Clinton Stresses Economy's Strength
White House opts for a cautious approach, as the stock market rallies
CHICAGO (AllPolitics, Oct. 28) -- As the stock market staged a dramatic rally to recover lost ground, President Bill Clinton said today the U.S. economy "is as strong and vibrant today as it has been in a generation."
Clinton, who discussed his education initiatives at a Chicago school, said he realized many Americans were concerned about the stock market, which plunged sharply on Monday.
"It may be disappointing, but I think it is neither prudent nor appropriate for any president to comment on the hour-by-hour or the day-by-day movements of the market," Clinton said.
Instead, Clinton focused on what he called the economy's basic strengths: a lower-than-expected federal deficit, unemployment and inflation at their lowest level in two decades, and healthy banks and businesses. (352K wav sound)
"That's why we have to feel confident and continue our economic strategy," Clinton said.
Some of the pressure was off Clinton when he spoke, because the market had already begun to rebound.
When trading began at 9:30 a.m. ET, the Dow Jones industrial average plunged more than 180 points in the first 45 minutes, then rebounded in startling fashion and finally finished the day up 333 points. Some analysts saw evidence of "panic buying" to take advantage of depressed stock prices. In a new record, volume was 1.18 billion shares.
On Monday, the Dow Jones industrial average plunged 554 points, roughly 7 percent, and analysts thought there might be at least another day of tumult before a turn-around.
Clinton's comments were similar in tone to Monday's remarks by Treasury Secretary Robert Rubin, who also stressed the U.S. economy's fundamentals -- low inflation and low unemployment -- were strong.
"It is important to remember that the fundamentals of the United States economy are strong and have been for the past several years, and the prospects for continued growth, with low inflation and low unemployment, are strong," Rubin said then, after the markets had closed. He was the only administration official to speak on Monday, and took no questions from reporters.
In urging White House aides to keep silent about Monday's slide in the stock market, sources told CNN that Rubin told administration ecomomic advisors the market could easily fall another 500 to 600 points today.
These sources say Rubin's Monday evening statement was carefully drafted with the prospect of a continued decline in mind, and that was the main reason he stressed the underlying fundamentals of the economy and his view that the systems designed to halt trading during volatile periods -- so-called "circuit breakers" -- were working correctly.
At a morning staff meeting today, just before 8 a.m. ET, Rubin again stressed it was important for the administration not to appear to be interfering in the financial markets.
Shortly after that meeting, Rubin spoke with Clinton in Chicago and it was agreed the president would make a short, general statement about the strength of the economy. Rubin returned to the White House for a 10 a.m. ET meeting on the fast track trade legislation and, unlike Monday, that meeting proceeded as planned and did not digress into a discussion of the markets.
Senate hearings -- next year
Meanwhile, the Senate plans to convene hearings early next year to examine the effect of taking a brief time out -- the so-called circuit-breaker mechanism -- used on Monday in an attempt to slow the abrupt plunge in stock prices.
Sen. Phil Gramm (R-Texas), chairman of the Senate Securities subcommittee, and ranking member Sen. Chris Dodd (D-Conn.) announced their plans to weigh the impact of the trigger and whether it caused stability or instability in the market. The senators intend to call experts from the stock markets, the Securities and Exchange Commission and others to testify.
The trigger, which was used on Monday for the first time, was put in place after the last deep plunge in stocks in October 1987.CNN's John King contributed to this report.
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Tuesday Oct. 28, 1997
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