November 9, 2009 Issue Posted October 29, 2009, 5:00PM EST

Executive Summary

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Reid surprised Washington by putting the public option back in the spotlight Chip Somodevilla/Getty Images

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Health-Care About-Face

Just when it seemed to be left for dead, he brought out the defibrillators. Senate Majority Leader Harry Reid (D-Nev.) shook up Washington on Oct. 26 with an announcement that health reform legislation must include a government-funded insurer, the so-called public option, days after the Finance Committee issued a bill without any such plan. Reid's stance placated liberals but angered lots of others. He admitted he would need all 58 Democratic senators and two Independents to immunize the bill against a filibuster, since no Republicans back a public plan. And rounding up 60 votes doesn't seem likely. Independent Senator Joseph Lieberman of Connecticut immediately said he would join with the GOP to fight a public plan, and at least three moderate Democrats have expressed reservations. The drama now shifts to the House, where members say their version of health reform could move to the floor in early November.

—Edited by Harry Maurer & Cristina Lindblad

Housing on the Mend

Home prices continue to inch up the stairs from the basement. In August, for the third month in a row, the Standard & Poor's/Case-Shiller 20-City Home Price index improved, and it now stands 3% higher than its May low—though it's still 30% below its peak in May 2006. Sales numbers in September, on the other hand, weren't so stellar. The National Association of Realtors said that existing-home sales reached their highest level since July 2007, rising by 9.2% from a year earlier. But sales of new homes were surprisingly slow, down 7.8% from last September, said the Census Bureau and the Housing & Urban Development Dept. Meanwhile, consumer confidence, after dipping in September, slid further in October, with the Conference Board's index falling 5.7 points, to 47.7. While the index remains 89% above its February bottom, it has essentially stalled over the past five months.

—Edited by Harry Maurer & Cristina Lindblad

Too Big to Fail?

Call it the AIG (AIG) problem: How to prevent huge and complex financial institutions from holding the taxpayer hostage when they begin to totter. The Treasury and Representative Barney Frank (D-Mass.), the powerful chairman of the House Financial Services Committee, on Oct. 27 unveiled legislation that would give the Fed and other regulators the authority to keep close tabs on potentially dangerous firms and dismantle them quickly and cleanly if they fail. The bill proposes that financial houses with more than $10 billion in assets share the cost of doing so. Although wrangling over the details is certain—some lawmakers balk at giving the Fed much more power—industry has broadly backed the concepts, and Congress is desperate to show progress in addressing the causes of the meltdown.

—Edited by Harry Maurer & Cristina Lindblad

A Giant Bank Shrinks

ING Group (ING), saved by $14.9 billion in bailout cash last year, is being cut down to size. Under pressure from the European Union, the once-mighty global player will shrink into something closer to a regional Benelux bank. ING said on Oct. 26 that it would split off its insurance business, including ING Direct USA, from its banking unit. ING will also raise $12 billion to pay back bailout money. The bank figures its balance sheet will shrink to 45% of its $2 trillion peak by 2013. The news pummeled ING's stock, which fell 18% on Oct. 26. That dragged down the shares of other bailed-out banks such as Britain's RBS and Lloyds Banking Group (LYG) on speculation that they, too, could be nudged to break up.

—Edited by Harry Maurer & Cristina Lindblad

Peltz Comes Calling

Diamonds. Hamburgers. Ketchup. What do they have in common? They've all drawn intense interest from activist investor Nelson Peltz, who bought stakes and pushed for change at Tiffany (TIF), Wendy's (WEN), and H.J. Heinz (HNZ), among other companies. Now Peltz has a new target, money manager Legg Mason (LM), whose mutual funds performed disastrously during the downturn, causing customers to decamp. Peltz started buying shares heavily this summer through his hedge fund, Trian Fund Management, and having accumulated a 4.3% stake, he demanded and won a board seat. In exchange, Peltz agreed not to buy more than 9.9% of the company.

—Edited by Harry Maurer & Cristina Lindblad

More Galleon Fallout

The charges of insider trading at Galleon Group have touched another prominent business figure: Hector Ruiz, former CEO of Advanced Micro Devices (AMD). On Oct. 27, The Wall Street Journal reported that Ruiz is the executive who federal authorities say tipped off Danielle Chiesi about the timing and structure of last year's massive reorganization of AMD. Chiesi, who worked at New Castle Funds, is one of six people facing charges in the Galleon matter. Ruiz, who has not been charged and declined to comment, is now chairman of GlobalFoundries, the chip manufacturer that AMD spun off with help from Abu Dhabi's investment arm.

AMD Exec's Loose Lips Help Sink Galleon

—Edited by Harry Maurer & Cristina Lindblad

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