By Dan Eggen
Washington Post Staff Writer
Friday, November 14, 2008
NEW YORK, Nov. 13 -- After presiding over some of the most dramatic market interventions in U.S. history over the past two months, President Bush came to Wall Street on Thursday to urge world leaders not to venture too far down a path of government interference in capitalist economies.
Speaking to a conservative audience at historic Federal Hall, Bush sharply criticized proposals for aggressive regulation and control over financial markets while simultaneously defending his administration's broad efforts to support the credit and housing sectors over the past two months.
His administration's moves, including corporate bailouts and a $700 billion rescue plan, were "necessary so that the economy would not melt down and affect millions of our fellow citizens," Bush said. But at the same time, he argued, world leaders gathering in Washington for a financial summit this week should avoid protectionism, excessive regulation or other measures that could stifle markets over the long term.
"History has shown that the greater threat to economic prosperity is not too little government involvement in the market, it is too much government involvement in the market," Bush said to resounding applause from the crowd of about 175. "Our aim should not be more government," he added later, "it should be smarter government."
The speech, delivered at a forum organized by the Manhattan Institute for Policy Research, came before a Saturday summit in Washington of the leaders of the Group of 20, a bloc of developing and industrialized nations that focuses on economic growth and the stability of the international financial system. Bush noted that member countries account for nearly 90 percent of the global economy.
The president's remarks clearly sought to influence a debate that appears headed in a direction Bush and his aides do not favor, just two months before he leaves office. Many of the world's most influential world leaders, including French President Nicolas Sarkozy, British Prime Minister Gordon Brown and Brazilian President Luiz Inácio Lula da Silva, have advocated bold reforms including, to use a Sarkozy example, restrictions on executive pay.
The speech came as the Bush administration still struggles to implement the faltering federal bailout package, while fending off calls from President-elect Barack Obama and other Democrats for additional stimulus measures. Treasury Secretary Henry M. Paulson Jr. acknowledged Wednesday that the administration had abandoned its initial plan to buy distressed mortgage securities, focusing instead on offering aid to banks and other lenders to shore up credit markets.
Bush agreed that "broader reforms," stronger investor protections and greater transparency are needed to strengthen the global economy, and also spoke favorably of reforms at the International Monetary Fund and the World Bank.
Bush also argued that "the crisis was not a failure of the free market system" and that leaders should "not try to reinvent that system." Rather, he said, global leaders need to "fix the problems we face, make the reforms we need, and move forward with the free-market principles that have delivered prosperity and hope to people around the world."
"If you seek economic growth, if you seek opportunity, if you seek social justice and human dignity, the free market system is the way to go," Bush said to another burst of applause. "And it would be a terrible mistake to allow a few months of crisis to undermine 60 years of success."
But Grant Aldonas, a former senior trade official in the Bush administration now with the Center for Strategic and International Studies, said the tenor of the speech suggests Bush "does not understand his moment." He also said the administration has lost authority to argue against government intervention in the markets.
"The disabling of capitalism has already begun and he's the one who started it," Aldonas said. "It rings hollow for an awful lot of people, not only in the marketplace but for world leaders abroad. . . . They are the ones who are going to have the leverage at the table."
Staff writer William Branigin in Washington contributed to this report.