Tuesday, September 30, 2008

Bush urges new action on bailout

US stock markets opened up on Tuesday after a massive fall the previous day [AFP]

George Bush, the US president, has said that the rejection by the US House of Representatives of a $700bn bailout for troubled financial institutions was not the end of efforts to pass a rescue plan.

In a televised address at the White House on Tuesday, he attempted to reassure taxpayers and the markets, while warning the US Congress decision would be "painful and lasting" for the economy.

"I recognise that this is a difficult vote for members of congress ... but the reality is that we are in an urgent situation and the consequences will grow worse each day if we do no act," he said.

Wall Street opened up on Tuesday after Bush's statement, with the Dow Jones industrial index rising 178 points or 1.7 per cent, following its worst plunge in a single day after the the House of Representatives voted against the plan by 228 votes to 205.

"I think the markets are believing there will be a bailout at some point, it will have to come in some size shape or form," Al Jazeera's John Terrett, reporting from New York, said.

"The problem is that Congress is now away until Thursday, at least the House of Representatives is away until Thusday ... there probably won't be any kind of vote on any new package until the weekend, so therefore we are now trading in uncharted waters."

'Large problem'

Bush told taxpayers that he understood that many people were concerned about the $700bn cost of the rescue plan, but the cost of not passing the bill would be greater.


Political reaction to the bail-out rejection

Economic analysis of what the bill rejection means

"That is a large amount of money ... but we are also dealing with a large problem, to put that in context the drop in the stock market yesterday represented more than $1 trillion in losses," he said.

He also said that he expected much of the money used to buy up the bad debts would be made back once they were sold as the market recovered.

"It is likely that many of the assets would go up in value over time, much, if not all, of the tax dollars invested over time would be paid back," he said.

Marsha Blackburn, a Republican who voted against the bill, said that many congressmen were still concerned about the level of taxpayer
commitment to the bailout.

"This is something we can't leave on the table and leave Washington. This is something that affects every man and woman, every family in this country," she told CBS television.


Al Jazeera's Rosiland Jordan, reporting from Washington DC, said the rejection of the bill had been a shocking loss for the Bush administration.

A substantial number of Republicans were saying they did not want the increase in spending and did not believe in any government intervention in the economy, our correspondent said.


US citizen's economic concerns

Effects of bail-out snub

The president on Tuesday appealed directly to those Republicans, especially the ones who opposed the plan as government interference in free markets, to get behind a deal.

"Our country is not facing a choice between government action and the smooth functioning of the free market. We're facing a choice between action and the
real prospect of economic hardship for millions of Americans," he said.

But Tom Price, a Republican who voted against the bailout, said that rather than not acting he thought "it's important to get this vote right, not necessarily to get it quick".

"We are principled in the fact that we believe we ought to stick to American principles, we ought to protect the taxpayer, we need to make sure that private money, private equity can get involved and have Wall Street bail out Wall Street, not on the backs of the taxpayers," he said on NBC television.

Marcy Kaptur, a Democrat Representative, said: "We have to look for something that will make the markets function in the way that they should, not reward bad behaviour."

David Buick from BCG Partners in London told Al Jazeera that now was the time for pragmatism rather than recriminations.

"The fact is we have a problem and I don't think that those people who voted against it know the implications," he said.

"The banking sector is the lifeline, the best artery ... to the fabric of every society in the world. Without strong banks we have nothing, we have a delapidated economy worldwide, we have no retail, we have unemployment, we have anarchy."

Shares fluctuate

Asian and European stock markets were volatile the day after the House of Representatives voted against the rescue plan.

Asian and European stock markets were volatile the day after the House of Representatives voted against the rescue plan.

Asian and European stock markets were volatile the day after the House of Representatives voted against the rescue plan.

Japanese share prices closed down 4.12 per cent on Tuesday, hitting a more than three-year low, while European shares fluctuated wildly in mid-morning trade.

Hong Kong's blue chip Hang Seng index shed nearly six per cent before it recovered ground and finally closed 0.8 percent up.

India's main stock exchange in Mumbai trimmed sharp early losses and closed 2.1 per cent up at 12,860.43, snapping three consecutive days of losses.

Share prices in Singapore, South Korea and Taiwan all fell sharply on Tuesday before regaining some ground. Australia ended the day down four.

London's FTSE 100 plunged on opening, briefly recovered and oscillated between a loss of three per cent and a gain of 0.77 in morning trades.

Frankfurt's DAX 30 slid 2.19 per cent to 5,679.67 points on opening and in Paris the CAC 40 tumbled 1.96 per cent before recovering to reach 0.26 per cent up at midday.

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