Treasury secretary says buying bad mortgages not “effective” use of $700bn bailout.
Bush will call the financial crisis a decisive moment for the global economy but “not a failure of the free market system”, according to prepared remarks.
Al Jazeera’s John Terrett says that Bush’s aim in his speech on Thursday will be to appear as buoyant and optimistic about the economy as possible in a bid to ease fears over the economy.
However, the aim is also political he says, as the US prepares for Barack Obama, the US president-elect, to enter office on January 20.
“The transition period is going well at the moment and both sides are talking but each still feels the need to score a point over the other,” our correspondent says.
The speech by Bush – who will also attend a United Nations sponsored conference on religious tolerance in New York – comes a day after Henry Paulson, the US treasury secretary, said that the $700bn US government bailout plan should stop buying up bank mortgage debts.
Paulson said on Wednesday the US should instead focus on using the funds for consumers to secure credit items such as credit cards and student and car loans in a bid to improve the consumer credit market.
|G20 meetings will continue once US President
elect Obama, left, enters office [AFP]
Paulson also said the US was also looking at a second wave of government investment into financial institutions as a quick way to cushion potential losses, but appeared to rule out assistance for the US’s ailing auto industry.
However Barney Frank, the Democratic head of the House of Representatives financial services committee, said he was “disappointed in Paulson” and called the shift in policy effectively an “abandonment” of the bill negotiated between congress and the White House last month.
US stocks opened slightly higher on Thursday, despite data from the US Labour Department showing the number of US workers filing new claims for jobless benefits rising last week to 516,000, the highest level since just after the September 11, 2001 attacks.
Hedge fund fears
Also on Thursday, US hedge fund managers testifying at a US House of Representatives hearing said they would welcome more transparency in the markets.
Fund managers told the committee that they would support the creation of
public exchanges or “clearinghouses” which would provide more transparency for
credit default swaps, a complicated form of investments blamed by many analysts for the current financial crisis.
“An open and transparent market for these transactions would reduce confusion and improve understanding,” Philip Falcone, senior managing director of Harbinger
Capital Partners Funds, told the House oversight and government reform committee.
However committee members warned that hedge funds could prove to be the next major financial institutions to collapse.
“[These funds] now pose a very public peril when the bets go bad,” said Tom Davis, the committee’s senior Republican.
G20 leaders – key emerging-market countries such as China, India, Brazil and South Africa along with with the “Group of Seven” or G7 industrial nations – will meet on Friday and Saturday in Washington to spur on efforts to overhaul the global financial framework.
World markets have slumped in recent months despite world governments pumping billions of dollars into markets in a bid to ease prevent the global economy from spiraling into a recession.
However, there has been anger among developing nations that they have not been invited to the meeting, despite their economies being adversely effected in the crisis.
The summit is the first in a series to be held over the current global crisis, with more to be held after Bush leaves office and Obama becomes president.