White House tries to stop the bleeding

President Bush, in a Rose Garden address, presented a dire portrait of the struggling economy as the Federal Reserve and the Treasury Department announced "unprecedented" actions to try and stop a crisis on Wall Street that has in recent days seen historical financial giants crumble. 

After a late-night meeting with members of Congress, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke joined Bush and Securities and Exchange Commission (SEC) Chairman Chris Cox in an effort to reassure Americans about the strength of the U.S. economy in “the long run.” However, Bush also pointed to risks associated with the historic government intervention in the housing, banking and insurance markets.

{mosads}Bush, who began by calling this a “pivotal moment for America’s economy,” acknowledged that a financial crisis that began with a flawed credit system and an imploding housing market has “spread throughout our financial system.”

On Friday, federal agencies announced new restrictions for the short-selling of stock, an unprecedented federal insurance policy for money markets and an initiative to buy troubled mortgages in an effort to stop what has become an all-out economic crisis. Bush, in a solemn Friday morning address, said that “these measures will act as grease for the gears of our financial system, which were at risk of grinding to a halt.”

To combat the crisis, the federal government has already bailed out mortgage giants Fannie Mae and Freddie Mac and the enormous insurance house American International Group (AIG).

Bush said he, along with Paulson, Bernanke and Cox, believe “that this decisive government action is needed to preserve America's financial system and sustain America’s overall economy.”

“These measures will require us to put a significant amount of taxpayer dollars on the line,” Bush said. “This action does entail risk. But we expect that this money will eventually be paid back.”

The economy has taken center stage in recent days and weeks as economists are painting the current crisis as the country’s worst since the Great Depression.

The Bush administration has tried repeatedly in recent days to reassure Americans that their personal banking accounts are safe, and the president said again Friday that in the 75 years since the creation of the Federal Deposit Insurance Corporation, “no one has ever lost a penny on an insured deposit — and this will not change.”

In his Rose Garden remarks, the president acknowledged that there has been “an erosion of confidence” in the country’s economy, but he tried to paint an optimistic picture.

“America’s financial system is intricate and complex. But behind all the technical terminology and statistics is a critical human factor — confidence,” the president said. “Confidence in our financial system and in its institutions is essential to the smooth operation of our economy, and recently that confidence has been shaken. Investors should know that the United States government is taking action to restore confidence in America’s financial markets so they can thrive again. In the long run, Americans have good reason to be confident in our economic strength.”