Bush Urges Congress to Enact Rescue Package

By Dan Eggen, William Branigin and Paul Kane
Washington Post Staff Writers
Friday, September 19, 2008 3:29 PM

President Bush, warning that urgent steps are needed to "to preserve America's financial system," asked Congress today to put aside partisan differences and enact a historic rescue package now being finalized by his administration.

In remarkably grim language for a president known for his economic optimism, Bush defended the federal government's "targeted measures" in recent weeks to shore up collapsing credit markets, but said there is now an "urgent need" for even broader government intervention.

"This is a pivotal time for America's economy," Bush said at the start of a nine-minute address in the White House Rose Garden. "We must act now to protect our nation's economic health from serious risk."

Bush also shot back at growing criticism of the administration's role in the meltdown from Capitol Hill and both major presidential campaigns.

"There will be ample time to debate the origins of this problem," Bush said after listing some of the key developments that have rocked global markets in recent days and weeks. "Now is the time to solve it."

Bush, who portrays himself as a conservative free-market advocate, also defended steps that have put billions of taxpayer dollars at risk. "Government intervention is not only warranted; it is essential," he said.

Flanked by Treasury Secretary Henry M. Paulson Jr., Federal Reserve Chairman Ben S. Bernanke and Securities and Exchange Commission head Christopher Cox, Bush offered an unusually negative assessment of the widening financial crisis that has taken hold during his final year in office. Focused until recently on emphasizing the inherent strengths of the U.S. economy, Bush acknowledged in stark language that his administration's rescue plans "require us to put a significant amount of taxpayer dollars on the line."

Late this morning, Bernanke and Paulson convened a conference call to brief more than 100 House Republicans on their plans, with the two administration officials speaking to the group for 45 minutes. According to one participant in the call, Bernanke and Paulson laid out a "strong and serious" case for how dire the financial situation is. However, the participant said, the duo were "vague in detail" and left many skeptics among the Republicans, who have grown increasingly frustrated with the administration's departure from free-market principles and soaring costs to taxpayers.

House Minority Leader John A. Boehner (R-Ohio) acted as the chief congressional backer for Bernanke and Paulson, indicating his support for "no cap" on the amount of funds available in the rescue plan, according to the participant, who requested anonymity to speak freely about internal party discussions.

House Republicans remained on the conference call for an additional 45 minutes after Bernanke and Paulson left it, discussing the range of options available and how best to limit taxpayer exposure.

Bush's appearance today marked his third and most extensive statement on the economy during a week that began with the bankruptcy of Lehman Brothers and an $85 billion federal rescue of insurer American International Group.

The administration followed up today by moving to safeguard assets in money-market mutual funds and temporarily banning the short selling of financial company stocks. In an effort to shore up money-market funds, which hold an estimated $3.5 trillion, Bush authorized the Treasury Department to use up to $50 billion from a Depression-era account to offer insurance similar to that provided by the Federal Deposit Insurance Corp. for cash accounts in banks.

Paulson announced late Thursday that the administration was assembling a proposal for a broader market rescue fund using government money and requiring congressional approval.

Bush characterized the wave of bankruptcies, bailouts and stock market plunges as rooted in the collapse of the housing market and a resulting loss in confidence.

"We must address the root cause behind much of the instability in our markets: mortgage assets that have lost value during the housing decline and are now restricting the flow of credit," Bush said. He said there is an "urgent need for Congress to pass legislation approving the federal government's purchase of illiquid assets, such as troubled mortgages, from banks and other financial institutions," adding: "This is a decisive step that will address underlying problems in our financial system."

But, citing U.S. productivity and foreign demand for American goods, he also offered at least a glimmer of optimism for long-term recovery.

"In the long run, Americans have good reason to be confident in our economic strength," Bush said. "We have a flexible and resilient system that absorbs challenges and makes corrections and bounces back. . . . We will weather this challenge, too, and we must do so together. This is no time for partisanship. We must join to move urgently needed legislation as quickly as possible without adding controversial provisions that could delay action."

The president, who has not answered a public query from reporter since Aug. 6, took no questions after the speech and walked back into the White House with his advisers.

White House press secretary Dana Perino fired back today at criticism from Democrats and some Republicans that Bush has not taken enough of a leadership role during the crisis.

"Just because the president isn't addressing the media in every single news cycle does not mean he is not leading," Perino said.

In a statement issued before Bush spoke, Democratic presidential candidate Barack Obama said he supports the efforts of Paulson and Bernanke to work with Congress on finding "a systemic solution to our deepening crisis." The senator from Illinois said events in recent days "have made it clear that we must take further bold and decisive action to shore up confidence in our financial markets and avoid a deepening economic crisis that could jeopardize the life savings and well-being of millions of Americans."

In a news conference in Coral Gables, Fla., Obama later elaborated on four principles he said must guide a plan to solve the financial crisis. He said it should immediately create jobs and help distressed homeowners and should not reward particular companies or reckless lenders or borrowers at taxpayer expense. He also said the plan should include tough new oversight and regulations for financial institutions and should be coordinated with U.S. partners in the G-20, a grouping of finance ministers and central bank governors of 19 countries plus the European Union.

Today's crisis results from "years and years of a philosophy in Washington and on Wall Street that viewed even common-sense regulation and oversight as unwise and unnecessary, that shredded consumer protections and loosened the rules of the road," Obama said. "CEOs and executives got reckless, lobbyists got what they wanted, and politicians in both parties looked the other way until it was too late. It is now the American people who've paid the price."

Obama said this week's events "have rendered a final verdict on that failed philosophy," which he vowed "will end if I am president of the United States."

He said he would refrain from presenting his own detailed blueprint for solving the crisis until he could fully review the one being proposed by Treasury and the Federal Reserve.

"I know these are difficult days," he said. "But . . . this is not a time for fear; it's not a time for panic. It's a time for resolve and a time for leadership."

Sen. John McCain (Ariz.), the Republican presidential nominee, said today that the Federal Reserve must "get out of the business of bailouts" and "get back to its core business of responsibly managing our money supply and inflation." McCain told a group of business leaders in Wisconsin that, if elected, he would "propose and sign into law reforms to prevent financial firms from concealing their bad practices."

McCain also appeared to chide the Bush administration in his remarks, saying that if he were elected, Treasury policies would be more consistent.

"In cases where failing companies seek taxpayer bailouts, the Treasury Department will follow consistent policies in deciding whether to guarantee loans," McCain said. "With billions of dollars in public money at stake, it will not do to keep making it up as we go along."

At a campaign rally in Wisconsin, McCain outlined what he described as a plan to reform U.S. financial markets by creating a "Mortgage and Financial Institutions Trust" (MFI) as part of the Treasury Department. He said the new organization would be "an early intervention program to help financial institutions avoid bankruptcy, expensive bailouts and damage to their customers."

The trust would offer troubled institutions an orderly process to identify bad loans, would provide funding at reasonable interest rates and eventually would sell the loans to the private sector at a profit, his campaign said.

"This will get the Treasury and other financial regulatory authorities in a proactive position instead of reacting in a crisis mode to one situation after another," McCain told supporters in Green Bay. "The MFI will restore investor and market confidence, build sound financial institutions, assist troubled institutions and protect our financial system while minimizing taxpayer exposure."

He pledged to take additional steps to ensure that "a crisis like this is never allowed to build and break over the American people again."

Senate Majority Leader Harry M. Reid (D-Nev.) said the administration's proposal "must not only address the broader, underlying structural issues in the financial markets, but also protect taxpayers and strengthen the middle class."

Although the current crisis "is a direct legacy of Bush-McCain economic policies that have failed this nation for eight years," Reid said, he pledged to work with the White House, Paulson and Bernanke "to provide relief for struggling Americans and create long-term solutions that will keep this kind of crisis from happening again."

Interviewed on ABC's "Good Morning America" program, Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee, said a briefing last night by Paulson and Bernanke suggested that "we're literally maybe days away from a complete meltdown of our financial system."

Sen. Richard C. Shelby (Ala.), the top Republican on the banking committee, said on the same program that the cost of the rescue package could amount to "at least" half a trillion dollars. "But if you look at what the Fed has already done, and the extension of power to the Treasury to deal with Fannie Mae and Freddie Mac, I believe we're talking about $1 trillion," he said.

In a news briefing later, Dodd declined to put a dollar estimate on the rescue plan.

"This will be a very difficult plan," he said. "We've already been told it is going to be a very costly plan. How much? We don't know."

He said he hopes the eventual legislation deals with the causes as well as the effects of the crisis, notably the persisting problem of housing foreclosures.

"So my hope is that this plan will not only allow us to deal with illiquid debt and obligations out there but also focus as well on bringing to a closure the foreclosure problem as well," Dodd said.