U.S. pleads for patience in crisis repair
WASHINGTON: President George W. Bush and foreign financial officials displayed joint resolve on Saturday to combat the unfolding economic crisis, hoping to calm investors whose panic has spread despite bold and accelerating government action.
Yet there was no concrete offer of new moves when Bush spoke on a Rose Garden stage outside the White House just after daybreak, flanked by representatives from nearly a dozen nations and international organisations. The fresh message of the day was Bush's plea that nations work together to address the crisis, avoiding the go-it-alone protectionist trade strategies that worsened conditions during the Great Depression of the 1930s.
``In an interconnected world, no nation will gain by driving down the fortunes of another. We are in this together. We will come through it together,'' Bush said. ``There have been moments of crisis in the past when powerful nations turned their energies against each other or sought to wall themselves off from the world. This time is different.''
White House spokesman Tony Fratto said Bush's commitment to collaborative action was repeated and agreed to by every official and minister who took part in a private White House meeting before the statement. Participating in that session with the President were top officials from the Group of Seven powers — the United States, Japan, Germany, France, Britain, Italy and Canada — as well as from the European Union, World Bank and International Monetary Fund.
Bush did not mention any specific action that prompted his call. But Ireland recently moved to guarantee all bank deposits, triggering similar actions in Germany and other countries concerned that nervous depositors would move their bank accounts to Ireland.
The President barely referenced a significant new step from his administration — partial nationalisation of some banks. After days of speculation this move was coming, Treasury Secretary Henry Paulson announced late Friday that the government would buy part ownership in an array of American banks.
President Herbert Hoover tried something like that in 1932 during the Great Depression. No details were provided about how the new approach would work, only that it was similar to Britain's move to pour cash into its troubled banks in exchange for stakes in them.
The U.S. government would use an unspecified portion of the $700 billion approved by Congress a week ago to purchase stocks in a wide variety of banks and other financial institutions.
The rescue programme originally was sold to Congress and the public as a plan to buy mortgage-related loans from financial institutions. The goal was to remove troubled assets from those institutions' books and inspire them to restart more normal lending operations.
Congress passed the massive and hard-fought legislation, and Bush signed it. The government raised the amount of bank deposits it insured. Billions of dollars of reserves have gone into banking systems in the U.S. and other countries. Yet credit, the economy's lifeblood, has remained virtually frozen.
This paralysis in the credit markets has translated into intense turmoil in the stock markets. The Dow Jones industrial average just completed its worst week in history, plummeting more than 18 per cent. Over the past year, people in the U.S. have watched $8.4 trillion drain from investment accounts and retirement savings.
So the administration decided to use the bailout bill to pump equity directly into the banks — an idea never mentioned during the Congressional debate. The administration says it is authorised in an obscure corner of the 400-page legislation.
Officials are not saying how long it will take to get this program under way — just as is the case with the even more complicated effort to buy mortgage-backed securities.
Bush seemed to acknowledge that the lag is feeding anxiety on Wall Street. ``These extraordinary efforts are being implemented as quickly and as effectively as possible,'' Bush said. ``The benefits will not be realized overnight.''
The White House session with Bush followed a three-hour meeting Friday night of G-7 finance ministers. The president largely echoed their terse statement, saying the nations have together pledged to ``do what it takes to resolve this crisis.''
Among their promises are preventing the failure of major banks, unfreezing credit markets, bolstering deposit insurance programs, getting the battered mortgage financing system to operate more normally and working with poorer but fast-growing nations that also are feeling the pinch.
To address this last pledge, Paulson scheduled a meeting Saturday evening of the Group of 20 countries — which include the G-7 plus the world's biggest developing countries such as China, Brazil and India — to explain recent actions by the U.S. and other wealthy allies.
French Finance Minister Christine Lagarde said she saw the discussions as a way to help emerging-market countries understand actions by wealthier nations so they can be included in solutions and ``if they wish, adopt the same principles.''
All the representatives are in Washington for weekend meetings of the 185-nation International Monetary Fund and the World Bank.
In a briefing for the IMF's policy-setting board, Paulson said that after the immediate crisis ``we must turn our attention to longer-term reforms to modernize our outdated financial regulatory structure.''
It was the 22nd day among the past 27 that Bush had spoken about the financial crisis, since evidence first arose that the year-old subprime mortgage mess was evolving into a broader and more calamitous meltdown. After the almost 40-minute meeting and his six-minute statement, the president left the White House for a nearly two-hour mountain bike ride in the nearby Virginia woods.