The New York Times, Los Angeles Times, and the Washington Postlead with, and the Wall Street Journalbanners, yet another horrible Monday for stock markets around the world. The Dow Jones industrial average plunged 4.2 percent to 6,763, marking the first time the index closed below 7,000 since April 1997. The Dow has now fallen almost 20 percent in January and February, “the worst first two months of the year in its 113-year history,” points out the LAT. The worldwide sell-off began in Asia and hit Europe particularly hard. Britain’s main stock index lost more than 5 percent and Italy’s plunged 6 percent. The dollar continued to rise, “as investors concluded that, for all the problems in the U.S. economy, it looks better than the rest of the world,” notes the Post.
USA Todaygives big front-page play to the stock markets but devotes its lead spot to increasing evidence that flu viruses are growing more resistant to the drug Tamiflu. In an analysis of Tamiflu resistance, researchers found that about 12 percent of the people infected with one of the three most common flu strains had caught a resistant virus. This year, Tamiflu resistance in that strain has reached almost 100 percent.
There wasn’t one single reason for the worldwide decline in the markets. Sure, there may have been a spate of fresh bad economic news, but analysts said the sell-off had more to do with a “deepening, sense of gloom among investors,” as the WSJ puts it. No one expects the pain to be over any time soon, and investors are just throwing up their hands and getting out of the stock market. For now, at least, it seems no one is betting on a market bottom just yet. “Stocks are in free fall. Investors are in panic mode,” USAT succinctly summarizes. “It’s a bloodbath, pure and simple,” one expert said.
Coming on the same day as American International Group reported a $61.7 billion quarterly loss, and the government announced yet another plan to bail out the insurance giant, there is growing skepticism about whether the Obama administration’s numerous attempts to save the economy through bailouts and stimulus would have any effect. “We’ve reached the point of disgust with Washington,” an equity strategist tells the LAT. “Every day there’s a new plan, and every day there’s a new bailout. I think bailout fatigue is gripping the market.”
A lack of confidence in government action is hardly limited to the United States. There was once hope that governments around the world would come up with a unified strategy to deal with the global recession, but “the European Union summit this weekend provided an indication that few countries were willing to risk their own taxpayers’ money to help others,” notes the NYT. Everyone speculates that yesterday’s declines may have been partly triggered by famed investor Warren Buffett, who said last weekend that “the economy will be in shambles, throughout 2009, and, for that matter, probably well beyond.”
The NYT off-leads word that Russian President Dmitri Medvedev isn’t a very good pen pal. President Obama sent him a secret letter three weeks ago that suggested the United States would be willing to drop its plans to set up the missile defense system in Eastern Europe if the Russian government helps efforts to stop Iran from developing long-range weapons. “It’s almost saying to them, put up or shut up,” said a senior administration official. “It’s not that the Russians get to say, ‘We’ll try and therefore you have to suspend.’ It says the threat has to go away.” Medvedev has not responded, but apparently Russia’s foreign minister will bring up the issue with Secretary of State Hillary Clinton when they meet Friday.
The WSJ and WP front, while everyone else covers, news that the CIA destroyed 92 videotapes depicting the harsh interrogation techniques that were used on two al-Qaida suspects. Although we already knew that videotapes had been destroyed, it was the first time that the number of tapes was revealed. The WP hears word that the ongoing investigation into why the tapes were destroyed is unlikely to result in any charges against CIA employees. The Senate intelligence committee is getting ready to broaden the investigation into the videotapes to take a look at the entire CIA interrogation program.
News of the videotapes wasn’t the only dirty laundry from the Bush years that the Obama administration made public yesterday. The LAT and NYT front the Justice Department posting newly declassified legal opinions and memos that were issued after the Sept. 11 attacks and formed the basis for the Bush administration’s claims of broad presidential powers. The WP points out that the number of “major legal errors” made by the Bush administration’s lawyers “was far greater than previously known.” In one memo that everyone highlights, administration lawyers said the president could order the military to deploy domestically and arrest terrorism suspects. The memo also claimed that the military could ignore free-speech protections. Unsurprisingly, many of the opinions were written by John Yoo, the former Justice official who is most famous for writing another memo that many have interpreted as an authorization to torture. Many of the memos had already been repudiated by the Justice Department but officials said it was important to release them for the sake of transparency.
The WP off-leads a look at how the Obama administration will have to hire tens of thousands of new federal employees if it hopes to fulfill the goals that were outlined in its budget last week, particularly considering that the president has vowed to cut back on private contractors. Exactly how many workers will have to be added to the federal payroll is still unknown and will likely remain that way until the full budget is released in April, but estimates range from 100,000 to 250,000. That would reverse a long-standing trend that had every president since Ronald Reagan limiting the size of the federal workforce. “If the outside estimates are realized, Obama could spur a government hiring spree on a scale unseen since President Lyndon B. Johnson’s Great Society agenda in the 1960s,” notes the Post.
The NYT points out that lawmakers and executives are beginning to “quietly acknowledge” that Fannie Mae and Freddie Mac are unlikely to return to private investors. Now that there’s lots of talk about possibly nationalizing some large banks, there are fears that the experience with the mortgage giants demonstrates “that a takeover so hobbles a company’s finances and decision making that independence may be nearly impossible,” notes the paper. Part of the reason why the companies are unlikely to return to independence is that it could take them 100 years, if not longer, to pay back the government. Republicans also say that Democratic lawmakers will want to hold on to the ability to directly affect the housing market and the economy at large. “Once government gets a new tool, it’s virtually impossible to take it away,” Republican Rep. Scott Garrett said.
The WSJ hears word that the Obama administration is considering setting up several investment funds to purchase the toxic assets that are currently clogging banks’ balance sheets. The White House had already announced it plans to spend somewhere between $500 billion and $1 trillion to buy these assets with what it called private-public partnerships but gave few details. Now it seems the administration is considering establishing these funds that would be run by private investment managers with a combination of private and public capital. The private investment managers would make all the decisions on what to buy and how much to pay, which would help the government avoid having to make these politically sensitive determinations. A key question has always been how to price assets for which there is no market, but some officials believe that setting up multiple funds might go a long way toward solving that problem.
While Americans turn away from SUVs, they’re increasingly popular in Iraq, reports USAT. The Hummer appears to be the car of choice among young Iraqis; government officials seem to prefer GMC Yukons; and families usually go for the Jeep Grand Cherokee.