Bush calls for calm amid global stock market panic
Source: 11-OCT-2008 Intellasia | Reuters
Oct 11, 2008 - 7:07:00 AM

US President George W. Bush has blamed "uncertainty and fear" for much of the global financial meltdown and insisted US authorities have the tools they need to confront the crisis. (AFP/Saul Loeb)

Warning that "anxiety can feed anxiety," US President George W. Bush implored Americans to remain confident on Friday and promised to restore stability in the face of a global stock market panic.

Finance ministers and central bankers from the Group of Seven, meeting in Washington, faced mounting pressure to repair the system after joint interest-rate cuts, individual liquidity injections, a US$700 billion US bailout and government plans to take equity stakes in banks failed to restore investor confidence.

The policy makers were considering their remaining options while experts offered their own proposals.

Much of the debate surrounded injecting capital into banks to keep them from failing. The US Treasury, the Federal Reserve and the White House were in consultations on how to do it, CNBC reported, citing senior government officials.

The White House declined to comment.

"There's no confidence --there's an atom or two of confidence returning," said market strategist Steve Goldman at Weeden & Co in Greenwich, Connecticut.

Bush spoke in a televised address ahead of the G7 meeting to confront the frozen credit markets and recessionary signals underlying the worst financial crisis since the Great Depression.

"We know what the problems are. We have the tools to fix them. And we're working swiftly to do so," Bush said after Wall Street opened with an 8% slide in the Dow Jones Industrial Average before trimming those losses in half.

British prime minister Gordon Brown said other governments should follow Britain in putting money into struggling banks and offering guarantees worth hundreds of billions to persuade banks to start lending to each other.

The Dow Jones industrials lost nearly 700 points in the opening minutes of trading, turned positive, then resumed their slide.

The Dow was down 4.5%, the S&P 500 5% and the Nasdaq 4% at midday after European stocks nosedived 7.6% and Japan's Nikkei sank 9.6%.

Wall Street titans Morgan Stanley and Goldman Sachs led the plummet, down 40 and 16%, with Morgan Stanley investors worried that Japan's Mitsubishi UFJ Financial Group Inc might back out of a deal to inject much-needed capital.

WEALTH WIPED OUT

Wall Street's tumble was part of a global evisceration of wealth that has affected investment bankers and retirees alike. Going into the trading day, stocks on the benchmark MSCI main worldwide index had lost US$14.3 trillion of value since October 31, 2007, leaving the global equity benchmark worth less than US$20 trillion for the first time in four-years.

The MSCI has lost nearly US$4.6 trillion in value in the previous seven days alone.

Bourses in Iceland, Russia, Austria, Indonesia, Romania and Ukraine all closed as a result of the share price falls.

In one glimmer of hope, there were signs of a thaw in the credit markets, which Bush identified as a fundamental cause of the distress. Interest rates on US overnight commercial paper dropped after overnight dollar and euro rates fell closer to central banks' new lower targets.

International Monetary Fund chief Dominic Strauss-Kahn called for a temporary guarantee of all interbank deposits.

Many investors have been looking for global leadership, but Bush is a lame duck ahead of the November 4 presidential election. Democratic nominee Barack Obama said the crisis required coordinated international action and Republican John McCain argued his experience made him the candidate who can lead Americans through a time of economic tumult.

One strategist said he feared a political vacuum with weak governments in Europe and North America.

"(French President Nicolas) Sarkozy has been the EU president and is doing what people regard as a good job, but his wife is more popular than he is. That leaves Italy then as a bastion of political stability," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.

"It scares me that there's a vacuum of strong political leaders right now. It's not like we have a Franklin Roosevelt and a Churchill," he said.

The larger Group of 20, which includes 19 of the world's largest economies plus the European Union, the International Monetary Fund and the World Bank also were due for weekend meetings. -By Jeremy Pelofsky and Daniel Trotta