September 9, 2008 (Tuesday): Lehman Anxiety Grows; Bailout Is Growing Campaign Issue

Lehman Brothers loses nearly half of its value in the stock market as nervous investors fret that the investment bank is in big trouble and that it won’t be rescued by the federal government. The action came on the eve of Lehman’s scheduled quarterly report, which investors expect to show a big loss. The fear ripples throughout the stock market sending the Standard & Poor’s 500 stock index down 3.4%, more than wiping out the previous day’s gains, which were sparked by the government takeover of mortgage giants Fannie Mae and Freddie Mac. Still, some market watchers said the government would be reluctant to let Lehman fail. (For more on this news, click here.)

During a town hall event in Lebanon, Va., Democratic presidential hopeful Barack Obama says the policies of John McCain and Sarah Palin don’t represent true change. “You can put lipstick on a pig, but it’s still a pig,” Obama says. The comment quickly becomes the focus of a kerfuffle. Many interpret it as a direct swipe at Alaska Gov. Sarah Palin, and Republicans criticize Obama for attack politics. The Obama campaign says the remark did not reference Palin’s own “lipstick” joke at the GOP convention. (For more on this news, click here and here.)

In a letter to Treasury Secretary Henry Paulson and the head of the Federal Housing Finance Agency, Fannie and Freddie’s new regulator, Sen. Barack Obama urges the reevaluation of golden-parachute payments for Daniel H. Mudd of Fannie Mae and Richard F. Syron of Freddie Mac. The men, both ousted from their posts as CEO, are eligible for as much as $24 million in severance and other benefits. Obama’s letter and similar comments by Sen. John McCain, the Republican nominee, suggest that the bailout is increasingly inserting itself into the presidential campaign. (For more on this news, click here.)