The New York Times, Washington Post, and Los Angeles Timeslead with the decrease in stock markets around the world yesterday as the U.S. credit crisis officially went global. The Dow Jones Industrial Average plunged 2.8 percent, marking the worst day of the year for the U.S. stock market since February.
The Wall Street Journal devotes much of its above-the-fold space to the financial news and tops its world-wide newsbox with President Bush's news conference, where he adamantly disagreed with the idea of an increase in the gasoline tax to finance repairs on the nation's bridges. The president also emphasized that the attorney general has done nothing wrong and chastised Congress for focusing on investigations at the expense of legislation. USA Todayleads with an analysis that shows states that increased cigarette taxes have seen sharp declines in smoking. Now that Congress is considering raising the federal cigarette tax to as much as $1 per pack, some predict it will lead to a huge drop in the number of smokers.
Remember when there were predictions that the mortgage crisis would have a limited impact on the rest of the world? Well, that optimistic view seems to have been shattered as the market woes began early yesterday with an announcement in Europe. France's biggest bank, BNP Paribas, announced it would not allow investors to remove money from three of its investment funds because they had experienced huge losses because of problems in the U.S. lending market.
The European Central Bank tried to calm the ensuing panic by pouring $130 billion into the financial system, the first time it took such action since Sept. 12, 2001. But investors saw the injection of capital as a sign that more problems are still to come, and the sell-off continued. The Federal Reserve then pumped $24 billion into the system, and this morning, as stocks in Asia began falling, Japan's central bank also took action.
The WSJ doesn't mince words and says that what began as concern over subprime mortgages "has mushroomed into a crisis for ... investors world-wide." The NYT plays up the surprise angle, saying the losses in European banks "turned up unexpectedly." Much of the concern has to do with uncertainty, and now, as the NYT makes clear in a separate story inside, investors are anxious that the next problem could rise up anywhere. "There's little knowledge about who holds the toxic waste and how much they hold," an economist tells the LAT.
If you're scratching your head wondering how this is possible, an article in the NYT's business pages does a good job of explaining how we got here and why central banks may not be up to the task of handling this type of mess. The NYT's Paul Krugman notes that "when liquidity dries up, the normal tools of policy lose much of their effectiveness." The LAT also has a helpful Q&A explaining what a liquidity crisis involves and how it could affect the larger economy.
The WSJ fronts an interesting look at the problems that led to the recent bailout of a German bank, which "shows how quickly global investors' abrupt new appreciation of credit risk can ricochet around the world."
The WP's Steven Pearlstein warns "we all need to get used to days like yesterday because there are going to be a lot more of them."
President Bush went on television for the second day in a row yesterday to try to assure everyone the economy is strong. "I am told there is enough liquidity in the system to enable markets to correct," he said. Others aren't so so sure about that.
In other news, the LAT fronts word that the Bush administration will announce a new initiative, which includes a set of "multipronged efforts," to catch illegal immigrants. These new measures are on top of the already reported crackdown on discrepancies in Social Security numbers. Among the expected measures is an increase in fines for employers and a decrease in the types of documents that can be used to prove immigration status. Businesses aren't happy that they were left out of the discussions.
The WP fronts, and the WSJ goes inside with, a look at the huge amounts of money that Mitt Romney is pouring into tomorrow's straw poll in Iowa. "The event has all the marking of a historic mismatch," says the Post. Romney's goal was to beat Rudy Giuliani and Sen. John McCain, but they have both dropped out of the event. Now Romney is left competing with the candidates who don't have nearly as much money to spend.
The Post fronts word that the Bush administration wants the United Nations to coordinate talks between the United States and Iraq's neighbors. "I think you need regional help to get the Iraqis to come together," Zalmay Khalilzad, the U.S. ambassador to the United Nations, said in an interview.
The LAT fronts a picture of the continuing rescue efforts in the Utah mine, where a microphone was lowered yesterday night. No sound was heard, but rescue workers emphasized this shouldn't be interpreted as a sure sign that the miners are dead.
The WSJ fronts an amusing look at how, despite the fact that "nobody actually hunts animals over the Internet," 33 states have banned the practice after the Humane Society started a campaign. There was a big hubbub when one person launched a Web site, but the hunting part never materialized and now everyone is against it, even the National Rifle Association. "It's pretty easy to outlaw something that doesn't exist," an NRA lobbyist said.
The LAT fronts the story of a group of monks who started a business selling printing and office supplies when they were struggling to make ends meet. The monks hit the jackpot as LaserMonks Inc. keeps growing and expects $7 million in sales in 2007. The success has "brought a standard of living that could be seen as excessive—for monks, at least."