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Critical to pass U.S. financial rescue soon, Bush says

Critical to pass U.S. financial rescue soon, Bush says

By Ruth Mantell, MarketWatch
Last update: 10:16 a.m. EDT Sept. 30, 2008

WASHINGTON (MarketWatch) — Saying this is a “critical moment” for the economy, President Bush urged Congress on Tuesday to regroup and act quickly on legislation to prop up the U.S. financial system — one day after the House shocked Washington and the markets by rejecting a $700 billion rescue plan.
“I assure our citizens and citizens around the world that this is not the end of the legislative process,” Bush said. “I recognize this is a difficult vote for members of Congress. The reality is that we are in an urgent situation, and the consequences will grow worse each day if we do not act.”
The administration is working with leaders of both parties on Capitol Hill to move legislation forward. While the House typically moves forward first with legislation, and representatives are reconvening Thursday, there has been talk that the Senate could get the process started earlier.
Echoing prior warnings of dire consequences from delayed action or even no action, Bush said at the White House that the economy is depending “on decisive action” from government — and warned economic damage will be “painful and lasting” if the nation continues on its course.
“We’re facing a choice between action and the real prospect of economic hardship for millions of Americans,” Bush said.
He added that the legislation will ultimately cost taxpayers less than $700 billion as the value of the assets would increase over time.
Stocks plummeted Monday after the House rejected the $700 billion financial rescue plan, with the Dow Jones Industrial Average falling 7% and the S&P 500 and the Nasdaq Composite faring even worse. U.S. stock indexes gained back some of those losses on the opening on Tuesday, however.
Meanwhile, overnight borrowing costs skyrocketed Tuesday, as the London interbank offered rate that banks charge each other for overnight loans soared. Overnight loans are frequently used to help fund routine business expenses such as meeting payrolls.
Waiting game
Congress wasn’t in session Tuesday in observance of Rosh Hashanah, but leaders were busy looking for ways to get the legislation approved when the House returns on Thursday. The lawmakers have several options, including letting the Senate take up the legislation next or giving the House another shot at a slightly altered version of the bill that was defeated.
A clearly disappointed Treasury Secretary Henry Paulson issued another dire warning Monday afternoon about stressed world markets reducing credit availability — a threat to American jobs and livelihood.
“This is much too important to simply let fail,” Paulson said.
Finger-pointing followed soon after Monday’s vote.
Republican leaders accused House Speaker Nancy Pelosi, D-Calif., of driving away some GOP votes with a partisan floor speech.
Rep. Barney Frank, chairman of the financial services committee, responded that Republicans may be “covering up the embarrassment” of not having the votes.
“And because somebody hurt their feelings they decide to punish the country,” said Frank, D-Mass. “I mean, I would not have imputed that degree of pettiness and hypersensitivity.”
Political calculations
Some House members balked at giving the Treasury immense power — the ability to buy up hundreds of billions of bad debt. And there have been ongoing complaints over insufficient accountability, transparency and large-scale government intervention.
But Paulson, along with Federal Reserve Chairman Ben Bernanke, has been intent over the past week on broadcasting warnings about dire consequences of delaying the plan.
With the November elections fast approaching, lawmakers from both parties are under intense scrutiny — and many were nervous about voting for a plan that risks so much taxpayer money without any definitive promise of success.
In the end, there were 205 votes cast in favor of the legislation and 228 against.
Among Democrats, 140 voted in favor and 95 against. Among Republicans, 65 voted in favor and 133 against.

Critics also say the plan inadequately addressed job losses and a distressed housing market –problems that underlie current economic weakness. Meanwhile, those in favor of the plan were looking to treat a manageable symptom — the frozen credit market — if not the actual disease.

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September 30, 2008 - Posted by | Uncategorized

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