Feds to bail out Freddie and Fannie; national unemployment at a five-year high.

A summary of what's in the major U.S. newspapers.
Sept. 6 2008 5:23 AM

Rescue Dawn

The Washington Post, the Wall Street Journal,and the New York Times all lead with news that government officials are poised to rescue Fannie Mae and Freddie Mac by placing the flailing mortgage-finance giants under federal control. The plan would see the troubled companies lose their chief executives but would allow them to continue functioning with the government guaranteeing their debts. It's unclear how much the bailout will cost taxpayers, but it's thought the final bill could run into tens of billions of dollars, making the deal one of the biggest corporate-rescue operations in America's history.

There were bleak tidings, meanwhile, from the government's latest national unemployment report: the Los Angeles Times leads  with, and everyone fronts, news that joblessness hit a five-year high in August, shedding 84,000 jobs to reach 6.1 percent. The new figures, which brought total job losses for the year to more than 600,000, were markedly worse than had been anticipated, dashing hopes that the economy would recover in the second half of 2008 and confirming that the country's economic jitters have spread beyond the housing and financial sectors. "These are really ugly numbers," said one economist. "Things are going to get worse before they get better."

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Treasury Secretary Henry Paulson met with Fannie Mae and Freddie Mac officials late yesterday to hash out the details of a bailout; the LAT reports that Paulson and Federal Reserve Chair Ben Bernanke were due to continue meeting with Fannie and Freddie executives through the weekend, in the hopes of unveiling a finalized rescue plan before financial markets open Monday morning. It's thought the deal would see the companies put under conservatorship, leaving them at least temporarily under government control; common stock would likely be heavily devalued if not entirely wiped out. With new figures showing foreclosures on the rise, the WSJ notes that the plan could help homeowners by reducing the impetus for interest-rate increases on mortgages.

And they're off! John McCain and Barack Obama's presidential campaigns have begun in earnest, declares the LAT, with the candidates heading to battleground states and trying to turn their respective post-convention bounces into a lasting electoral edge. The Post fronts a look at both candidates' efforts to eke political mileage out of America's economic woes; in stump speeches, McCain sought to cast his rival as a tax-and-spend liberal, while Obama mocked McCain's recent claim that "the fundamentals of our economy are strong". "What's more fundamental than having a job?" Obama scoffed. "What's more fundamental than that?"

The NYT argues that the race has been transformed by McCain's decision to jettison his former message of experience and try to co-opt his rival's theme of change. In an editorial, the Post lambasts both candidates for empty posturing and calls for them to run more substantive campaigns in the race's remaining weeks; the paper also runs a column by Michael Gerson, in which the former Bush speechwriter laments McCain's failure to deliver "actual and unexpected reform."

McCain was in Michigan yesterday; the WSJ fronts a look at his chances of wooing the state's Reagan Democrats. Central to the campaign's strategy: an attempt to sell McCain as a bipartisan capable of working with a Democratic Congress to get things done; and an increasing reliance on Sarah Palin, whose stump speeches are expected to go over well with blue-collar workers. It's unclear, though, how much crossover appeal Palin will have; the Post fronts a poll suggesting that McCain's running mate won't significantly increase the ticket's pulling power with independent voters.

The NYT notes that Palin—dubbed "Baberaham Lincoln" by a hyperventilating Peggy Noonan on the WSJ's op-ed page—has been ducking reporters' questions in recent days. Still, she comes under continued scrutiny in all the papers. The WSJ eyes the largest project Palin undertook as mayor of Wasilla: the construction of a hockey rink, which led to years of litigation, major budget overruns, and continuing financial headaches. The Post interviews the state trooper at the center of the Troopergate scandal; he says he wishes Palin luck but denies threatening to kill her father. The LAT considers Palin's role as commander of Alaska's National Guard; military officials say it was mostly managerial and conferred little or no foreign-policy experience. The LAT also ponders Palin's support for contraceptive education, which clashes with McCain's preference for abstinence-only education and might alarm some social conservatives.

In a new book, Bob Woodward suggests that the United States spied on Iraqi Prime Minister Nouri al-Maliki; that's drawn a dismayed response from the Iraqi government and could jeopardize negotiations over the continuing U.S. presence in the country. The White House, meanwhile, issued a terse statement contesting Woodward's claim that Bush had grown detached from the handling of the war, saying that the Post reporter's account was "at best incomplete."

With Tropical Storm Hannah working her way up the eastern seaboard, aid agencies continue to struggle with the aftermath of recent storms. In Haiti, U.N. peacekeepers handed out food and water as receding floodwaters revealed many bodies, adding to a death toll that already stood at 163. Back home, the Post reports, the American Red Cross is taking on massive debt to finance post-Gustav aid efforts; a softening economy and a sense of anticlimax meant the organization received relatively few donations as the storm swept across the Gulf Coast.

King Mswati III of Swaziland has angered his impoverished subjects by insisting on a lavish celebration for his 40th birthday and building a 15,000-seat stadium to house the festivities. It's not the first time Mswati's expensive tastes have gotten him into trouble, notes the NYT; the ruler had previously raised eyebrows by buying new BMWs for his 13 wives, in a break from his father's more austere habit of shipping his 70 brides around by bus.

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