The black comedy of the recession-hit American newspaper industry is nowhere more clearly symbolised than by the New York Times's gleaming new skyscraper on the corner of 41st St and 8th Avenue. The newspaper moved from its venerable colossus on Times Square into the Renzo Piano-designed edifice a year ago, amid signs of new vigour and forward-thinking industriousness. Today, it's a move the controlling Sulzberger family have reason to regret.

Over the next three years, $1.5bn in New York Times debt comes due. A big tranche - nearly half a billion - is up for re-financing next May. Yet the firm's share price has halved in a year to a junk-rated $8, valuing the company at just over a billion. That's too little for credit-crunched banks to risk lending against, so the company plans to use its controlling share of the 52-floor building as collateral to raise $225m of the outstanding half billion - a mortgage on a mortage, if you will.

Owning the Times is said to be worth two dinners a year at the White House

But will anyone take it? The US newspaper business is in deep crisis. On Monday, Sam Zell, the real estate mogul who took an $8.3bn punt on the LA Times and Chicago Tribune only a year ago, threw in the towel and sought bankruptcy protection for Tribune Co, the papers' parent. Last week the Miami Herald was put up for sale. The intersecting problems of unserviceable debt, advertising revenue that's falling at 25 per cent a year and tumbling circulations bring casualties almost daily.

Even the glossy magazine industry, once thought to be immune because luxury advertising could never decline, is about to be pummelled with rumours circulating that industry leader Conde Nast's advertising income will be off 30 per cent by next spring. So far, the only solution has come from James Macpherson at Pasadena Now, who is outsourcing news coverage to Bangalore at $7.50 for 1,000 words - an idea to make Western journalists sick.

But it's the New York Times - without question the most finely produced and reported newspaper in the world - that stands as the industry's bellwether. Fine journalism aside, however, it is easy to bash: in the latest incidents of apparent mismanagement, the company not only spent $500m on the new headquarters but lost nearly $350m on the old Times Square building by selling it on a 2004 valuation.

With the Times's finances in an obvious mess, even previous potential white knights like Mayor Mike Bloomberg (who is seeing his financial data business suffer with Wall Street bank collapses and job losses) or Rupert Murdoch (who is now having to convince shareholders that buying the Wall Street Journal at a 67 per cent premium was a good idea after all) have backed off.

The one hope is Carlos Slim Helu, the reclusive Mexican businessman with the reputation as the wealthiest man in the world. Earlier this year Slim bought a 6.4 per cent stake in the Times for a knockdown price of $130m. Slim said his investment was "financial" and he would not be taking an activist role. But for a man whose fortune is valued at $53bn, buying the entire company and its debt would hardly be a hardship and would instantly catapult him to considerable political influence. Owning the Times is said to be worth at least two dinners a year at the White House.

Still, amid talk of the newspaper industry's collapse, its enduring importance is also sometimes apparent. Yesterday, Illinois Governor Rod Blagojevich was arrested by the FBI on corruption charges. Among his duties is the appointment of a senator to replace Barack Obama. US Attorney Patrick Fitzgerald, famous for prosecuting Dick Cheney's chief of staff Lewis Libby, accused 52-year-old Blagojevich of putting a "for sale sign" on the selection process.

Blagojevich, who denies the charges and says he has "nothing but sunshine hanging over me", was taken into custody just hours after the Chicago Tribune, which has been among the governor's most dogged critics, reported that the FBI investigation into the governor's alleged "pay-to-play" appointment system had been expanded to include Obama's replacement.

The indictment also alleges that Blagojevich threatened to block state financial assistance to Chicago's famous ballpark Wrigley Field - one of the assets of Sam Zell's beleaguered Tribune Co - unless certain editorial writers on the Chicago Tribune critical of Blagojevich were "purged".

"The breadth of corruption laid out in these charges is staggering," Fitzgerald said in a statement. "Blagojevich put a 'for sale' sign on the naming of a United States Senator; involved himself personally in pay-to-play schemes with the urgency of a salesman meeting his annual sales target; and corruptly used his office in an effort to trample editorial voices of criticism."

Early accounts of the investigation suggest the Chicago Tribune itself played an important part in snaring the governor - proof, if any were needed, that while newspapers may be broke, and their content is read increasingly online, they are far from irrelevant. ·