When the Model Fails

First Takeaway: For banks, the potential stigma of accepting a government handout has quickly been turned around to become the potential stigma of not accepting a handout.

"There's a perception in the market that the government is actively picking winners and losers...we wanted it well-known in the market that we're on the list of survivors," Roy Whitehead, the chief executive of Washington Federal tells the Wall Street Journal.

Elizabeth Williamson of the Journal reports that as many as 1,800 banks and other institutions could apply for a share of the Treasury Department's $700 billion Tarp program.

The Financial Times leads with the growing expectations that the European Central Bank and the Bank of England will follow other central banks and slash interest rates.

Last week, Mary Williams Walsh of the New York Times shone some light on the black box that is still American International Group. This morning, Carrick Mollenkamp, Serena Ng, Liam Pleven, and Randall Smith of the Wall Street Journal ask an equally important set of questions: Did A.I.G. really understand credit default swaps? And did it put too much faith in the computer model used to calculate their risk?

The article profiles Gary Gorton, a 57-year-old finance professor at Yale School of Management, who devised the giant insurer's models.

At a now infamous December 2007 investors conference, when Martin Sullivan, then chief executive of A.I.G., and Joseph Cassano, chief executive of A.I.G.-Financial Productions played down the potential hit to the company from its C.D.S exposure.

At that conference, Gorton explained that A.I.G.'s models "are all extremely simple" that he had come up with his own estimates of the risk to A.I.G. Garbage in, garbage out?

Andrew Ross Sorkin and Michael de la Merced of the New York Times point to a number of recent buyouts that have filed for bankruptcy and warn of the coming mountain of deal debt that will be coming due.

And time may be running out on the scariest buyout of them all. Bill Vlasic and Micheline Maynard of the Times report that Treasury has turned down G.M.'s request for $10 billion to help finance a merger with Chrysler.