The Federal Reserve is considering a major new intervention in the US financial system. Under the proposed plan, the Fed would purchase vast amounts of unsecured short-term debt, known as commercial paper. The move could essentially turn the Fed into a direct lender to American companies and increase the risk to taxpayers on top of last week’s $700 billion Wall Street bailout. The Fed also says it will make available $900 billion in loans to commercial banks. Just last month the Fed had capped its banks loans at $150 billion. In San Antonio, President Bush said the White House is addressing the crisis.
President Bush: “A lot of people here in Texas and around the country are not pleased with the government having to take the steps they took. Their question is, I pay my bills, I pay my mortgage, why — why are you helping Wall Street? And the answer is because had we not done anything, people like the folks behind me would be a lot worse off. We’ll make sure, as time goes on, this doesn’t happen again. In the meantime, we got to solve the problem.”
The new moves come as markets worldwide continue to plunge. On Monday, the Dow dropped 3.6 percent, closing beneath the 10,000 mark for the first time in four years. In Russia, the stock market dropped 19 percent, its biggest decline since the fall of the Soviet Union. Major stock market indexes in London, Frankfurt and Paris all fell by at least seven percent. And stocks in Latin America and other emerging economies had what the New York Times calls “their worst collective tumble in a decade.”
On the campaign trail, Senators Barack Obama and John McCain square off tonight in a town-hall debate in Nashville, Tennessee. Republicans have intensified attacks on Obama as polls show McCain losing ground in key battleground states, including Ohio. On Monday, Republican vice-presidential nominee Sarah Palin continued to invoke Obama’s connection to Bill Ayers, a former member of the militant 1960s antiwar group, the Weather Underground.
Alaska Gov. Sarah Palin: "I am just so fearful that this is not a man who sees America the way that you and I see America: as the greatest source for good in this world. I am afraid this is someone who sees America as imperfect
enough to work with a former domestic terrorist who had targeted his own country."
Obama was eight years old when Ayers was a Weather Underground member. Today Ayers is a tenured professor and leading expert on education reform. Ayers and Obama have few ties beyond living in the same Chicago neighborhood and having once served together on the board of two nonprofits. Ayers also hosted an event for Obama when he first ran for the State Senate. As Palin spoke about Obama, an audience member yelled out “kill him.” It’s unclear if Palin heard the remark, but she did not respond.
Top McCain aides have recently admitted to trying to steer the campaign’s focus away from the economy. In an interview with the New York Daily News, an unnamed McCain strategist said, “If we keep talking about the economic crisis, we’re going to lose.” And on Saturday, McCain adviser Grep Strimple told the Washington Post, “We are looking forward to turning a page on this financial crisis and getting back to discussing [Obama’s] aggressively liberal record and how he will be too risky for Americans.” On Monday, Obama responded during a campaign stop in Asheville, North Carolina.
Sen. Barack Obama: "I was a little surprised over the past couple of days to hear Senator McCain say, or Senator McCain’s campaign say, that we want to turn the page on discussions about the economy and a campaign — a member of Senator McCain’s campaign saying today that if we keep on talking about the economic crisis, we’ll lose. I’ve got news for the McCain campaign, the American people are losing right now. They’re losing their jobs, they’re losing their healthcare, they’re losing their homes, they’re losing their savings. I cannot imagine anything more important to talk about than the economic crisis."
McCain, meanwhile, was in New Mexico. He accused Obama of failing to respond to the economic crisis.
Sen. John McCain: "Even after he refused to lift a finger to prevent this crisis, when the crisis hit, he was missing in action. He didn’t even start making calls to round up votes until after the rescue bill failed in the House and the markets crashed. We continue to see the price of delay today as the markets continue to fall. Today, the Dow has fallen below 10,000, and yet members of his own party said they felt no pressure to vote for the bill. Why didn’t Senator Obama work to pass this bill from the start? Why did he let it fail and drag out this crisis for a full week before doing a thing to help pass it?"
In other campaign news, a McCain aide has disclosed the Republican candidate’s health plan would result in a major reduction to spending on Medicare and Medicaid. The Wall Street Journal reports the plan could result in cuts of up to $1.3 trillion over ten years. The cuts would be necessary to keep a McCain campaign pledge for a “budget neutral” health plan. Medicaid and Medicare provide government-backed healthcare to seniors, poor families and the disabled. The programs have already seen sharp funding cuts under the Bush administration.
On Capitol Hill, the House Oversight Committee has held the first of a series of promised hearings on the financial crisis. Richard Fuld, the CEO of the failed investment bank Lehman Brothers, appeared before skeptical lawmakers.
Richard Fuld: "But I wake up every single night thinking what could I have done differently? And it’s been going on. What could I have done differently? In certain conversations, what could I have said? What should I have done? And I have searched myself every single night."
Fuld went on to disclose he personally took home more than $300 million since 2000, including $60 million in bonuses. He also admitted Lehman executives were assured their bonuses would not be affected, even as the company sought a federal bailout. Three departing executives were given “special payments” of $20 million. House Oversight Chair Henry Waxman criticized Fuld and other Lehman executives.
Rep. Henry Waxman: "I accept the fact that you are still haunted every night, as you said, by the wonder, wondering whether you could have done something different, whether this could have had a different ending. But I must say, that statement you made that the system works because you lost the value of some of your shares really doesn’t sound right to me, because the system that you lived under gave you a very, very generous reward when your company was highly leveraged and everything was going up, and that’s the American way, but when the leverage meant that you were taking huge losses when the values were not holding up, you still got substantial compensation."
Fuld also denied misleading investors, despite being shown internal documents describing panic at Lehman in the months leading to its collapse.
The Supreme Court will continue to consider the appeal of the Georgia death row prisoner Troy Anthony Davis. The court gave Davis a last-minute reprieve less than two hours before his scheduled execution last month. It was expected to issue a final ruling on Davis’s appeal on Monday but instead said it will deliberate for at least two more sessions. An African American, Davis was convicted for the 1989 killing of a white police officer, Mark Allen McPhail. But since the trial, seven of the nine non-police witnesses have recanted their testimony. There is no direct physical evidence tying Davis to the crime scene. And three witnesses claim another man later admitted to the killing.
Meanwhile, the Supreme Court has rejected a new trial for the journalist and former Black Panther Mumia Abu-Jamal. But the decision leaves in place a lower court ruling that grants Abu-Jamal a new sentencing hearing because of flawed jury instructions. If re-sentenced, Abu-Jamal will face either death or life in prison without parole. Abu-Jamal was convicted for the 1981 killing of a white police officer following a controversial trial before a predominantly white jury.
And today marks the seventh anniversary of the US attack on Afghanistan. An internally displaced Afghan man reflected on the date, saying the US occupation has brought disunity and hardship.
Afghan resident: "After the arrival of the Americans in Afghanistan, we can see they have brought disunity. They have made each part of Afghanistan a battle field. We want unity between the people and stability in our county. None of these are possible as long as the Americans are present. The Americans say 'we are fighting the Taliban,' but we see them continuing to kill and bomb civilians. Why?"