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Tuesday, 24th November 2009
 
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Business Blog

Rescue plan is needed - and needed now


Scary, isn't it? The world is holding its breath over the US administration's $700 billion financial rescue plan and all that American Presidential candidates do is play politics.

Now, of course, it you are trying to win election to the most powerful office in the world, you do have to play the political game.

John McCain's "dramatic" gesture to try to cancel his debate with Barack Obama to remain in Washington to deal with the crisis seems on the face of it the right thing to do.

But is McCain, falling behind in the polls, actually making a selfless gesture? Or is he, like his opponent - who told him that he wanted the debate to go ahead - just playing the game?

It looks rather like it.

In "normal" times, one could dismiss the Presidential skirmishing for what it is - politicians playing for very high stakes seeking advantage in a close race for the White House.

But these are not normal times, as George Bush admitted last night

Ironically, it fell to President Bush in his address to the American people

to try to bring some sense of urgency and reality to the debate.

Bush will be meeting both Obama and McCain later today to try to knock heads together to get them to work in what Americans call a bi-partisan manner. They always say they will, in practice raw politics usually wins the day.

Bush was as partisan as the next politician when seeking office but, once in the White House and near the end of his term, he does have a greater responsibility to the nation as a whole and, because of the US's importance, to the whole of the world.

So it is worth looking at what he said last night. This is where it gets scary.

America would face a "long and painful recession" if Congress failed to act and "major sectors of America’s financial system are at risk of shutting down", he said.

And this: "Our entire economy is in danger."

He added that the US needed to send a signal around the world that America’s financial system was "back on track".

You bet, Mr President. Yet there are two problems. Congressional leaders are asking for some more detail from Bush, Ben Bernanke, the Federal Reserve chairman, and Hank Paulson, the US Treasury Secretary.

A perfectly reasonable demand given the almost incomprehensibly large sum involved.

And also the task of selling the plan to ordinary Americans is not going to be easy.

Congressman John Spratt, chairman of the House of Representatives Budget Committee, today revealed that the US population had failed to grasp the seriousness of the economic downturn.

He told the BBC Radio 4 Today programme: "Back home, even though we have a slumping economy, most people don’t see the severity of the situation. They think it’s on Wall Street not Main Street, so it’s a hard sell."

Yet the longer there are delays, the greater the uncertainty and the more spooked the markets across the world will become.

And that has an effect here as well as in America

"The only show in town is the US bailout, and it’s see-sawing as to whether it will get through," said Richard Hunter, head of UK equities at Hargreaves Lansdown said today. "The longer it goes on the more uncertainty there will be... and if there’s one thing the market hates it’s uncertainty."

He's right. Bush is right. What America needs, what the world needs, is for the politicians in Washington to get their acts together and act.

If you accept that the bail out is necessary - even if it sticks in the craw that the banks who made colossal errors are being helped out - that action needs to happen soon. Very soon.

The world is holding its breath.



Last Updated: 25/9/2008

 


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