Entire economy in danger

Source StraitsTimes

WASHINGTON - PRESIDENT George W. Bush said on Wednesday that lawmakers risk a cascade of wiped-out retirement savings, rising home foreclosures, lost jobs and closed businesses if they fail to act on a massive financial rescue plan. 'Our entire economy is in danger,' he said.

'Without immediate action by Congress, American could slip into a financial panic and a distressing scenario would unfold,' Mr Bush said in a 12-minute prime-time address delivered from the White House East Room that he hoped would help rescue his tough-sell bailout package.

'Ultimately, our country could experience a long and painful recession.' said Mr Bush, 'we must not let this happen.'

The unprecedented US$700 billion (S$996 billion) bailout, which the Bush administration asked Congress last weekend to approve before it adjourns, is meeting with deep skepticism, especially from conservatives in Bush's own Republican Party who are revolting at the high price tag and massive private-sector intervention by government.

Though there is general agreement that something must be done to address the spiraling economic problems, Mr Bush has been forced to accept changes almost daily, based on demands from the right and left.

Seeking to explain himself to conservatives, Mr Bush stressed he was reluctant to put taxpayer money on the line to help businesses that had made bad decisions and that the rescue is not aimed at saving individual companies.

He tried to address some of the major complaints from Democrats by promising that CEOs of failed companies won't be rewarded, while warning he would draw the line at regulations he determined would hamper economic growth.

'With the situation becoming more precarious by the day, I faced a choice: to step in with dramatic government action or to stand back and allow the irresponsible actions by some to undermine the financial security of all,' Mr Bush said.

The president turned himself into an economics professor for much of the address, tracing the origins of the problem back a decade.

But while generally acknowledging risky and poorly thought-out financial decisions at many levels of society, Mr Bush never assigned blame to any specific entity, such as his administration, the quasi-independent mortgage giants Fannie Mae and Freddie Mac or the Wall Street firms that built rising profits on increasingly speculative mortgage-backed securities.

Instead, he spoke in terms of investment banks that 'found themselves saddled with' the toxic assets the government is now proposing to buy and banks that 'found themselves' with questionable balance sheets.

Intensive, personal lobbying of lawmakers is not usually Mr Bush's style as president, unlike some predecessors. He does not often make calls or twist arms on behalf of a legislative priority.

But with the nation facing the biggest financial meltdown in decades, Mr Bush took the unusual step of asking Democrat Barack Obama and Republican John McCain, one of whom will inherit the financial mess in four months, and key congressional leaders of both parties to a White House meeting on Thursday to work on a compromise.

Obama spokesman Bill Burton said the senator would attend the meeting scheduled for the afternoon, and senior McCain advisers said he would, too. The plans of the other invitees were unknown. The White House said that the idea for the joint meeting was Mr McCain's and that aides went about setting it up after Mr Bush and Mr McCain spoke on Wednesday afternoon.

In another move welcome at the White House, Mr Obama and Mr McCain issued a joint statement using their own dire language to urge lawmakers to act. The two candidates - bitterly fighting each other for the White House but coming together over this issue - said the situation offers a chance for politicians to prove Washington's worth.

'The plan that has been submitted to Congress by the Bush administration is flawed, but the effort to protect the American economy must not fail,' they said. 'This is a time to rise above politics for the good of the country. We cannot risk an economic catastrophe.'

However, the Oval Office rivals were not putting politics aside entirely. Mr McCain asked Mr Obama to agree to delay their first debate, scheduled for Friday, while Mr Obama said it should go ahead.

White House and administration officials have warned repeatedly in recent days of a coming 'financial calamity'.

But that has not closed the deal, which for many recalls previous warnings of grave threats from Mr Bush - such as before the Iraq war - that did not materialise.

So Mr Bush's goal with his speech, his first prime-time address in 377 days, was to frame the debate in layman's terms to show the depths of the crisis, explain how it affects the people's daily lives and inspire the public to demand action from Washington.

He said that more banks could fail, the stock market could plummet and erase retirement accounts, businesses could find it hard to get credit and be forced to close, wiping out jobs for millions of Americans.

He ended on a positive note, predicting lawmakers would 'rise to the occasion' and that the nation's economy will overcome 'a moment of great challenge'.

With so many crises hitting the United States at once, the presidential race has taken a back seat and so has Mr Bush's involvement in politics. Mr Bush cancelled a campaign trip to Florida on Wednesday to deal with the problem, the third time in a week that he has scrapped his attendance at out-of-town fundraisers, either because of the market turmoil or Hurricane Ike.

The economic crisis also is almost certain to overshadow the rest of Mr Bush's four months left in office and could hugely impact his legacy.

It has been assumed that the long-term view of Mr Bush's presidency was to be shaped largely by Iraq, Hurricane Katrina and the Sept 11, 2001, attacks. Now, the dire economic problems and the aftermath of the government's attempted solution will certainly be added to that list. -- AP Congress, Mr Bush said his 'natural instinct' was to oppose government intervention in the financial sector, but the financial turmoil called for a different approach.

'I believe companies that make bad decisions should be allowed to go out of business,' Mr Bush said. 'Under normal circumstances, I would have followed this course. But these are not normal circumstances.'

He cited a market that was not functioning properly, a widespread loss of confidence and major financial sectors at risk of shutting down.

More financial distress could lead more banks to fail, the stock market to drop further, businesses to close, job losses and home values to drop, Mr Bush said.

'And, ultimately, our country could experience a long and painful recession,' Bush said. 'Fellow citizens, we must not let this happen.'

Less than two hours before the speech, Mr Bush telephoned Democratic presidential nominee Barack Obama and invited him to the White House on Thursday for a meeting with congressional leaders and Republican nominee John McCain on the financial bailout package.

Mr Obama accepted and The Bush administration and Congress have been trying to hammer out an agreement on a plan that would allow the government to step in and take illiquid loans from shaky Wall Street firms to address financial turmoil in the markets.

The unprecedented bailout has met skepticism and anger from lawmakers who argue that the administration's proposal should not just be rubber-stamped. But they have also avoided suggesting they would block the plan for fear of spooking the markets.

Mr Bush said again that urgent action was needed to bolster the markets. His last prime-time national televised address was on Sept 13, 2007, when he spoke of the 'way forward in Iraq'.

Senate Majority Leader Harry Reid, a Nevada Democrat, said Mr Bush had a lot of explaining to do in his speech.

'It is time for him to explain why his administration sat on its hands for months and only now has come to realize the need for immediate and unprecedented government action,' Mr Reid said before Bush's address.