Bush ‘disappointed’ after bailout plan is defeated
Obama urges calm on markets after vote in Congress
Barack Obama told a rally in Westminster in Denver, Colorado, yesterday that there could be 'trials and tribulations and ups and downs' before the US government's rescue package for the financial markets would pass through the House of Representatives
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US POLITICIANS shocked the world yesterday when they rejected the $700bn (€486bn) bailout to save the global financial system from potential collapse.
There were extraordinary scenes within minutes of Congress voting against the plans. American politicians said they were determined to renegotiate a deal but the uncertainty is likely to have profound effects on financial markets this week.
President George W Bush said he was “very disappointed’’ with the vote. He had previously warned that without the scheme the impact on the US economy would be devastating and that Americans would struggle to get mortgages, credit cards or loans.
Ben Bernanke, the chairman of the Federal Reserve, America’s central bank, had warned of “grave threats’’ to the financial system if Congress rejected the plan.
Under the terms of the bailout, the US government was to take on bad banking debts. It was hoped that this would allow beleaguered banks to begin lending again. However, American politicians were wary that voters would regard the scheme as using taxpayers’ money to save wealthy Wall Street banks.
The rejection of the package was blamed on the Republicans and was branded as one of the most significant financial events in a generation.
The meltdown in America came after financial markets in Britain, Europe and Asia had already suffered one of the worst days on record amid growing doubts over the rescue package.
Last night, Barack Obama called for calm after the rescue plan was rejected, saying “it will get done”.
Failure of the measure brought a sharp attack from John McCain’s campaign. The Republican candidate’s top economic adviser, Doug Holtz- Eakin, blamed it on Mr Obama and the Democratic congressional leadership, who he said “put politics ahead of country”.
Mr Obama addressed a rally in the Denver suburb of Westminster, less than an hour after the House defeated the measure 228-205, with 133 Republicans and 95 Democrats voting against it.
“It’s important for the American public and for the markets to stay calm because things are never smooth in Congress,” the Democratic presidential nominee said. “There are going to be some bumps and trials and tribulations and ups and downs before we get this rescue package through.”
Both presidential candidates telephoned US Treasury Secretary Henry Paulson after the vote. Mr Obama’s campaign said the Illinois senator spoke to Democratic congressional leaders, and Mr McCain’s aides said their man spoke to Mr Bernanke.
Neither campaign has announced any changes to their schedule that would bring them back to Washington. After the vote, Democrats blamed some Republicans in the US Congress for defeating the plan. But Mr Holtz-Eakin joined some Republicans in faulting a speech on the floor of the House of Congress by speaker Nancy Pelosi in which she criticised “the Bush administration’s failed economic policies”.
‘Poisoned’
“Just before the vote, when the outcome was still in doubt, Speaker Pelosi gave a stronglyworded partisan speech and poisoned the outcome,” Mr Holtz-Eakin said.
A few hours before the House voted, Mr McCain took credit for urging changes in the credit- market rescue proposal first put forward by President Bush’s administration.
McCain said the revisions would protect consumers, and he defended his decision last week to return to Washington to take part in negotiations. “Some people have criticised my decision, but I will never, ever be a president who sits on the sidelines when this country faces a crisis,” the Arizona senator said during a rally in Columbus.
He added that Mr Obama was “watching from the sidelines” as lawmakers haggled over the proposal to revive US credit markets.
The attacks were a contrast with statements by the two candidates last week, when they both urged Congress to act on a rescue plan. Mr McCain and Mr Obama had also issued a joint statement outlining their common concerns.
They favoured adding oversight provisions, limits on compensation for company executives and protection for homeowners.
- Robert Winnett
