Investors dump banking shares as fears grow that more lenders might fail.

A summary of what's in the major U.S. newspapers.
July 15 2008 6:14 AM

Banking on Trouble

The New York Timesleads, and the Los Angeles Timesoff-leads, with investors' fears that the federal takeover of IndyMac on Friday was only the beginning and more banks will fail in the near future. As thousands of IndyMac customers lined up for hours to withdraw their money, Wall Street was in almost full-panic mode as rumors started to circulate about which lenders could be next. Regulators tried to offer some comforting words, but investors weren't listening, as they were busy dumping stocks that led to the "steepest one-day decline in banking shares since 1989," notes the LAT. The LAT leads with the Federal Reserve's announcing new rules on mortgage lenders to provide better protection from abusive lending practices. The new measures will, among other things, require all lenders to verify that a borrower can pay back a loan and impose new advertising standards that ban some commonly used misleading claims and require more transparency.

USA Today leads with a look at how the United States has stepped up its airstrikes in Afghanistan to make up for the current shortage of ground troops in the country. The number of missiles and bombs dropped in Afghanistan in the first six months of the year was 40 percent higher than in the same period in 2007. But the increased aerial campaign hasn't managed to stop the Taliban resurgence, which has led military officials to say that the situation won't improve until more ground troops are sent to Afghanistan. The Wall Street Journal leads its world-wide newsbox with President Bush's lifting an executive ban on offshore drilling. The Washington Postleads with news that the District of Columbia Council will consider emergency legislation today that would allow the city's residents to keep handguns in their home. The legislation comes as officials try to comply with the recent Supreme Court decision, but the measure has so many restrictions that many think further legal wrangling is almost inevitable.

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The NYT highlights that investors' fears are now centered on smaller regional banks that many think are too small to receive help from the federal government. But big lenders were also vulnerable as shares of Washington Mutual, the nation's largest savings and loan, dropped nearly 35 percent. The Federal Deposit Insurance Corporation tried to assure depositors that just because a bank's stock price is in freefall doesn't mean it's going to fail. But even if most customers weren't rushing to put their money under the mattress, "Wall Street staged its own sort of bank run," as the NYT puts it. Analysts say some banks will fail over the next year and any more bad news from the sector is likely to be met with more panic from Wall Street.

The NYT seems determined to push the panic buttons. "It's about to start getting real bad," one analyst said. "We are closer to the Depression scenario than not," alleged the managing director of an investment fund.

The NYT and WSJ both front detailed reconstructions of how the Bush administration's plan to rescue Fannie Mae and Freddie Mac came about. Both papers point to Treasury Secretary Henry Paulson as the architect of the plan. But while the NYT gives the impression that it was all put together over the weekend, the WSJ says Paulson had asked his staff to come up with plans two weeks earlier and had been discussing possible steps for more than a week. Regardless, there's little doubt of its significance. The NYT calls it "one of the most striking—though unspoken—regulatory shifts in modern times," while the WSJ says it further illustrated how Paulson, a free-market advocate, has become "an activist" in using the "the government's power to stem housing-crisis fallout."

As more details were released about the attack by Taliban insurgents on a remote American base in Afghanistan that killed nine U.S. soldiers, the NYT reefers a look at how the surprise assault highlights the vulnerability of American forces in the area. It marked the first time that insurgents managed to partly breach one of the dozens of military outposts operated by Afghan and American forces in the country. The unusually bold attack by about 200 insurgents also highlights how the Taliban is getting stronger and is more willing to attack NATO forces head on.

Lifting the presidential moratorium on offshore drilling, which was put in place by Bush's father, won't mean anything unless Congress lifts its own prohibitions. The move seemed designed to prod Congress to act, but Democrats appear to be in no rush to lift the longstanding ban. Still, the WSJ notes that the congressional ban expires on Sept. 30 and, in a time of skyrocketing gas prices, lawmakers might conclude that it's not politically viable to extend it.

The WP off-leads with more ethical questions surrounding the lawmaker who justified choosing a Cadillac DeVille as his taxpayer-funded car by saying that he often offers rides to his constituents and wants them to feel that "their congressman is somebody." Today, the paper takes a look at how House Ways and Means committee chairman Charles Rangel of New York has launched an aggressive campaign to get businesses to donate money for an academic center that will bear his name. Rangel has used congressional stationery to write to corporations that have interests in legislation that is discussed in his committee. Rangel has also managed to get some federal money for the project. This is not the first time the Rangel Center has come under scrutiny, but ethics experts say the fundraising effort highlight why this type of undertaking by an incumbent politician is usually a bad idea.

It's another week, which means more bad news from the LAT. The paper fronts news that its publisher, David Hiller, resigned yesterday ("forced out," says the Post) after holding down the job for 21 months. Hiller's tenure was "particularly disappointing" as the LAT experienced a deep drop in cash flow and he acquired a reputation as an "indecisive leader." The announcement came on the same day that the LAT began implementing its latest round of cutbacks that will lay off 17 percent of its editorial staff and coincided with the resignation of the Chicago Tribune's editor, Ann Marie Lipinski. Her resignation came a few days after the Chicago paper was ordered to cut 14 percent of its newsroom staff in what will be the "fourth round of cutbacks in three years," notes the Post.

All the papers write about the hubbub over the satirical cover of The New Yorkerthat depicts Sen. Barack Obama dressed as a Muslim, fist-bumping his gun-toting wife in the Oval Office, where there's a painting of Osama bin Laden on the wall, and an American flag burning in the fireplace. The NYT folds the controversy into a larger story about how late-night comedians have found it difficult to joke about Obama. Those who skewer politicians for a living say that, so far, Obama hasn't given them anything "easy to turn to for an easy laugh." Plus, there's also the uncomfortable fact that much of their audience doesn't seem willing to laugh at a man they admire. Obama's campaign spoke up against The New Yorker cover, saying that "most readers will see it as tasteless and offensive—and we agree."

"The usual lesson, when something such as this happens, is that there is some invisible, but essential, line that has been crossed," writes the Post's Philip Kennicott. "That line, of course, doesn't exist, but gets manufactured in the moment." In the LAT, James Rainey wonders how it is that "Obamites … suddenly want to play censor when the 1st Amendment puts their man even remotely on the hot seat?" In an editorial, the LAT says that although "the real mudslinging" hasn't even started, it seems "the Obama camp is a trifle thin-skinned." If they react so strongly to an obviously sympathetic satirical cartoon, "what are they going to do when the Republicans start sharpening their artists' pencils?"

Daniel Politi has been contributing to Slate since 2004 and wrote the "Today's Papers" column from 2006 to 2009. You can follow him on Twitter @dpoliti.

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