President Bush on Wednesday addressed the proposed $700 billion bailout of toxic debt on national television, asking America to support the plan to resolve the crisis and urging swift action from Congress.
Secretary Henry Paulson and
Chief Ben Bernanke have spent hours on Capitol Hill explaining to Congress the dire consequences of not acting immediately on the bailout, including warnings of a "credit freeze" or "recession." Democrats in Congress have resisted so far, insisting on limits to executive compensation and the size of the bailout.
In his address, Bush said he recognized many Americans fail to understand the crisis gripping Wall Street. He offered a detailed account of how easy money led to low lending standards and an excessive buildup in the housing market. He explained how the economy was awash with money. Yet, the frothy housing market required soaring prices. But once housing prices started to fall, they began plummeting. Homes fell into foreclosure, and a "domino effect" of lost businesses and jobs hurt the economy.
While Bush has a strong belief that "companies that make bad decisions should be allowed to go out of business," he said the widespread lack of confidence would hurt all Americans. Without immediate action, he warned that "America could slip into a financial panic" leading to a "long and painful recession."
"We must not let this happen," Bush said.
Bush realized the reticence of leaders in Congress, saying "it will be tough," and "I understand the frustration of average Americans."
Bush announced a "spirit of cooperation" by leaders in Washington. He announced that both Sen. Barack Obama (D., Ill.) and Sen. John McCain (R., Ariz.) had accepted his offer to sit down with leaders of Congress and hammer out a bipartisan solution.
Bush explained the principles behind the bailout. The amount of money required "needs to be big enough to solve a serious problem." The $700 billion would allow the removal of troubled assets and free banks to begin lending again. He would ensure taxpayer money be protected. Taxpayers would have a stake in securities and then hold them until they could be sold at a higher price. Failed executives wouldn't be allowed to profit from a bailout. Finally, a bipartisan board would implement the terms of the bailout.
Bush said the plan looks to the future, a "safeguarding financial security for workers, families and small businesses." He reminded everyone that the Treasury has already taken steps to guarantee money market funds. Furthermore, he noted the Federal Deposit Insurance Corp. has covered ensured every deposit in its 75-year existence.
The president also addressed financial reform. Bush said Congress would be able to update the country's financial structures once the economy recovers. Paulson had announced modernization plans in the spring.
Finally, Bush vowed to Americans: "There's reason to be confident." American capitalism has always responded to the challenges it has faced because of its inherent flexibility.
Congress continues negotiations on Thursday with both McCain and Obama offering their support.