(by Joseph Goldstein, NYSun.com) WASHINGTON – Warning that a “long and painful recession” could loom unless the Treasury Department intervenes on Wall Street, President Bush is pressing to convince the nation that there is no alternative to his $700 billion bailout plan.
During a nationally televised address in which he stated that “democratic capitalism is the best system ever devised” and that his “natural instinct is to avoid government intervention,” Mr. Bush nonetheless spoke in the firmest terms against leaving the economy to its own devices.
“These are not normal circumstances,” Mr. Bush said at one point during a 13-minute address. “Our entire economy is in danger,” he said at another.
Mr. Bush has asked Congress to give his Treasury secretary $700 billion to buy up the mortgage-related assets that are bringing down Wall Street institutions. Mr. Bush expressed doubt that the market for these assets, which has dried up entirely, would jump-start itself.
“The government is the one institution with the patience and resources to buy these assets at these current low prices and hold them until the market returned to normal,” he said.
Much of Mr. Bush’s speech consisted of an explanation of how a slowdown in the housing market has, through widespread sale of mortgage-backed securities, circulated throughout the entirety of the financial markets. Building on that economic tutorial, Mr. Bush presented the case that the market downturn would bring pain to Americans who live far beyond the nation’s financial centers.
“The government’s top economic experts warn that, without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold,” Mr. Bush said.
“More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of you home could plummet. Foreclosures would rise dramatically.”
He said: “Millions of Americans could lose their jobs.”
“Fellow citizens, we must not let this happen,” Mr. Bush said. At one point, he seemed to try to protect against a run on the banks, grimly reminding Americans that their accounts were insured by the Federal Deposit Insurance Corp.
Whether Mr. Bush’s dark predictions sway the citizenry to support the bill is far from clear. Lawmakers on Capitol Hill say their constituents are almost universally opposed to spending money to help Wall Street. That point was made in vivid terms yesterday by Rep. Walter Jones, a Republican of North Carolina, who said in a hearing that one constituent wrote him to say that the proposal “should be about as welcome as malaria.”
Addressing these sentiments, Mr. Bush said he understood “the frustration of responsible Americans who pay their mortgages on time, file their tax returns every April 15th, and are reluctant to pay the cost of excesses on Wall Street.”
The “rescue effort” – as Mr. Bush described his proposal– “is not aimed at preserving any individual company or industry.”
“It is aimed at preserving America’s overall economy,” he said.
Toward the end of his speech, Mr. Bush expressed confidence in an eventual recovery.
“Our economy is facing a moment of great challenge, but we’ve overcome tough challenges before, and we will overcome this one,” he said.
Mr. Bush also made several concessions in his speech to lawmakers who have said they would not pass a bill that had no oversight provisions or did not contain strict terms limiting the pay of executives from companies that needed bailing out.
He called for a “bipartisan board to oversee the plan’s implementation” and said that the plan should “make certain that failed executives do not receive a windfall from your tax dollars.”
That last comment came only hours after Treasury Secretary Paulson, who has been pitching the bailout plan on Capitol Hill, bowed to congressional leaders saying any bailout legislation ought to include limits on the salaries of Wall Street executives whose corporations receive aid.
Earlier this week, Mr. Paulson had resisted calls to cap executive pay, saying it could undermine the effectiveness of the bailout by discouraging executives from participating. As Goldman Sachs’s chairman before taking the Treasury job, Mr. Paulson himself was Wall Street’s highest-paid executive in 2005, receiving $38.3 million all told, Bloomberg News reported.
Yesterday, departing from his scripted testimony, Mr. Paulson told the House Financial Services Committee that “the American people are angry about executive compensation, and rightfully so.”
“Many of you cite this as a serious problem, and I agree,” Mr. Paulson said. “We must find a way to address this issue in this legislation, without undermining the effectiveness of this program.”
He was circumspect on how to clip executive pay. After pressing Mr. Paulson for details, Rep. Luis Gutierrez, a Democrat of Illinois, said with frustration that it was “obvious we’re not going to get an answer.”
Reprinted here with permission from The New York Sun. Visit the website at NYSun.com.
1. What was the purpose of President Bush’s speech to the nation last night?
2. Why did President Bush say he wants the government to intervene in the economic crisis despite his belief that “democratic capitalism is the best system ever devised” and his “natural instinct is to avoid government intervention?”
3. a) What is President Bush asking Congress to do?
b) Why does he say this is necessary?
4. According to President Bush, what have the government’s top economic experts warned might happen without immediate action by Congress?
5. How did President Bush address the opposition most Americans have to bailing out Wall Street?
6. a) How did President Bush address concerns of congressmen who have said they would not pass a bill that had no oversight provisions or did not contain strict terms limiting the pay of executives from companies that needed bailing out?
b) For what reason did Treasury Secretary Paulson say he was not firmly committed to limiting the pay of executives from the companies that needed bailing out?
To persuade Congress to o.k. the $700 billion bailout, President Bush has called a White House meeting of the bipartisan leadership of Congress and presidential candidates John McCain and Barack Obama for this afternoon.
Senators McCain and Obama had had a back and forth Wednesday afternoon over whether the presidential debate scheduled for Friday should proceed.
Sen. McCain had said he would suspend his campaign on Thursday morning, and that he wanted the debate cancelled for Friday so that he could focus his attention on a bipartisan effort in Washington, D.C., including a meeting he hoped to have with the president and congressional leadership, to get a bailout deal done.
Sen. Obama had said it was possible to both work on a bailout deal and have a debate on Friday night. Both candidates have agreed to attend the meeting at the White House scheduled for today.
Read and/or watch President Bush’s speech to the nation on Wednesday night at whitehouse.gov.