For the President, A Matter of Principle
Sunday, March 23, 2008
Standing on the windswept docks outside Jacksonville, Fla., on Tuesday afternoon, President Bush praised the steps taken by federal regulators to stave off a financial crisis on Wall Street.
"The Federal Reserve and the Treasury acted swiftly to promote stability in our financial markets at a crucial time," he told a modest crowd of stevedores and local GOP notables.
But Bush made no mention of the latest move that day by the Fed, which had just announced another dramatic cut in short-term interest rates. Though a sharp rate cut was widely anticipated, the president learned about it at the same time as the rest of the nation, administration officials said.
The episode underscores Bush's largely peripheral role over the past week as Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry M. Paulson Jr. engineered a series of dramatic government interventions in wobbly financial markets. The president was left to pledge his support and, at one point, thank Paulson for "working over the weekend."
Bush is hardly the first president to find himself only slightly involved in the major decisions of the central bank and other federal regulatory agencies, which are designed to be insulated from day-to-day politics. But Bush's low profile also reflects his traditionally conservative views on economic issues, including a natural resistance to the kind of aggressive intervention favored by many Democrats, according to White House officials and outside experts.
That approach has prompted a flurry of attacks from the two Democratic presidential candidates, Sens. Hillary Rodham Clinton (N.Y.) and Barack Obama (Ill.), who have endorsed broad proposals to cope with the credit and housing crises and who argue that Bush has not done enough. The presumptive GOP nominee, Sen. John McCain (Ariz.), praised the Fed's recent actions but has urged caution in going too far.
"The president seems to have been somewhat detached from the entire sub-prime crisis, with its various repercussions in the economy," said Daniel K. Tarullo, a senior economic adviser for Obama. "Even at this moment, they continue to resist anything that would deal head-on with the problem of foreclosures."
Alice M. Rivlin, a director of the Office of Management and Budget during the Clinton administration, said the Bush White House is generally against market intervention "except in emergencies, and their definition of emergencies is fairly extreme. It would take a president that really wanted to intervene, and so far this president hasn't."
Indeed, Bush warned of excessive government intervention in a March 14 speech, telling the Economic Club of New York that "it's important not to overcorrect -- because when you overcorrect, you end up in the ditch."
Two days later, the Fed announced its decision to back a rescue of critically wounded investment firm, Bear Stearns, and to offer cut-rate loans to other investment banks for the first time. The unusual deal was brokered with help from Paulson, who informed Bush of the decision March 16. Then on Tuesday came the rate cuts, including a drop of three-quarters of a percentage point in the central bank's main lending rate.
The moves were both remarkable and unconventional, aimed simultaneously at propping up a falling economy and staving off a potential crisis on Wall Street related to the collapsing housing market.
In recent remarks, Bush has acknowledged "challenging" financial times but has emphasized indictors that the economy is still strong, such as the low unemployment rate.