Signaling a Shift to Europe's Path
Wednesday, October 15, 2008
In announcing plans to partly nationalize nine major banks yesterday, President Bush found himself in the unusual position of having to reassure Americans that he was not, in fact, opposed to capitalism.
"These measures are not intended to take over the free market but to preserve it," Bush said after a White House meeting with his economic advisers.
The ongoing global financial crisis has prompted a series of unlikely decisions by Bush, an avowed advocate of laissez-faire economics who has nonetheless approved dramatic government interventions over the last month in an attempt to free up credit and stabilize collapsing financial markets.
The administration's latest moves also signaled a shift to Europe's preferred path for dealing with the crisis -- part of what Bush described as a "coordinated plan for action" formulated over the weekend between the United States and other major industrialized nations.
In addition to announcing it would invest as much as $250 billion of taxpayer money into private banks, the administration announced new deposit and bank debt guarantees by the Federal Deposit Insurance Corp. and new limits on executive pay for banks that accept government intervention. Bush also formally asked Congress for another $100 billion installment in the recently approved financial bailout plan.
Bush and other administration officials have repeatedly emphasized that they were reluctant to move ahead with the succession of bailouts, takeovers and other federal interventions, but concluded they had little choice in order to avoid an even bigger disaster.
Treasury Secretary Henry M. Paulson Jr. went so far yesterday as to call some parts of the latest plan "objectionable," explaining that the "actions are not what we ever wanted to do." Indeed, Paulson and other administration officials had earlier dismissed the idea of buying equity stakes in banks, and instead endorsed a broad purchase of mortgage-backed securities that now appears to be on hold.
Bush stressed that "the government's role will be limited and temporary," and said officials were careful to ensure that taxpayers would be protected. The president also acknowledged that the vast financial upheavals of recent weeks may "seem distant" from the concerns of regular Americans, but he said the measures would be beneficial to all.
"This is an essential short-term measure to ensure the viability of America's banking system," Bush said, adding a few moments later: "We have a strategy that is broad, that is flexible and that is aimed at the root cause of our problem."
The coordinated response between the United States and other major economic powers follows years of rocky relations between European governments and Bush, who famously declared that the nations of the world were either "with us or against us" after Sept. 11, 2001, and who frequently clashed with foreign leaders on issues ranging from the Iraq war to global warming.
"We've certainly seen a lot of softening of the hardest edges of his presidency over the last few years, and this is another example of that," said David Greenberg, a presidential historian at Rutgers University. "It seems to represent a break from his general path regarding world opinion. It is a kind of concession to reality and a recognition that something more had to be done."
But Ari Fleischer, a former White House press secretary under Bush, argued that the president has always been more cooperative in his dealings with foreign leaders than he gets credit for. Even in the run-up to the Iraq war, Fleischer said, Bush opposed administration hard-liners by going to the United Nations to make the case for war.