A New Optimism Emerges

The Wall Street Journal tops its front page and the New York Times leads its business coverage with better-than-expected earnings at Ford, which reported yesterday that in the first quarter the automaker experienced a net loss of $1.4 billion with revenue falling 37 percent to $24.8 billion, meaning it would not need a government bailout. Meanwhile, the Washington Post and the Financial Times highlight the still-undisclosed results of bank stress tests and the likelihood that some banks will need to raise more capital at the behest of the government.

Ford's (F) financial situation is improving, the NYT says. Compared with last year's fourth quarter, which saw a net loss of $5.5 billion, the automaker is in shape to ride out the recession without dipping into government funds. Following the earnings report, Goldman Sachs analyst Patrick Archambault wrote to clients that Ford has enough money to last through at least 2010 and upgraded his rating on the company this week to buy. "Unlike GM, we do not foresee bankruptcy at Ford," Archambault wrote.

The WSJ focuses on how an "uncontrolled bankruptcy reorganization" at GM (GM) and Chrysler, which is reportedly imminent, could greatly affect Ford's business "by taking down their shared networks of suppliers and dealers." Friday, Ford CEO Alan Mulally said, "[T]he health of the supply base is probably the most critical issue as the government helps GM and Chrysler restructure." The paper reports that according to an unnamed source, Ford has made a list of "critical suppliers" to determine which it would prop up in the event that problems at its peers' organizations take them down, even in a managed bankruptcy.

The government yesterday told 17 large banks at the Federal Reserve the results of their stress tests, which determine the solvency of the institutions in the next two years. The WP learned that at least one bank, though it doesn't know which one, was told it would have to raise more capital. Cue the FT, which reports that in fact Citigroup (C) was informed that it might "need more capital beyond a planned conversion of preferred shares into common stock that will give the government a 36 per cent shareholding." Some of the banks that underwent the stress tests will be asked to "improve the quality of their capital" by upping their amount of common equity.

According to the WP, "banks required to raise money have several months to find private investors before they are forced to accept federal aid"—and increased oversight, particularly in matters involving executive compensation. Also, the government has decided not to release the evaluations until the week of May 4, and the Federal Reserve yesterday "disappointed many investors by declining to disclose even the standards it is using to evaluate the banks," the paper writes.

Bloomberg and Reuters report that the finance ministers and central bankers of the G7 have changed their tune dramatically from just a couple of months ago, saying that the global economy might've seen the worst of it already and that there could the beginnings of a " 'weak' economic recovery" in the latter half of the year. However, careful not to sound too assured (or assuring), they did stress that a full recovery may still be a ways away and what is going on right now is a slowing down of the pace of decline—a slowing down of the slowing down, Reuters says. In a closing communiqué, the leaders emphasized that they would continue to intervene as much as necessary to "ensure the soundness of systemically important institutions" and restore lending.

Indices reacted positively to Friday's spate of good news, Bloomberg reports. The Standard & Poor's 500 Index rose 1.7 percent to 866.23, "trimming losses at the end of its first weekly drop in almost two months," Bloomberg says. The Dow Jones Industrial Average gained 119.23 points, or 1.5 percent, to 8,076.29. "Almost four stocks climbed for each that fell on the New York Stock Exchange." However, the S&P 500 ended the week down 0.4 percent as concerns about rising credit losses triggered a 4.3 percent drop April 20.

The WSJ takes readers leisurely into the world of the Gates (as in Bill Gates) family and explores the circumstances that birthed a "boy who appeared to gain the intellect of an adult almost overnight." The story puts the spotlight on 83-year-old Bill Gates Sr., who is co-chair of his son's $30 billion philanthropy, the Bill & Melinda Gates Foundation, and has authored a short book on his "thoughts on life," to be published next week. The best anecdote, and the one the article leads with, is one in which a young Bill Gates Jr. "was having a particularly nasty argument with his mother at the dinner table. Fed up, his father threw a glass of cold water in the boy's face."

"Thanks for the shower," the young Gates snapped.