President George W. Bush and Fed chairman Ben Bernanke on Thursday threw their weight behind calls for a fiscal stimulus of up to $150bn as stocks fell to their lowest levels since October 2006. White House officials said the president will sketch out the “principles” of a fiscal plan in a speech Friday. The centerpiece of the package will be tax rebates for individuals though Bush is also expected to propose investment incentives for companies. However, the prospect of a fiscal boost failed to reassure the stock market, which plunged Thursday as housing starts dived, concerns about bond insurers intensified and the Philadelphia Fed survey of manufacturing conditions fell to recession levels. Bernanke, meanwhile, warned that business investment was “likely to slow” in coming months as companies adjusted their spending plans amid the downturn. He said nothing to challenge expectations that the US central bank would cut interest rates by at least 50bp at its Jan 30 policy meeting.
