Post by kelvin on Sept 24, 2008 22:09:34 GMT -5
www.theglobeandmail.com/servlet/story/RTGAM.20080924.wbanksbernake25/BNStory/Business
BARRIE MCKENNA
September 24, 2008 at 10:08 PM EDT
WASHINGTON — Public outrage over a $700-billion (U.S.) bank bailout and dire economic warnings have sent George W. Bush and the two men who want his job scrambling to forge an 11th-hour compromise that bridges the interests of Wall Street and Main Street.
The U.S. President made a rare prime-time television address last night to sell his plan to a skeptical nation, assuring Americans it's not a bailout of greedy Wall Street bankers, but a lifeline for a shaken U.S. economy.
“Our entire economy is in danger,” Mr. Bush warned in his first prime-time appearance in more than a year. Without quick action by Congress, the country would face a “long and painful” recession and financial panic that would endanger the savings and economic prospects of all Americans, he said, acknowledging that, as a believer in “free enterprise,” he's not happy.
“But these are not normal circumstances,” Mr. Bush said. “The market is not functioning properly. There has been a widespread loss of confidence, and major sectors of America's financial system are at risk of shutting down. … Without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold.”
He cited an epidemic of bank failures, a further plunge in home and farm values, lost savings, business bankruptcies and soaring unemployment.
Mr. Bush invited Republican candidate John McCain and Democrat Barack Obama to a White House summit Thursday to help reach a compromise.
Hours before the U.S. President's pitch, Mr. McCain abruptly suspended his run for the White House to deal with the crisis and pulled out of a planned debate Friday with rival Mr. Obama.
“We're running out of time,” the Arizona senator said as he appealed for bipartisanship to fix the mess.
The surprise move comes as new national and key state polls show Mr. Obama taking a clear lead amid heightened concern about the economy.
Mr. Obama joined Mr. McCain in endorsing a compromise on the bailout plan, including setting limits on bloated banking-industry salaries and beefing up protection for taxpayers. But the Illinois senator refused to stop campaigning and said he stands ready to debate as planned at the University of Mississippi in Oxford, Miss.
“This is exactly the time when the American people need to hear from the person who, in approximately 40 days, will be responsible for dealing with this mess,” Mr. Obama said. “It is going to be part of the president's job to deal with more than one thing at once.”
The campaign theatrics underscore how the financial crisis has become the defining issue in the Nov. 4 vote. And the candidate Americans trust most to deal with problem is likely to be the next president.
Mr. Obama also laid out a list of principles that should guide Congress and the Bush administration as they craft a revamped bailout.
“The clock is ticking,” Mr. Obama said. “We have to act swiftly, but we have to also get it right.”
Mr. Obama, echoing other Democrats, set out four add-ons to the bailout – independent oversight of how the money is spent, curbs on executive salaries at banks that dump their soured assets on the Treasury, stricter protection for taxpayers and direct help for homeowners struggling to pay their mortgages.
Meanwhile, Federal Reserve Board chief Ben Bernanke and Treasury Secretary Henry Paulson spent a second day on Capitol Hill selling the bailout to a dubious Congress. Mr. Bernanke warned that the mess on Wall Street is quickly seeping through to Main Street, restricting loans to consumers and businesses alike, and posing a direct threat to the real economy.
“The choking up of credit is like taking the lifeblood out of an economy,” Mr. Bernanke explained to members of the joint economic committee of Congress.
Job losses are mounting, disposable incomes are poised to fall, consumers are spending less and business activity is grinding down, Mr. Bernanke said as he laid out his grimmest outlook yet on the economy.
The credit problem isn't just an “inconvenience,” Mr. Bernanke added, responding to questions from members of Congress. He argued that Americans' retirement savings and everyone's standard of living are now at risk.
Resistance to the plan to buy up soured mortgage securities remains intense as members of Congress respond to anger among Americans about the bailout. Congress is pushing for tighter banking regulation, perhaps limits on executive salaries at banks that take advantage of the plan, and limiting its size.
As the congressional debate drags on, Mr. Bernanke said the economic outlook is getting worse.
“When worried lenders tighten credit, then spending, production and job creation slow,” Mr. Bernanke explained.
“The intensification of financial stress in recent weeks, which will make lenders still more cautious about extending credit to households and business, could prove a significant further drag on growth.”
Mr. Bernanke, who as an academic specialized in the Great Depression, stopped short of likening the current situation to the Dirty Thirties. But he said it's most certainly the worst financial crisis in the post-Second-World-War era.
Mr. Bernanke said he shares Americans' unease about the plan, including the perception that the government is rewarding those who created the mess and indebting future generations of Americans.
But he said lawmakers should focus first on easing credit conditions and saving banks before tackling the longer-term problem of re-regulating Wall Street. Tighter regulation of hedge-funds derivatives and investment banking and the like will require months of work by Congress and should not be tied directly to the bailout, he said.
“It would be very costly to Main Street if this system broke down.”
BARRIE MCKENNA
September 24, 2008 at 10:08 PM EDT
WASHINGTON — Public outrage over a $700-billion (U.S.) bank bailout and dire economic warnings have sent George W. Bush and the two men who want his job scrambling to forge an 11th-hour compromise that bridges the interests of Wall Street and Main Street.
The U.S. President made a rare prime-time television address last night to sell his plan to a skeptical nation, assuring Americans it's not a bailout of greedy Wall Street bankers, but a lifeline for a shaken U.S. economy.
“Our entire economy is in danger,” Mr. Bush warned in his first prime-time appearance in more than a year. Without quick action by Congress, the country would face a “long and painful” recession and financial panic that would endanger the savings and economic prospects of all Americans, he said, acknowledging that, as a believer in “free enterprise,” he's not happy.
“But these are not normal circumstances,” Mr. Bush said. “The market is not functioning properly. There has been a widespread loss of confidence, and major sectors of America's financial system are at risk of shutting down. … Without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold.”
He cited an epidemic of bank failures, a further plunge in home and farm values, lost savings, business bankruptcies and soaring unemployment.
Mr. Bush invited Republican candidate John McCain and Democrat Barack Obama to a White House summit Thursday to help reach a compromise.
Hours before the U.S. President's pitch, Mr. McCain abruptly suspended his run for the White House to deal with the crisis and pulled out of a planned debate Friday with rival Mr. Obama.
“We're running out of time,” the Arizona senator said as he appealed for bipartisanship to fix the mess.
The surprise move comes as new national and key state polls show Mr. Obama taking a clear lead amid heightened concern about the economy.
Mr. Obama joined Mr. McCain in endorsing a compromise on the bailout plan, including setting limits on bloated banking-industry salaries and beefing up protection for taxpayers. But the Illinois senator refused to stop campaigning and said he stands ready to debate as planned at the University of Mississippi in Oxford, Miss.
“This is exactly the time when the American people need to hear from the person who, in approximately 40 days, will be responsible for dealing with this mess,” Mr. Obama said. “It is going to be part of the president's job to deal with more than one thing at once.”
The campaign theatrics underscore how the financial crisis has become the defining issue in the Nov. 4 vote. And the candidate Americans trust most to deal with problem is likely to be the next president.
Mr. Obama also laid out a list of principles that should guide Congress and the Bush administration as they craft a revamped bailout.
“The clock is ticking,” Mr. Obama said. “We have to act swiftly, but we have to also get it right.”
Mr. Obama, echoing other Democrats, set out four add-ons to the bailout – independent oversight of how the money is spent, curbs on executive salaries at banks that dump their soured assets on the Treasury, stricter protection for taxpayers and direct help for homeowners struggling to pay their mortgages.
Meanwhile, Federal Reserve Board chief Ben Bernanke and Treasury Secretary Henry Paulson spent a second day on Capitol Hill selling the bailout to a dubious Congress. Mr. Bernanke warned that the mess on Wall Street is quickly seeping through to Main Street, restricting loans to consumers and businesses alike, and posing a direct threat to the real economy.
“The choking up of credit is like taking the lifeblood out of an economy,” Mr. Bernanke explained to members of the joint economic committee of Congress.
Job losses are mounting, disposable incomes are poised to fall, consumers are spending less and business activity is grinding down, Mr. Bernanke said as he laid out his grimmest outlook yet on the economy.
The credit problem isn't just an “inconvenience,” Mr. Bernanke added, responding to questions from members of Congress. He argued that Americans' retirement savings and everyone's standard of living are now at risk.
Resistance to the plan to buy up soured mortgage securities remains intense as members of Congress respond to anger among Americans about the bailout. Congress is pushing for tighter banking regulation, perhaps limits on executive salaries at banks that take advantage of the plan, and limiting its size.
As the congressional debate drags on, Mr. Bernanke said the economic outlook is getting worse.
“When worried lenders tighten credit, then spending, production and job creation slow,” Mr. Bernanke explained.
“The intensification of financial stress in recent weeks, which will make lenders still more cautious about extending credit to households and business, could prove a significant further drag on growth.”
Mr. Bernanke, who as an academic specialized in the Great Depression, stopped short of likening the current situation to the Dirty Thirties. But he said it's most certainly the worst financial crisis in the post-Second-World-War era.
Mr. Bernanke said he shares Americans' unease about the plan, including the perception that the government is rewarding those who created the mess and indebting future generations of Americans.
But he said lawmakers should focus first on easing credit conditions and saving banks before tackling the longer-term problem of re-regulating Wall Street. Tighter regulation of hedge-funds derivatives and investment banking and the like will require months of work by Congress and should not be tied directly to the bailout, he said.
“It would be very costly to Main Street if this system broke down.”