Washington – Facing an economy beset by volatile stocks, troubled mortgages, a struggling housing market and questions about the stability of the nation’s infrastructure, President Bush sought Thursday to reassure Americans that the economy is strong and that his policies will ensure it stays that way.
But the stock market at least remained beyond Bush’s reach, as the Dow Jones industrials dropped more than 200 points within minutes of the opening bell and plummeted a total of 387.18 points by day’s end to 13,270.68.
The 2.83 percent decline came after more signs that the credit crunch rippling through the nation is spilling into overseas markets.
Thursday’s big sell-off, the second biggest of the year, was sparked by a French bank, which froze three funds that had invested in subprime mortgages in the United States.
Bush, calling a news conference shortly before leaving for summer vacation, made his second statement on the economy in two days, signaling an apparent desire to avert any anxiety that the economy is stumbling.
“The American economy is the envy of the world, and we need to keep it that way,” Bush said. “The fundamentals of our economy are strong. … Job creation is strong. Real after-tax wages are on the rise. Inflation is low.”
The unraveling of the subprime mortgage industry – higher-interest loans made to individuals who have weak credit – has sent the U.S. markets on a roller-coaster ride for the past several months.
The announcement by French bank BNP Paribas sent fears through markets that the tightening credit might prevent individuals and businesses from borrowing the money they need to keep the economy moving. A move by the European Central Bank to inject more than $130 billion in overnight funds to banks only heightened concern Thursday on Wall Street.
As Bush had in an appearance a day earlier at the Treasury Department, he portrayed himself Thursday as holding the line for a strong economy by fighting Democrats’ spending decisions and efforts to raise taxes.
The economy took center stage Thursday, as Bush confronted the impact of a turbulent economy in which mortgage foreclosures have sent the stock market on a shaky roller-coaster.
While conceding that “I’m not an economist,” Bush maintained that the basic building blocks of the American economy were strong.
“My belief is that people will make rational decisions based upon facts, and the fundamentals of our economy are strong,” Bush said.
