Fed's urgent actions sooth only some investors
Markets around the world sputter in reaction to the Bear Stearns fire sale, a key rate cut and broadened lending to investment houses.
NEW YORK -- — A day after the Federal Reserve reassured investors by taking extraordinary steps, including supporting the purchase of ailing Bear Stearns Cos. by rival JPMorgan Chase & Co., stocks gyrated and politicians fought over what comes next.
On Sunday, the Fed also opened a lending window to securities firms, sliced a key interest rate and backed with $30 billion in emergency funds the bargain-basement purchase of Bear Stearns.
The moves were designed to placate investors, but stocks fell across the world. In New York, the market took a roller-coaster ride, dropping sharply on opening before recovering into positive territory, then falling again. By midafternoon, it was back in positive territory, up about 90 points.
Earlier, in Washington, President Bush tried to calm the sputtering markets with a statement saying that the government has "taken strong and decisive action" with weekend moves by the Fed to bolster financial markets.
After a meeting with top economic advisors, Bush issued a statement thanking Treasury Secretary Henry Paulson for working over the weekend through the crisis.
"You've shown the country and the world that the United States is on top of the situation," he said.
Pledging to monitor the situation closely and "act decisively" when needed, Bush said the economy is in "a difficult situation," but decreed that "in the long run, our economy is going to be fine."
Bush met in the Roosevelt Room this morning with Paulson, National Economic Council Director Keith Hennessey, Council of Economic Advisors Chairman Edward Lazear, Undersecretary of the Treasury Robert Steel and Chief of Staff Josh Bolten.
"We talked about the markets, emphasized that the priority is the orderly function of our markets," Paulson told reporters at a televised news conference. We "talked about the strength of our financial institutions and he [Bush] was generally quite pleased with the actions that were taken."
Paulson sought to be reassuring as he answered questions from reporters.
"Our economy has ups and downs," Paulson said. "The long-term fundamentals and I am very confident about this . . . we have strong long-term fundamentals that will be reflected in our currency markets. Our whole focus here is on policies going to increase the confidence in our economy."
