President George W. Bush will press for agreement on a massive bailout of US financial firms in an emergency meeting with lawmakers including the two men battling to succeed him. The meeting takes place after the United States' biggest industrial conglomerate, General Electric Co, cut its earnings forecast in the face of a slowing economy and cited “recent dramatic developments in the financial markets.”
Troubles at Wall Street firms have triggered the proposed $700 billion rescue that is the subject of a fierce political debate and drawn global markets into their worst crisis since the Great Depression. The crisis has forced central banks to pump in billions of extra dollars each day as nervous banks refuse to lend to each other.
Just weeks before Americans go to the polls to elect their next president, critics have expressed concern that freewheeling bankers will get off too lightly and doubts over whether the plan can solve the wider credit crisis.
Despite the bipartisan reluctance to back the rescue, there were positive signals on Wednesday that a deal could be done in coming days, including comments by Senate Banking Committee Chairman Christopher Dodd.
“We're not there yet,” Dodd told reporters, but added there was a “good possibility we'll get there in a day or so.”
Democrat Rep. Barney Frank, chairman of the House of Representatives Financial Services Committee, told CNBC: “Earlier today (Wednesday), it became clear to me we would get the votes to pass this bill.”
Frank said there was agreement between House and Senate Democrats on what should be in the bill and that a meeting was set for Thursday with the Republicans.
Stock markets remained on edge, with Asian stock markets mixed, European shares only slightly higher, and US futures indicating shares would open flat.
The euro rose 0.4% from late US trade to around $1.4670 while the dollar index, which tracks the currency's performance against six major currencies, dropped a third of a percent.
Gold was higher as investors sought safety in bullion. The metal is up about 20% since September 11, when a collapse in shares of Lehman Brothers raised questions about the global banking system.
German Finance Minister Peer Steinbrueck said on Thursday one outcome of the crisis would be a less dominant role for the United States in the global financial system.
“The United States will lose its superpower status in the world financial system. The world financial system will become more multi-polar,” he said.
He joined a growing chorus of international politicians who have blamed the United States for spawning the global financial crisis with a blind drive for higher profits and insufficient market regulation.
Bush has offered few details about the emerging bailout but has warned of a looming economic disaster if Congress fails to act swiftly to fund a rescue that would cost more than the Iraq war.
In a televised speech, he told Americans there was little choice but to undertake the bailout, which could cost every man, woman and child in America $2,300.
“I believe companies that make bad decisions should be allowed to go out of business. Under normal circumstances, I would have followed this course. But these are not normal circumstances,” Bush said.
“The market is not functioning properly. There has been a widespread loss of confidence, and major sectors of America's financial system are at risk of shutting down.”
Struggling automakers General Motors Corp, Ford Motor Co, and Chrysler LLC hurt by tight credit markets won House of Representatives backing on Wednesday for guarantees needed to fund a $25 billion loan package.
Democratic presidential candidate Sen. Barack Obama and his Republican rival Sen. John McCain are among those set to meet Bush on Thursday.
McCain has asked to cancel a debate with Obama set for Friday citing the need to work on the bailout.
Obama said the first of a series of planned debates should go ahead: “What is important is that we don't suddenly infuse Capitol Hill with presidential politics.”
Wrangling over the bailout has overshadowed progress on selling stakes in and units of Wall Street financial firms this week.
Warren Buffett, one of the world's richest men, announced a deal for his firm Berkshire Hathaway Inc to invest $5 billion in Goldman Sachs Group Inc. on Wednesday.
That followed Britain's Barclays and Japan's Nomura Holdings buying parts of Lehman Brothers and Japanese bank Mitsubishi UFJ Financial agreeing to buy up to 20% of Morgan Stanley.
The deals came after the US government's takeover of mortgage companies Fannie Mae and Freddie Mac, the bailout of insurer American International Group Inc, and the bankruptcy filing of Lehman Brothers. (Reuters)