The Wall Street Journal goes page one with a story about the Federal Deposit Insurance Corporation running a bank that issued predatory subprime mortgages. The paper says hundreds of borrowers have subsequently lost their homes.

The banking regulator seized an Illinois bank in 2001 and continued to let it make loans for months while trying to sell it.

The FDIC then sold a big chunk of the loans to another bank. That loan pool was afflicted by the same problems for which regulators have faulted the industry: lending to unqualified borrowers, inflated appraisals and poor verification of borrowers’ incomes, according to a written report from a government-hired expert. The report said that many of the loans never should have been made in the first place.

The bank that bought the shoddy loans is now suing the government.

It’s a big black eye for the FDIC that undermines its credibility as a regulator at a time when it could really use it.

Food companies stick it to customers

The Financial Times says on page one that food companies are planning significant price hikes. It says the price of Jimmy Dean sausage, for instance, may rise by 20 percent later this year. Kraft says it will push up its prices by 12 percent to 13 percent and up to a quarter for some cheeses.

Food inflation is already up more than 5 percent in the last year and the increases have been picking up speed. Meat prices hit a two-decade high recently and that’s prompting big cutbacks in consumption, the most in twenty-seven years.

It comes, of course, at a time when the economy is slowing generally and more people are losing their jobs or getting hours cut back, which has raised worries about a bout of seventies-style stagflation.

Eat, or drink, but not both

The New York Times on A1 reports that countries in the Middle East are facing a serious dilemma about whether to funnel more of their already limited water supplies to farming in order to deal with soaring food costs.

The paper says the countries import much more of their food than they grow and the rich ones are preparing schemes to buy land in places like Pakistan specifically to grow food for themselves. And the oil boom gives them plenty of money to spend:

Djibouti is growing rice in solar-powered greenhouses, fed by groundwater and cooled with seawater, in a project that produces what the World Bank economist Ruslan Yemtsov calls “probably the most expensive rice on earth.”

Please, Starbucks, don’t make me walk an extra block for coffee!

The Journal for some reason puts on A3 a story reporting that Starbucks customers are begging—begging!—the chain not to shutter their beloved coffee outlets in its round of 600 closings.

In towns as small as Bloomfield, N.M., and metropolises as large as New York, customers and city officials are starting to write letters, place phone calls, circulate petitions and otherwise plead with the coffee company to change its mind.

Seems a little flacky for A3.

S&L bailout was chump change

The WSJ has an interesting Ahead of the Tape column today on its Money & Investing section front.

The paper points out the folly of having financial institutions “scrounging” for money every quarter because they are significantly under-capitalized, and says the next step in the ordeal may well be something like the prospect of a savings-and-loan style Resolution Trust Corporation, which bailed out and sold off hundreds of failed banks. That cost taxpayers $76 billion.

Potential losses in this crisis are far larger, with estimates of $1 trillion or more being bandied about. Taxpayers won’t be on the hook for anything close to that. But their bill could make the $124 billion they paid, in total, for the S&L crisis seem a bargain.

Rethinking investments in the U.S.

The Times on C1 looks at how the Fannie Mae and Freddie Mac crisis could affect how foreign countries invest in the U.S.

International investors own $1.5 trillion worth of Fannie and Freddie mortgages, which until now were considered quite safe.

Now that the two companies are at risk, how their rescue is handled will ultimately test the world’s faith in American markets. It could also influence the level of interest rates and weigh on the strength of the dollar for years to come, analysts say… Also at stake is Americans’ future ability to gain access to credit. If foreign companies and governments abandon United States investments, home, auto and credit card loans will be much more difficult to come by.
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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.