VZCZCXYZ0015
OO RUEHWEB

DE RUEHSO #0520 2741121
ZNR UUUUU ZZH
O 301121Z SEP 08
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8555
INFO RHEHNSC/NATIONAL SECURITY COUNCIL WASHDC IMMEDIATE
RUEHBR/AMEMBASSY BRASILIA PRIORITY 9687
RUEHRI/AMCONSUL RIO DE JANEIRO PRIORITY 8867
RUCPDOC/USDOC WASHDC 3178

UNCLAS SAO PAULO 000520 
 
SIPDIS 
 
STATE INR/R/MR; IIP/R/MR; WHA/PD 
 
DEPT PASS USTR 
 
USDOC 4322/MAC/OLAC/JAFEE 
E.O. 12958: N/A 
TAGS: KMDR OPRC OIIP ETRD XM XR BR
SUBJECT: GLOBAL ECONOMY 
 
Black Monday 
 
Lead editorial in center-right O Estado de S. Paulo (09/30) says: 
"...President Bush had defended an "audacious" action in order to 
avoid the aggravation of the financial crisis... Congressmen from 
his party did not appear so audacious: they preferred to follow the 
Republican tradition, avoiding another big intervention in the 
market and maintaining the rhetoric of protecting the taxpayer's 
pocketbook.  But they only vetoed the package, without eliminating 
the crisis or removing the necessity of new actions on the part of 
the government.  They prepared a bad beginning for the next 
president. ... Without the US$700 billion package and without an 
action plan of similar magnitude, the U.S. government can only act 
in the style of the Europeans, trying to take care of the problems 
on a case by case basis.  If this is the path, the insecurity in the 
markets will tend to continue... The reaction of the stock markets 
might not be the worst consequence of the rejection of the package. 
If a good alternative is not found, the tightening of credit could 
intensify disastrously in most of the markets, increasing the risk 
of a large-scale recession. In light of this, President Luiz Inacio 
Lula da Silva should pay more attention to Central Bank president 
Henrique Meirelles and start taking more seriously the danger of 
contamination of the Brazilian economy." 
 
Convulsion in the finances 
 
Editorial in liberal Folha de S. Paulo comments (09/30): "An 
unpopular government at the end of a mandate; an overpowering 
crisis; a plan to save banks with a lot of public money; congressmen 
in electoral ebullition.  This mixture of ingredients knocked down 
the White House and the Democratic and Republican legislative 
leaderships; it brought to the ground the US$700 billion bailout 
plan and provoked a world financial convulsion not seen since 
1987... By following their electoral instinct - which is part of the 
rules of a democratic game - 228 U.S. congressmen increased the 
destructive power of this crisis for the U.S. society.  They also 
probably increased the final cost of the financial help package 
which will fall back on the Treasury Department of the country, and 
therefore, on the taxpayers.  The amazement with which the U.S. 
economic authorities reacted to the news of the legislative defeat 
indicates that the Bush Administration had no alternative plan.  It 
will have to work fast now and in addition to this find means of 
by-passing the opposition in Congress.  Meanwhile, the uncertainty 
future of the global economy tends to become more radical." 
White