Bush paints grim picture to justify tax cost

Washington: US President George W. Bush defended his government's financial rescue plan on Saturday, saying the cost to taxpayers to shore up shaky markets was better than the alternative of "massive" job losses and devastated retirement accounts.

The Bush administration is working through the weekend with the Democratic-led Congress to craft a plan to spend hundreds of billions of federal dollars to flush securities tied to bad mortgages and other assets from bank balance sheets to keep the financial system from collapsing.

"These measures require us to put a significant amount of taxpayer dollars on the line," Bush said in his weekly Saturday radio address.

"But I'm convinced that this bold approach will cost American families far less than the alternative," he said. "Further stress on our financial markets would cause massive job losses, devastate retirement accounts, further erode housing values, and dry up new loans for homes, cars and college tuitions."

The plan, which includes a new federal guarantee for money market fund holdings, comes on the heels of an $85 billion (Dh312.4 billion) Federal Reserve rescue of insurance firm American International Group and the Treasury's takeover of mortgage giants Fannie Mae and Freddie Mac.

Bush and administration officials emphasised that the moves were necessary to prevent the financial crisis from spreading.

"Given the precarious state of our financial markets and their vital importance to the daily lives of the American people, government intervention is not only warranted, it is essential," he said.

'Free market is dead'

Critics said the government was going too far in bailing out the financial sector, but both Republican and Democratic leaders in Congress have signalled that they will work with the White House to craft legislation that can be passed.

"The free market for all intents and purposes is dead in America," said Senator Jim Bunning of Kentucky, a member of Bush's Republican Party.

But Bush, and supporters of the rescue plan, said it would allow financial institutions to resume lending and restore confidence in the financial system.

"In the long term, Americans can have reason to be confident in our economic strength," Bush said.