Bush: A 'Critical Moment' for Economy

Bush Implores Congress to Act to Rescue Markets

President Bush said Tuesday that the economic damage to the nation will be 'painful and lasting' if Congress fails to pass a $700 billion bailout bill.

President Bush took to the podium again this morning in an attempt to salvage his endangered financial rescue package, warning lawmakers that the United States will face a "painful and lasting" economic downturn if they do not approve a bailout.

Appearing drawn and frustrated, Bush said in remarks at the White House that this is a "critical moment" for the U.S. economy. He noted that yesterday's single-day loss on the stock market, estimated at more than $1 trillion, was greater than the highest estimated cost of his administration's bailout plan.

"The consequences will grow worse each day if you do not act," Bush said, addressing dissident lawmakers. He added a moment later: "Our economy is depending on decisive action from the government...This is what elected leaders owe the American people."

"Our country is not facing a choice between action and the smooth functioning of the free market. We are facing a choice between action and the real prospect of financial hardship" that will be felt across the board, Bush said.

"I am disappointed by the outcome" of the House vote, Bush said, "but I assure our citizens and citizens around the world that this is not the end of the legislative process."

That the problem has become global could be see in falling stock values in Asia, bank rescues in Europe, and a spike in short-term interest rates that reflects the increasing unwillingness of financial institutions to lend money to each other -- depriving the world economy of an important tool for providing business and households with the cash needed to make major purchases and pay bills.

Bush's plea marks the seventh straight day that he has issued a public plea for passage of a rescue plan, starting with an unusually dire prime-time speech last Wednesday in which he warned of a looming "financial panic." It came a day after a majority of House lawmakers, including two-thirds of his fellow Republicans, rejected the administration's proposed $700 billion bailout plan. The vote was a devastating blow for Bush, and underscored his rapidly vanishing influence even on members of his own party.

Even as recriminations flew, there was focus on ways to revive the bill and broaden its support. Both presidential contenders, for example, suggested raising federal insurance on bank deposits from $100,000 to $250,000.

The rebellion sent global stock prices plunging, prompting fierce recriminations on the presidential campaign trail. House Democratic and Republican leaders vowed to go back into negotiations to devise compromise legislation to stabilize the credit markets, but no talks were scheduled. After U.S. financial markets closed, with the Dow Jones industrial average down a one-day record of 778 points, or 7 percent, Treasury Secretary Henry M. Paulson Jr. tried to calm frazzled traders, assuring them that work on a market intervention would resume.

"I will continue to work with congressional leaders to find a way forward to pass a comprehensive plan to stabilize our financial system and protect the American people by limiting the prospects of further deterioration in our economy," he said. "We've got much work to do, and this is much too important to simply let fail."

Rarely has a congressional vote held such high drama and produced such immediate repercussions, directly from the House floor to the trading floor. Wall Street traders huddling around television screens watched lawmakers denounce the bailout legislation, and then sent the Dow plummeting. Stocks had recovered somewhat by the time the vote was gaveled to a close, but jittery investors sent them plunging again as Republicans and Democrats took turns blaming each other for the defeat. In a few hours, $1.2 trillion in paper wealth was wiped out.

As lawmakers in Congress pointed fingers, the collapse of the world's financial markets only built steam. Brazil's main stock index lost more than 9 percent on the news of the U.S. congressional vote, and fears spread that other emerging markets could feel the credit crunch. European bourses fell earlier in the day as a result of the financial struggles of major European banks, and regulators from Belgium, the Netherlands and Luxembourg moved to rescue the European banking and insurance giant Fortis. And Citigroup stepped in to buy Wachovia's banking operations for $2.16 billion, making it the dominant bank in the Washington area.