US moves to counter credit crisis

President Bush has been explaining why the US government needs to spend hundreds of billions of dollars of taxpayers money to contain the credit market crisis.

He said unprecedented challenges call for unprecedented action: “This is a pivotal moment for America’s economy: problems that originated in the credit markets, and first showed up in the area of sub-prime mortgages, have spread throughout our financial system.

“This has led to an erosion of confidence that has frozen many financial transactions, including loans to consumers and to businesses seeking to expand and create jobs. As a result, we must act now to protect our nation’s economic health from serious risk. There will be ample opportunity to debate the origins of this problem – now is the time to solve it.”

As Wall Street’s problems have become those of Main Street, USA, and hit economies around the world, the plan is to rescue financial firms from the so-called toxic – or worthless – mortgages that threaten to collapse the financial system.

The US government’s moves caused European stocks to surge. They enjoyed their biggest one-day percentage gain ever, up over 9%, with banks making huge gains.

But analyst Howard Wheeldon is cautious: “It’s not the end of this crisis by any means, but it does provide some relief and some time to gather thoughts and to move into what is going be a very difficult era.”

The indexes were also boosted by the introduction of temporary bans on short sales of financial stocks – that is betting that the value of those shares will fall.

Copyright © 2009 euronews