Frozen credit markets begin to thaw; Bernanke supports new stimulus package.

Frozen credit markets begin to thaw; Bernanke supports new stimulus package.

Frozen credit markets begin to thaw; Bernanke supports new stimulus package.

A summary of what's in the major U.S. newspapers.
Oct. 21 2008 5:57 AM

Melting Point?

The New York Timesleads with a look at how the credit markets gave encouraging signs yesterday as the crunch appeared to ease somewhat and money began to tentatively flow through the financial system. Wall Street cheered at the positive signs and the Dow Jones industrial average soared 4.7 percent. The Washington Postmentions the developments in the credit markets in its lead story but focuses on Federal Reserve Chairman Ben Bernanke's endorsement of plans for a new stimulus package, which was also partly responsible for the increase in the stock markets. Bernanke told lawmakers that because the economy is "likely to be weak for several quarters" and there's "some risk of a protracted slowdown," a new stimulus package "seems appropriate." The Wall Street Journal leads its world-wide newsbox with Barack Obama's rallies in Florida that coincided with the beginning of early voting in that state. By the middle of this week, voters in 18 states will be able to head to the polls, and Democrats are eager to mobilize supporters as early as possible to capitalize on Obama's current lead in the polls. The Democratic candidate announced he'll be canceling campaign events Thursday and Friday to visit his gravely ill grandmother in Hawaii.

USA Todayleads with an in-house survey that found the number of homeless families with children is increasing in several large cities. Homelessness had largely been on the decline, but it appears to have experienced an upswing lately as foreclosures and job losses increase at a time when higher prices for food and fuel had already stretched the average family's budget. The Los Angeles Times leads locally and goes high with the first in a three-part series looking at the broken state of the health insurance system in the United States that "leaves patients responsible for bills they understood would be covered, squeezes doctors and hospitals, and tries to avoid even minuscule risks." Ever conscious of their bottom lines, insurance companies are making it more expensive and difficult for Americans to get individual coverage. And those lucky enough to have health insurance frequently find it does them no good when they need it most. Even some insurance executives "agree the system is inefficient and sometimes inhumane," notes the LAT.

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The encouraging signs from the credit markets seem to suggest that the unprecedented global effort to tackle the financial crisis is making a difference. One critical measure of the borrowing rate between banks, known as LIBOR, dropped yesterday by the largest amount in nine months, which is "an indication of growing confidence in the financial system," notes the NYT. The VIX index, which measures volatility in the market, fell 25 percent from Friday, and interest rates on commercial paper "fell to a four-month low." While no one thinks we're out of the woods yet, these were all seen as signs that fear is receding and that the credit markets are inching toward normalcy. In a piece inside, the WSJ also notes these positive developments but says it could still "be weeks or months before the markets return to normal."

Meanwhile, investors weren't the only ones cheering after Bernanke expressed support for a new stimulus package. Democrats have been arguing for weeks that a new round of government spending is needed to boost the economy and were encouraged by Bernanke's words. As the LAT and WSJ point out, Bernanke's support was critical when lawmakers approved the $168 billion stimulus package earlier this year. And the same is likely to be true this time. While the Bush administration hasn't been eager to support new spending, its tune appeared to change after Bernanke spoke. The White House said the president was "open to ideas" as long as they were "targeted, temporary, and timely."

Bernanke didn't advocate specific steps but made it clear that any stimulus package should be "significant" and provide real relief in the coming months. The WP talks to economists who say that a package aimed at low-income Americans is likely to provide the quickest results since they're less likely to save any money they receive. Democrats have been pushing for a $150 billion package, though there's word that key lawmakers are working on a $300 billion plan they could pass after the election. Among other measures, Democrats are arguing for an expansion of unemployment benefits, which appears to have some bipartisan support. House Speaker Nancy Pelosi has also made it clear she wants any legislation to include new spending on infrastructure. Republicans don't like that idea and would prefer to stimulate the economy through a variety of tax breaks for businesses and consumers.

While many bank executives debate whether to apply for a piece of the $250 billion government plan to prop up financial institutions, the question remains: How will they use the money? In an almost-warning tone, the WSJ says that many banks are likely to use the taxpayer money to "gobble up their weaker peers." This move "could prove controversial" because acquisitions are likely to provide less of a boost to the economy than increased lending, which the Treasury has always said was its goal. The WSJ talks to Treasury officials who say they don't want government money to go directly to funding acquisitions. But the NYT hears something completely different from "two senior officials" who say that in deciding who gets a piece of the pie, the government will select banks who need money to finance acquisitions. "One purpose of this plan is to drive consolidation," one official said. The NYT sees this as evidence that "the government wants not only to stabilize the industry, but also to reshape it."

USAT fronts a look at how the sharp rise in narcotic pain-relief prescriptions for U.S. troops is raising questions about whether doctors who treat service members are relying too much on the powerful drugs without worrying about the potential for addiction and abuse. It's hardly surprising that pain is the No.1 medical complaint when service members return from duty. But many say doctors are too quick to reach for their prescription pad instead of exploring other ways to manage pain.

The WP points out an often-overlooked aspect of the expanded veterans benefits that Congress passed this year is that it will take effect in August of next year and won't be retroactive. That means many veterans of Iraq and Afghanistan who chose to go back to school will be saddled with thousands of dollars of debt by the time they graduate. Now there's even a question of whether the Department of Veterans Affairs will be able to meet the deadline to implement the program after it suddenly decided to implement the program itself rather than hire a private contractor.

The NYT issues a correction related to an article earlier this month that talked about the increasing stress of business travel. The article cited an annual survey that supposedly revealed people are most vulnerable to stress on a business trip and in the office and that the financial crisis "was the No. 1 cause of anxiety." Turns out the survey said nothing of the sort and didn't even ask any questions that referred to Wall Street or an economic crisis. "The author of the article distorted the survey's findings to fit his theme," the NYT states.

In an editorial, the NYT criticizes Sen. Christopher Dodd for failing to keep his word to release documents that will supposedly clear his name from charges that he benefited financially from preferential treatment on two home mortgages issued by Countrywide. Dodd's "excuses are wearing ridiculously thin," says the NYT. "I think it will become obvious at the time when it's the right time, and I'll explain that at the time when I do so," Dodd said last week. When asked to elaborate, he said: "My answer is what it is, and in the right time, it will be there."

Daniel Politi has been contributing to Slate since 2004 and wrote the Today’s Papers column from 2006 to 2009. Follow him on Twitter.