The New York Timesand Washington Postlead with another good day on Wall Street as investors seemed desperate to turn anything that could be interpreted as good news into an excuse to buy. “The news, by and large, was bad—just not quite as bad as feared,” notes the NYT. In what was the second major rally of the week, the Dow Jones industrial average surged 3.5 percent. The Dow has gained 9.5 percent since Monday, while the broader S&P 500 increased 11 percent. Despite these impressive numbers, no one is ready to declare an end to the bear market, and new data from the Federal Reserve illustrated just how much the markets would have to gain in order to restore all the wealth that American families lost in the last year.
The Wall Street Journalbanners, and the Los Angeles Timesdevotes its top nonlocal spot to, inmate No. 61727-054, aka Bernard Madoff. The disgraced financier pleaded guilty to 11 felony charges and publicly discussed for the first time how he carried out the biggest fraud in Wall Street’s history before the judge revoked Madoff’s bail and sent him to jail to wait for the June 16 sentencing. “I am painfully aware that I have deeply hurt many, many people,” Madoff said. “I cannot adequately express how sorry I am for what I have done.” Everyone talks to some of Madoff’s victims who attended the hearing. While many said they were glad to see him in handcuffs, they emphasized that there are still many unanswered questions they want to see resolved. USA Todayleads with a new report by the Government Accountability Office that says fraud and abuse were partly to blame for the 44 percent increase in Medicare spending on home health services over five years. From 2002 to 2006, people using the home health services increased 17 percent, and the price tag reached $13 billion. The spending increase has continued, and last year Medicare devoted around $16.5 billion to in-home services.
The Fed reported yesterday that American households saw their net worth decline by $11 trillion, or 18 percent, in 2008, “a decline in a single year that equals the combined annual output of Germany, Japan and the U.K.,” details the WSJ. Almost half of that, or $5.1 trillion, was lost in the last three months of 2008. These numbers make previous downturns seem like a walk in the park. In 2002, the next biggest annual decline, household net worth dropped a comparatively tiny 3 percent. “The new data underlined just how quickly wealth created during the biggest credit bubble in history has vanished,” says the Post, “leaving Americans without the college funds, nest eggs and other reserves they had set aside.”
Still, investors seemed ready to feel a bit optimistic yesterday even if the developments that led to this surge of hope “would have been regarded as alarming” only a few months ago, notes the NYT. Shares of General Electric increased 13 percent even though its credit rating fell by one notch for the first time since 1956. Turns out, analysts were expecting it to be worse. General Motors said it wouldn’t immediately need the $2 billion in government assistance for March it had requested, and its shares surged 17 percent. Financial stocks continued on their upward trend after Bank of America reported that it managed to make some money in the first two months of the year. The retail sector also received a much-needed boost after the Commerce Department noted that sales were down 0.1 percent from January, which was better than many had expected.
Despite the recent upward trend, experts warned that investors shouldn’t be feeling too bullish, particularly since this week’s rally looks an awful lot like the increases that began in November and led the S&P 500 to surge 24 percent before plunging again this year. “There is nothing new here, every serious bear market has rallies like this,” an analyst tells the NYT. The WP points out that the encouraging news from the retail sector doesn’t change the fact that companies are still having trouble getting rid of excess inventory, which means most won’t be expanding anytime soon. “It’s too early to uncork the champagne,” an economist tells the Post.
When Madoff acknowledged his guilt publicly for the first time, he gave some details of his Ponzi scheme that conflicted with what prosecutors have said. Madoff said his scheme began in the early 1990s—prosecutors say it started in the 1980s—when he felt pressured to give investors good returns despite the weak stock market, and Madoff emphasized that it all quickly spiraled out of control. “When I began the Ponzi scheme I believed it would end shortly and I would be able to extricate myself and my clients from the scheme,” he told the court. “However, this proved difficult and ultimately impossible.” As time went on and the scheme got bigger, “I realized this day, and my arrest, would inevitably come,” Madoff added. Madoff insisted none of his family members helped him pull off the fraud and didn’t reveal any information that shed light into where all the money has gone.
The prosecutor handling the case said the government will continue to investigate the case to try to shed light on how the scheme was carried out, but the LAT says some “are skeptical that prosecutors will be able to piece together a fraud of such magnitude.” For now, Madoff will spend his time in the Metropolitan Correctional Center. The WSJ describes the living conditions Madoff will have to endure, noting that “typical cells at the corrections center house two inmates and are 7 feet by 8 feet with a bunk bed, sink, desk and toilet.”
When journalists from the mainstream media crowded outside the Manhattan courtroom to catch a glimpse of Madoff, they weren’t just joined by his victims but also by members of the tabloid media. The NYT fronts a look at how the tabloid media that are normally focused on the daily travails of celebrities have now taken a great interest in corporate America’s excesses. Motivated by the deep populist anger that Americans are feeling toward Wall Street, these media outlets are devoting lots of effort to documenting what many would consider to be improper use of taxpayer money. And tabloids aren’t the only ones getting into the act. Network news organizations are also devoting lots of effort to catching examples of excessive spending by corporate titans.
The NYT points out that Obama “is being forced” to figure out whether he supports awarding health insurance benefits to the same-sex partners of federal employees. Two federal appeals judges in California have said their employees were entitled to the benefit, but the Office of Personnel Management has said that’s not possible because of the Defense of Marriage Act. Obama has always said he doesn’t support marriage for same-sex couples but during the campaign vowed to “fight hard” for gay rights and sponsored legislation as a senator to award health benefits to the same-sex spouses of federal employees. But it’s unclear whether Obama will want to get involved in such a politically and socially contentious issue so early in his presidency.
Everyone reports that the Iraqi journalist who threw his shoes at President George Bush during a news conference in December was convicted of assaulting a foreign leader and sentenced to three years in prison.
In the LAT’s op-ed page, Frederic Morton writes that in all the talk about what can be done to restore the American dream, “an issue underlying all others” is being ignored: “the need to reform the American dream itself.” The American dream is part of the country’s “unwritten constitution” that “mandates a steely ambition, a heroic greed braving all consequences.” That creates huge highs but also devastating lows, such as what we’re living through in this economic crisis. Many see this constant striving for the impossible as the very foundation of the country, but it hasn’t necessarily made people happier. We even have a president who seems to embody the very definition of the American dream. “Therefore, I put the question to you and me,” writes Morton. “Do we have the courage to free ourselves from the fixation on the exceptional? Shall we try to dream a dream less extreme? Can we give up the mania that must crash into depression?”