WASHINGTON: US President George W. Bush and foreign financial officials displayed joint resolve yesterday 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 organizations. 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.”
Participating in that session with the president were top officials from the Group of Seven powers — the US, Japan, Germany, France, Britain, Italy and Canada — as well as from the European Union, World Bank and International Monetary Fund (IMF).
The president barely referenced a significant new step from his administration — partial nationalization of some banks. After days of speculation this move was coming, Treasury Secretary Henry Paulson announced late Friday night that the government would buy part ownership in an array of American banks. 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 US 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.
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 percent. Over the past year, people in the US 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 authorized 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.