Bailout: Today’s Papers at Slate Report Things Fall Apart

today’s papers, Things Fall Apart By Daniel Politi,Posted Friday, Sept. 26, 2008, at 6:48 AM ET

“… Who’s to blame for the breakdown? The Washington Post doesn’t mince words and declares right off the bat that a “renegade bloc of Republicans” managed both to surprise and to anger administration officials as well as congressional leaders when they “moved to reshape” the bailout. The Wall Street Journal reports that talks are set to resume this morning “without House Republicans.” Meanwhile, lawmakers received a crude reminder of the fragility of the U.S. financial system last night as federal regulators seized Washington Mutual and immediately sold the bulk of its operations to J.P. Morgan Chase in what amounted to the largest bank failure in U.S. history.”

“…So how did we get from deal to no deal so quickly? Well, all that optimism quickly disappeared when the House Republican leader, John Boehner, laid a bomb by flatly declaring that rank-and-file members of his party were unable to support the bailout plan. And he wasn’t talking about making an amendment or two—Boehner didn’t like the idea of the government buying distressed securities from troubled financial companies. And as those following from home should know by now, that’s pretty much the entire basis behind the administration’s plan.”

“…You know it’s a big news day when the largest bank failure in U.S. history gets relegated to second-tier status on the front pages of the newspapers. After seizing Washington Mutual, which was the country’s largest savings-and-loan institution, federal regulators immediately turned around and sold much of the company to J.P. Morgan Chase for $1.9 billion in a deal that will create the nation’s largest bank in terms of deposits. WaMu depositors have nothing to worry about because their cash will be secure, even those with deposits larger than the federally insured maximum. Shareholders, on the other hand, aren’t likely to see any money. The good news out of the “historic two-step,” as the WP describes it, is that the federal insurance fund won’t have to dig into its own pockets to cover WaMu’s deposits, which totaled $188 billion in June.”

“WaMu’s board was “kept completely in the dark” about the deal, and its chief executive, Alan Fishman, was actually in midair when the deal finally came through. Fishman shouldn’t feel too bad, though. He has been on the job for only 16 days and “is eligible for $11.6 million in cash severance and will get to keep his $7.5 million signing bonus,” says the NYT.”

‘And while the failure of WaMu might be the most visible sign of the financial troubles facing the nation, it’s hardly the only one. The NYT reminds readers that even as some people wonder whether the Bush administration is exaggerating the possibility of an economic collapse, “the reality of tight credit already is limiting daily economic activity.” Many analysts continue to fear that unless financial institutions find a way to get rid of their toxic securities, they’re likely to continue to “hoard their dollars and starve the economy of capital,” which could “pin the nation in distress for years.” And we won’t have to wait long. The WSJ ominously warns that “inside markets that are hidden to most Americans … action was unfolding that will soon affect how companies meet payroll, pay vendors and make investments.”

The WP’s Steven Pearlstein writes what TP thinks just might be the most concise and easy-to-understand case in favor of the bailout. Addressing those who are angry at the deal, he writes that we have to make a choice between preventing a financial collapse or teaching Wall Street a lesson, because “you can’t do both at the same time.” Pearlstein even mentions an intriguing idea of how to structure the rescue package “around a new government-owned corporation” but does so to emphasize why it’s important to give the Treasury flexibility. “Just as we entrust generals to fight a war, we are going to have to trust the Treasury to find a way out of this crisis.”
Daniel Politi writes “Today’s Papers” for Slate. He can be reached at todayspapers@slate.com.

Article URL: http://www.slate.com/id/2201006/
Slate
Copyright 2008 Washingtonpost.Newsweek Intera

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1 Comment

  1. The root cause for the necessary emergency bailout seem very interesting. Here is a very informative video:
    http://ca.youtube.com/watch?v=H5tZc8oH–o


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