President Bush emphasizes support for free market, taxpayer protection in new rescue plan

President Bush got all kinds of grief -- as well as praise -- two weeks ago when he pushed the administration's $700-billion answer to the credit crisis.

He was putting taxpayer money at risk to bail out Wall Street, critics cried. He was violating his sacred philosophy of keeping the government out of the market.

So today, announcing the latest effort to right the foundering banking system, Bush went out of his way to provide assurances that his critics had nothing to fear.

He said that Treasury Secretary Henry M. Paulson and other financial advisors, in presenting the details of the program, would make clear that "each of these new programs contains safeguards to protect the taxpayers."

Bush added:

They will make clear that the government's role will be limited and temporary. And they will make clear that these measures are not intended to take over the free market, but to preserve it.

The president called the steps "unprecedented and aggressive" and part of a strategy that was "broad," "flexible" and "aimed at the root cause of our problem."

As our Los Angeles Times colleague Maura Reynolds reported Monday night, the federal government intends to pump capital into nine major banks and financial firms. In return, it is expected that the government would receive preferred nonvoting shares of their stock. And additional banks would participate as the program moves forward.

In addition to helping recapitalize banks, the administration will also try to restart lending between banks by using the Federal Deposit Insurance Corp. to insure senior preferred bank debt, which commonly includes funds borrowed from other banks.

And, it will insure the non-interest-bearing accounts often used by small businesses. They often top $250,000 and had not been entirely protected by the earlier insurance system.

-- James Gerstenzang

Photo: Saul Loeb / AFP/Getty Images