Today's Papers

Extreme Makeover: Financial Edition

The New York Timesleads with word that operatives from a secretive wing of Pakistan’s military intelligence agency are providing direct support—including money, supplies, and strategic planning—to the Taliban as well as other militant groups in Afghanistan. The Washington Postleads with, and the NYT fronts, a preview of the Obama administration’s plan to expand federal regulation over the financial system, which Treasury Secretary Timothy Geithner will begin to outline for lawmakers today. The plan would expand federal regulations to all financial derivative products and companies that have previously been free of such oversight, including insurance companies, hedge funds, and private-equity firms. The administration sees these new regulations as essential to restore faith in the financial system.

The Wall Street Journalleads its world-wide newsbox with President Obama lobbying Democratic lawmakers to maintain his priorities in the budget and stay united throughout the negotiations. But divisions are already emerging, and some centrist Democrats are pushing for a budget with less spending and fewer tax cuts in order to lower the deficit. The Los Angeles Timesleads with Congress approving “the largest expansion of the wilderness system in 15 years,” extending federal protection to 2 million acres in nine states. In what will be President Obama’s first signing of an important conservation bill, almost as much land will be designated as wilderness as was done so throughout his predecessor’s entire tenure. The measure would also initiate one of the largest river restoration projects and step up protection of scenic rivers. USA Todayleads with federal accident investigators suggesting that the pilot was to blame for the crash that killed 50 people outside Buffalo last month. Weather was initially suspected to have been the culprit, but investigators said the crash was likely due to the pilot’s decision to take the plane into a sudden steep climb that led to a loss of control over the aircraft.

The fact that Pakistan’s spies help out the Taliban is hardly news, but the details revealed by the NYT today show “that the spy agency is aiding a broader array of militant networks with more diverse types of support than was previously known.” No one thinks that Pakistan’s top leaders have a hand in what’s going on in the S Wing of Pakistan’s spy service, but they also seem unwilling or unable to stop it. Pakistani officials say that Americans make too much of these ties, insisting they’re just part of a strategy to maintain influence in Afghanistan after the U.S. troops have left.

The WSJ also hears word of this connection and adds that U.S. and Pakistani officials are drawing up a new list of targets for Predator drone strikes along the Afghan border, which is part of an American review of the program. Pakistani officials want to expand the program so it also targets extremists who have attacked Pakistanis, in the hope that it would help the government win some support domestically. Although the program is largely considered successful, so it’s unlikely to change significantly, the WSJ notes that the review wants to set out clear guidelines on under what circumstances the strikes should be carried out, and it “could change the pace and size of the program.”

The NYT points out that Obama’s plan to overhaul the federal regulations of the financial system “goes further than expected.” And the WSJ highlights that Geithner’s presentation to lawmakers today merely “represents an early salvo in what will likely be a long debate.” The WP notes that it makes sense that these changes are coming now since the “nation’s financial regulations are largely an accumulation of responses to financial crises,” but it’s still important to note that the administration’s proposals amount to the “most significant regulatory expansion” since the Great Depression era. “In essence, the plan is a rebuke of raw capitalism and a reassertion that regulation is critical to the healthy function of financial markets,” says the Post.

Most of what the Obama administration wants to put in place would require approval from Congress. What the WP describes as the White House’s “signature proposal” involves giving one federal agency (probably the Federal Reserve) oversight responsibility across the financial system with the power to regulate the largest financial firms, including nonbank entities. Congress would have to pass legislation in order to determine which firms are considered so large that their failure would be a shock to the entire financial system, and then these companies would be required to meet much more stringent capital requirements to prevent them from running out of cash when the economy tumbles.

Unregulated investment firms, such as hedge funds and private-equity funds, would have to register for the first time with the Securities and Exchange Commission. The administration also wants the SEC to have more power over money-market mutual funds to ensure they don’t take on too much risk. The NYT predicts that the biggest fight will be over the administration’s plan to regulate trading “in more exotic derivatives that trade privately,” such as credit-default swaps. Geithner isn’t expected to give much detail in how all this would work, but it’s just the beginning.

The WP notes that over the next few months, the administration will present proposals to protect consumers, revise existing regulations to remove any flaws, and increase coordination with the international community. It is hardly a coincidence that the administration is launching the first stage in its plan mere days before Geithner and Obama are scheduled to meet with world leaders in London to discuss the crisis, as many European countries have said that reforming the financial regulatory structure is one of their top priorities.

When Obama went to lobby Senate Democrats on the budget yesterday, he kept the focus on the issues where there’s much agreement between party members. “It was vintage Obama,” Senate Majority Leader Harry Reid said. “He made us all feel content and inspired by where we need to go.” Still, there are real divisions between the Democrats, but it seems Obama’s most ambitious initiatives that he has identified as his priorities—education, health, energy, and deficit reduction—will remain in the budget. The NYT notes that these divisions among Democrats “bring to life a paradox of political success.” As a party expands its base, it means that it’s harder to keep all of its members united.

The WSJ fronts word that Obama’s auto industry task force will begin announcing decisions within the next few days, and it seems like the government is ready to lend General Motors and Chrysler some more money. The government doesn’t want to see the companies go bankrupt, and, in fact, the task force is likely to say that both companies can have “viable futures … but only if there are sacrifices from their managements, unions and GM’s bondholders,” reports the WSJ. The automakers have requested $22 billion more, but the “task force may not disburse new aid immediately, choosing instead to preserve that as leverage,” notes the paper.

The WP is alone in fronting news that John Hope Franklin, one of the nation’s most prominent scholars of African-American history, died of congestive heart failure yesterday. He was 94. The Post highlights that Franklin’s reputation wasn’t just due to his scholarly work but also because he “had seen racial horrors up close and thus was able to give his academic work a stinging ballast.” Franklin was among the first black scholars to earn top spots in some of the nation’s leading universities. His book From Slavery to Freedom  has sold more than 3 million copies and is still in many college reading lists.

In the WP’s op-ed page, Walter Dellinger writes a tribute to Franklin and calls him “one of the most remarkable Americans of the 20th century.” Dellinger taught a class with Franklin for seven years and “never ceased to marvel at how he managed both to embody this history and yet recount it with an extraordinarily candid honesty.” Franklin “was the master of the great American story of that century, the story of race.” After Obama won the Democratic nomination, Franklin acknowledged he never thought he would live long enough to see a black man win a major party’s nomination. “That he did live into this year seems a special gift from God.”