Bush: Situation ‘deeply unsettling’ for Americans

President Bush sought to assure the public Friday that his administration is taking steps to address the financial crisis as volatile markets continued to gyrate, but announced no new measures to be taken by the White House. 

Bush acknowledged an economic situation “deeply unsettling” to the American people, and said the “startling drop” in stock markets was driven by uncertainty and fear. He also warned of a situation where “anxiety can feed anxiety.”

{mosads}The Dow Jones industrial opened the day by plunging hundreds of points and briefly landed below 8,000. It then rallied before Bush began his address before falling again by about 100 points at the end of his speech, when it was clear the president was offering no new initiatives.

In trying to calm markets and the public, Bush emphasized all of the steps the government has already taken to deal with the crisis. He assured the nation that the federal government would “continue to act to resolve this crisis and restore stability to our markets.”

Bush spoke amid reports that the administration is considering new steps including temporarily insuring all bank deposits through the Federal Deposit Insurance Corporation. Under the $700 billion bailout package approved by Congress last week, bank and credit union deposits up to $250,000 are insured, up from $100,000 before the bill.

The Treasury Department is also considering a direct capital infusion in banks in return for taking a partial ownership stake in the banks, according to sources.

Lifting the ceiling on deposit insurance is a move supported by the trade association representing community banks, which fears large depositors might withdraw their money given the panicky environment.

The idea was first raised by the FDIC during negotiations over the bailout bill, but was not included because of lawmaker fears that it would put taxpayers at too much risk. While the FDIC is funded by the banking industry, the federal government is the backstop insurer.

“We thought it was prudent to give the FDIC that kind of flexibility,” said Steve Verdier, senior vice president and director of congressional affairs for the Independent Community Bankers of America (ICBA). “We would support that same idea.”

Allowing the FDIC to insure deposits to any level would seem to require congressional action.

The FDIC has the ability to fully cover bank deposits up to any level now, but Verdier said his interpretation of this “systemic risk” provision is that it is on a bank-by-bank basis and would not allow the FDIC to insure all deposits at all banks. He also said the FDIC suggested it believes it
lacks this authority when it asked Congress to consider providing it this power during talks on the bailout bill.

Before the insurance rate was raised to deposits up to $250,000, 36.5 percent of about $7 trillion in bank deposits was uninsured.

In his speech, Bush also said he would continue to work with global leaders to find solutions to the problem. Washington will host annual meetings of the World Bank and International Monetary Fund this weekend, and Bush said he would participate in meetings of the G-7 industrial countries.

He said this would send the “unmistakable signal” that “we’re in this together and we’ll come through this together.”