David Wessel in his A2 “Capital” column in the WSJ says the politics of a homeowner bailout have transformed now that the government has bailed out a big Wall Street firm:

No matter the merits or intellectual distinctions, it is nearly impossible for a politician to explain the following: Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson were willing to risk as much as $30 billion of taxpayer money—without congressional approval—so that J.P. Morgan Chase could buy Bear Stearns cheap at an auction in which it was the sole bidder. But a taxpayer-backed rescue of homeowners whose mortgages are worth more than their homes is unwise and unwarranted.

He also says Wall Street should be regulated more heavily since “it’s getting harder to see the line that distinguishes banks and other financial entities… Securities firms today look an awful lot like banks: They, too, are susceptible to runs and, for the good of the system, they can now borrow directly from the Fed.”

The D-word rears its ugly head

The Los Angeles Times goes page one with a look at just how big the financial crisis is, in a story headlined “A New Great Depression? It’s Different This Time.”

Dysfunctional capital markets, frantic central banks, stressed-out consumers, fear and uncertainty—all are alarming echoes of the global economic cataclysm of the 1930s…
On the surface, there are disquieting parallels between economic conditions in the early 1930s and those of today. There is the popping of enormous asset bubbles—stocks then, housing now.

And, as in the Great Depression, the financial system is in disarray. It was symbolized back then by the failure of thousands of banks, mostly small, local outfits—2,300 in 1931 alone. The parallel today is the crippling of onetime giants such as Bear Stearns Cos., Countrywide Financial Corp. and Ameriquest Mortgage Co.

Very few expect an utter catastrophe like the Great Depression to occur, but the Times uses some faulty analogies to come to its conclusion that one is unlikely. It compares unemployment rates between now (4.8 percent) and 1933 (25 percent) without noting that back then it took four years from the start of the crisis to plunge to that level.

And it notes that the international economy was crippled in the 1930s, but is fine today. The problem with both of these points is that the effects of any financial crisis take some time to mature—the current one is still in the crib, having begun in earnest about seven months ago.

It also doesn’t mention the more-intriguing parallels between the current mess and what triggered the Japanese depression of the 1990s, which was much milder than the Great Depression but nasty enough that the country’s still struggling with its effects nearly twenty years after it began. The Nikkei stock average peaked at 38915.87 in 1989. It’s worth less than a third of that today, at 12,260.44.

The econony sucks, basically

In economic news, the WSJ fronts a story saying that U.S. airlines are facing another round of restructuring after rebounding in the last couple of years. The headwinds of high oil prices and a slowing economy will result in the industry losing a combined $1.5 billion this year. For the life of us we still can’t figure out why anyone would invest in the airline business.

The Journal also says on A2 that another struggling American industry—the auto business— is preparing for a “worsening slump.”

A Bloomberg poll of economists expects today’s report on economic leading indicators to be negative for the fifth-straight month, the longest such stretch since recessionary 1990.

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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 rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.