The White House has a plan for the next recession.

A summary of what's in the major U.S. newspapers.
March 14 2008 8:25 AM

A Dollar Short

The Washington Post and New York Times lead with, and the Los Angeles Times fronts, administration proposals to stave off a recession—the next one. The L.A. Times leads with a report that Southern California home prices have fallen back to 2004 levels, and the Wall Street Journal tops its newsbox with an item on Democratic efforts to challenge the White House on spying authority. USA Today leads with fears among Democrats that attacks by Hillary Clinton on Barack Obama could cost the party the White House in November.

The bulk of the proposals to prevent the next recession focus on regulating the "securitization" of mortgages, report the papers. Securitization is a financial trick that magically turns a bunch of unrelated, risky investments into one big, safe bet—C'mon, honey! It's a sure thing!

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The Post neatly sums up how the financial industry lost the nation's house and says that the administration effort "seeks to cure three paramount failings behind the credit meltdown: Financial firms at each step of the securitization process didn't know what they were buying, didn't care as long as they were making money, and didn't have enough cash to cover mistaken bets."

The Times, though, spies a problem, noting that "the plan relies on the same market participants—from mortgage brokers to credit-rating agencies and Wall Street firms—that government officials and other experts blame for the current crisis." It's called capitalism, and the Times seems to be going a bit squishy on it.

Not without reason, as all the papers prominently report: Consumer confidence tumbled along with the dollar, gold prices cracked $1,000 an ounce, and oil hit a record high of $110 per barrel. Southern California home prices plunged nearly one-fifth from last year's peak, a shockingly rapid decline, causing forecasters to "rethink their previous forecasts." The Wall Street Journal'stop headline describes a Carlyle Group investment fund as in "free fall." Carlyle Capital's stock is down 97 percent and is at risk of having its assets seized. The paper suggests that "connections don't mean much in today's credit crunch," a reference to the apparent powerlessness of the powerful owners of the legendary Carlyle Group to defy economic gravity.

Democrats, seconded by a Times editorial, countered that the administration plan does too little to calm the current turmoil—"a day late and a dollar short," in the words of New York Sen. Charles E. Schumer. Democrats see it instead as a way to deflect congressional energy away from its more vigorous proposals to use government power to encourage mortgage companies to renegotiate and write down home loans to stave off foreclosures or at least prevent them from pulling the economy further down.

Paul Krugman isn't optimistic that anyone can. He notes that, as a result of a recent fed move to back the securitization magic trick, "no advanced-country's central bank has ever exposed itself to this much market risk." (TP plans to lump all his upset picks in the NCAA tournament together, then sell them to investors as one risk-free product.)

USAT has a harsh assessment of Clinton's recent campaign tactics. The first line of its lead story: "Democrats are increasingly worried about their chances for victory in November after a series of attacks by Sen. Hillary Rodham Clinton on rival Sen. Barack Obama's leadership, credibility, readiness as commander in chief and, now, his ability to win the White House."

Lorne Michaels can't get too fired up, though, as the story quotes top Clinton pollster Mark Penn saying on a conference call Thursday that "Sen. Obama really can't win the general election." This angle throws out the standard practice whereby members of the same party insist that any fellow contender—Dennis Kucinich, whoever—would be able to beat the other party's candidate.

Clinton spokesman Howard Wolfson clarified that Pennsylvania was the context of the remark. "If you don't compete in Pennsylvania, you can't win a general election," he said. (President John Kerry won Pennsylvania in the general, as TP recalls.)