President Bush, trying to calm turmoil in financial markets after a dramatic weekend, declared Monday that his administration is “on top of the situation” and dealing decisively with the slumping economy.
“One thing is for certain, we’re in challenging times,” Bush said after meeting with Treasury Secretary Henry Paulson and other senior economic advisers. “But another thing is for certain: We’ve taken strong, decisive action.”
Bush spoke as the financial markets absorbed the stunning news that 85-year-old Wall Street powerhouse Bear Stearns had agreed to be acquired by rival JPMorgan Chase for the fire-sale price of $2 a share. Bear Stearns, which traded at nearly $160 a share less than a year ago, collapsed after losing billions of dollars on mortgage-backed securities.
Bush commended the Federal Reserve for its urgent actions over the weekend, which included guaranteeing financing for the Bear Stearns deal and making available more credit to Wall Street investment banks. Fed policymakers are scheduled to meet again Tuesday and are expected to lower a key short-term interest rate by as much as three-quarters of a percentage point.
The White House moved quickly to raise Bush’s public profile Monday, and he continued to send an upbeat message, even in acknowledging a downturn that keeps roiling the economy and the country’s people as well.
Bush said “our financial institutions are strong” and “our capital markets are functioning efficiently and effectively.” He praised Paulson for working with the Fed and showing “the country and the world that the United States is on top of the situation.”
Still, Bush said the administration is monitoring economic developments closely.
“When need be, we’ll act decisively in a way that continues to bring order to financial markets,” Bush said.
He did not indicate any other steps the government might take, or when.
“In the long run, our economy is going to be fine,” Bush said. “Right now we’re dealing with a difficult situation.”
Over the weekend the the Fed, which operates independently, approved a cut in its emergency lending rate to financial institutions to 3.25 percent from 3.50 percent.
White House press secretary Dana Perino said Bush had been kept informed of the Fed’s intended actions through a variety of people, but that he was not personally involved in making or approving the decision.
She defended the dramatic intervention on behalf of the financial markets as necessary, even though Bush himself had warned Friday against excessive government intervention in the housing markets. “The concern about possible future market disruptions is real, and a concern not only just to the president but also to world markets,” Perino said.
Global markets plunged Monday, with Tokyo's Nikkei index off nearly 4 percent and major European indices down about 3 percent.
She also said the administration was taking action to help individual homeowners suffering from higher mortgage defaults, and that there is “a responsibility on the part of the media to really explain” that assistance.
Later Monday, Bush met with his Working Group on Financial Markets, which includes Paulson, Federal Reserve Chairman Ben Bernanke and Securities and Exchange Commission Chairman Christopher Cox.
Afterward, Paulson rejected the notion that the government had bailed out Bear Stearns with a $30 billion line of credit for a takeover by JPMorgan Chase. “If you would ask the Bear Stears shareholder in what has happened in terms of their value, I don’t think any of them would think this is a good outcome for them,” Paulson told reporters in the White House driveway.
“This was an easy decision,” he said. “It was the right outcome.”