Afternoon Trio

Bloomberg: Paulson Says Fed Lending Plan to Help Consumer Credit

Fox News: Amber Alert Issued in Michigan for 3 Girls Whose Mother Was Found Dead

Voice of America: Opposition Gains Ground in Venezuela

Afternoon Trio

ESPN: BREAKING: Fulmer agrees to step down as Vols coach

Lexington Herald-Leader: Kentucky favors status quo in delegation

Wall Street Journal: Circuit City to Retrench

Evening Trio

IBD/TIPP Tracking Poll: Surge for McCain in poll

AP: Palin wants more funding for special-needs kids

FDIC: Georgia's Alpha Bank & Trust fails

Evening Trio

Bloomberg: Paulson Plans to Invest in `Thousands' of U.S. Banks

AP: Erratic winds hinder, help S. Calif. firefighters

eWeek: FCC Clears Path for Free Wireless Broadband

Morning Trio

AP: World stocks soar on bank rescue plans

Wall Street Journal: OpenGate Will Acquire TV Guide

Fox Sports: Stairs emerges as Phillies' unsung hero in Game 4

Afternoon Trio

AP: US moves to get rescue plan started; stocks rise

Voice of America: Critics of US-North Korea Nuclear Deal Say US Concedes Too Much

Courier-Journal: Developing: Derby winner Big Brown out of Breeders’ Cup

Evening Trio

AP via Fox News: Draft Declaration: Europe Would Guarantee Inter-Bank Lending

UPI: Pope canonized four as saints

Courier-Journal: Daniel Orton commits to Kentucky

Morning Trio

Fox News: Panel: Palin Abused Her Power in Firing of Commissioner

MarketWatch: Paulson gives new detail of bank ownership plan

Fox News: Meltdown! Space-Station Toilet Breaking Down Again

Red Alert: The G-7 -- Geopolitics, Politics and the Financial Crisis

From www.stratfor.com:

The finance ministers of the G-7 countries are meeting in Washington. The first announcements on the meetings will come this weekend. It is not too extreme to say that the outcome of these meetings could redefine how the financial markets work, certainly for months and perhaps for a generation. The Americans are arguing that the regime of intervention and bailouts be allowed to continue. Others, like the British, are arguing for what in effect would be the nationalization of financial markets on a global scale. It is not clear what will be decided, but it is clear that this meeting matters.

The meetings will extend through the weekend to include members of the G-20 countries, which together account for about 90 percent of the global economy. This meeting was called because previous steps have not freed up lending between financial institutions, and the financial problem has increasingly become an economic one, affecting production and consumption in the global economy. The political leadership of these countries is under extreme pressure from the public to do something to solve — or at least alleviate — the problem.

Underlying this political pressure is a sense that the financial class, people who run global financial institutions, have failed to behave responsibly and effectively, and have therefore lost their legitimacy. The expectation, reasonable or not, is that the political system will now supplant these managers and impose at least a temporary solution. The finance ministers therefore have a political mandate, almost global in scope, to act decisively. The question is what they will do?

That question then divides further into two parts. The first is whether they will try to craft a single, global, integrated solution. The second is the degree to which they will take control of the financial system — and inter-financial institution lending in particular. (A primary reason for the credit crunch is that banks are currently afraid to lend — even to each other.) Thus far, attempts at solutions on the whole have been national rather than international. In addition, they have been built around incentivizing certain action and increasing the available money in the system.

So far, this hasn’t worked. The first problem is that financial institutions have not increased interbank lending significantly because they are concerned about the unknowns in the borrower’s balance sheet, and about the borrowers’ ability to repay the loans. With even large institutions failing, the fear is that other institutions will fail, but since the identity of the ones that will fail is unknown, lending on any terms — with or without government money — is imprudent. There is more lending to non-financial corporations than to financial ones because fewer unknowns are involved. Therefore, in the United States, infusions and promises of infusion of funds have not solved the basic problem: the uncertain solvency of the borrower.

The second problem is the international character of the crisis. An example from the Icelandic meltdown is relevant. The government of Iceland promised to repay Icelandic depositors in the island country’s failed banks. They did not extend the guarantee to non-Icelandic depositors. Partly they simply didn’t have the cash, but partly the view has been that taking care of one’s own takes priority. Countries do not want to bail out foreigners, and different governments do not want to assume the liabilities of other nations. The nature of political solutions is always that politicians respond to their own constituencies, not to people who can’t vote for them.

This weekend some basic decisions have to be made. The first is whether to give the bailouts time to work, to increase the packages or to accept that they have failed and move to the next step. The next step is for governments and central banks to take over decision making from financial institutions, and cause them to lend. This can be done in one of two ways. The first is to guarantee the loans made between financial institutions so that solvency is not an issue and risk is eliminated. The second is to directly take over the lending process, with the state dictating how much is lent to whom. In a real sense, the distinction between the two is not as significant as it appears. The market is abolished and wealth is distributed through mechanisms created by the state, with risk eliminated from the system, or more precisely, transferred from the lender to the taxing authority of the state.

The more complex issue is how to manage this on an international scale. For example, American banks lend to European banks. If the United States comes up with a plan which guarantees loans to U.S. banks but not European banks, and Europeans lend to Europe and not the United States, the integration of the global economy will very quickly shatter, leading to significant limitations on international trade, currency convertibility and so on. You will nationalize economies that can’t stand being purely national.

At the same time, there is no global mechanism for managing radical solutions. In taking over lending or guarantees, the administrative structure is everything. Managing the interbank-lending of the global economy is something for which there is no institution. And even with coordination, finance ministries and central banks would find it difficult to bear the burden — not to mention managing the system’s Herculean size and labyrinthine complexity. But if the G-7 in effect nationalize global financial systems and do it without international understandings and coordination, the consequences will be immediate and serious.

The G-7 is looking hard for a solution that will not require this level of intrusion, both because they don’t want to abolish markets even temporarily, and more important, because they have no idea how to manage this on a global scale. They very much want to have the problem solved with liquidity injections and bailouts. Their inclination is to give the current regime some more time. The problem is that the global equity markets are destroying value at extremely high rates and declines are approaching historic levels.

In other words, a crisis in the financial system is becoming an economic problem — and that means public pressure will surge, not decline. Therefore, it is plausible that they might choose to ask for what FDR did in 1933, a bank holiday, which in this case would be the suspension of trading on equity markets globally for several days while administrative solutions are reached. We have no information whatsoever that they are thinking of this, but in starting to grapple with a problem of this magnitude — and searching for solutions on this scale — it is totally understandable that they might like to buy some time.

It is not clear what they will decide. Fundamental issues to watch for are whether they move from manipulating markets through government intrusions that leave the markets fundamentally free, or do they abandon free markets at least temporarily.

Another such issue is whether they can find a way to do this globally or whether it will be done nationally. If they do go international and suspending markets, the question is how they will unwind this situation. It will be easier to start this than to end it and state-controlled markets are usually not very attractive in the long run. But then again, neither is where we are now.

Afternoon Trio

Voice of America: Bush Attempts to Reassure Americans as G-7 Finance Ministers Gather in Washington

Bloomberg: Crude Oil Drops Below $80 as Equities Slump on Credit Freeze

Sports Network: Phils try to go two up on Dodgers in NLCS

Evening Trio

AP: White House: AIG execs' retreat `despicable'

Fox News: McCain Seeks Game-Changer With Housing Policy

AFP: Russia completes withdrawal from Georgia buffer zones

Afternoon Trio

MarketWatch: Fed, major central banks slash rates

AP: Lawmaker's son indicted in Palin e-mail hacking

Business First of Louisville: AT&T announces nearly $500,000 in grants for Kentucky schools

Evening Trio

Bloomberg: Bernanke Signals Fed May Cut Rates as Crisis Deepens

Christian Post: Dobson Gives Green Light to GOP Ticket Ahead of Debate

AP: `Mail Goggles' might prevent e-mail regrets

Evening Trio

AP: Bailout signed, now it's wait and see its effect

Hugh Hewitt: With One Month To Go: Why McCain Will Close and Win

The Economist: Christianity in China: Sons of heaven

Evening Trio

Albert Mohler: Are We Promised Prosperity?

Voice of America: US Says North Korea Continues Steps to Restart Nuclear Program

AP via Sporting News: Wildcats aim for upset against No. 2 Tide

FLASH: HOUSE PASSES BAILOUT

The US House has passed the bailout by a vote of 263-171. Even though I did not like the bailout, I'll have to live with it. Here is how Kentucky's congressmen voted (Click here to see the full yeas and nays):

YEA:

2nd District: Ron Lewis (R)
3rd District: John Yarmuth (D; voted against original version on Monday)
5th District: Hal Rogers (R)

NAY:

1st District: Ed Whitfield (R)
4th District: Geoff Davis (R)
6th District: Ben Chandler (D)

Evening Trio

Google Finance: BREAKING: Dow closes down almost 350 points

Bloomberg: Lawmakers Switching Sides to Support Financial-Rescue Package

Gospel for Asia: Three More Christians Killed in Orissa

Monster Bailout Vote LIVE Blogging

The Senate is about to vote on the monster bailout...post your thoughts.

9:07pm: The vote begins.

9:21pm: 74-25 in favor of the monster bailout. While I personally oppose a bailout, I believe that something needs to be done to fix the economy.

9:25: The previous vote was on the Dodd Amendment. The vote right now is on final passage.

9:39: Looks like they will have enough votes to pass the final bill.

Afternoon Trio

WorldNetDaily: VP debate moderator Ifill releasing pro-Obama book

MarketWatch: Senate to vote Wednesday on rescue package

CBN News: Hindu State: Purging Christians from Orissa

Morning Trio

MarketWatch: Asian stocks end mixed amid bailout review hopes

USA Today: Nashville pastors shun national pulpit protest

WYMT: Crusade Brings Hundreds Together