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 | | There was a mixed reaction to the rejection of the bailout on global markets |
George Bush, the US president, has said that rejection by the US House of Representatives of a $700bn bailout for troubled financial institutions was not the end of efforts to pass a rescue plan.
In a televised address at the White House on Tuesday, he attempted to reassure taxpayers and the markets, while warning the US Congress failure would be "painful and lasting" for the economy. "I recognise that this is a difficult vote for members of congress ... but the reality is that we are in an urgent situation and the consequences will grow worse each day if we do no act," he said. Volatilty ruled the Asian and European stock markets the day after the House of Representatives voted against the plan by 228 votes to 205. US stocks had suffered their worst plunge in a single day after the vote on Monday, with the benchmark Dow Jones industrial index falling 778 points to close at 10,365. 'Large problem' Bush told taxpayers that he understood that many people were concerned about the $700bn cost of the rescue plan, but the cost of not passing the bill would be greater. "That is a large amount of money ... but we are also dealing with a large problem, to put that in context the drop in the stock market yesterday represented more than $1 trillion in losses," he said. He also said that he expected much of the money used to but up the bad debts would be made back once they were sold as the market recovered."It is likely that many of the assets would go up in value over time, much, if not all, of the tax dollars invested over time would be paid back," he said. Japanese share prices closed down 4.12 per cent on Monday, hitting a more than three-year low, while European shares fluctuated wildly in mid-morning trade on Tuesday. Hong Kong's blue chip Hang Seng index shed nearly six per cent before it recovered ground and finally closed 0.8 percent up. India's main stock exchange in Mumbai trimmed sharp early losses and closed 2.1 per cent up at 12,860.43, snapping three consecutive days of losses. Share prices in Singapore, South Korea and Taiwan all fell sharply on Tuesday before regaining some ground. Australia ended the day down four. London's FTSE 100 plunged on opening, briefly recovered and oscillated between a loss of three per cent and a gain of 0.77 in morning trades. Frankfurt's DAX 30 slid 2.19 per cent to 5,679.67 points on opening and in Paris the CAC 40 tumbled 1.96 per cent before recovering to reach 0.26 per cent up at midday. Massive setback A substantial number of Republicans were saying they did not want the increase in spending and did not believe in any government intervention in the economy, our correspondent said. Nancy Pelosi, the speaker of the house, announced that "the legislation has failed and the crisis is still with us". "We must work in a bi-partisan way to have another bite at the apple," she said. The House of Representatives is to reconvene on Thursday over the issue but Republican and Democratic leaders have much to do if they are to persuade their dissenting colleagues to support the plan. Republican accusations Republicans blamed Pelosi's scathing speech near the close of the debate for the vote's failure. Pelosi had attacked Bush's economic policies and "right-wing ideology of anything goes, no supervision, no discipline, no regulation". John Boehner, the Republican house minority leader, said "we could have gotten there today had it not been for the partisan speech that the speaker gave on the floor of the house". Roy Blunt, the house Republican whip, estimated that Pelosi's speech changed the minds of a dozen Republicans who might otherwise have supported the plan. That was a remarkable accusation by Republicans against Republicans, Barney Frank, the Democratic chairman of the House Financial Services Committee, said. "Because somebody hurt their feelings, they decided to punish the country," he said. Gerald Friedman, a US economist, saidthe Republicans were to blame. "The Republicans in the House of Representatives are playing chicken with world economy. "The pro-deregulation people, the Republicans who voted this down, are the same people who have deregulated financial markets over the last 30 years. "The people that got us into this mess are now the ones that want to wash their hands of it. It's a little hypocritical."
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