Stocks slide after Bush speech
US president to discuss crisis with European leaders amid continued market turmoil.
European leaders have said the meeting could pave the way for an overhaul of the global financial regulatory system.
‘Focus on economy’
Charlie Parker, an investment editor from Citywire, a financial news service, told Al Jazeera: “The markets have moved from a sense of utter panic last week … to a sense that the time has come to focus on the economy.
“The problem is, even if markets stabilise, we are looking at a situation where production is falling, unemployment is growing, and not just in the Western world.
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“In one sense – and I don’t want to give credit to George Bush – governments have been pretty decisive around the world.
“They reacted and it has helped. Banks are starting to lend again.
“Have they avoided a recession? No, they haven’t. And really, they were never going to.”
Earlier, Bush said every dollar spent on the $700bn bailout, which is using taxpayers money to buy up bad loans held by financial institutions, will be “subject to strong oversight”.
“We’re looking into serious incidents of fraud, abuse in the financial system,” he said.
“American people want a clear explanation of what this crisis means for them, what the government is doing to fix it and what it means for the future of the free market.
“As a strong believer in the free market, I would oppose such measures [government intervention] under ordinary circumstance, but these are not ordinary circumstances.”
Bush blamed the global crisis on bad mortgages, packaged up as “complex financial assets that were sold … across the world”.
Lack of regulation
“Had the government not acted, the hole in our financial system would have grown larger,” Bush said, adding that the bailout, passed by congress on October 4, had been necessary in order to avoid “more drastic and costly measures later on”.
The bailout plan will also see the US government take stakes in some US institutions, bringing the it closer to deals arranged in Europe.
The US government announced on Tuesday that it would use up to $250bn of the bailout to buy stakes in major banks.
Many Americans see highly paid executives on Wall Street, as well as a lack of regulation of their activities, as being behind the credit problem.
Troubled markets
Rosiland Jordan, Al Jazeera’s correspondent in Washington, said that Bush was trying to bolster confidence in the US moves to end the crisis.
“We’ve heard from President Bush this fall [autumn] much more frequently than one might expect … it’s very important from where President Bush sits to try to convince people that this crisis will spell itself out,” she said.
The falls on Wall Street followed a US government report that said home construction fell more than expected last month to the lowest pace since early 1991.
The commerce department report said that first-time home purchases fell more than six per cent in September, below the 880,000 units forecast by Wall Street economists.
The report is a reminder that the original source of much of the economy’s turmoil, the housing market and the sub-prime chaos, remains troubled.