By Daniel Politi
The New York Times leads with the Obama administration’s busy Sunday, when officials went on a charm offensive to try to convince private investors to participate in the government’s long-awaited effort to remove troubled assets from banks’ balance sheets. Treasury Secretary Timothy Geithner will officially unveil the plan’s details today, but officials were already out in full force yesterday to motivate private investors to take the handsome government subsidies and buy up the troubled assets. The Washington Post leads with key administration officials making it pretty clear that the White House isn’t too happy about the idea of recovering bonuses through taxes. Although some of the administration’s top economic officials were careful to emphasize that the public has a right to feel angry about the bonuses, they said it’s not a good idea to use the tax code to target a small group of people.
The Wall Street Journal leads its world-wide newsbox with Christina Romer, the chairwoman of the White House Council of Economic Advisers, saying that she’s “extremely confident” the U.S. economy will rebound within the next year. Republicans strongly disagree with this rosy diagnosis. The Los Angeles Times leads with a look at how Mexican drug cartels have become important players in the lucrative business of smuggling illegal immigrants into the United States. By taking over a business that had previously been operated largely by independent coyotes, drug cartels have made it more violent and dangerous. So far, Washington has largely ignored this side of their operations, preferring to focus on drug trafficking. USA Today leads with an Army inspector general’s report that found the rules to determine whether a soldier is fit for combat are so confusing that they increase the likelihood that “soldiers who do not meet medical deployability requirements may be deployed in violation of one or more policies.” The Army insists it’s working on improving the process to ensure that everyone who gets sent to a combat zone meets all of the medical requirements.
Some investors are optimistic about joining forces with the government to buy up troubled assets, but others have been quick to tell administration officials that they’re reluctant to participate due to recent controversy over the bonus payments at American International Group. The NYT talks to three heads of investment firms, who say the terms sound appealing (hardly surprising, considering that the government plans to “lend nearly 95 percent of the money for any investment”), but they’re not jumping on the opportunity to participate out of fear of future regulation. Investors are asking the White House to guarantee that it won’t be imposing compensation restrictions for participating firms. Administration officials went on the Sunday talk shows to try to convince Americans that there’s a difference between companies that receive bailout money and investors who are participating in broad government programs. “What we’re talking about now are private firms that are kind of doing us a favor,” the White House’s chief economist said.
Although Wall Street has been anxiously waiting for Geithner’s plan, “the rollout comes at an inopportune time,” notes the WSJ, pointing out that last week’s outrage over the bonuses is making administration officials wary of appearing to pursue a plan that ultimately rewards Wall Street.
Despite all the sweet talking with investors, it’s still unclear exactly how these troubled assets will be valued. Investors said the government still hasn’t quite answered the question of how the prices will be reconciled, given what banks want for their toxic assets and what investors are willing to pay. The Treasury clearly believes these assets are now undervalued and the government plan will help create a market for them. “Over time, by providing a market for these assets that does not now exist, this program will help improve asset values, increase lending capacity by banks, and reduce uncertainty about the scale of losses on bank balance sheets,” Geithner writes in an op-ed piece in the WSJ. Even as the administration works to fight off the current crisis, it’s important to “also start the process of ensuring a crisis like this never happens again,” notes Geithner, who adds that the “lack of an appropriate and modern regulatory regime and resolution authority helped cause this crisis.”
As members of the world’s leading economies prepare for the Group of 20 meeting on April 2, the WSJ fronts an interview with the president of the European Central Bank, who says European countries don’t need to boost their spending in order to fight the downturn. The United States has been trying to convince European leaders to boost spending, but comments by Jean-Claude Trichet are sure to make that task even more difficult. Trichet said that instead of trying to get new spending, governments should be focusing on quickly implementing the policies they already have. “Decisions have been taken; they are very important,” he said. “Let’s do it! Quick implementation, quick disbursement is what is needed.”
The WP fronts a look at how “flex time,” which seemed to be all the rage just a little while ago, is slowly disappearing. When the economy was good, employees were eager to snap up options to telecommute or work different hours to balance their work and family obligations. The anecdotal piece says workers are now giving up these types of perks out of fear that they could give employers a good excuse to lay them off, and many are scared to even bring up the topic during such hard economic times. One expert says there’s a “silent fright” among workers that is reminiscent of how women used to feel like they had to hide their family from employers. “That’s what it feels like we’re returning to. Work as many hours as you possibly can. Make yourself indispensable. Don’t ever complain. Don’t ever ask for anything,” she said.
The LAT fronts the results of a study that found that teenagers who go to a school with a fast-food restaurant within walking distance have a higher probability of being obese. Researchers studied data from ninth graders in California and discovered that if a school has a fast-food outlet within 530 feet, there is a 5.2 percent increase in the incidence of obesity. Older people don’t seem to be as affected by a nearby temptation. “School kids are a captive audience. They can’t go very far from school during lunch, but adults can get in their car and have more choices,” one of the study’s co-authors said.
The LAT fronts, and everyone covers, news that a small, single-engine plane that departed from California to Montana crashed and killed as many as 17 people. A mechanic at a California airport said there were about a dozen children onboard, ranging in age from 6 to 10. They appear to have been on a ski trip.
After reading the leaked details of Obama’s bank rescue plan over the weekend, the NYT‘s Paul Krugman isn’t happy with what he calls a recycling of the Bush administration’s “cash for trash” plan. It almost seems as if the president wants “to confirm the growing perception that he and his economic team are out of touch.” The Obama administration continues to insist that its plan will allow the market to set a fair price for the toxic assets, but the truth is that it’s simply “an indirect, disguised way to subsidize purchases of bad assets.” The bottom line is that the plan simply won’t work because “no amount of financial hocus-pocus” will change the fact that “financial executives literally bet their banks on the belief that there was no housing bubble.” Meanwhile, Obama is risking his credibility. “If this plan fails,” writes Krugman, “it’s unlikely that he’ll be able to persuade Congress to come up with more funds to do what he should have done in the first place.”