Bernanke, Bush weigh in on lending squeeze
Federal Reserve Chairman Ben Bernanke and President Bush sent separate tough love messages Friday to Wall Street and Main Street: We understand your pain but it's not our job to rescue you from your financial woes.
For both, the country's economic health is the main concern.
And, to that end, Bernanke vowed Friday to do all that is necessary to protect the national economy from the ill effects of a global credit crunch -- but not to bail out investors and lenders "from the consequences of their financial decisions."
On Wall Street, stocks rose after Bernanke's remarks. The Dow Jones industrials closed up 119 points.
While Bush announced steps Friday to help homeowners struggling to make their mortgage payments, he made clear he has no interest in bailing out lenders, some of whom got cocky, took on too much risk and ended up with bad loans.
"The government's got a role to play, but it is limited," Bush said at the White House. "A federal bailout of lenders would only encourage a recurrence of the problem. It's not the government's job to bail out speculators, or those who made the decision to buy a home they knew they could never afford."
Friday's comments -- made in separate appearances -- by Bernanke in Jackson Hole, Wyo., and the president in Washington, also sought to send a reassuring message: Fed policymakers and the Bush administration are on top of the credit crunch that has unnerved investors on Wall Street and around the world and raised anxiety on Main Street. But they'll act in the best interests of the economy.
Many believe the odds are growing that the Fed will cut its most important interest rate, now at 5.25 percent, by at least one-quarter percentage point on or before Sept. 18, its next regularly scheduled meeting. The Fed hasn't lowered the rate in four years.
A key element of Bush's plan would let homeowners with a good credit history who cannot afford their mortgage payments refinance with mortgages insured by the Federal Housing Administration to keep from defaulting.