Putting the weight of “consequences” behind him, US President George Bush on Tuesday urged the House of Representatives to support his $700 billion bailout package, after the members rejected it on Monday.
Markets across the globe, that had fallen following the rejection and the subsequent 778-point fall in the US premier benchmark index Dow Jones, the biggest-ever, staged a recovery. While most of Asia was still awash in the red, India and Hong Kong gained.
In India’s case, confidence-building statements from Finance Minister P Chidambaram and Securities and Exchange Board of India chief CB Bhave, pushed the Sensex up by 265 points or 2.1 per cent.
“There is no panic and we are monitoring the situation,” said Bhave in a statement issued in Delhi, during trading hours. Chidambarm’s followed soon after: “There is nothing to worry about the Indian market.”
Even as North Block was busy fighting a falling market sentiment, rumours were causing a run on ICICI Bank, forcing Reserve Bank of India to clarify that the bank had “sufficient liquidity, including in its current account with RBI, to meet the requirements of its depositors.”
“Asian markets fell on speculation but the impression is clear now that the US government has absolutely no way out than to bail companies out from the current situation,” said Ashvin Parekh, national head (financial services), Ernst & Young.
“Legislation is needed to open credit and rescue the economy,” Bush said. “The consequences of inaction will get worse every day.” Adding a carrot of profits, he also said the risky assets could be sold at a time when the markets recover.
His relentless solutions-seeking to the crisis restored confidence in the markets. The Dow rose 3 per cent, following his statement. Taking cues from the Dow, Canada rose 4.3 per cent, Brazil rose 3.5 per cent, while Argentina was up 2.5 per cent.
This, Bush said, amounted to a loss of $1 trillion. In other words, in value terms, capital worth the entire Indian stock market got wiped out in one day’s trading.
As the day ended on an uncertain note, the ball is back in Bush’s court, against a backdrop of what is increasingly being seen as a politically unacceptable solution. The undertone: those who profited from the American financial system, and not American taxpayers, should be made to pay.
Meanwhile, expect Asian markets to rise tomorrow.