President George Bush was forced into making his fourth address to the nation in a week today as the US financial crisis stumbled on.
He warned that quick decisive action was needed to avoid “painful and lasting” damage to the nation after the $700bn (€497) economic rescue package lay in tatters after being rejected by the lower house of the US Congress yesterday.
The world was watching to see if the nation would recover from the crisis which saw stock markets plunge by record levels.
Mr Bush’s speech came as EU leaders urged the US to show “statesmanship” for the sake of the world economy.
Mr Bush has also repeatedly talked about the Wall Street bail-out in meetings with world leaders, including Prime Minister Gordon Brown, in written statements and in his weekly radio address.
Speaking at the White House, the president said: “The reality is that we are in an urgent situation and the consequences will grow worse each day if we do not act.
“The dramatic drop in the stock market that we saw yesterday will have a direct impact on the retirement accounts, pension funds and personal savings of millions of our citizens.
“And if our nation continues on this course, the economic damage will be painful and lasting.”
He said the US was dealing with a “large problem” as the world watched, but that this was “not the end” for the legislative process.
“Our economy is depending on decisive action from the government,” he said.
“The sooner we address the problem, the sooner we can get back on the path of growth and job creation, which is what elected leaders owe the American people.
“And I’m confident we’ll deliver.”
Mr Bush said the stock market losses yesterday, as the Dow Jones Industrials Average dropped a record 777 points – more than on the first day of trading after the September 11 terror attacks – “represented more than a trillion dollars in losses”.
He said he was disappointed by the rejection of the bill and said: “I assure our citizens, and citizens around the world, that this is not the end of the legislative process.”
The president said passing a bill was often “complicated” and “contentious”, but added: “It matters little what path a bill takes to become law. What matters is that we get a law.
“We are at a critical moment for our economy and we need legislation that decisively addresses the troubled assets now clogging the financial system.”
He repeated that he recognised the bill presented a “difficult vote” for members of the US Congress.
All members of its lower house, the House of Representatives, which rejected the bill yesterday, face elections in November and the package commits up to $700bn (€497bn) of taxpayers’ money and is unpopular with voters.
But Mr Bush said the legislation was expected to “ultimately cost the taxpayer far less than $700bn as the government would sell the assets it buys once the market recovered.
“Much, if not all, of the tax dollars we invest will be paid back,” he said.
“As much as we might wish the situation to be different, our country is not facing a choice between government action and the smooth functioning of the free market.
“We’re facing a choice between action and the real prospect of economic hardship for millions of Americans.
“For the financial security of every American, Congress must act.”
He added that the Bush administration would be talking to congressional leaders about how to move legislation forward once it returns after the Jewish New Year holiday.
Earlier, EU Commission spokesman Johannes Laitenberger said the EU was disappointed the House of Representatives rejected the rescue package and added Washington had a special responsibility towards the global economy.
Meanwhile, Mr Brown pledged to do “whatever is necessary” to protect Britain’s financial system and said the collapse of the bill was “very disappointing”.
And German Chancellor Angela Merkel called on the US to pass a financial bail-out package this week.
US stocks staged a partial rebound as the markets opened today as the carnage on Wall Street attracted bargain hunters.
But without the bailout plan in place to absorb bad mortgage debt and other bad loans from banks’ balance sheets, investors were wondering what might be able to restore confidence in lending.
And moves in the credit markets were more ominous.
The benchmark London Interbank Offered Rate, or Libor, that banks charge to lend to one another rose, making it more expensive and difficult for consumers and businesses to borrow money.
The bill designed to stave off financial panic was rejected 228-205 by the US House of Representatives yesterday, with 133 Republicans and 95 Democrats refusing to back the rescue package.
The crisis also dominated the presidential election and both Republican nominee John McCain and his Democratic rival Barack Obama called on US politicians to stay at work until an acceptable plan is assembled.
“The first thing I would do is say, ’Let’s not call it a bailout. Let’s call it a rescue,” Mr McCain told CNN.
He said Americans were “frightened right now” and said it was the job of political leaders to give them both an immediate solution and a longer-term approach to the problem.
Mr Obama said members of the US Congress should not start from scratch as they weigh their next move.
He added that further inaction would be catastrophic for the economy and for American families.
Yesterday’s vote had been preceded by unusually aggressive lobbying and the president had used a “call list” of people he wanted to persuade to vote yes.
Members of the House shouted news of the plummeting Dow Jones average as others crowded on the House floor during the drawn-out and tense call of the roll, which dragged on for about 40 minutes as leaders on both sides scrambled to corral enough of their rank-and-file members to support the deeply unpopular measure.
All involved said they hoped to continue bipartisan negotiations and bring another economic Bill to the floor for a vote, possibly later this week.
On Capitol Hill, House Republicans blamed a partisan speech by Democratic Speaker Nancy Pelosi, in which she criticised the Bush administration’s “reckless economic policies” and “fiscal irresponsibility”, for the bill’s failure.