Will do all he can to shield financial markets, Paulson says
KEVIN CARMICHAEL and BRIAN MILNER
Monday, September 29, 2008
OTTAWA, TORONTO — U.S. President George W. Bush says he is “disappointed” that lawmakers turned thumbs down on a $700-billion (U.S.) rescue plan for the financial system, but said he would continue to seek a solution to the credit crisis.
The rejection sent stock markets reeling around the world, as the unprecedented credit squeeze claimed more major banks.
“I was disappointed in the vote that the United States Congress [had] on the economic rescue plan,” Mr. Bush told reporters after a meeting with Ukraine President Viktor Yushchenko. “We put forth a plan that was big because we've got a big problem.”
Earlier, U.S. Treasury Secretary Henry Paulson vowed to do all he can to protect the financial markets and the economy.
The plan's defeat sent stocks down sharply, with the Dow Jones industrial average briefly falling more than 700 points, its biggest intraday drop ever.
Treasury spokeswoman Michel Davis said Mr. Paulson would consult with President Bush, Federal Reserve chairman Ben Bernanke and congressional leaders on what steps to take next.
In her statement, Ms. Davis said Treasury officials “stand ready to work with fellow regulators and use all the tools at our disposal, as we have over the last several months, to protect our financial markets and the economy.”
North American stock markets began plunging even before the final vote in the House of Representatives on the package designed to halt the worst financial crisis since the Great Depression.
Rank-and-file legislators from both the Republican and Democratic parties defied the advice of senior party leaders and Mr. Bush and voted against the bill, which is drawing the ire of voters as a bailout of millionaire bankers.
The House voted 228-205 against the 110-page proposal, despite intense lobbying from Mr. Paulson and Vice-President Dick Cheney. The politicians, facing an election in November, feared a widespread voter backlash to the bailout.
But administration officials indicated Monday that they will try again.
“Our strategy is to continue to address this economic situation head-on and we'll be working to develop a strategy that will enable us to continue to move forward,” Mr. Bush said.
In Toronto, the S&P/TSX sank more than 840 points, or 6.9 per cent.
The proposed bailout would have put in place an unprecedented federal program to buy up rotten assets from cash-starved firms.
The goal was to free up choked credit that was threatening to cause broader market turmoil.
“Many of us feel that the national interest requires us to do something which is, in many ways, unpopular,” Rep. Barney Frank, the financial services committee chairman, said before the vote. “It is hard to get political credit for avoiding something that has not yet happened.”
Mr. Bush urged the bill's passage, saying in a White House appearance Monday morning that “every member of Congress and every American should keep in mind that a vote for this bill is a vote to prevent economic damage to you and your community.”
“With this strong and decisive legislation,” he said, “we will help restart the flow of credit so American families can meet their daily needs and American businesses can make purchases, ship goods and meet their payrolls.”
Critics on the left and right said Congress was being stampeded into hasty action on a plan that wouldn't make a dent in the nation's economic woes, which have at their root a subprime mortgage meltdown and the bursting of the housing bubble, followed by a wave of foreclosures.
The proposed legislation does not require any federal action to prevent foreclosures, although it mandates that the government try renegotiating the bad mortgages it acquires with the aim of lowering borrowers' monthly payments so they can keep their homes.
“Like the Iraq war and the Patriot Act, this bill is fuelled on fear and hinges on haste,” said Democratic Rep. Lloyd Doggett, R-Texas.
Republican Jeb Hensarling of Texas, a leading conservative, said the bill puts the country “on the slippery slope to socialism. If you lose your ability to fail, soon you will lose your ability to succeed.”
With files from The Associated Press
© The Globe and Mail
