The Chicago Tribune this morning reports on an insidious new phenomenon: online payday loans. One woman, Rochelle Parker, landed an 842 percent APR loan, and a succession of loans to pay off the earlier ones. But that’s nothing says the Trib: some of these loans’ rates can hit 2,000 percent.

The paper says some states have gone after the operations, but have had difficulty tracking them down, and it reports that even the payday-lending association (wouldn’t you love to work for them) is calling for regulation, though they also blame the proliferation of sites on the crackdowns on the industry. Many sites are, of course, total scams as opposed to simple rip-offs.

People like Parker are falling through one of the newest trapdoors in the cash-strapped economy—online payday loans. Such loans typically were the province of payday loan storefronts that cater mostly to the working poor and low-middle-income workers, short on cash until payday. Now online loans are spreading to the middle class as a result of rising gasoline and food prices, tightening credit, the subprime mortgage fallout and the ease of home computer access to the Web.

Maybe this industry (or at least its usurious practices) can finally be put to sleep now that it’s affecting the middle class, not just the poor—which the Trib says is increasingly the case.

The Trib tells us that Illinois protects its citizens by capping payday loans at a low, low 400 percent annual interest rate, but the industry is back on its heels—New Hampshire last week capped loans at 36 percent and Ohio is trying for 28 percent. West Virginia bans them entirely.

Be careful what you wish for

It looks like Rupert Murdoch won’t get his paws on Newsday after all. His Wall Street Journal puts the news inside the Marketplace section after a weekend scoop that News Corporation had backed out of the bidding.

The $650 million bid by Cablevision is $70 million more than Rupert wanted to pay and is extra good news for seller Tribune Company, which needs to pay down its crippling debt load—and fast. The Journal reports that despite recent reports, the deal doesn’t include Newsday’s real estate.

While a Newsday deal will ease Tribune’s debt load, the company will lose an important asset. The daily and its related businesses had nearly $500 million in revenue last year, about 10% of Tribune’s revenue, according to the company’s annual report filed with the Securities and Exchange Commission.

I’m no fan of Murdoch, but it’s unclear if he’d be worse than Cablevision’s notorious Dolan family, which Newsday itself reports that a deal would “create a regional news and advertising giant with a powerful grip on Long Island.

The New York Times looks at the company and the family on C1, noting up high that “Like many actions taken by the Dolans…” their bid “has resulted in a collective head scratch.” It quotes an anonymous executive who’s done business with the family before saying “their interest in Newsday could not be entirely economic ‘because there’s not a business rationale to spend what they’re willing to spend.’”

The WSJ quotes a media consultant saying Cablevision could add 100,000 papers to Newday’s 380,000 circulation, but is skimpy on how exactly that would happen in this disastrous environment for newspapers. It says Murdoch is slashing costs at the money-losing New York Post and raising newsstand prices.

The Times gets a little rumor-y for its kicker, but it brings the Quote of the Day:

A cynical theory for the Dolans’ recent deal-making is making the rounds of Wall Street. Under this line of thinking, the family is so angered that shareholders killed the buyout that the Dolans now consider the company their own private fief.

“That’s ridiculous,” Mr. Moffett said. “No one’s going to say, ‘I’m going to light up some of my billions just to spite shareholders.’ ”

Separately, the Times on C1 takes a look at what’s up with newspaper-killer Craig Newmark of Craigslist. To sum up: he’s squabbling with minority shareholder eBay, doesn’t think he’s a newspaper killer, and is expanding into ever smaller communities.

We would be truly shocked if this were true

The Journal reports on page two that a House of Representatives committee is investigating whether energy markets are being manipulated by speculators. It will particularly focus on the doings of investment banks and hedge funds in pushing the price of oil up to a record price of nearly $126 a barrel.

The politicians are restless as gas nears $4 a gallon, but this little investigation sounds a lot better than the Great Gas-Tax Holiday Pander of 2008.

Cold, hard cash

The Times on its front page reports a trend among about a dozen states to supplement low-wage workers’ income with direct cash payments. The programs seem something like the successful earned-income tax credit, but with more immediate payments, though the paper doesn’t make the obvious comparison.

The new strategy reflects, in part, a growing concern about the challenges facing the poor nearly 12 years after Congress overhauled welfare laws. While states have drastically reduced their welfare caseloads, research suggests that they have been far less successful in helping people find and keep jobs that lift families out of poverty.

The trend has also been driven by new federal rules that require states to engage 50 percent of welfare recipients in work-related activities. By offering payments to people already working, states are also trying to ensure that they meet federal mandates and avoid steep fines.

That’s evident by states like Michigan and Massachusetts, which aren’t even trying. The former is giving $10 a month and the latter can only come off of $7 a month. Compare that to poor state Arkansas, which is giving payments of $204 monthly plus bonuses.

But we can think of another way of supplementing low-wage workers’ incomes: Raise the minimum wage.

To make and omelette…

The Journal on page three says Democrats risk a political backlash from their efforts to bail out struggling homeowners. Many Republicans, including the Bush administration, say some of the efforts will end up “rewarding bad behavior.”

It’s a good point. How do you separate those who made dumb decisions and got in over their heads but now get a government-backed mortgage-principle write-off from those who bought the house they could afford and get nothing but a couple of less foreclosures in their neighborhood?

The public is split. “If you’re the Secretary of Bailouts, and people come in and show you that they’re worthy of being helped out, everybody will have a story,” says Robert Krance, 64 years old, a Houston physician and McCain backer. “I don’t know how you can create a reasonable, enforceable method for deciding who should be helped.”

A hands-off approach by the government is “the right thing to do,” agrees Jeff Cohu, a 40-year-old professor attending a McCain rally last week. “The market will readjust faster and better than the government could.”

A Gallup poll found just 56 percent want the government to intervene to save people’s homes versus 42 percent who don’t and the inevitable 4 percent or so who don’t understand the question.

AIG could lose its airplane-leasing unit

The WSJ scoops on page one that American International Group, the insurer that just reported its second consecutive billion-dollar loss, has some restless natives in one of its better units.

Its International Lease Finance Corporation unit, which leases airplanes, is getting nailed along with the rest of the company for the mother ship’s mistakes in the credit and derivatives markets. That has it agitating for a spin-off or sale, and the Journal says that could lead shareholders to demand other businesses be separated from the empire, too. Other than that, the paper doesn’t do a good job explaining why this story merits page-one placement, especially compared to the more interesting, better-reported, and better-written C1 story on the fall of hedge fund Peloton Partners (see below).

Inflation conflagration

Signs of inflation continue to spread around the globe. A key measure of producer prices in Britain surged last month to a 7.5 percent annual rate, the fastest in twenty-two years, while overall inflation in China hit 8.5 percent.

China is curbing its banks’ lending in order to cool down its economy and inflation pressures, Bloomberg reports, while Britain is considering an end to its interest-rate cuts, something the Federal Reserve recently signaled in the U.S., in large part because it wanted to avoid further exacerbating inflation.

Central banks around the world are grappling with faster inflation and slowing growth. In Asia, Bank Indonesia on May 6 raised interest rates for the first time in more than two years and the Reserve Bank of India last month twice ordered lenders to set aside more reserves.

Meat prices climbed 48 percent in April from a year earlier, the fourth straight monthly acceleration. Food prices rose 21 percent in March…

Wheat has climbed 63 percent in the past year and rice, a staple for half the world, has more than doubled.

Even nuke plants aren’t immune to inflation. The Journal reports on its Marketplace cover that prices to build nuclear power plants, which after three decades in the wilderness are back in vogue because of sky-high energy costs, will be double or triple what was estimated not long ago. They’ll cost a whopping $5 billion to $12 billion apiece. There just aren’t any easy fixes.

Plumbing Peloton’s plunge

The Journal on its Money & Investing front looks at the collapse of the Peloton hedge fund in what appears to be in WSJ parlance a “busted leder,” a story aimed at the front page that didn’t quite make it (and a phenomenon with which we’re intimately familiar).

The paper gets behind the scenes at Peloton, which lost $17 billion “in a matter of days” but whose founder blames it on lily-livered banks who bailed when his mortgage investments “temporarily” declined in value rather than hold firm and wait for a recovery. The Journal says the story illustrates the delicate nature of the rough-and-tumble hedge-fund world:

There is a widespread weakness in the hedge-fund business: Highflying managers sometimes fail to fully factor in broader risks, such as what happens when troubled banks pull back the borrowed money many funds need to make their investments. Peloton was particularly susceptible because it borrowed heavily to boost returns. For every dollar of client money, Peloton had borrowed at least another nine dollars to buy some bonds.

Stunningly, the firm’s investments were up 88 percent on the year last November, but three months later it would be all over after it couldn’t sell assets to cover banks’ calls for more collateral.

It’s hard reporting on the opaque, unregulated world of hedge funds and we need more efforts like this.

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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.