The Wall Street Journalbanners and the New York Timesleads with news that Bernard Madoff is expected to plead guilty tomorrow to 11 felony charges and will likely spend the rest of his life in prison. Prosecutors say Madoff began operating what may be the largest fraud in Wall Street's history as early as the 1980s. Ten days before he was arrested, Madoff sent statements to clients claiming to have a total of $64.8 billion, far more than the $50 billion the disgraced financier originally confessed to losing. The Washington Postleads with the first major stock market rally of 2009 that came after Citigroup reported some surprising good news and Federal Reserve Chairman Ben Bernanke called for reforms in the financial system. Citigroup announced it was profitable in the first two months of the year, and its shares surged 38 percent. The Dow Jones industrial average increased 5.8 percent, the biggest gain since Nov. 21.
The Los Angeles Timesleads with President Obama's strong criticism of the state of public schools. In a speech yesterday, Obama called for more charter schools as well as higher salaries for good teachers and a system to quickly fire bad ones, outlining a set of priorities that put the president on a collision course with teachers' unions. He had mentioned many of these plans during the campaign but he always "treaded carefully on the politics of education reform, siding with critics of public education at some points but carefully preserving his relationship with powerful education unions," notes the paper. "His speech appeared to position him closer to the critics." USA Todayleads with a look at how the first two months of 2009 have marked the driest start of any year since the government began to keep track in 1895. The dry conditions have led to a severe drought in Texas and farmers are increasingly worried it will be a bad year for crops while firefighters say it could lead to a longer fire season.
Assuming Madoff pleads guilty to all 11 charges against him, he could face a maximum prison sentence of 150 years. Everyone expects the actual sentence to be significantly lower, though still effectively a life sentence for the 70-year-old. In documents that were unsealed yesterday, federal prosecutors revealed new details about Madoff's scheme but still left many unanswered questions. Prosecutors say Madoff hired inexperienced employees and directed them to "generate false and fraudulent documents." He also carried out huge bank transfers to make it seem as though he was trading in European securities. But it's still unclear whether anyone knowingly helped Madoff with the scheme, and whether his brother, wife, and sons who worked for the firm knew what was going on. It's also still unclear how much money investors lost and how much money Madoff managed to take for himself. Assuming he did manage to pocket a significant amount of the money, where is it? So far, only about $1 billion in assets have been recovered. The government said it plans to seek at least $170 billion in assets from Madoff. No one actually believes Madoff has that kind of money, but "prosecutors want to be able to grab everything he does have," as the WSJ puts it.
In addition to the good news from Citigroup, investors were also upbeat about suggestions from federal regulators that they may reinstitute rules that put certain limits on short selling when markets are on a downward spiral. In a speech yesterday, Bernanke said the rules of the financial system need to be reformed in order to prevent another financial crisis and suggested that it might be necessary to review accounting rules that determine how companies value their assets. Everyone warns that yesterday's rally might not mean much because during the crisis there have been several upswings that later led to more losses. And while Citigroup's news was encouraging to investors, many were skeptical that the banking giant will be able to hold on to any profits if the global economy continues to deteriorate.
The WSJ points out that yesterday also marked the end of the first 50 calendar days since President Obama was inaugurated, a period in which the Dow industrials fell 16.36 percent. That is "the second-worst mark for the period in more than a century," reports the paper. The only one who was faced with worse numbers was President Gerald Ford, who saw industrials fall 20.76 percent during his first 50 days.
USAT reports that the government's terrorist watch list now has 1 million entries, a 32 percent increase since 2007. The million records currently on the list represent around 400,000 individuals since there are often multiple entries for one person to reflect aliases or different spellings of a name. In the past two years, 51,000 people have asked to be taken off the list but the vast majority of cases that have been reviewed found these people weren't on the list at all. There have been 830 requests since 2005 from people who were, in fact, on the list and approximately 150 of them were removed.
Nobody fronts yesterday's suicide bombing in western Baghdad that killed more than 30 people and raised fears that insurgent violence could increase as Obama begins to implement his 18-month withdrawal plan. More than 60 people have been killed in Iraq since Sunday. U.S. officials insist the attacks are acts of desperation from a fading insurgency. But the NYT points out that both attacks this week targeted Iraqi soldiers that have high levels of security, "suggesting much planning and coordination." Indeed, the WP points out that the attacks took place in areas that "are fortified even by the standards of the capital," and perhaps more significantly, the "Iraqi security forces seemed undisciplined in the immediate aftermath."
The NYT reports on its front page that a group of leading lawmakers led by Sen. Russ Feingold want to change the Constitution in order to require any Senate vacancies to be filled through an election. There are currently four appointed lawmakers serving in the Senate, and while that is hardly a record, it is higher than average. "I really became troubled when I realized that such a significant percentage of the U.S. Senate was about to be appointed rather than elected by the people," Feingold said. It's unclear whether the initiative will get very far, particularly considering that it's far from easy to enact a constitutional amendment, but the idea has gained some high-profile backers, including Sen. John McCain.
The papers note the Smithsonian confirmed a long-standing rumor that a pocket watch that belonged to Abraham Lincoln contains a secret message that was engraved by a watchmaker who repaired it in 1861. The watchmaker, Jonathan Dillon, told his family he was repairing the watch when he heard news that Fort Sumter in South Carolina had been attacked. Turns out, the engraving was there, and reads, in part: "Jonathan Dillon April 13-1861. Fort Sumpter [sic] was attacked by the rebels on the above date thank God we have a government." Dillon misspelled Sumter and apparently didn't know the opening shot of the Civil War had been fired a day earlier. And it wasn't quite how Dillon remembered it when he told the NYT in 1906 that the engraving read: "The first gun is fired. Slavery is dead. Thank God we have a President who at least will try." The NYT publishes a correction today and points out the 1906 article noted the 84-year-old had a "remarkable memory."
In the WP's op-ed page, Andrew Grove writes that in order to institute change "an organization must travel through two phases." First, there has to be "a period of chaotic experimentation" where options are discussed. Then there comes a time "for the leadership to end the chaos and commit to a path." We have now lived through the chaos to try to figure out the best way to stabilize the financial system, but the administration still hasn't made a decision. Until that happens, it needs to hold off on trying to fix other parts of the economy. "First things first. Strive to achieve stability in our financial system," he writes. "When the momentum is clear enough to allow trust in the system to return, then tackle the next mega-problem."
The NYT's Thomas Friedman writes that he's worried Washington still doesn't quite grasp the severity of the ongoing crisis. "Economically, this is the big one," he writes. "Yet, in too many ways, we seem to be playing politics as usual." Republicans seem to be lost in the woods. "Rather than help the president make the hard calls, the G.O.P. has opted for cat calls." Meanwhile, Obama sometimes gives the impression that he'd rather stay a bit removed from the crisis and push forward with other initiatives. "I understand that he doesn't want his presidency to be held hostage to the ups and downs of bank stocks, but a hostage he is," writes Friedman. "We all are."