US President George W. Bush has warned that the US economy is in danger unless a $US700 billion ($842 billion) plan to bailout the country`s banks is approved.
"We are in the midst of a serious financial crisis,`` he said. "Our entire economy is in danger.``
In a speech aimed at explaining his rescue package to the American public and convincing Congress to pass the proposal, Mr Bush warned that inaction could wipe out banks, threaten retirement nest eggs, send home values into freefall and foreclosures skyrocketing, and lose millions of jobs.
"And, ultimately, our country could experience a long and painful recession," Mr Bush said. "Fellow citizens, we must not let this happen."
Any recession in the US would have negative flow-on effects in other economies around the world, including Australia. Uncertainty over whether the rescue plan will be passed has already caused jitters on global share markets.
Turbulence in Wall St flows on to the Australian market - as seen last week when tens of billions of dollars were wiped off the ASX in a single day.
Macquarie Equities associate director Lucinda Chan said today that uncertainty about the bailout had led to volatility on the share market.
"I think the quicker they make a decision, the quicker we will see stability back in the market,`` she said.
Mr Bush said the rescue package would send a signal to markets around the world that America’s financial system was back on track.
The central bank said Australia had coped better with the recent turmoil than many other financial systems.
The RBA said Australia`s banks had only limited exposure to sub-prime assets and were still profitable.
"While the Australian financial system has not been completely insulated from developments abroad, it is weathering the current difficulties much better than many other financial systems,`` the central bank said.
The plan
Congress has greeted the plan with scepticism, with opponents saying it has not been effectively explained to the public and the $US700bn price tag is too high.
The American banking system is struggling as bad loans come home to roost. Billions of dollars of bonds, backed by bad mortgages, are threatening the security of banks.
The US government wants to set up a fund to buy the distressed mortgage bonds from the banks, to provide banks with the liquidity they need to conduct business. The idea is, that once the markets recover, Treasury can re-sell the bonds and hopefully claw back some of the $US700 billion.
Taxpayers are angry that their money will be used to bailout Wall St fat cats. The plan will cost every American taxpayer around $US5000.
Mr Bush said today that not passing a bill now would end up costing Americans more in the long run.
Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke have spent the past couple of days trying to convince Congress to pass the package.
Mr Bush will host White House rivals John McCain and Barack Obama, as well as top politicians for economic crisis talks tomorrow.
Greed no good?
And perhaps in a sign that nerves are starting to fray further than usual, Hollywood actor Douglas was asked his opinion on it all.
A reporter at the UN general assembly asked Douglas, who played Gordon Gecko in the 1987 film Wall St: "Are you saying, Gordon, that greed is not good?".
"I`m not saying that," Douglas said. "And my name is not Gordon. He`s a character I played 20 years ago."
In Washington, Federal Reserve chairman Ben Bernanke urged Congress "to act quickly to address the grave threats to financial stability that we currently face".
But Democrats are worried that the package will merely reward the "cowboy" CEOs whose gambling with credit got the world`s finances into the mess in the first place.
They want an independent body set up to ensure the huge sum will be spent properly.
Wall St
On trade overnight, the Dow Jones Industrial Average fell 20.15 points (0.19 per cent) to 10,834.02 at the close of trade, while the tech-heavy Nasdaq composite edged up 2.35 points (0.11 per cent) to 2155.68.
The broad-market Standard & Poor`s 500 index was virtually flat, down 1.04 point (0.09 per cent) at 1187.18, based on preliminary closing data.
"Thus far, the market has been duly unimpressed with the (Congress) hearings (into the package). It hasn`t liked the manner in which the Treasury secretary and Fed chairman have been selling the plan nor the manner in which Congressional leaders are negotiating to get a plan passed," Patrick O`Hare, analyst at Briefing.com.
"The prevailing sense now with respect to the plan is one of uncertainty, and that uncertainty has been behind this week`s selling interest," he said.
Defending the time taken to look into the package, Senate Banking Committee chairman Christopher Dodd said: "We`ve got to get this right. There is no second act".
This is a 700 Billion dollar con. The people making these decisions are socially connected to the villains on Wall street, and are basically just rescuing their mates. Let a couple of banks and hedge funds go bankrupt. It will be good for the system and flush out those who made bad decisions.Thereare plenty of cashed up Asians, Arabs and Russianswho will come in and pick up the pieces once these Wall street villains bite the dust. Paulson'splan is nothing more then a"Henney Penny" and if we follow him we're all going to be eaten up by the fox.
Posted by: Damian of Brisbane 3:09pm today
Hey! Anti Conservative of Perth. You nailed it! Yes, where are the free market capitalists and the free market conservatives now? They have banked their billions and they have slunk off into the woods like the miserable, greedy, leaching cowards they are. Well done Anit Conservative of Perth.
Posted by: Dollar Dazzler of Sydney 3:06pm today
Peter from the Bush, neither McCain or Obama are going to solve the problem in the next few days, it's just as important to get an idea of who will be in charge over the next several years and how they will handle the problem then.It's gonna be years at a minimum before this is fixed.I'm tipping that McCain is scared to debate on this because his party was in power when it all hit the fan.
We welcome your comments on this story. Comments are submitted for possible publication on the condition that they may be edited. Please provide your full name. We also require a working email address - not for publication, but for verification. The location field is optional.Read our publication guidelines.
Submit your feedback here:
Search for more stories on this topic on Newstext, our news archive service. Click here
