Bush pushes bailout as bank crisis spreads

Tue Sep 30, 2008 2:48pm EDT
 
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By Eddie Evans

NEW YORK (Reuters) - President George W. Bush eased pressure on financial markets Tuesday with assurances that a $700 billion bailout for the financial sector can be revived, but the crisis spread further through European banks.

The dollar rallied and stocks recovered 3 percent after suffering their blackest day in 20 years on Monday as the House of Representatives rejected the rescue plan. The White House, Treasury Secretary Henry Paulson, congressional leaders and the two candidates hoping to succeed Bush as president, Sens. John McCain and Barack Obama, kept up a steady drumbeat of support for the plan, and around the world markets stabilized.

"There's an overarching belief that at some point this week, whether it's Wednesday or Thursday, we'll get something passed by the House," said Arthur Hogan, chief market analyst at Jefferies & Co in Boston.

But global money markets remained frozen, and London interbank offered rates shot to record levels, indicating banks were not lending to each other. The rate for overnight dollar loans rose to nearly 6.9 percent from just over 2.5 percent on Monday.

Without the bailout plan, which would allow the Treasury to buy toxic mortgage-related assets from banks, credit markets could remain frozen and lead to a recession.

"I assure our citizens and citizens around the world that this is not the end of the legislative process," Bush said.

From Dublin to Moscow, the financial crisis was an ominous presence.

Ireland unveiled a blanket guarantee for savings held by its banks, and for the second time in a month Russia briefly shut down its stock markets.   Continued...

 
<p>Standing in front of a painting of George Washington, President George W. Bush speaks about the economic rescue plan at the White House in Washington September 30, 2008. Bush said on Tuesday the U.S. economy was depending on decisive action from the government on a financial bailout plan or the economic damage could be "painful and lasting". REUTERS/Kevin Lamarque</p>