New Lease on Auto Loan
The New York Times, the Washington Post, and the Los Angeles Times all lead with (and the Wall Street Journal fronts) the White House offering a little bit of hope for the auto industry by saying it will provide loans to keep American automakers afloat into 2009.
The White House had repeatedly refused to get involved with the auto industry's flagging fortunes. But with Congress at an impasse, the administration says it will allow some of the $700 billion dollar fund that was approved to bail out financial companies to be spent shoring up the auto industry. The White House hasn't said how much money it will lend or what the conditions will be. It also hasn't ruled out bankruptcy for one or more of the auto companies.
As the LAT notes, Senate Republicans used debate over the loan bill as an excuse to decry the wages and benefits paid to union auto employees. The Republicans argued that union contracts keep American automakers from being competitive. The NYT has an interesting spin on the conflict between Republican Sen. Robert Corker of Tennessee and United Automobile Workers President Ron Gettelfinger. The two men faced each other down on Thursday, with Corker demanding the union scale back wages and benefits while Gettelfinger insisted compensation couldn't be cut until after next year. The paper declares them both winners after a fashion—even though neither man got what he wanted and the deal fell apart. Instead, the buck gets passed to the White House and now both men get to claim a moral victory for their side.
General Motors has said it will idle its plants in the United States and Canada for at least part of the first quarter of 2009. The company says it could run out of money without a loan this month from the government.
The WSJ fronts the ongoing fallout from the revelation that Bernard Madoff's investment securities company was in fact a $50 billion Ponzi scheme, making it the biggest fraud in financial history. Banks, hedge funds, institutions, and individuals alike may have lost everything they'd invested in Madoff's firm. The paper focuses on the investors who were caught up in the scheme, many of whom were previously among the very wealthy. The paper notes that part of Madoff's way of marketing his firm was by word-of-mouth in certain well-to-do social circles, especially in Jewish communities.
Thousands of people—everyone from senior citizens to Jewish charities to the New York Mets—had money in Madoff's firm. Many of Madoff's clients had done business with him for years and had gradually trusted him with all their savings, says the NYT. Now it's unlikely that any of them will ever see that money again.
The impact of the scandal isn't fully understood yet, according to the NYT, but investor confidence in hedge funds is expected to take a big hit. Coming out of the crisis, investors will likely demand much more transparency from fund managers.
How it is possible that one man was able to defraud so many people out of so much money? Investigators haven't released key details yet, such as what happened to the money and whether or not Madoff acted alone, but the NYT says that the unusual structure of Madoff's organization may have helped shield him from scrutiny. Madoff's firm was investigated by the SEC in 1992, and there have a few bouts of suspicion from different quarters since, but no one ever accused Madoff of wrongdoing. A series of odd accounting maneuvers may have helped Madoff keep investors and regulators in the dark. Trust is also a factor. Most Ponzi schemes are short-lived and make a lot of crazy promises about easy money. Madoff provided high, but not unreasonable, returns on investments for more than 30 years. Clients who wanted their money were paid promptly. He never gave anyone a reason to doubt him.
The WP alone goes under the fold with the resignation of John Harris, the top aide to Illinois Gov. Rod Blagojevich. The paper takes Harris' resignation as a sign that he's cooperating with federal investigators building a case against Blagojevich for charges including plotting to sell an appointment to President-elect Barack Obama's former Senate seat. Harris' cooperation may be necessary, since some analysts think investigators pulled the ripcord a little too soon on the investigation and may not have the evidence needed to make charges stick.
The WP devotes much of its front page to a feature on the status of girls in India. Especially in poorer regions, girls must often work at home while their brothers go to school. Education efforts by the government mean that many girls now get at least a little schooling, often just enough to make them aware of the inequity of their situation.
Jesse Stanchak is a writer living in Washington, D.C.