Media reports are casting the government's decision to effectively rescue troubled insurance giant AIG with an $85 billion loan in exchange for a close-to-80% stake in the company as a surprise move, an indication of the continuing peril and uncertainty in the financial sector. The Los Angeles Times calls the move "the largest single financial intervention in the nation's history and a measure of the depths of America's financial crisis." On its front page, the New York Times calls the government's move "the most radical intervention in private business in the central bank's history," a step taken "to avert a possible financial crisis worldwide."
The Washington Post calls the Fed's move "a stunning turnaround," while USA Today says it was a "stunning decision," coming "just days after the Treasury and Fed refused to bail out investment bank Lehman Bros., which filed Monday for the largest bankruptcy ever." The Wall Street Journal refers to it as "a dramatic turnabout for the federal government, which has strongly resisted overtures from AIG for an emergency loan or some intervention that would prevent the insurer from falling into bankruptcy." The Financial Times says AIG shares "fell 21 per cent in New York to $3.75. It was not clear how an intervention would affect equity and debt holders."
The AP notes White House spokesman Tony Fratto said last night, "The President supports the agreement announced this evening by the Federal Reserve. ... These steps are taken in the interest of promoting stability in financial markets and limiting damage to the broader economy."
The Los Angeles Times reports the government's "potential ownership of AIG could put policymakers at cross purposes with their own efforts to regulate a variety of financial transactions in which the company participates."
Reporting on the impact of AIG's woes, the Wall Street Journal says "fears are growing that institutions around the world could be slammed with billions of dollars in write-downs or losses if AIG is allowed to fail, which may cause the debt insurance it provided to disappear."
The Washington Post reports, "With more than $1 trillion in assets, AIG is bigger than Fannie Mae, Freddie Mac, Merrill Lynch, Lehman Brothers or the former Bear Stearns." The Post adds "analysts say most of AIG's businesses are, on their own, in fine financial shape. But what is happening on Wall Street is at the root of AIG's troubles."
Paulson, Bernanke Brief Lawmakers The Washington Post reports Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke "traveled to Capitol Hill Tuesday evening to brief congressional leaders on the government's plan for AIG. A source said Paulson and Bernanke explained that AIG would be put into conservatorship, which would allow the federal government to operate the company on a caretaker basis." Sen. Chuck Schumer said after the meeting, "The administration is approaching an unprecedented step, but unfortunately we are living in unprecedented times." The Politico reports "Paulson and Bernanke weren't seeking new legislative authority from Congress but clearly they wanted some political blessing from lawmakers."
Bush Cancels Statement On Markets The AP reports this morning, "With little explanation, President Bush on Tuesday scrapped a statement he planned to give on the tumultuous financial markets, abandoning any press coverage of his meeting with key economic advisers as more developments roiled Wall Street." White House spokesman Tony Fratto "said only, 'We decided it would be best to limit public comment about markets today,'" and "declined to offer any explanation."
USA Today reports US automakers "have decided to back off from their drive for $50 billion in loan subsidies from the federal government and now are focused on persuading Washington to appropriate the money to back the original $25 billion promised in last year's energy bill." Treasury Secretary Henry Paulson "said Monday that he isn't ruling out future intervention, but the automakers are careful to say the loans are not another bailout."
The Politico reports, "Despite high costs, Michigan lawmakers and the US auto industry appear increasingly confident of winning House approval of financing for up to $25 billion in new loan guarantees to help companies retool to produce more energy efficient vehicles." The Los Angeles Times suggests "presidential politics may be driving the recent rush toward government assistance," noting that John McCain initially opposed the loans and that "as Michigan's importance as a swing state in the presidential race grew" he "changed his tune." Barack Obama "supports the auto loans."
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The Hill reports, "House Speaker Nancy Pelosi, when asked Tuesday whether Democrats bear some of the responsibility regarding the current crisis on Wall Street, had a one-word answer: 'No.'" Pelosi "ripped President Bush's 'mismanagement' of the economy and a lack of regulation that led to the current situation." The Politico, meanwhile, reports Pelosi "has ordered a broad, swift investigation of Wall Street and will demand testimony from Bush administration officials and captains of finance, congressional officials said."
The New York Times reports "some lawmakers and experts were considering a longer-term legislative solution that would create a new agency to dispose of the mortgage-related assets at the core of Wall Street's woes."
While some observers thought the precarious state of the financial markets would prompt the Federal Reserve Board's Open Market Committee to cut a key interest rate, the Fed, citing the potential danger from inflation, left the Fed funds rate unchanged at 2%. The AP reports, "Wreckage on Wall Street in recent days did not force the Fed -- as some thought possible -- to reverse course and cut rates." The CBS Evening News said "the Fed showed some tough love by leaving a key interest rate unchanged, hoping the economy will ride out the storm without a rate cut."
ABC World News reported, "It was another wild ride on the seesaw otherwise known as Wall Street. The Dow was down 175 points just after the opening bell. Then did an about face. And at the close, was up over 140 points." The AP reports, "The Dow initially dropped about 100 points but rallied to finish the day up 141, and back over 11,000." USA Today notes "the Standard & Poor's 500 index rose 20.90, or 1.8%, to 1,213.60, and the Nasdaq composite index rose 27.99, or 1.3%, to 2,207.90."
The Wall Street Journal reports the central bank's policy committee had "its first unanimous vote since last September," suggesting "little interest in fighting the financial crisis with more interest-rate cuts."
The New York Times reports, "Although the decision initially disappointed investors, analysts said it reflected the Fed's determination to separate basic monetary policy from the specific credit and cash problems on Wall Street." McClatchy says "a sense of calm returned to Wall Street on Tuesday, leaving weary investors wondering whether it was a return to normalcy or the eye of the storm, even as the day featured the best inflation report in two years and the Federal Reserve chose not to change its benchmark lending rate."
Inflation Fears Ease The Financial Times reports, "US consumer prices fell last month for the first time in nearly two years as oil prices dropped sharply from record highs in a sign that inflation may have peaked, data from the Department of Labor indicated." The AP and the Wall Street Journal also report the story.
Oil Prices Continue "Dramatic Slide" ABC World News reported, "Oil prices continue their dramatic slide today tumbling again, as investors bet the weak economy will keep demand down. Oil dropped more than four dollars a barrel closing just above $91, a slide of about ten percent in the past two days."
On its front page, the Washington Post reports although "prices remain extremely high by historical standards," "in two months, the world's total energy costs have dropped by more than $4 billion a day." The US, "which spent $51.4 billion on oil imports in July, accounting for most of its trade deficit, is on track to spend much less than that this month, reducing pressure on the dollar, the trade deficit and inflation."
The Wall Street Journal reports embattled Rep. Charles Rangel "won't step down as chairman of the House's tax-writing committee, his lawyer said Tuesday." The lawyer, Lanny Davis, said Rangel "has not considered, nor has it ever been on the table, that he would step aside from his current position as chairman of the House Ways and Means Committee." The Journal adds House Speaker Nancy Pelosi, "who met privately with Rep. Rangel Monday night, said Tuesday, 'I see no reason why Mr. Rangel should step down.'"
According to The Hill, Rangel "reached out to colleagues in the Congressional Black Caucus and the New York delegation to explain his efforts to correct omissions and errors in financial disclosure forms and income tax returns that go back 20 years. ... Some members said Rangel had told them privately that the only Democratic leader who has not been supportive is House Democratic Caucus Chairman Rahm Emanuel (Ill.)." The Washington Post and Roll Call run additional stories on Rangel.
The Washington Post reports that the House "approved a package of energy initiatives yesterday, including measures that would allow oil drilling as close as 50 miles off the Atlantic and Pacific coasts and finance the long-term development of alternative energy sources." The House "divided largely along party lines, 236 to 189, with most Republicans rejecting the Democratic-sponsored legislation because it would prohibit exploration of much of the known oil reserves closer to the coasts and in the Gulf of Mexico."
The New York Times says that "to make their bill more palatable, Democrats attached items like alternative fuel requirements for utility companies, energy tax incentives and the phasing out of some $17 billion in tax breaks for the oil industry."
White House Issues Veto Threat The Wall Street Journal notes that "in contrast to proposals backed by Republicans and some moderate Senate Democrats, the bill approved in the House Tuesday wouldn't share any royalties gained from increased offshore oil drilling with coastal states." The White House "announced late Tuesday that Mr. Bush's senior advisors would recommend he veto the House measure, should it reach his desk. The White House cited the royalty issue among its objections."
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Media coverage of the presidential campaign suggests the McCain camp has been put on the defensive by the recent turmoil on Wall Street. NBC Nightly News reported "McCain spent much of the day arguing his case that he gets how bad things are, and accusing Obama of using hard times for political gain." NBC added "McCain's trouble here is in part of his own making with these words." McCain was shown saying on Monday, "Our economy, I think, still, the fundamentals of our economy are strong." The New York Times, under the headline "McCain Laboring To Hit Right Note On The Economy," notes on its front page that McCain said yesterday the economy was in "crisis" and says, "The sharp turnabout in tone and substance reflected a recognition not only that Mr. McCain had struck a discordant note at a sensitive moment but also that he had done so with regard to the very issue on which he can least afford to stumble." Fox News reported Obama "continues to try to take maximum advantage of the economic situation. He pounded...McCain again today on the Republicans' contention that the American economy itself is basically strong -- the statement McCain himself is trying to explain."
Financial Problems Said To Have "Transformed" Campaign The CBS Evening News reported the "drama" in the nation's financial sector "has transformed the presidential campaign, with the candidates engaging in a long-distance debate about how to fix the economy." The Wall Street Journal reports the Obama campaign, "which has made financial reform part of its policy prescriptions -- sees the latest turmoil as a chance to seize the momentum lost after Sen. McCain selected Alaska Gov. Sarah Palin as a running mate." Obama "accused Sen. McCain of being a 'Johnny-come-lately' in the financial crisis." The Christian Science Monitor adds "both major presidential candidates have jumped to the fore with proposals," but McCain "faces the tougher challenge. Fairly or not, as the nominee of the party controlling the White House...McCain faces the prospect of guilt by association."
NBC Nightly News reported Obama yesterday "blamed the mortgage meltdown just like the collapse of the savings and loan industry on government regulators being asleep at the switch." And "while...McCain said today he wants to set up a commission to update regulatory responsibilities Obama called that passing the buck." Obama: "This isn't 9/11. We know how we got into this mess. What we need now is leadership that gets us out. I'll provide it. John McCain won't."
McCain Adopts Populist Message, Releases Ad The New York Times reports that McCain, looking to deal with the issue, "has adopted a populist reformer message in vowing to 'clean up Wall Street.'" Obama "originally built his campaign on his opposition to the Iraq war, but his message has shifted to the economy." Under the headline "McCain Embraces Regulation After Many Years Of Opposition," the Washington Post reports on its front page that while McCain "hopes to tap into anger among voters who are looking for someone to blame for the economic meltdown," his "past support of congressional deregulation efforts and his arguments against 'government interference' in the free market by federal, state and local officials have given...Obama an opening to press the advantage Democrats traditionally have in times of economic trouble." The Wall Street Journal, meanwhile, reports the McCain camp "announced a new TV ad with the senator saying: 'I'll meet this financial crisis head on. Reform Wall Street. New rules for fairness and honesty. I won't tolerate a system that puts you and your family at risk.'"
Obama Outlines Proposals, Launches 2-Minute Ad The CBS Evening News interviewed Obama, who discussed his plans for dealing with the financial crisis, saying, "We have to overhaul our regulatory system. It is not working and that's part of the reason that the market lacks confidence. It is because it doesn't know whether the ratings agencies properly measuring the risks that were involved in these investments that were made. Are the books transparent? Has the SEC and other agencies have they been looking at them? We've got to have complete transparency and openness in how our financial markets are working to restore trust."
Sen. John McCain leads Sen. Barack Obama in four of five national polls out this morning, with his advantage ranging from a tie (McClatchy/Ipsos) to five points (the Battleground poll).
A George Washington University Battleground poll of 1,000 likely voters taken September 7-11 shows McCain leading Obama 46%-40% when asked at the beginning of the survey and not given the candidates names. Given the names of the candidates, plus those of Ralph Nader (I) and Bob Barr (L), later in the survey, 49% said they would vote for McCain-Palin, 44% for Obama-Biden.
An American Research Group poll of 1,200 likely voters taken September 12-15 shows McCain leading Obama 48%-45%. The Gallup daily presidential tracking poll of 2,800 registered voters taken September 13-15 shows McCain leading Obama 47%-46%. McCain had led Obama 47%-45% the three previous days. The Rasmussen Reports automated daily presidential tracking poll for September 16 shows McCain leading Obama 47%-46%.
A McClatchy /Ipsos poll of 1,046 registered voters taken September 11-15 shows McCain and Obama tied at 45% apiece. In its story on the poll, McClatchy quotes Ipsos pollster Clifford Young saying, "It seems like McCain is holding the ground he gained with his convention bump. We're not seeing any fast deterioration."
Obama Has Wide Lead In New York A Rasmussen Reports automated poll of 500 likely New York State voters taken September 15 shows Obama leading McCain 55%-42%, down from a 52%-32% lead in August but well ahead of the Siena poll out earlier this week which showed Obama up just 46%-41%.
McCain Up 4 In Ohio A Public Policy Polling (D) survey of 1,077 likely Ohio voters taken September 13-14 shows McCain leading Obama 48%-44%. The race was tied in PPP's August Ohio survey.
In a story that is receiving relatively limited media attention this morning, AFP reports that Barbra Streisand performed last night at a "glittering and lucrative Hollywood fundraiser" for Barack Obama. The AP notes Obama "raised an eye-popping $9 million for his presidential campaign and the Democratic Party." The event "was split into two glitzy events, a reception and dinner costing $28,500 each at the Greystone Mansion, followed by entertainment by Streisand at the nearby Regent Beverly Wilshire Hotel." The Los Angeles Times reports, "On Obama's flight from Denver to Burbank, Obama strategist David Axelrod suggested voters would not care that the Democrat was hobnobbing with Hollywood glitterati."
NBC Nightly News reports that Sen. John McCain "made a special point telling voters near hard hit Youngstown where Obama is tonight," saying, "Talk about siding with the people. Siding with the people just before he flew to Hollywood for a fundraiser with Barbara Streisand and his celebrity friends."
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A pair of statements yesterday by surrogates for Sen. John McCain are drawing negative media attention for the candidate. Under the headline, "Adviser: McCain Lacks Corporate Experience," the AP reports McCain economic advisor Carly Fiorina, the former CEO of HP, "says neither the presidential candidate nor his running mate is qualified to lead a large corporation." Fiorina "was asked by KTRS radio in St. Louis on Tuesday whether she thought vice presidential candidate Sarah Palin had the experience to run a big company." Fiorina said, "No, I don't. But that's not what she's running for. Running a corporation is a different set of things." The Washington Post adds Fiorina "tried to revise and extend her remarks during an interview with NBC's Andrea Mitchell a few hours later. But that didn't go overly well either, providing more grist for Democrats -- not to mention late-night comedians."
Meanwhile, the AP reports McCain "helped create the BlackBerry. At least that's the contention of a top McCain policy adviser, Douglas Holtz-Eakin. Waving his BlackBerry personal digital assistant and citing McCain's work as a senator, he told reporters Tuesday, 'You're looking at the miracle that John McCain helped create.'" A McCain aide "later dismissed the remark as 'a boneheaded joke by a staffer.'" The Washington Post reports Holtz-Eakin's remark "began the breakdown -- at least for a day -- of the new discipline of the McCain campaign's message machine." The Hill reports that the Obama camp quickly seized on Holtz-Eakin's "BlackBerry" claim, with a spokesman saying, "If John McCain hadn't said that 'the fundamentals of our economy are strong' on the day of one of our nation's worst financial crises, the claim that he invented the BlackBerry would have been the most preposterous thing said all week."
CNN reports on its 'Political Ticker blog that Lynn Forester de Rothschild, "a prominent Hillary Clinton supporter and member of the Democratic National Committee's Platform Committee, will endorse John McCain for president on Wednesday, her spokesman tells CNN. The announcement will take place at a news conference on Capitol Hill, just blocks away from the DNC headquarters." Forester "was a major donor for Clinton earning her the title as a Hillraiser for helping to raise at least $100,000 for the New York Democratic senator's failed presidential bid."
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Jay Leno: "Earlier this evening, Barack Obama was in Hollywood at a...sold-out fundraiser featuring Barbra Streisand singing." The event, which cost "$28,500," featured "dinner prepared by the finest Hollywood chefs serving an array of gourmet food. And the topic tonight was how John McCain is out of touch with the common people."
Jay Leno: "John McCain said again today that the 'fundamentals of our economy' are still sound," to "which O.J. Simpson said, 'Hey, is it too late to get him on the jury?'"
Craig Ferguson: "President Bush" had "a small growth removed from his forehead. Doctors say it wasn't a health risk. The growth just didn't want to be photographed with President Bush."
Craig Ferguson: "Barbra Streisand threw a big fundraiser for Democrats. First was dinner," which "cost 28 grand a plate," then "a Streisand concert. For an extra grand, you could leave before she started singing."
Craig Ferguson: "The fundraiser" brought in "a lot of money." Barack Obama "must be very happy, because nothing says, 'I'm a man of the people,' like a star-studded dinner in the Beverly Hills Hotel."
Conan O'Brien: "An adviser to John McCain...claimed today, just a couple of hours ago, that McCain helped create the Blackberry," or, "as McCain calls it, 'the fancy garage door opener.'"
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