The FT reports that a New York official wants to regulate the $62 trillion credit-default swap market.

And Wachovia said it is under investigation by states and the federal government and being sued for its activities involving the frozen auction-rate securities market. The Journal says the market is shaping up to be a legal land mine for Wall Street.

The Los Angeles Times says “investors are increasingly throwing in the towel” on mortgage lenders in Southern California. Which is saying something, since the towel-throwing has been going on for more than a year now. IndyMac was the latest with bad news yesterday, reporting a $184 million loss and suspending its dividend and preferred-share payments—and it wasn’t even in subprime, preferring the relative “safety” of Alt-A mortgages (“liar loans” made to borrowers with better-than-subprime credit).

Here’s an analyst talking about IndyMac’s CEO, and it’s the Quote of the Day:

“Mike said today that they’ve turned the corner,” Cannon said. “But he’s said that so often that by now they’ve gone around the block at least once.”

The Journal says the bank may have to raise capital. Get in line.

Menthol missing from cigarette-regulation bill

The NYT on A1 looks at the legislation winding through Congress that would let the Food and Drug Administration regulate tobacco for the first time. The bill would ban flavored cigarettes like clove and cinnamon, the Times says, but let menthol smokes go and that raises public-health concerns for the black community, three-quarters of whose smokers like their cigarettes minty fresh.

The paper says banning menthol is off the table because it represents more than a quarter of the $70 billion in cigarettes sold in the U.S. (every year, we presume), something public-health officials call a “cave-in to the industry.” One large study found that menthol smokers are 30 percent less likely to quit smoking than regular smokers and 89 percent more apt to relapse.

We suppose that by now, in this eighth year of the Bush administration, we should be inured to its Orwellian-ness, but this is still remarkable:

Despite the support of Mr. Kennedy and 56 co-sponsors in the Senate, the legislation faces some determined opposition from tobacco-state lawmakers who resist industry regulation. And the White House has said it opposes the legislation, arguing that F.D.A. regulation could create the false impression that tobacco is safe.

Can’t they come up with anything better than that?

In a sidebar, the Times looks at the role marketing has played in the African-American taste for menthol cigarettes. It notes a report that magazine advertising for menthol smokes was 76 percent of the total in 2006, up from just 12 percent eight years earlier.

Makes as much sense as AOL-Time Warner

Hewlett-Packard is near a $13 billion deal for Electronic Data Systems, in a bid to take on IBM in the fast-growing computer-services business, the Journal says in its lead A1 story.

Fast-growing businesses are clearly deal-fertile territory, but this one has some glaring problems. The WSJ notes that H-P “already is a sprawling conglomerate” that would have to “digest a large company with a starkly different culture than its own” while the NYT on C1 says:

The business has long been rough—with competitors eking out low profit margins—but it has become particularly challenging in recent years as companies award contracts to outsource work to overseas companies, notably in India, that pay lower wages.

Brazil, behemoth

Brazil became the latest country to form a so-called sovereign-wealth fund, this one worth up to $20 billion. The Journal puts the news on page one and expands on it to say the country is entering the “front rank of new economic powers.”

Brazil has recently seen its debt upgraded to investment grade, discovered a giant oil pool off its shores, and is growing at 5 percent, aided by a stable currency, “a key ingredient that had long eluded it,” the WSJ says.

What Pearlstine-to-Bloomberg means

The NYT on its Business Day front says the appointment of former Time and Wall Street Journal editor Norman Pearlstine to a new job at Bloomberg signals that “the news business may be in the doldrums, but the competition over business news could be heating up.”

The paper says Bloomberg means to beef up its journalism, which already boasts 2,300 employees in 135 bureaus, by adding Pearlstine as “chief content officer.” Its news business has twice as many workers as it did seven years ago. The WSJ puts the news on B8 and says Pearlstine has a “mandate to look for opportunities for growth for the financial-news titan’s news service and television, radio, magazine and online products.”

Corporate tax payments lag

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.