Bush Sees ‘Value’ in Markets

Defending his administration’s performance during the Wall Street rout, President Bush summoned investors back to the stock market Monday, professing his faith in the U.S. economy and in the quality of a White House economic team headed by embattled Treasury Secretary Paul H. O’Neill.

In comments to reporters, Bush took what some observers saw as the politically dicey step of recommending that Americans go back to buying stocks despite steep declines in virtually every market measure during the last four months.

“I’m not a stockbroker or a stock picker,” the president said. But, he continued, “I do believe that the fundamentals for economic growth are real.

“Investors are going to realize there’s value in the market,” he said. “If they buy stock, they’re buying value--as opposed to buying

Some Wall Street veterans reacted to the president’s remarks with scorn. “Sweet nothings like ‘The economy is fundamentally sound’ or ‘It’s time to buy’ are just empty talk,” said New York investment strategist Peter L. Bernstein. “Those are the kind of remarks that reverberate down through history”--such as Herbert Hoover’s rosy assessments when the country was on the verge of the Great Depression--Bernstein said.

After a weekend in which criticism of O’Neill mounted, Bush rose to the defense of his Treasury secretary, a former corporate chief executive who has spent much of the last few months traveling overseas. (He’s recently been to Africa and Asia.) “He’s doing a fine job,” the president said. “I have all the confidence in the world” in him.

Bush said that when the stock market recovers, “I hope they will give him credit.”

Administration officials have fumed in recent days about what they view as unfair coverage of the White House amid the steep market declines.

They suggested that press accounts misrepresented O’Neill as being overseas during the worst of the tumble, when in fact he was in the country for many of the markets’ worst days. And aides complained that some television networks covering Bush’s July 9 Wall Street speech included a so-called “bug” in the lower right-hand corner of the screen that showed the Dow and other stock indexes headed downward.

But the administration’s problem with the dropping Dow go well beyond public perception. Even longtime Wall Street optimists now say the president and his economic team--which includes O’Neill, chief economic advisor Lawrence B. Lindsey, budget director Mitchell E. Daniels Jr. and economist R. Glenn Hubbard--have failed to come to grips with the economic danger of the market slide.

“This is a time for leadership, but so far the president hasn’t wrestled the mantle of leadership” from Democrats and critics, warned Morgan Stanley economist Richard Berner.

In large measure, said Berner, that is because Bush’s team has failed to come up with strong proposals to cope with the crisis. “They have blue-ribbon credentials, but they have not grabbed hold of the agenda,” he said.

The economic jitters that the White House is trying to calm carry long-term and immediate dangers for the president. In the short run, they sow confusion in the congressional races that will be decided in November.

But if the plunging stock market dries up investment money and, with it, capital for growth, the immediate skittishness could turn into an extended downturn. That, in turn, would present Bush with a picture similar to the one his father faced when he ran for reelection in 1992, in which his war-fueled popularity was swamped by a soured economy.

Despite such worries, the president had nothing but optimistic words Monday.

Once Congress passes pending legislation intended to restore faith in the integrity of corporations and their directors, he said, “the investor is going to pick value, make decisions on value.”

“From what I hear, corporate profits are improving, which means values will be available for those who invest in the market,” the president said.

“I’m an optimist. I believe the future is going to be bright,” Bush said, adding: “But, look, you’re talking to the wrong guy about what stocks to buy.”

Bush said House Speaker J. Dennis Hastert of Illinois--the Republican leader in whose district Bush was traveling--was optimistic about producing legislation Bush would sign. The president said he hoped the measure would be delivered to him before Congress’ summer recess. The House is scheduled to begin its holiday at the end of this week; the Senate breaks a week later.

Addressing the latest news of corporate bankruptcy--WorldCom Inc. announced it was taking that step Sunday--Bush said he believed that the stock market already had taken such a move into account and that his concern now was for the company’s employees.

After losing 7.7% of its value last week to close at its lowest level since October 1998, the Dow lost almost another 3% on Monday to close at 7784.58. Other indexes lost similar amounts.

Bush’s remarks about the economy came during an appearance at Argonne National Laboratory that had been intended to promote his call for creation of a Department of Homeland Security.

Bush, while pressing Congress to approve trade legislation and the corporate integrity measure, has made the plan to merge 22 government agencies--and many more smaller offices--into the new department his top priority.

The House appears to be moving toward approving the creation of the new department, but Bush is working to keep its shape close to the format he proposed.

Gerstenzang reported from Argonne and Gosselin from Washington.