Bush defends US financial bailout
President says the country is in the midst of a “serious financial crisis”.
He blamed the global crisis on bad mortgages, packaged up as “complex financial assets that were sold … across the world”.
“Had the government not acted, the hole in our financial system would have grown larger,” Bush said, adding that the bailout had been necessary in order to avoid “more drastic and costly measures later on”.
Government intervention
The bailout plan will also see the US government take stakes in some US institutions, bringing the US bailout closer to deals arranged in Europe.
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On Tuesday, the US government announced that it would use up to $250bn of the bailout to buy stakes in major banks.
But in his speech to the chamber of commerce, Bush appeared keen to stress his free market credentials, saying: “I would oppose such measures under ordinary circumstances.”
The president was resolute in his defence of the free market and said there had been penalties built in to the US rescue in order to “protect taxpayers” and ensure that the deal did not “shield the executives” of firms that had overstretched themselves.
Many residents see highly paid executives on Wall Street, as well as a lack of regulation of their activities, as being behind the credit problem.
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.
Shares slump
Bush’s speech came just before trading began on Wall Street.
US stocks fell, with the the Dow Jones industrial average down 2.38 per cent to 8,763 within the first minutes of trading.
The Standard & Poor’s 500 index declined 2.59 per cent to 921.96, and the Nasdaq composite index fell 2.12 per cent, to 1,681.30.
The falls in early trading follow a government report that said US home construction fell more than expected last month to the lowest pace since early 1991.
The commerce department report said that housing starts fell more than six per cent to the annual rate of 817,000 units 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, remains troubled.