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President makes another pitch

POSTED: October 01, 2008, 12:00 am

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After seeing the House of Representatives vote his mortgage bailout plan down, President George W. Bush took the airwaves Tuesday morning to make another appeal to the American public and Congressional leaders for support of the package. Mr. Bush’s appearance came the morning after the Dow Jones Industrial Average experienced the largest single day fall off in the market’s history as nervous investors engaged in a frantic sell off. As the market reacted negatively, lawmakers on Capitol Hill in each party were pointing fingers at each other, attempting to lay blame for the embarrassing outcome Monday after spending the prior weekend behind closed doors negotiating.

For the President more is at stake than the embarrassment of losing a major battle on Capitol Hill. The current economic crisis bears the mark of the Bush administration, and his handling of the situation will further impact his legacy. By all accounts, the events of the last ten days, going back to the collapse of Lehman Brothers, has tarnished a White House that is already reeling from prolonged wars in Iraq and Afghanistan, and numerous scandals related to the former, as well as a significant economic downturn.

Starting with the bailout of Bear Stearns, the administration has not been able to get in front of the ever changing economic picture and its myriad of challenges. For months the President and his advisers stressed that the economy was not in recession, and that a recovery, though not imminent, was on the horizon. The sudden and dramatic change in tone by Treasury Secretary Henry Paulson after the collapse of Lehman Brothers and the federal bailout of the insurance business of American International Group (AIG) signaled that the nation’s fiscal outlook was precarious.

On Tuesday President Bush parsed his words carefully in addressing Members of Congress. Mr. Bush said, “I recognize this is a difficult vote for members of Congress. Many of them don't like the fact that our economy has reached this point, and I understand that. But the reality is that we are in an urgent situation, and the consequences will grow worse each day if we do not act. The dramatic drop in the stock market that we saw yesterday will have a direct impact on the retirement accounts, pension funds, and personal savings of millions of our citizens. And if our nation continues on this course, the economic damage will be painful and lasting.”

For the President, the success or failure of his economic proposal is a matter of personal credibility at this point. His Rose Garden speech one week ago, standing with Paulson, Securities and Exchange Commissioner (SEC) Christopher Cox and Federal Reserve Chairman Ben Bernanke, failed to sway doubters on the Hill and did little to move a skeptical public. It also failed to provide the market any confidence that the remedy proposed would be an effective intervention to arrest the downturn.

With his proposal taking hits from all sides – Republican, Democrats, the market, the public, political pundits – Mr. Bush has been struggling to ensure the nation that the $700 billion plan would indeed result in the stabilization of financial firms but that the return on investment would be sufficient to protect taxpayers. “Because the government would be purchasing troubled assets and selling them once the market recovers, it is likely that many of the assets would go up in value over time. Ultimately, we expect that much -- if not all -- of the tax dollars we invest will be paid back,” assured the President.

As Mr. Bush attempted to gain his footing, Members in the House were left to explain why the bill went down in defeat, and the Senate as bystanders unsure as to when the matter could be called up for a vote. However, late Tuesday night Senate Majority Leader Harry Reid (D-NV) announced that a vote would be scheduled on the bailout bill on Wednesday. Included in the version the Senate will consider is a $150,000 increase in the amount of deposits covered by federal deposit insurance; a provision that has the backing of the Federal Deposit Insurance Corporation (FDIC).

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