(Oct. 1, 2008) The Yomiuri Shimbun
U.S. must take action to cure financial woes
米国発金融危機 米政府と議会は迅速に動け(10月1日付・読売社説)

Some economists are warning that the world economy is on the verge of falling into a depression. This global financial crisis, which has its origins in the United States, must be contained using any and every means available.

Above all else, the U.S. government and the U.S. Congress must wake up to their responsibilities as they oversee the economy that is the epicenter of the subprime loan problem. They also should work together to enact a 700 billion dollars financial bailout package as soon as possible.

After the bailout package failed to pass the U.S. House of Representatives, the Dow Jones industrials index on the New York Stock Exchange plunged by a record 777 points Monday, surpassing the 684-point drop on the first trading day after the Sept. 11, 2001, terrorist attacks on the United States.

This nosedive of U.S. share prices was echoed across the world. Tokyo stocks swooned Tuesday and the key Nikkei index lost nearly 500 points. Stock prices fell almost across the board on every market in Asia and Europe.

When will this chain of falling stock prices stop? The U.S. dollar was widely sold on foreign exchange markets, strengthening the yen against the dollar. This could threaten the credibility of the dollar.


Package rejected, stock down

Turmoil in the stock markets started after the House unexpectedly rejected the bailout package. The legislation would have allowed the U.S. government to buy bad mortgages held by troubled banks and other financial institutions with taxpayers' money to prevent a complete financial meltdown.

The White House and congressional leaders had reportedly agreed to an acceptable revision of an earlier version of the package after marathon weekend talks. This appeared to set the stage for Congress to pass the rescue plan without delay. However, the package was rejected after many lawmakers of U.S. President George W. Bush's Republican Party balked at the injection of taxpayer dollars as outlined under the rescue plan and voted against it.

This rejection betrayed the expectations of the market. The feeling of disappointment spread and stocks were sold in a state of panic. Congress should bear an extremely heavy responsibility for this situation.

Presidential and congressional elections are scheduled for November, so lawmakers are still coordinating opinions on the package and calculating the political risk of backing the measure, which is unpopular among voters. Are they aware that the global financial system is in critical condition? The U.S. government and Congress reportedly will resume talks on the package soon, but its passage remains far from certain.

In Japan, the financial turmoil and the recession that followed the collapse of the asset-inflated "bubble" economy in the early 1990s stubbornly hung around because the government failed to inject public money into troubled banks and financial institutions soon after the nation's financial system became unstable. U.S. authorities should draw on the lessons learned from Japan's bitter experience to deal with the current situation quickly.

Both U.S. Republican presidential candidate John McCain and his Democratic counterpart Barack Obama should urge Congress to support the rescue plan.

While the White House and congressional leaders were trying to cobble together a fragile compromise on the package, the financial upheaval was only getting worse.


Crisis spreads to Europe

The U.S. government announced Monday that Citigroup Inc. would acquire the banking operations of Wachovia Corp., the fourth-largest U.S. bank, which faces bankruptcy and has become the latest victim of the deepening financial crisis.

Meanwhile, the crisis has spread to Europe. Financial authorities have decided to nationalize some operations of midsized banks in Britain, the Netherlands, Iceland and other countries.

More and more financial institutions are facing credit difficulties as short-term markets in the United States and Europe see an increasing demand for funds.

Predictions that a repeat of the Great Depression of the 1930s could be looming if the chain-reaction crisis cannot be stopped are looking increasingly prescient.

Many economists predict the financial turmoil will weaken the U.S. real economy and further whip up uncertainty in the financial market.

Meanwhile, financial authorities around the world are being forced to walk a tightrope as they try to deal with the crisis.

Central banks around the world, including the Federal Reserve Board, the European Central Bank and the Bank of Japan, galvanized their joint efforts Monday to supply massive amounts of U.S. dollars to their respective money markets, demonstrating their resolve to support cash-strapped banks and financial institutions.

However, the problem is that financial institutions are losing corporate vitality as losses from securitized mortgages they hold are increasing as house prices in the United States fall. The chorus of economists calling for public funds to be used to strengthen these institutions' capital bases is growing louder.

Central banks around the world must enhance their mutual cooperation and try to stabilize the global financial market by using every tool they have available.


Japanese economy chilled

The spreading financial crisis and volatility on global money markets have poured cold water on the stuttering Japanese economy, which has shown signs of falling into recession.

The economic downswing was clearly shown in economic indexes for August announced Tuesday.

The index of industrial output showed the largest drop in history and household spending decreased for six straight months. The unemployment rate ticked up to 4.2 percent, rising to the highest level in about two years.

Market instability--such as plunging stock prices and the appreciation of the yen against the dollar--will deter investment and consumption.

The Bank of Japan has injected more than 20 trillion yen into the Tokyo money market since major U.S. investment bank Lehman Brothers Holdings Inc. filed for bankruptcy in mid-September. Nonetheless, foreign banks still have the jitters over their cash-flow situations. The government needs to take flexible and agile policy measures to prevent paralysis of the financial system.

Before anything else, it must pass a supplementary budget for fiscal 2008 as soon as possible to implement the comprehensive economic package designed to alleviate the pains of the weakening economy.

The U.S. Congress rejected the bailout package out of partisan interests and aggravated the financial confusion. Japan must not repeat this mistake.

(From The Yomiuri Shimbun, Oct. 1, 2008)
(2008年10月1日02時08分 読売新聞)

by kiyoshimat | 2008-10-01 13:42 | 英字新聞

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