Harold Maass of The Week The Best of Today's Business

NEWS AT A GLANCE

Bailout plan comes into focus

Congressional leaders and the Bush administration are getting close to a deal on the massive Wall Street bailout plan, with the White House agreeing to restrictions on executive pay at participating firms. Sticking points include whether to phase in the $700 billion and if the government gets any equity in the firms it bails out. (AP in Yahoo! Finance) President Bush is convening a meeting with key players in Congress, including presidential candidates Sens. John McCain and Barack Obama. (Reuters) Money market rates rose as banks hoarded cash, in a sign that the markets think the bailout package could be delayed or diluted. (Bloomberg)

Washington Mutual looks for a buyer

Washington Mutual, the top U.S. savings and loan, has approached private equity funds about a potential takeover, after banks started to lose interest, The Wall Street Journal reported. One possible deal includes Carlyle Group and Blackstone teaming up with Texas billionaire Gerald J. Ford. (Reuters) Federal regulators have also stepped in to try to help broker a deal for the ailing bank. Washington Mutual's position became more tenuous after Standard & Poor's downgraded its shares further into junk status. (The New York Times) Washington Mutual says it's "well capitalized." The potential suitors "are all kind of playing a wait-and-see game right now," said Joe Heider at Dawson Wealth Management. (AP in CNNMoney.com)

Oracle enters hardware market

Oracle, the No. 2 software maker, is entering the hardware market, pairing up with Hewlett-Packard to make servers. The HP Oracle Exadata server and separate Database Machine, designed to run on Oracle software, will help Oracle push into the expanding data warehousing market. (San Francisco Chronicle) Database software has been a big money-maker for Oracle -- it controls about half the $17 billion market -- helping it survive a broader falloff in business software. Oracle said it is selling servers to help speed up performance for companies running Oracle database software. "Anything you can do to reduce the cost of plumbing is a big win for customers," says Bruce Richardson at AMR Research. (BusinessWeek.com)

U.S. prestige, intact so far

The fact that the U.S. needs to rescue Wall Street in a $700 billion bailout might, you'd think, lead other countries' business communities to lose faith in the U.S. financial system. Surprisingly, it hasn't, at least so far. That's partly because many foreigners see the U.S. more in Silicon Valley and Hollywood than in Wall Street. It's also because if the U.S. model fails, there isn't another good one ready to take its place. "When it comes to democracy and free market economics, the U.S. is still the original article," says Ulf Mark Schneider, the CEO of German health care provider Fresenius. "Nobody wants to see it fail." (BusinessWeek.com)

BEST COLUMNS OF THE DAY

Buffett and the bailout

Economists "overwhelmingly agree" that we "need quick, bold action" to stave off a deep recession, says David Leonhardt in The New York Times. But few of them agree that Henry Paulson's plan is the right action. A main concern is that taxpayers don't get any stake in the firms their dollars help. Paulson says that demanding ownership stakes would keep healthier banks from participating, keeping credit markets paralyzed. But he has a problem: Warren Buffett, who convinced relatively healthy Goldman Sachs to sell him a stake with very healthy returns. Paulson could be right, but he needs to sell his plan better. Otherwise "maybe the American taxpayers should be asking Warren Buffett to be negotiating on their behalf."

About that $700 billion . . .

The U.S. needs to "unlock the capital markets," and quickly, says Chad Gray in Seeking Alpha, but let's be honest about what our actions will cost us. The "Paulson & Co. talking points" now assure us that the bailout ultimately won't really cost us $700 billion, and that "Heck, taxpayers could turn a tidy profit!" The logic is that the assets we buy will have greater value than what we pay for them, because they're tied to "a representative cross-section of American real estate," both good mortgages and bad ones. That logic is flawed. "When Paulson opens up his financial waste treatment plant," the debt thrown in will be the "most putrid" assets out there. The $700 billion is an expense, not an investment.

GOOD DAY FOR: Portable fantasies, as the boom in smart phones and other mobile devices is creating a new source of fantasy-sports revenue, with people able to check on their team players anytime they want. "It's like you've combined the old macho notion of knowing more than anybody about sports with Dungeons and Dragons," said professor Robert Thompson at Syracuse University. "It turns out that's a pretty good marriage." (Reuters)

BAD DAY FOR: Running on empty, after U.S. gasoline inventories fell to their lowest level since 1967, in the wake of supply disruptions from Hurricanes Ike and Gustav. Five refineries are still closed from Hurricane Ike, leading to long lines at gas stations throughout the South and Ohio. In 1967, the U.S. consumed 5 million barrels of fuel a day; today, daily U.S. consumption is 9 million barrels. (Reuters)

NOTED: General Electric, widely seen as a U.S. economic bellwether, cut its annual earnings forecast, citing "unprecedented weakness and volatility" in the financial services market. (Bloomberg) GE also halted a stock buyback. With the U.S. economy slowing, it's normal for a broad conglomerate like GE to warn, said Philippe Gijselst at Fortis Bank in Brussels. "I fear that there will be more of the same in the industrial sector in a not too distant future." (Reuters)

This column was written by Peter Weber and edited by Harold Maass of TheWeek.com.