P2JW2630D7-5-A00100-10000F7FFFF ***** C M Y K Composite 09/19/2008 AZ,CX,EE,FL,MW,NC,NE,NY,PN,RM,SA,SC,SW,WE BG,BM,CH,CK,DA,DE,DM,DN,FW,HL,HW,LG,NA,NM,OR,PA,RI,RO,SB,SH,TU,UT,WO P2JW2630D7-5-A00100-10000F7FFFF Weekend Journal: Dancing on Gehry’s Rooftops DJIA 11019.69 s 410.03 3.9% HHHH $2.00 F R I DAY, S E P T E M B E R 1 9, 2 0 0 8 ~ VO L . C C L I I N O . 6 8 * * * * * NASDAQ 2199.10 s 4.8% NIKKEI 11489.30 t 2.2% DJ STOXX 50 2569.45 t 1.1% 10-YR TREAS t 7/32, yield 3.436% OIL $97.88 s $0.72 GOLD $892.70 s $46.10 EURO $1.4305 YEN 105.65 U.S. Drafts Sweeping Plan to Fight Crisis As Turmoil Worsens in Credit Markets Paulson Briefs Congress on Idea to Buy Bad Assets From Banks, Insure Money-Market Funds; Stocks Rebound Sharply By Deborah Solomon And Damian Paletta Bailout Brigade Governments have spearheaded unprecedented efforts to prop up financial markets this month. Infusions and amounts, in billions Sept. 7: U.S. says it will shore up Fannie Mae and Freddie Mac (not trading day) Aug. Sept. 3 29 2 $200 5 8 $180 $85 9 10 11 12 15 16 17 18 11600 11400 European Pressphoto Agency 11200 11000 The Dow Jones Industrial Average, daily data 10800 Source: WSJ Market Data Group (DJIA); central banks; published reports 10600 President George W. Bush arrives to make a statement regarding the economy in the Oval Office Colonnade at the White House Thursday. ban might extend, but it could apply only to financial stocks. Details of the planwere still being worked out Thursday night andcouldbedeliveredtoCongress in “hours,” said Senate Majority Leader Harry Reid of Nevada. The administration had been taking a patchwork approach to the financial crisis, putting out fires as they ignited. The new moves represent an effort to take a more systematic approach, after a spiral of bad debts, credit down- grades and tumbling stocks brought down venerable names from investment bank Lehman Brothers Holdings Inc. to insurance giant American International Group Inc. Banks have grown unwilling to lend to one another, a sign of extreme stress, because financialmarketsworkonlywheninstitutionshavefaithineachother’s ability to meet their obligations. (See articles on Pages A9 and C1.) Word of the plan came the Please turn to page A10 Street Scenes: The Players What’s News– Remaking Financial World i i i i Business&Finance World-Wide he government is working on a sweeping series of programs that could mark the biggest intervention in financial markets since the 1930s. At the center of the potential plan is a mechanism to take bad assets off balance sheets of financial companies. Federal insurance for investors in money-market mutual funds is also being considered. A1 n The SEC plans to temporarily ban investors from making bets on stock declines, joining a similar move by the U.K. to halt short selling. A1 Bush sought to reassure the public about markets. In a live-TV statement on the financial crisis, the president defended the government’s recent moves and said “markets are adjusting.” His comments had little immediate effect on financial markets, though stocks surged on suggestions the White House is considering bigger bailout steps. Democrats blasted Bush’s comments as insufficient. A6, A7 McCain said he would fire the SEC chairman if he were president, blaming Cox for poor handling of the crisis. T The Fed expanded its currency-swap lines by $180 billion and unveiled new programs to give foreign central banks access to dollars. A4 n Actions by central banks did little to alleviate lending markets as banks held onto the newly injected funds. A9 n n The Dow industrials soared 410.03 points, or 3.9%, to 11019.69, boosted by reports that a plan is being considered to bail out troubled banks. C1 n Russia unveiled an expanded $120 billion rescue package for the nation’s financial system as fears of an economic slowdown grew. A8 n China plans to buy shares and take other measures to halt a stock-market slide and boost investor sentiment. A8 Turmoil in the U.S. financial sector is showing signs of spreading to other industries. The index of leading indicators fell by 0.5% in August. A3 n n AIG’s new CEO said in an interview that he hopes to keep large insurance operations intact after selling assets to pay back the government. A3 n Citigroup is considering making a bid for WaMu, while other suitors are reviewing the thrift’s books. C1 Morgan Stanley CEO John Mack went on the offensive, lobbying for intervention and rule changes targeting short selling. Shares rose 3.7%. C3 n 7 n n House Democrats are mov- ing to include a narrowed list of stimulus proposals in a stopgap spending bill. A13 n Israel’s foreign minister began efforts to build a coalition government after her party chose her as prime minister. A16 n Pakistan’s foreign minister said the U.S. hadn’t informed Islamabad before it launched a drone missile attack. A17 n The White House is reviewing its Afghan strategy as violence spreads, Gates said. Gov. Schwarzenegger and leaders of California’s Democratrun Legislature struck a deal to end a budget standoff. A12 n The Pentagon said a malfunction likely caused a helicopter crash in southern Iraq that killed seven U.S. soldiers. A17 n since the 1930s. And do it quickly. They hail from all parts of the financial world, a banker from North Carolina, a London financial executive, the U.S. Treasury chieftain who himself once ruled a Wall Street powerhouse. Along with small cadre of other men, they are struggling to shore up the foundations of Wall Street, on the fly. It’s too early to know whether thechoices they’ve made—rapidfire acquisitions of Wall Street The FDA proposed rules on regulating genetically engineered animals, likely paving the way for their sale as food. A12 n Buffett’s MidAmerican Energy is paying $4.7 billion for Constellation Energy. B1, C12 n A U.S. psychologists’ group was apparently text-messaging shortly before last week’s fatal crash near Los Angeles. A11 voted to ban members from taking part in interrogations that violate international law. A13 n Crane operators will have to pass a certification test under proposed rules, OSHA said. A13 Follow the news all day at WSJ.com CONTENTS Campaign ’08 .....A14,15 Currents .......................A18 Health ...................................B10 Heard on the Street ...C12 Letters to Editor ...A22 Media & Marketing ..B7 Opinion ....................A21-23 Stocks in the News ..C5 Technology .................B10 U.S. News ..............A11-13 Weather Watch ......B12 Who’s News .................B4 World News ..A16,17,20 s Copyright 2008 Dow Jones & Company. All Rights Reserved icons MerrillLynch & Co. and Lehman Brothers Holdings Inc., government seizure of one of the world’s biggest insurers, American International Group Inc.—were the right ones. Rarely are decisions on the trillion-dollar scale made so hastily and with wasn’t going to check the balance of his retirement account. “The less you know,” he said, “thebetteryoufeel.There’snothing wrong with working in your 80s.” The crisis gripping global finance is filtering into the everyday lives of Americans, spawning confusion and denial, avarice and anxiety, stoicism and black humor. For some, it has meant putting off retirement or long- By Jennifer Levitz, Ilan Brat And Nicholas Casey Bradford Roth, the 56-year-old chairman of a Chicago law firm, had a clear strategy for dealing with Wall Street’s gyrations when he stopped by a local Fidelity Investments branch Wednesday. He’d make a deposit to his cashmanagement account, but he so little vetting. Now, the government appears ready to embark on yet another attempt to stem the financial carnage. The Treasury Department and the Federal Reserve are considering ways to Please turn to page A7 By Kara Scannell, Deborah Solomon, Craig Karmin and Gregory Zuckerman stock-market slides in years, according to people briefed on the proposal. The SEC was convening a late-night commission meeting to consider several items, some of which could be announced as early as today, a person familiar with the matter said. It’s unclear whether the halt will be limited to a certain number of financial stocks or how long it would last. Following a late meeting with Congress, Mr. Cox said, “We’re going back to work tonight and in fact the entire commission is in formal meeting right now.” He declined to comment on the temporary ban on short sales. In short selling, traders borrow shares of stock and sell them, hoping the price of the shares declines and they can profit by buying them back at a lower price. Short sellers have become scapegoats for the big declines in the share prices of weakened companies including Lehman Brothers Holdings Inc. and American International Group Inc., though it is unclear whether they were the cause of the declines. Earlier Thursday, the U.K.’s Financial Services Authority said it would ban short selling in financial stocks until January. The FSA said it would review the ban in 30 days. The FSA also announced additional disclosure requirements from hedge funds of short sales if a certain threshold is met. U.K. Treasury Chief Alistair Darling, who was involved in the FSA’s decision, said in a statePlease turn to page A20 planned moves. For others, it meant moving their money out of stocks and bonds and into foreclosed homes, gold, livestock or even just having a good time. “I’ve been talking to my banker and telling him to get all my money out of the market,” said Pat Hurley, a 57-year-old electrical contractor from Phoenix. “I’m really worried—I think the stock market is going to get worse and worse,” he said. Mr. Hurley has $440,000 in his retirement fund, a sizable chunk but not nearly the million dollars he was hoping for. “I finally got back to where I was in 2001 and now the stock market’s diving again,” he said. BobConrad,a59-year-oldbudget director at the U.S. District Court in Dallas, sees his chance Please turn to the next page The House Takes a Hit as Casinos Ban Cigarette Smoking i n n North Korea appears to be taking a harder line in nuclear talks with its leader’s health in question, U.S. officials said. A16 Henry Paulson,right, and JohnThainon the NYSEtradingfloor during betterdays. The Securities and Exchange Commission prepared an aggressive assault against short-sellers, saying it would temporarily prevent investors from making bets on stock declines in an attempt to stem some of the worst Wall Street’s Ills Seep Into Everyday Lives n Palin’s husband refused to testify in the Alaska Legislature’s investigation of his wife’s alleged abuse of power. A12 n A commuter-train engineer > By Susanne Craig, Carrick Mollenkamp, Deborah Solomon and Dan Fitzpatrick n At least 25 militants with suspected al Qaeda ties were arrested in the deadly attack on the U.S. Embassy in Yemen. n Freddie Mac said Lehman hasn’t made principal payments of $1.2 billion plus interest on short-term loans. A4 n Dow Jones said Kraft Foods will join the Dow Jones Industrial Average on Monday, replacing AIG. C5 History has thrown a handful of men together this week with a task that they themselves might have brushed off as unthinkable just days ago: Give the U.S. financial system its biggest makeover Associated Press i 7 i i Several States Are Kicking the Habit, But Gamblers Leave Slots for Nicotine By Tamara Audi JOLIET, Ill.—At one point during her Saturday evening on Harrah’s casino barge anchored outside Chicago, Tensi Beavers needed a cigarette. But Illinois had recently banned smoking in casinos. So Ms. Beavers did something that is making gambling executives choke on their smoke-free casino air: She walked away from her game. “I like to play and smoke, but you can’t, so…,” Ms. Beavers said, clutching a pack of cigarettes and searching for the smokers’ lounge, located just off the casino floor but too far from the nearest slot machine to gamble. To players like Ms. Beavers, smoking and gambling go hand in hand—cigarette in one hand, slot-machine button in the other. “You take a pull and hope you hit it,” Ms. Beavers said. with epa estimated 20 mpg cit y 7 Now, that ritual is being upended in several states where casino smoking bans have been implemented or are on the way. The bans are hitting casinos at a time when larger economic woes— such as airline flight reductions, cash-strapped consumers and the credit crisis—are driving down casino revenues from Las Vegas to Connecticut. “The smoking ban is having a major impact,” said Tom Swoik, head of the Illinois Casino Gaming Association. Casinos in Illinois have posted double-digit declines in revenue since the smoking ban took effect in January. Casino officials say steep revenue losses threaten to force staff cuts, and drastically reduce state tax revenues generated by casinos. They point to a 2005 research paper by the Federal Reserve Bank of St. Louis that says Delaware’s “racinos”—racePlease turn to page A20 FiNaLLy, a FULL - siZe LUXURy sUV cONFideNt eNOUgh tO taLK aBOUt FUeL eFFicieNcy. iN Limited aVaiLaBiLit y. cadiLLac.cOm/hyBRid © 2008 GM Corp. All rights reserved. Cadillac ® Escalade ® P2JW2630D7-5-A00100-10000F7FFFF i 7 4 Central banks offer credit U.S. bails out AIG SEC Is Set To Issue Temporary Ban Against ShortSelling 5897646 WASHINGTON—The federal government is working on a sweeping series of programs that would represent perhaps the biggest intervention in financial markets since the 1930s, embracing the need for a comprehensive approachtothe financial crisis after a series of ad hoc rescues. At the center of the potential plan is a mechanism that would take bad assets off the balance sheets of financial companies, saidpeople familiar with the matter, a device that echoes similar moves taken in past financial crises. The size of the entity could reach hundreds of billions of dollars, one person said. Another proposal would be the creationof federal insurance for investors in money-market mutual funds, coverage akin to the insurance that currently safeguards bank deposits. The move is designed to stem an outflow of funds as consumers start to worry about even the safest of investments, a signofhowthecrisisisspreadingto Main Street.Thereis $3.4 trillion in money-market funds outstanding. In addition, the Securities and ExchangeCommissionissettoproposeatemporarybanonshort-selling. It’s not clear how broadly the Composite CYAN BLACK YELLOW MAGENTA