It was another day of grim, fast-moving news on the economy. The New York Times leads with late-breaking plans by the Treasury Department to take ownership stakes in some banks while “injecting” cash into them. All the other papers lead with coordinated interest rate cuts by central banks across the globe, which failed to stop financial markets from falling further downward.
The NYT said the bank nationalization plan is “still preliminary and it was unclear how the process would work, but it appeared that it would be voluntary for banks.” The authority to do this was part of the $700 billion bailout package and is similar to a British government plan announced Wednesday. The paper cites administration officials saying that the plan “has emerged as one of the most favored new options being discussed in Washington and on Wall Street. The appeal is that it would directly address the worries that banks have about lending to one another and to other customers.”
The sourcing on the NYT piece is a bit opaque, and the story apparently broke late. The piece contains no comments, even on background, from government officials, although it does say “Treasury officials” described the broad outlines of the plan. But it noted that Paulson, at a press conference Wednesday, “pointedly named the Treasury’s new authority to inject capital into institutions as the first in a list of new powers included in the bailout law.” Of the other papers, only the Wall Street Journal had the story, and an Associated Press piece on the plan said an “administration official” talked about the plan late Wednesday.
Everyone calls the other big news, the coordinated interest rate cut, “unprecedented.” Central bankers from the United States, the euro zone, the United Kingdom, Canada, Sweden, and Switzerland all cut interest rates by half a percentage point. In the United States, that puts us at 1.5 percent—a “tricky spot,” the Journal says, as it means “rates don’t have room to go much lower.” China, Australia, South Korea, Taiwan, and Brazil also cut rates, although not as part of the coordinated effort. But it failed to stop the stock market tumble, at least immediately, as the Dow Jones average fell another 189 points yesterday (though Asian markets did appear to be bouncing back overnight). The international efforts will continue on Saturday; the United States has called a meeting of the Group of 20, which includes the United States, Europe, and “cash-rich stars of the developing world, such as China, Brazil and Saudi Arabia,” according to USA Today, which leads with the story.
The NYT fronts a lengthy, damning analysis of the legacy of the once-revered Alan Greenspan, the longtime chair of the federal reserve, and his role in pushing deregulation of financial derivatives. Those derivatives, he argued throughout his career, would allow investors to share risks, but they have now fueled the crisis we’re in. “If Mr. Greenspan had acted differently during his tenure as Federal Reserve chairman from 1987 to 2006, many economists say, the current crisis might have been averted or muted,” the paper says. Greenspan, for his part, keeps the faith and blames greedy investors rather than a lack of regulation for the crisis. “In a market system based on trust, reputation has a significant economic value,” Greenspan told a Washington audience last week. “I am therefore distressed at how far we have let concerns for reputation slip in recent years.”
The Los Angeles Times fronts some news you can use, an analysis of whether the market has bottomed out yet and whether you should buy in. The verdict? Probably not: “Economists and market strategists willing to call a bottom amid the current market turmoil are thin on the ground, vastly outnumbered by forecasters with distinctly more apocalyptic outlooks,” the paper writes.
The Washington Post has a long front-page account of Barack Obama’s days in the Illinois state Senate where, the paper says, he was converted from an idealistic do-gooder into a tough politician. “Barack had this misconception that you could change votes with thoughtful questions and good debate,” one of his former colleagues told the paper. “That was a little idealistic, if you ask me. It’s not necessarily about smarts and logic down there. Votes are made with a lot of horse trading, compromise, coercion, working with the other side. Those are things that Barack can do—can do very well, actually. But it took him a little while to figure it out.”
Also in the papers … the NYT and Post get word of an upcoming intelligence report on Afghanistan that concludes the country is in a “downward spiral” with widening violence and a corrupt government unable to handle it. A tragicomic play skewering the Iraqi government is selling out in Baghdad, the LAT finds. It’s not just the United States that’s dragging down the world economy—the Journal reports that Iceland, too, is suffering a banking crisis that is drawing in the rest of Europe. And all the papers report that Russia has pulled its troops out of Georgia proper, two days ahead of the deadline called for in the French-brokered peace deal.