Obama Tries to Reassure Investors as Markets Plunge Again
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JUDY WOODRUFF: Wall Street had its worst day since 2008, as investors fled stocks in a global rout. It was fueled by the downgrade of U.S. debt, worries about Europe’s debt load, and fears of a new worldwide recession.
The sell-off swamped markets around the world, rolling across Asia and Europe and engulfing Wall Street. U.S. stocks plunged with the opening bell and never recovered. By the time it was over, the Dow Jones Industrial Average had lost nearly 635 points to close below 10,810. The Nasdaq gave up 174 points to close at 2,357, with prospects of more losses to come.
DOREEN MOGAVERO, Mogavero, Lee & Company, Inc.: I would anticipate that this is going to go on for quite some time. I think — as I say, I think we need to know where we’re going. As long as there’s uncertainty in the markets, there will be volatility.
JUDY WOODRUFF: One element in the uncertainty came from Standard & Poor’s decision to lower the U.S. government’s credit rating from AAA to AA+. That was Friday night.
But, today, President Obama dismissed the downgrade.
PRESIDENT BARACK OBAMA: Markets will rise and fall, but this is the United States of America. And no matter what some agency may say, we’ve always been and always will be a AAA country.
JUDY WOODRUFF: At the same time, the president acknowledged, the protracted fight over cutting deficits has hurt.
BARACK OBAMA: We knew from the outset that a prolonged debate over the debt ceiling, a debate where the threat of default was used as a bargaining chip, could do enormous damage to our economy and the world’s.
JUDY WOODRUFF: The Standard & Poor’s move had already become a political football, with both parties pointing fingers over the weekend.
SEN. JOHN MCCAIN, R-Ariz.: That there is dysfunction in our system, and a lot of it has to do with the failure of the president of the United States to lead.
DAVID AXELROD, senior White House adviser: This is essentially a Tea Party downgrade. The Tea Party brought us to the brink of a default.
JUDY WOODRUFF: And at the Treasury Department, Secretary Timothy Geithner focused his ire on the rating agency itself.
SECRETARY OF TREASURY TIMOTHY GEITHNER: I think S&P has shown really terrible judgment. And they have handled themselves very poorly. And they have shown a stunning lack of knowledge about basic U.S. fiscal budget math.
JUDY WOODRUFF: In fact, White House and Treasury officials charge that S&P failed to factor in more than $2 trillion in debt reduction in the newly enacted congressional compromise.
But the head of S&P’s government ratings unit, David Beers, minimized the significance of that claim this morning on ABC.
DAVID BEERS, Standard & Poor’s: Well, first of all, we just reject out of hand the characterization that the Treasury has made about an error.
JUDY WOODRUFF: He also rejected criticism that S&P’s assessment is unreliable, given its failures in the 2008 financial crisis.
DAVID BEERS: We’re talking today about our government ratings, the group that I head up. That track record remains very strong.
JUDY WOODRUFF: In a further step, S&P today lowered the credit ratings of mortgage lenders Fannie Mae and Freddie Mac and other agencies tied to U.S. government debt.
Despite the downgrades and warnings of higher interest rates, demand for U.S. Treasury bonds rose today, sending rates down. Still, for major creditors, it was unsettling. A Chinese state newspaper criticized political gridlock in the U.S. And, in Europe, the downgrade of U.S. debt, coupled with rising doubts about the solvency of Spain and Italy, helped to fuel fears of a new global recession.
OSCAR BERNARL, ING Bank: What we really need at this point is that there is a coordinated movement, a clear signal that is sent to the markets that Europeans are not letting down any country member, any member country of the Eurozone. And this is what really markets are needing — need at this point.
JUDY WOODRUFF: In a bid to beat back panic, the European Central Bank bought an estimated several billion dollars in Italian and Spanish bonds to restore confidence.
In the meantime, oil prices slipped again to a little over $83 a barrel on concerns that a weaker global economy would reduce demand. Instead, investors poured money into the relative safety of gold, pushing the price over $1,700 an ounce for the first time.