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Page last updated at 14:02 GMT, Tuesday, 30 September 2008 15:02 UK

World media review: US bail-out failure

Newspapers across the world have been largely critical of US lawmakers' rejection of the planned $700bn to stabilise the American economy. Many warn that the move may have dire consequences.

Steven Pearlstein in the WASHINGTON POST

The basic problem here is that too many people don't understand the seriousness of the situation.

Americans fail to understand that they are facing the real prospect of a decade of little or no economic growth because of the bursting of a credit bubble that they helped create and that now threatens to bring down the global financial system.

Politicians worry less about preventing a financial meltdown than about ideology, partisan posturing and teaching people a lesson. Financiers have yet to own up publicly to their own greed, arrogance and incompetence.

And leaders of foreign governments still think that this is an American problem and that they have no need to mount similar rescue efforts in their own countries. In the coming weeks and months, all of these people will come to understand how deep the hole really is and how we're all in it together.

Gerald F Seib in the WALL STREET JOURNAL

The country has learned in recent weeks the price of financial failure. Now it will learn the price of political failure. But even if senators manage to revive the bail-out plan, a great deal of damage already has been done.

American voters, who didn't like the plan in the first place, will like even less the discovery that Washington's response to their concerns was to collapse into genuine dysfunction.

Three-quarters of Americans already think the country is on the wrong track, and the same share disapproves of the job Congress is doing. Before Monday, it seemed unlikely those numbers could go much higher. They can, and now probably will.

Jackie Calmes in the NEW YORK TIMES

The collapse of the proposed rescue plan for the teetering financial system was the product of a larger failure - of political leadership in Washington - at a moment when the world was looking to the United States to contain the cascading economic crisis.

From the White House to Congress to the presidential campaign trail, the principal players did not rally the votes they needed in the House. They appeared not to comprehend or address in a convincing way an intense strain of opposition to the deal among voters. They allowed partisan politics to flare at sensitive moments.

THE TIMES (LONDON)

The Republicans who killed the plan yesterday have misread this plan fatally, as simply a lifeboat for fat-cat bankers on Wall Street. In fact, the collapse of the plan threatens all of Main Street in America, and further afield.

The fallout will be felt globally, but the world is looking to America for a solution. If America's elected representatives do not realise the potential damage they have caused, they need to think again - fast.

Rupert Cornwell in THE INDEPENDENT (LONDON)

Yesterday was not only a black Monday for markets. It was the blackest of Mondays too for the US political system, saddled with a discredited president who has completely lost control of his own party and a Congress that responds to a national emergency with little except snarling partisanship.

THE GUARDIAN (LONDON)

It was a bad plan - but it was a plan. The refusal of Congress to back Hank Paulson's bail-out takes us into new territory.

Some horse-trading in Washington may yet produce a revised deal that would be acceptable to the politicians, but the banks know there will be no easy handouts: Main Street, for better or worse, wants to see Wall Street suffer. In an election year, voters get what they want.

Josef Joffe in DIE ZEIT (GERMANY)

Like every crisis, this one consists at least half of psychology, panic and hysteria. On Monday morning in Washington, these emotions weighed even more heavily than before.

The House of Representatives voted narrowly, but clearly, with 228 votes to 205, against the bail-out plan of the Bush administration. And the Dow Jones promptly fell by 777 points at the New York Stock Exchange. The biggest fall in its history.

So what will happen now is likely to be exactly what the president wanted to avoid at all costs - that the "crisis in our financial system will hit the whole economy".

Moritz Koche in DIE SUDDEUTSCHE ZEITUNG (GERMANY)

It was meant to be the biggest bail-out in history - and became an unparalleled disgrace. The House of Representatives let the $700bn fund fail, with which the American government wanted to salvage the banking sector.

Responsible for the debacle? Republican finance fundamentalists, who believe the "Promised Land" of capitalism would be on its way to a state-run economy. Also guilty - the House Majority Leader Nancy Pelosi.

Madam Speaker likes to split. Even before the most important vote since the approval of the Iraq war, Pelosi provokes the Republicans with a superfluous tirade against free-market dogmas. The House wanted to show bipartisan responsibility - at the end, it delivered party-political irresponsibility.

EL PAIS (SPAIN)

The rejection by Congress should be read in strictly political terms, as a leadership failure in the Democratic and Republican parties - 95 Democratic members of Congress, and 134 Republican ones voted against the plan - a demonstration that on the Republican side rancid anti-interventionist reflexes still weigh heavily.

Whatever rescue plan may be spelled out in future, whether of Democratic or Republican inspiration, will be a more or less intensive intervention by the state, with public money in the US market.

The longer it takes to approve the plan, the more expensive and more difficult the rescue will be.

Jacqueline Thorpe in NATIONAL POST (CANADA)

Hunker down. Things could get a whole lot uglier for the US and global economies. While many on Wall Street believe Congress will pull a financial bail-out out of its hat yet, the U.S. economy is heading for debt detox and it's not going to be pretty for anyone.

Serious delay on a bail-out means the channels of credit coursing through the global economy will remain clogged for longer, risking further upsets for financial institutions around the globe and a deeper recession for the United States.

Either way, the rosy notion that the rest of the global economy could escape the US downdraft seems outlandish now, as dramatic losses on the Toronto Stock Exchange and commodity prices Monday attest.

EL UNIVERSAL (MEXICO)

US lawmakers, worried about their political future, have deepened their economic crisis. And there is no doubt that Mexico will be badly affected. That's why, instead of looking for some kind of protection against the looming situation, we have to look for a way out.

The crisis is happening at the worst possible moment in the US - literally on the eve of an election to choose a successor to a president who will leave office in four months with his credibility questioned over his handling of the war on terror and his administration of the economy.

Carlos Alberto Sardenberg in BRAZIL GLOBO

Opposing ideologies joined up to reject the bail-out plan. People on the left, in the Democratic Party, voted against because they didn't think people's money should be given to bankers. People on the right, in the Republican Party, voted against because a government administering a financial crisis is like a government controlling the economy - in other words, socialism.

Now, when two contrary positions end up voting the same way, either one is wrong or they are both wrong at the same time - which is what happened here. The consequences? By not saving the financial system, the decision affects everyone who depends on that system - that is the whole of society.

The left aim at the banker and hit the banker who is going to lose his job. The conservative says the market will react - and it does, by provoking recession and unemployment.

Michael West in SYDNEY MORNING HERALD

And so $700bn it was. Paulson and co pulled it out of thin air. This was the "slap in the face'' theory - that markets needed a big slap in the face to right their wrong behaviour.

So out went the treasury secretary with Fed chairman Ben Bernanke to chuck $700bn at anybody who wanted to part with their delinquent assets - as long as they were on Wall Street and had lots of them. No wonder Congress slapped it back.

It was never credible and would have delivered only temporary relief had US legislators embraced it.

BUSINESS DAILY (SOUTH AFRICA)

Even with (a US bail-out plan), the world will be a tense place for a good while yet, especially if nothing is done to tackle the underlying causes of the credit crunch.

And what the demise of European banks has highlighted is that the solutions will have to cross borders rather than involve the US alone. Financial markets and those who play in them will have to be subjected to more and better regulation.

And regulators from different countries will have to work together in ways they haven't until now. But all this is not going to come together quickly, so the road ahead will be rocky.



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