WASHINGTON, Oct. 14, 2008
Bush Outlines $250B Bank Share Buy-Up
U.S. Will Invest Funds Allocated By $700 Billion Bailout Package In Big Banks
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"With confidence and determination we will return our economy to the path of growth and prosperity," President George W. Bush said in a statement Oct. 14, 2008. (AP)
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Federal Reserve Chairman Ben Bernanke, left, and Treasury Secretary Henry Paulson. (AP Photo/Evan Vucci)
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Play CBS Video Video World Markets Make Gains Global financial markets improved as banks now have money to lend., reports Mark Phillips. Bianca Solorzano reports on what this means for Wall Street.
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Video Obama Tackles The Economy Barack Obama's new plan to help bolster the economy comes after heated criticism that he's been standing on the sidelines as the financial crisis continues. Dean Reynolds reports.
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Video The Man With A Plan Gordon Brown's blueprint for salvaging the British economy has been met with great interest from other European leaders. But will his plan prove to be a lasting cure? Mark Phillips reports.
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Timeline Financial Meltdown Track major events that lead to one of the most tumultuous times in Wall Street's history.
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Timeline Credit Crunch Feeling the squeeze? Here's a look at actions and statements from key players in Washington.
Mr. Bush, in the latest of a series of statements on the troubled economy, said in a brief Rose Garden statement that the move echoed similar bold moves made overseas in an effort to prevent a global recession.
The announcement propelled the Dow Jones industrials up more than 300 points in the first minutes of trading Tuesday and followed the Dow's historic 936-point jump Monday, when investors were buying in anticipation of the government's plan.
The president made his statement after an early morning meeting with his economic advisers, announcing these steps:
Mr. Bush said this will help banks continue to make loans to businesses and individuals.
"These efforts are designed to directly benefit the American people," Mr. Bush said. He added: "With confidence and determination we will return our econ to the path of growth and prosperity."
He said that the partial nationalization of the nation's battered financial sector was a short-term move to help banks to be able to begin lending again.
"Government's role will be limited and temporary," the president pledged.
Treasury Secretary Henry Paulson, at a news conference a short time later, said "today's actions are what we must do to restore confidence in our financial system."
"We regret having to take these actions," said Paulson. "Today's actions are not what we ever wanted to do - but today's actions are what we must do to restore confidence to our financial system."
It was the latest in a series of moves by the government in an effort to combat a global credit crisis that is threatening to push the United States into a deep recession.
New York Times columnist and Princeton University economics professor Paul Krugman, who was awarded the Nobel Prize in Economics on Monday, told CBS' The Early Show the bank investment "is what the doctor ordered, as far as we can tell."
Economist Lakshman Achuthan agreed that the government's investment in the banks was a necessary move for their survival.
"If the U.S. Treasury, the U.S. Government, is putting the full faith and credit of the United States behind an institution, a company, the company is not going to fail," Achuthan told CBS News correspondent Anthony Mason.
The Federal Reserve, meanwhile, announced Tuesday that it will begin buying massive amounts of short-term debt on Oct. 27 - its latest effort to break through a credit clog. The Fed is invoking Depression-era emergency powers to buy commercial paper - a crucial short-term funding that many companies rely on to pay their workers and buy supplies. Last week the Fed said it intended to take the action but didn't specify when.
Fed Chairman Ben Bernanke welcomed all the new steps and said he believes they will help ease problems plaguing financial markets and threatening the economy. However, he also made clear that policymakers would continue to take actions as needed to battle the crisis.
"Our strategy will continue to evolve and be refined as we adapt to new developments and the inevitable set backs," he said. "But we will not stand down until we have achieved our goals of repairing and reforming our financial system and thereby restoring prosperity to our economy."
Executives of the biggest U.S. banks were summoned to a remarkable meeting at the Treasury Department on Monday to be briefed on the plan. Treasury Secretary Henry Paulson basically told the bank CEOs that they had to accept the government stock purchases for the good of the U.S. economy.
The administration plans to spend $250 billion of the $700 billion government rescue program passed by Congress on Oct. 3 to make stock purchases this year. The first purchases will be in nine large banks, officials said.
Paulson was expected to outline details of the plan at a Treasury Department news conference.
Earlier Monday, stocks soared around the world in response to dramatic government economic relief efforts in the U.S. and overseas.
"Over the past few weeks, my administration has worked with both parties in Congress to pass a financial rescue plan. Federal agencies have moved decisively to shore up struggling institutions and stabilize our markets," Mr. Bush said. "And the United States has worked with partners around the world to coordinate our actions to get our economies back on track."
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Nobel Laureate, Economics
He called the decision for the government to buy stock in the distressed banks "an essential short-term measure to ensure the viability of America's banking system."This is what the doctor ordered, as far as we can tell.
Paul KrugmanNobel Laureate, Economics
It does put the United States in the awkward position of owning shares in institutions it also regulates. The shares purchased by the government are expected to be nonvoting ones.
"The truth is that no one is sure it will work," Krugman told The Early Show. "There's going to be manic depressive markets," he said. "There may be moments of depression coming along."
Krugman said the White House's maneuvers, while welcome, were unlikely to stave off the looming economic recession, and, he said; "It looks like a nasty recession.
"There's a lot of momentum behind it."
© MMVIII, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.
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Add a Comment See all 132 Comments
- The firing squad would be better.
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Posted by brianbwb at 02:03 PM : Oct 14, 2008
Amen brother!
But where is he though? Hadn''t heard nothing about the man in quite awhile... - Reply to this comment
- "Bu$h is reported to be asking "Anyone seen my DlCK?""
Posted by inventagod2
Let us hope, for the sake of humanity, that his heart pump is still functioning, we wouldn''t want him to go out like that.
The firing squad would be better. - Reply to this comment
In other news, DlCK CHENEY has disappeared.
Bu$h is reported to be asking "Anyone seen my DlCK?"- Reply to this comment
- "Don''t fool yourself, what the posts contained was conservative viewpoints, period....I have witnessed myself banning with no use of any of those....Liberal Pro-Obama comments with the most vile language never get censored or their nicknames deleted, only conservative viewpoints, so don''t make excuses for the Liberal Biased Censors...please"
Posted by Minuteman-8
It may be that your "viewpoint" was posing as fact, and may have contained issues known to be false, or libelous, or slanderous, lately this has been very common from those calling themselves "conservative", just peruse the previous posts, there is a lot of leeway given, but there are boundaries, you very likely crossed one. - Reply to this comment
- Using YOUR OWN MONEY to give you the shaft. Aren''''t corporations great?
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Posted by jennings501 at 12:37 PM : Oct 14, 2008
They think that all Americans need to have their prostates checked.
Esp the females (sarcasm). - Reply to this comment
- When the doctor is a quack, the cure is often worse than the disease.
Expect a horrific mess from incompetent government intervention.
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Posted by DcratLosers at 12:49 PM : Oct 14, 2008
Of course incompetent doctors too. - Reply to this comment
- Name ONE government program that is well-managed.
Posted by DcratLosers ------------------------
Probably the best run program I''ve seen is the one by the shadow government that keeps most of americans convinced that there really are two parties that are at opposite ends of the spectrum on almost everything, when, actually, the powers that be are in total agreement on what their main agenda is. - Reply to this comment
- Don''''t fool yourself, what the posts contained was conservative viewpoints, period....I have witnessed myself banning with no use of any of those....Liberal Pro-Obama comments with the most vile language never get censored or their nicknames deleted, only conservative viewpoints, so don''''t make excuses for the Liberal Biased Censors...please
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Posted by Minuteman-8
The CBS moderators/censors are probably wanna-be future editors in chief, and they get to practice editing public opinion into what they want the public to think public opinion is. Those who do good(by that I mean what their bosses want them to do)get moved up the corporate ladder, and those who don''t get their jobs ''edited''. It''s the American(media''s) way! - Reply to this comment
- This is a turning point in US History.
Great article about nationalization of the banking system.
http://www.thenewamerican.com/economy/sectors-mainmenu-46/412 - Reply to this comment
- Great! Taxpayers give billions and billions to banks and the big banks turn around and give it right back to the consumers. Or should I say ''shove it right back''. Higher credit card rates, lower credit limits, fees, fees, fees,... Using YOUR OWN MONEY to give you the shaft. Aren''t corporations great?
- Reply to this comment
Author Thomas Friedman on Obama's Afghanistan plan and the war on terror.
