Rumours of U.S. government action send stocks soaring
U.S. President George W. Bush makes a statement outside the Oval Office at the White House in Washington on Thursday.(Pablo Martinez Monsivais/Associated Press)
U.S. President George W. Bush met with his treasury secretary and the head of the U.S. Federal Reserve late Thursday, as some suggested the government was on the verge of taking new action to stem the country's financial crisis.
"The American people are concerned about the situation in our financial markets and our economy," Bush said after his meeting with Treasury Secretary Henry Paulson, Fed Chairman Ben Bernanke and Christopher Cox, chairman of the Securities and Exchange Commission.
"And I share their concerns."
Administration officials went on to meet with Congressional leaders to discuss legislation that would give the U.S. government power to purchase bad debt from suffering financial institutions, according to Congressman Barney Frank.
Frank said there was "virtually unanimous agreement" among those at the meeting that such legislation was needed.
Without providing details of the plan, Paulson emerged from the meeting on Capitol Hill to say the solution would be "aimed right at the heart of this problem."
He said the goal was to come up with a "comprehensive approach that will require legislation to deal with the illiquid assets on bank balance sheets."
House Speaker Nancy Pelosi said that once the administration had presented its proposal "we hope to move very quickly" to come to an agreement.
With news of the imminent plan having leaked to Wall Street earlier Thursday, the Dow Jones industrial average jumped 410 points — its biggest percentage gain in nearly six years.
Markets in both Canada and the United States were boosted by an earlier report that Paulson was considering the establishment of a federal agency that would take over the especially bad parts of ailing financial firms.
Earlier Thursday, Bush went on television to reassure Americans that the government is prepared to take further action.
Speaking from just outside the Oval Office, Bush said he had cancelled his travel plans for the day to stay in Washington and monitor the situation and consult with his economic advisers.
He went on to outline what he described as "extraordinary measures" taken by the government to try to stabilize financial markets, including assuming control of home mortgage giants Fannie Mae and Freddie Mac, bailing out insurer American International Group Inc., as well as the U.S. Federal Reserve's overnight move, along with other central banks, to inject more cash into global money markets.
"These measures are necessary and they're important and the markets are adjusting to them," Bush said.
"Our financial markets continue to deal with serious challenges. My administration is focused on meeting these challenges. The American people can be sure we will continue to act to strengthen and stabilize our financial markets and improve investor confidence," he said.
Missing from Bush's remarks were any new policy moves and the usual reassurances that the fundamentals of the U.S. economy are sound.
The move by central banks in North America, Europe and Asia to inject more liquidity into the financial system failed to calm investors as stock markets remained volatile.
In Toronto, the TSX composite index closed up 186 points after surging more than 500 points earlier in the day.
In New York, the Dow Jones gained 410 points after swinging in and out of the red, at one point down 150 points from Wednesday's close.
Markets in Britain and France posted small declines, while Germany's Dax ended the day flat.
With files from the Associated Press
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