Slate: Inching Closer to Nationalization

Inching Closer to Nationalization
By Daniel Politi
Posted Tuesday, Feb. 24, 2009, at 6:33 AM ET

The New York Times leads with a look at how the Obama administration is facing “mounting pressure” to put more money into troubled companies that have already received billions from Uncle Sam. American International Group, the insurance giant, is now saying its $150 billion rescue won’t be enough and is asking for billions more. The requests, which have also come from two of Detroit’s Big Three and Citigroup, “reflect just how hard it is to stanch the flow of losses as the economy deteriorates.” The NYT also mentions, and the Washington Post devotes its lead story to, the White House making it clear that it’s willing to acquire a controlling ownership stake in troubled banks that can’t raise enough private capital. The move could “culminate with the government nationalizing some of the country’s largest banks,” declares the Post.

The Los Angeles Times leads with, and the Wall Street Journal gives big play to, yesterday’s plunge in the U.S. stock market as major indexes fell to levels not seen since 1997. The Dow Jones industrial average dropped 3.4 percent and the Standard & Poor’s 500 index fell 3.5 percent as the losses spread to sectors that had been doing relatively well amid the ongoing turmoil. USA Today leads with a new poll that found a majority of Americans support plans to help struggling individuals but oppose bailouts for companies. Although a slim majority thinks the plan to help homeowners is “unfair,” 59 percent say it is “necessary.” The WSJ leads its world-wide newsbox with President Obama promising that his administration will move to tackle the country’s growing deficit. After holding a “fiscal responsibility summit” with members of both parties, Obama said that “we cannot simply spend as we please and defer the consequences to the next budget.” As the administration prepares to unveil its budget Thursday, the president also announced that the White House will host a summit on health care next week.

The WSJ devotes a front-page piece to AIG’s attempts to get the government to overhaul its $150 billion bailout package. The discussions have been going on since December as AIG is seeking to repay up to $60 billion of the bailout cash with “a combination of debt, equity, cash and operating businesses, such as stakes in AIG’s lucrative Asian life-insurance arms,” details the WSJ. The move would ultimately convert the government from a creditor to a potential owner of AIG. An announcement is expected by Monday, when the company will release its fourth-quarter results that may end up being “one of the biggest year-end losses in American history,” notes the NYT. The deal would help AIG avoid going through a credit rating downgrade, which would force it to make billions of dollars in payments to its partners.

The question of ownership is also at the heart of the discussions over what to do with the nation’s ailing banks. In what the NYT calls an “unexpectedly assertive joint statement, the Treasury Department, the Federal Reserve, and regulatory agencies directly stated that the government might demand a direct ownership stake from banks that can’t raise enough private capital. Whether a bank needs extra capital will be determined by the so-called “stress tests” that the government will begin to perform this week to see whether banks could survive if the economy gets worse. The government still insists that nationalization of the banks would never be their preferred course of action but it seems officials are growing less allergic to the dreaded N-word with each passing day. Officials emphasized that just because the government has a majority stake in a company doesn’t necessarily mean it would get involved in managing its daily operations, although no one is ruling anything out.

USAT’s survey suggests that polls measuring the public’s support for using government money to stabilize banks should be taken with a grain of salt because “attitudes vary depending on the language used.” But there does seem to be strong support to helping individuals, and about 80 percent back new programs to create jobs. Many of USAT’s findings are backed up by polls in the NYT and WP. The WP notes that “large majorities” of Americans support the stimulus package as well as the plan to help avoid more foreclosures while almost 70 percent of Americans oppose giving more money to Chrysler and General Motors.

As Obama prepares to address a joint session of Congress tonight, it is clear that Americans are worried but still have faith in their young president. The NYT reports that 55 percent of Americans say they’re just scraping by, while more than 60 percent say they’re worried that layoffs will directly affect someone in their household in the next year. Despite these concerns, Obama still has plenty of political capital. USAT puts Obama’s approval rating at 62 percent, the NYT at 63 percent, and the WP at 68 percent. The WP highlights that support for Obama among Republicans has decreased and now stands at 37 percent. The NYT notes that the overwhelming majority of Americans think Obama is trying to work with Republicans, and 63 percent say Republicans opposed the stimulus plan for political reasons. A mere 26 percent of Americans trust Congressional Republicans more than Obama to deal with the economy.

In a front-page piece, the LAT becomes the latest paper to note that Obama’s budget will include money for the wars in Iraq and Afghanistan, as well as other expenditures that the previous administration often kept separate. The Bush administration was often criticized for failing to include certain costs in its budget to make the deficit seem smaller. While this new tactic follows Obama’s pledge to make government more transparent, it could also make it easier for the new president to make good on his promise to cut the federal deficit in half during his first term. “By starting with a huge deficit now,” explains the LAT, “he could slash spending in his fourth year.”

When the “fiscal responsibility summit” ended, many Republicans complained Obama has yet to prove that he’s serious about fighting the deficit. While the White House said that the president will make clear that he’s “making hard choices” in his first budget, the NYT states that “early indications do not suggest bold action.” Most of the savings will not come from budget cuts, but rather “from a combination of existing policies and economic assumptions.”

In a front-page dispatch from Pakistan, USAT takes a look at how “the global economic crisis is making combustible countries … even more of a security risk.” Many fear that as Pakistan’s economy deteriorates more will turn against the government and begin to back extremists. “If the economy goes down, the militants benefit,” a Pakistani political analyst said.

Everyone reports that Obama has apparently settled on former Washington Gov. Gary Locke to lead the Commerce Department. Locke, an early supporter of Hillary Clinton in the Democratic primaries, would be Obama’s third choice for the job, as well as the third Asian-American in the Cabinet.

The LAT notes that the average American now watches more than 151 hours of TV a month. Nielsen’s report for the fourth quarter revealed the all-time high figure that translates into about five hours of TV watching a day.

Daniel Politi writes “Today’s Papers” for Slate. He can be reached at

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