Bush: Economy still growing despite problems

By Jon Ward (Contact) | Tuesday, July 15, 2008

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President Bush on Tuesday attempted to calm jittery economic markets and anxious Americans at a morning press conference, insisting that the U.S. economy is still growing despite its problems, even as new reports showed inflation rising at the fastest pace in more than a quarter-century, and the prospect of more bank failures loomed.

"The bottom line is this. We're going through a tough time," Mr. Bush said to reporters in the James A. Brady briefing room.

"But our economy's continued growing, consumers are spending, businesses are investing, exports continue increasing, and American productivity remains strong. We can have confidence in the long-term foundation of our economy, and I believe we will come through this challenge stronger than ever before, he said.

Nonetheless, the Dow Jones Industrial Index fell by more than 200 points at the beginning of the day, partly in response to comments by Federal Reserve Chairman Ben Bernanke on Capitol Hill.

Mr. Bernanke told a congressional committee that the economy is facing "numerous difficulties," including strains on financial credit markets, the banking sector, and the housing sector, a rise in lost jobs, and inflation.

A new Labor Department report Tuesday showed that inflation has risen 9.2 percent over the past year, which is the fastest uptick in a quarter-century, since 1981.

Mr. Bernanke called the inflation outlook "unusually uncertain."

The rising inflation was driven almost entirely by food and energy prices. Wholesale inflation grew by 1.8 percent in June, while core inflation, which excludes food and energy, went up by only .2 percent.

In addition, confidence in the American banking sector continued to unsettle Wall Street, as numerous banks around the country looked poised to collapse in the wake of the third-largest bank failure in U.S. history last week.

On Monday, banking stocks plummeted and in California, people lined up outside IndyMac Federal Bank to pull out their money, despite the federal governments takeover of the bank on Friday.

The president said he believes the banking system is "basically sound."

"I truly do. And I understand there's a lot of nervousness," he said.

Mr. Bush then stressed that a depositors money is insured by the government up to $100,000, and told a story about seeing a run on the bank in his hometown of Midland, Tx.

"I'll never forget the guy standing in the bank lobby say, 'Your deposits are good. We got you insured. You don't have to worry about it, if you've got less than 100,000 in the bank.' The problem was, people didn't hear," Mr. Bush said.

"And there's a -- you know, became a nervousness. My hope is, is that people take a deep breath and realize that their deposits are protected by our government," he said.

Mr. Bush also pointed to the Treasury Departments move on Sunday to back up Fannie Mae and Freddie Mac, two of the nations largest mortgage financiers, by increasing loan limits and buying equity in the mortgage giants.

"To the extent that we find weakness, we'll move," the president said.

The Treasury Departments move requires congressional action, and though Democratic leaders have said they plan to support the plan, Mr. Bush urged them to move quickly.

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