Bush claims to be ‘on top’ in dealing with economic slump

By Arun Kumar, IANS

Washington : President W. George Bush has welcomed the US central bank’s sweeping intervention in the financial markets, saying his administration is “on top of the situation” in dealing with the slumping economy.

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Facing accusations Monday that his administration supported the bailout of a prestigious investment bank while doing little to address the hardships faced by Americans facing foreclosures on their homes, he asserted: “We’ve taken strong, decisive action.”

Bush made the remarks after conferring with his economic aides at the White House on the turmoil. Bush thanked Treasury secretary, Henry M. Paulson for initiating the action over the weekend.

His press secretary, Dana M. Perino, said Bush had conferred with Paulson by phone Sunday afternoon as Federal Reserve, as the US central bank is called, and JP Morgan Chase were laying plans to bail out the investment bank Bear Stearns.

In a rare weekend move, the Federal Reserve offered Wall Street investment houses short-term emergency loans. It also approved a cut in its emergency lending rate to financial institutions to 3.25 percent from 3.50 percent.

As he did in New York Friday, Bush again projected an optimistic front Monday. “One thing is for certain. We’re in challenging times,” he acknowledged. “But another thing is for certain: We’ve taken strong, decisive action.”

“We agree upon the fact that our financial institutions are strong, and that our capital markets are functioning efficiently and effectively,” Bush said with his economic aides.

“When need be, we’ll act decisively in a way that continues to bring order to financial markets,” he said as his administration continues to monitor economic developments closely.

“In the long run, our economy is going to be fine,” Bush said. “Right now we’re dealing with a difficult situation,” he added without indicating any other steps his administration might take, or when.

But opposition Democrats in Congress reacted harshly, with the Senate’s majority leader, Harry Reid, saying the White House was willing “to bail out Wall Street at taxpayer expense,” even as it opposed legislation intended to ease the financial crunch on

Meanwhile, a senior International Monetary Fund (IMF) official warned that mounting global credit crisis could widen into financial “contagion” that could wipe $800 billion of value from the books of US and global financial institutions.

“This is clearly a period of exceptional uncertainty,” Anoop Singh, IMF director for the Western Hemisphere Department told a conference in Brazil, according to the official text of his speech “The distrib ution of risks for the US outlook is wide and skewed clearly toward the downside, and the probability of additional shocks leading to a US recession is quite high,” Singh said.

“All in all, current estimates suggest that the global financial system could be facing losses of close to $800 billion spread across banks, insurance companies, hedge funds and pension funds, although some analysts are projecting much higher losses,” he said.

The US was almost certainly looking at a protracted housing crisis and signs were growing that problems in the US housing market are starting to spread beyond the sub-prime mortgage market to other real estate areas, Singh said He said there is also growing concern that similar housing price increases abroad-many of which have been larger than in the United States-might “deflate abruptly,” with potential financial implications as well.