Bush Warns Of Crisis As Congress Deliberates
LINDA WERTHEIMER, host:
This is Morning Edition from NPR News. I'm Linda Wertheimer.
STEVE INSKEEP, host:
And I'm Steve Inskeep. Good morning. Until now, two officials have led the response to the financial crisis. One is the Treasury secretary, the other is the Fed chairman, and neither is elected. Now President Bush takes a more public role. He'll meet with congressional leaders, and he has also invited Barack Obama and John McCain to join him in the White House that they want to win. Last night, the president said lawmakers should approve a $700 billion bailout of the financial services industry. And he warned of a long and painful recession without it. Here's NPR's Brian Naylor.
BRIAN NAYLOR: The president spoke for about 15 minutes in the White House, and he did not mince words about the severity of the crisis facing the nation's economy. Calling himself a strong believer in free enterprise and an opponent of government intervention, Mr. Bush said he usually believes that companies that make bad decisions should be allowed to go out of business.
President GEORGE W. BUSH: Under normal circumstances, I would have followed this course, but these are not normal circumstances. The market is not functioning properly. There has been a widespread loss of confidence, and major sectors of America's financial system are at risk of shutting down.
NAYLOR: The president said without immediate action by Congress, the nation could slip into what he called a financial panic and that a, quote, "distressing scenario" would unfold.
President BUSH: More businesses would close their doors, and millions of Americans could lose their jobs. Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And ultimately, our country could experience a long and painful recession.
NAYLOR: The president's speech followed a second day of hearings on Capitol Hill with Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke answering questions for hours from skeptical and sometimes hostile lawmakers. Many, like Texas Democrat Lloyd Doggett, expressed anger for their constituents who are being asked to shoulder the cost of the bailout.
Representative LLOYD DOGGETT (Democrat, Texas): In Texas we'd say the chickens have come home to roast. This isn't the result of just bad luck. It's the result of bankrupt ideology. In this case, the vultures have come home to roast, and I think we need to look very critically at this giant bailout before we place all the burden on the people who didn't benefit from what went wrong here.
NAYLOR: Negotiations went on throughout the day between Paulson and congressional leaders, and the sides reported progress. The administration seems to be willing to accept a key demand of lawmakers that multi-million dollar salaries of Wall Street executives be trimmed as a condition of accepting the bailout money. Details of that agreement were not forthcoming. Some lawmakers are also pushing the administration to accept a smaller upfront infusion of a $150 billion rather than the full 700 billion. Paulson seemed to hedge a bit when asked about the idea yesterday, indicating the money wouldn't be needed all at once.
Secretary HENRY PAULSON (Treasury Department): This will be something that will be staged over a period of time, but we believe that $700 billion is the right number. We thought about it a lot, and we think that's what's necessary.
NAYLOR: Late yesterday, there was a new element thrown into the negotiations: presidential politics. Republican John McCain announced he was suspending his campaign and wants to postpone Friday night's debate with Democrat Barack Obama in order to take part in the bailout negotiations. Democrats reacted coolly to the notion. House Financial Services Committee Chairman Barney Frank called it, quote, "the longest Hail Mary pass in the history of football and Marys." Senate Majority Leader Harry Reid called it a photo op.
Senator HARRY REID (Democrat, Nevada; Senate Majority Leader): We're doing just fine. This should - we should not have presidential politics enter what we're doing here. It appears to me that John McCain is trying to divert attention to his failing campaign, and coming back here is not going to add to the process.
NAYLOR: But the president invited McCain, Obama, and the congressional leaders to a meeting today at the White House, hoping to have a bailout plan and assurance for the markets by the week's end. Brian Naylor, NPR News.