve Chairman Ben Bernanke “preferred to risk doing too much rather than too little.” It takes a while until a cut in interest rates begins to stimulate the economy, but the WP notes the “psychological impact … can be instant.” USA Todaydoes the best job in pointing out how the decrease could quickly affect consumers and businesses. Big lenders cut the prime rate for their best customers, which is likely to lower rates on many home-equity loans and credit cards in the coming months.

The LAT does a good job of explaining how the Fed’s signal that it really isn’t interested in a series of interest rate cuts illustrates “the hard-to-read-nature of the economy’s current condition.” Of course, there are problems in the housing sector and turmoil in the financial markets, but in general “the economy has continued to show moderate strength and low inflation.” The Post explains the cut was an example of “what watchers of the central bank call a ‘risk management’ approach to guiding the nation’s economy” because officials want to “try to eliminate even the possibility” of a recession, even if they don’t think it’s likely.

Some expressed concern the Fed may have gone too far. While the stock markets rallied, inflation fears were also clearly evident as the dollar sharply decreased, oil prices increased, and the yield on long-term Treasury bonds rose. The WSJ notes the Fed didn’t say whether it was more worried about inflation or growth.

The cut in interest rates, “represents a dramatic turnaround for Fed Chairman Ben Bernanke,” says USAT, and, indeed, several of the papers try to figure out what the actions tell us about him. Both the NYT and WSJ say yesterday’s aggressive move seems to suggest that despite what many thought, Bernanke may not be that different from his predecessor, Alan Greenspan.

The NYT fronts a look at migration data the Iraqi Red Crescent Organization is expected to release later this week that shows the “surprisingly complex” pattern of internal migration in Iraq. Approximately 280,000 families have been forced to move but despite conventional wisdom “some Iraqis would rather continue to live in mixed communities.” This revelation certainly complicates the picture for those who have advocated a partition of Iraq. The landscape is particularly murky in the capital, where migration “is not neatly dividing Baghdad along the Tigris.” Many families move more than once, often in search of better living conditions, an option that is not open to the poorest Iraqis, who often end up living in refugee camps or slums.

The LAT fronts news that the U.S. Embassy in Baghdad has banned ground travel for its diplomats and civilian government employees. An initial report by the Iraqi government said security guards from contractor Blackwater USA were not ambushed and began firing without provocation Sunday after a car carrying a couple and a child failed to come to a complete stop. The report also says Blackwater helicopters fired indiscriminately. The NYT notes the Ministry of Defense said 20 Iraqis had been killed, which was a higher number than previously reported. The WP points out that restricting the movement outside the Green Zone pretty much brings Blackwater’s operations to a halt because one of the company’s main responsibilities is to escort officials.

The WP goes inside with a look at how Senate Democrats appear to be abandoning their efforts to come up with a bipartisan resolution  for troop withdrawal without timelines. Since it doesn’t look like there aren’t enough Republicans to approve a compromise measure, Democratic leaders are going back to pushing for timelines. It looks like there’s less of a chance that Sen. James Webb’s proposal to extend the amount of time between deployments will pass after Sen. John Warner, one of the most influential Republicans, hinted he may no longer support the measure.

The WSJ tops its world-wide newsbox with Defense Secretary Robert Gates  discussing his long-term vision for Iraq in an interview, where the paper notes he didn’t mention “transforming the region and spreading democracy.” Instead, he outlined a vision that includes a smaller presence of U.S. troops in the country and no permanent bases. Gates said he is “focused on how we can put Iraq in a place where we can have a long-term stabilizing presence that has broad bipartisan support.”

The NYT’s David Brooks also talked to Gates and asked him whether it “was a good idea” to invade Iraq. “I don’t know,” Gates answered. Throughout the interview, Gates frequently “returned to the importance of soft power.” Gates said two of the biggest mistakes after the Cold War were getting rid of the U.S. Information Agency and shrinking the U.S. Agency for International Development.

Everyone notes O.J. Simpson was charged with 10 felony counts, including assault with a deadly weapon and kidnapping.