JEANNINE AVERSA AP Economics Writer WASHINGTON
The country hit fresh economic potholes Wednesday, Oct. 8, as President Bush sought to reassure anxious Americans that the government's latest rescue plan will eventually bring relief. A day after announcing a $250 billion cash infusion into the nation's banks in return for a stake in those institutions, Bush and his Treasury Secretary Henry Paulson said the plan should stabilize the system, induce banks to lend again, and in time help improve the economy. Confidence and cash will restore the economy's health, but it will take time and patience, too, they said. Bush said he's confident that "in the long run, that this economy will come back." Even as they spoke, the economy was showing the kind of hurdles it has to leap. Retail sales slumped in September and wholesale prices remained high. "This will take time. There will be challenges," Paulson said on ABC's "Good Morning America." He acknowledged that he initially opposed this type of government intervention into the banking industry but that new facts changed the circumstances in recent days. Paulson said, "There's no doubt that the way to get the maximum bang for the taxpayers here was to invest in banks." He said he was more confident the system would right itself because of the steps the U.S. and other countries had taken recently to pry open locked lending that has stifled the global economy. Investors on Wall Street and around the world weren't able to cast off their worries despite the rescue plan. U. S. stocks headed for a lower opening after JPMorgan Chase & Co. Reported a whopping 84 percent decline in its thirdquarter profit. And, European and Asian markets mostly fell back Wednesday following a strong two-day rally. The FTSE 100 index of leading British shares fell 3.3 percent, Germany's DAX slid 2.9 percent and France's CAC-40 dropped 2.6 percent. British Prime Minister Gordon Brown is calling for global talks this year aimed at creating better international rules to guide financial markets. On the credit front, however, there were early signs of some easing in key lending rates Wednesday. A bank-tobank lending rate for three-month dollar loans dipped. U. S. investors, meanwhile, turned their gaze toward the economy's obstacles: vanishing jobs, shrinking paychecks and nest eggs, and slumping home values continue to force millions of Americans to pull back. Sales at the nation's retailers fell with a thud in September, dropping by 1. 2 percent, the most in three years. Uncertainty about the economy and their own financial fortunes probably will force consumers and businesses alike to hunker down further, spelling more problems for the already troubled economy. Another report showed that wholesale prices dropped for the second straight month, as energy costs retreated from record highs. Yet prices are still up sharply over the past year and are squeezing businesses. Anxiety about the economy is the No. 1 concern of voters. With the presidential election just weeks away, Democra t Barack Obama and Republican rival John McCain are working furiously to convince people that each is the best choice to steer the economy through these perilous times. Many economists believe the country is on the edge of or already in its first recession since 2001. If the government's new plan works it will merely cushion the blow. Democrats on Capitol Hill are pushing for another round of stimulus that could cost as much as $150 billion, an effort to provide additional relief and lift the country out of the doldrums.
