For Immediate Release Office of the Press Secretary October 14, 2008
President Bush Discusses Economy Rose Garden, 8:02 A.M. EDT
THE PRESIDENT: Good morning. I just completed a meeting with my working group on financial markets. We discussed the unprecedented and aggressive steps the federal government is taking to address the financial crisis. Over the past few weeks, my administration has worked with both parties in Congress to pass a financial rescue plan. Federal agencies have moved decisively to shore up struggling institutions and stabilize our markets. And the United States has worked with partners around the world to coordinate our actions to get our economies back on track.
This weekend, I met with finance ministers from the G7 and the G20 -- organizations representing some of the world's largest and fastest-growing economies. We agreed on a coordinated plan for action to provide new liquidity, strengthen financial institutions, protect our citizens' savings, and ensure fairness and integrity in the markets. Yesterday, leaders in Europe moved forward with this plan. They announced significant steps to inject capital into their financial systems by purchasing equity in major banks. And they announced a new effort to jumpstart lending by providing temporary government guarantees for bank loans. These are wise and timely actions, and they have the full support of the United States.
Today, I am announcing new measures America is taking to implement the G7 action plan and strengthen banks across our country.
First, the federal government will use a portion of the $700 billion financial rescue plan to inject capital into banks by purchasing equity shares. This new capital will help healthy banks continue making loans to businesses and consumers. And this new capital will help struggling banks fill the hole created by losses during the financial crisis, so they can resume lending and help spur job creation and economic growth. This is an essential short-term measure to ensure the viability of America's banking system. And the program is carefully designed to encourage banks to buy these shares back from the government when the markets stabilize and they can raise capital from private investors.
Second, and effective immediately, the FDIC will temporarily guarantee most new debt issued by insured banks. This will address one of the central problems plaguing our financial system -- banks have been unable to borrow money, and that has restricted their ability to lend to consumers and businesses. When money flows more freely between banks, it will make it easier for Americans to borrow for cars, and homes, and for small businesses to expand.
Third, the FDIC will immediately and temporarily expand government insurance to cover all non-interest bearing transaction accounts. These accounts are used primarily by small businesses to cover day-to-day operations. By insuring every dollar in these accounts, we will give small business owners peace of mind and bring stability to the -- and bring greater stability to the banking system.
Fourth, the Federal Reserve will soon finalize work on a new program to serve as a buyer of last resort for commercial paper. This is a key source of short-term financing for American businesses and financial institutions. And by unfreezing the market for commercial paper, the Federal Reserve will help American businesses meet payroll, and purchase inventory, and invest to create jobs.
In a few moments, Secretary Paulson and other members of my Working Group on Financial Markets will explain these steps in greater detail. They will make clear that each of these new programs contains safeguards to protect the taxpayers. 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 measures I have announced today are the latest steps in this systematic approach to address the crisis. I know Americans are deeply concerned about the stress in our financial markets, and the impact it is having on their retirement accounts, and 401(k)s, and college savings, and other investments. I recognize that the action leaders are taking here in Washington and in European capitals can seem distant from those concerns. But these efforts are designed to directly benefit the American people by stabilizing our overall financial system and helping our economy recover.
It will take time for our efforts to have their full impact, but the American people can have confidence about our long-term economic future. We have a strategy that is broad, that is flexible, and that is aimed at the root cause of our problem. Nations around the world are working together to overcome this challenge. And with confidence and determination, we will return our economies to the path of growth and prosperity. Thank you. END 8:08 A.M. EDT
October 10, 2008
Keith Hennessey Good afternoon. Thank you for joining me today to discuss the economy and what our Administration is doing to restore stability to the markets. The President spoke from the Rose Garden this morning to reassure the American people that the government is responding aggressively to the challenges in our financial markets. Here is what he said:
"Here's what the American people need to know: that the United States government is acting; we will continue to act to resolve this crisis and restore stability to our markets. We are a prosperous nation with immense resources and a wide range of tools at our disposal. We're using these tools aggressively."
"The plan we are executing is aggressive. It is the right plan. It will take time to have its full impact. It is flexible enough to adapt as the situation changes. And it is big enough to work."
I look forward to taking your questions.
Sheri, from Greene writes: Why doesn't anyone see that each time a government bailout has been announced, the stock market plumets? Most Americans do not want bigger government. Please allow the stock market and the economy work itself out. Free enterprise is the best for the best country in the world.
Keith Hennessey President Bush is a strong believer in free markets. He believes that government should get involved in business transactions only as a last resort, and that firms that make bad decisions should be allowed to fail.
He does not, however, believe that we should allow the financial system to risk failure, and so that's why we're acting. The actions that the federal government has taken, and that we plan to take, are designed to restore confidence, patience, and capital to our financial system, so that firms can lend and trade again with each other, and with a minimum of government interference.
Haley, from Slippery Rock, PA writes: Mr. Hennessey, Can you please explain in simple terms WHY the government is giving $700 billion to companies and HOW it helps the economy? I think people would be more accepting of it if they saw how it would help them in the long run.
Keith Hennessey The US banking system is undercapitalized. Banks, and some other large financial institutions like insurance companies, made the same bad decision -- they purchased mortgage-related assets, when they didn't understand the mortgages that made them up, and in some cases they didn't understand the complex securitization process that created them.
When banks lack capital, they can't lend. Our economy relies on credit to operate -- even if you pay your credit card balance every month, you are still relying on the credit card company to loan you the funds between when you purchase something and when you pay your bill.
If you or your child, have a student loan, you are relying on credit to finance a long-term investment. If you have a mortgage, you're borrowing to finance a large asset purchase. If you get a car loan, you're also relying on credit. If you're a farmer who borrows early in the season to buy seed and fertilizer, and then pays back the loan after harvest, you rely on credit. If you're a small businessman who needs to manage his cash flow between when he buys the raw materials and when he sells the good, you're relying on credit. And if you want to buy a new lathe to make more widgets, you need credit for that loan.
Banks in the US and around the world are not providing the credit that we all need to live in the daily economy, and for that economy to grow.
Our first choice is that private investors provide that credit. But since we must have that credit, we have asked Congress to loan us $700B of taxpayer money to provide that base amount of capital to banks. It's a last resort, and we're taking it.
Note that we expect to get some (most?) of that money back. These are investments, and we expect the taxpayer will get a return. So the actual cost to the taxpayer will be less than $700B, and we hope much less.
Charles, from West Point, NY writes: What kinds of precautionary measures is the Administration taking to prepare for the transition team coming in at the end of this year, at a time when the transfer of economic power from one President to the next is clearly going to be extremely fragile?
Keith Hennessey The President signed an Executive Order yesterday to set up a Transition Council to make sure we have a smooth transition. The current financial crisis and economic stress is one of several areas when a smooth transition of power and knowledge is essential. Others obviously involve things like Iraq and Afghanistan, as well as protecting our homeland from terrorist attack.
As a member of the President's economic team, I'll be doing my part to make sure my successor, and the successors to the economic parts of the Cabinet, have what they need to be operational and effective on Day 1. And this is true no matter who wins the Election.
Bob, from Tolland, CT writes: Hello,My background is not in economics. However, I have reason to believe the path taken to deal with the financial markets caving in is a very dangerous one. This leads to my question; would Mr. Hennessey's office care to comment on the potential for hyperinflation as a result of the planned drastic increase in the money supply?
Keith Hennessey We're significantly less worried about inflation than we are about the downside effects and risks from what we're seeing in the financial markets. When oil was $140+ per barrel, there was more room for concern about inflation. Now, we're far more concerned that the economy is not growing fast enough.
Felix, from Washington, D.C. writes: Mr. Hennessey: Can you explain why the Treasury Department's bailout is focusing on the purchase of mortgage-backed securities to free up credit instead of trying to bolster the value of the underlying assets (i.e., the real estatehomes) to aid in a housing recovery? It seems to me that the Treasury's TARP plan is completely backwards and will be too slow for the marketplace to aid in any sort of recovery, particularly when you consider that nobody can seem to place a value on these securities. Also, is there any movement at Treasury to work with other governments to create a global clearinghouse for making credit-default swaps more transparent and above-the-board?
Keith Hennessey The value of homes fundamentally depends on the supply of and demand for houses. There were housing booms, especially in areas like CA, AZ, NV, and FL, for several years that dramatically increased the supply of houses. As long as supply greatly exceeds demand for houses, we expect that housing prices will continue to drop. And since the seller of a home is often quite reluctant to lower the sales price, this adjustment takes a lot of time.
So I don't think that the TARP will be slower than attacking the underlying value of the assets. We're doing our best to push on both fronts, and have taken actions to help homeowners keep their homes and avoid foreclosure (which would further increase supply), at the same time that Secretary Paulson and the Treasury are working hard to flesh out the details of the TARP.
Tony, from Boston writes: So why had President Bush been so reluctant to declare that we in the USA are in a recession when all the economic signs point to being in one ? It seems to me like he's an ostrich unwilling to confront the situation and trying feverishly to dodge the obvious questions - we seem to have elected a president who has problems when dealing with reality and the truth. Why ?
Keith Hennessey The best data we have show that the US economy grew around 1 percent in the first quarter of this year, and 3.3 percent in the second quarter. That's not even close to a recession, and 3.3% is fairly strong growth.
The economy is clearly in a worse position now than it was in the second quarter, due first to high oil prices, and now to the consequences of what's going on in the financial markets. But the term "recession" is a technical economic term, and I don't think it should be used to mean "something is wrong in the economy", as often is done in a political environment.
So things are tough now, and we're working to fix them as best we can. But I'll wait on evaluating the "recession" word until we see the data.
Valerie, from Mesa, AZ writes: As a young working American...I would like to know what steps I can take to ensure a proper retirement for myself? In the current state of the economy today it is very hard to get ahead much less save for retirement. Eventually I will have children and wonder what kind of impact todays economy will have on my future?
Keith Hennessey Start saving a little bit now with each paycheck. Once you get used to saving, it's easier to dial the amount up a bit. Even if the amount you're saving now seems trivial, you'll find that the amounts can go up as your pay increases over time, and you also may find that you're used to saving, and you'll find ways to squirrel a little more away.
And then, after a few years, you'll start to see the beauty of compound interest, as those small amounts you saved early in your career start to accumulate and grow.
Carrie, from Colfax, CA writes: Hi, I was wondering now that the government has passed the Emergency Economic Stabilization and has begun to buy up bad debts and property Mortgages which branch of the government will be in control of selling the properties once the economy starts to improve? I ask this because I plan to go back to school and would be interested in this field.
Keith Hennessey Actually, the buying hasn't begun yet, but it will in the near future. I expect that the Treasury Department will hire one or more private firms to handle the mechanics of buying and selling assets.
Heather, from Las Vegas, NV writes: When is the President going to give a State of the Union type of speech about the economy? We need to hear more from our President during this turmoil in the economy. I have been a strong supporter of the Republican party and voted for President Bush during both elections. Right now is the time to show true leadership and band our country together to be strong again.
Keith Hennessey He has spoken a bunch over the past few weeks, including some serious speeches. The biggest speech was an evening speech from the East Room of the White House (that's a signal in itself -- we use the East Room only for big speeches) on September 24th. You can find it here.
Austin, from Pheonix writes: Dr Mr. Hennessey, I am currently writing a school essay and wanted your opinion on a matter. If you could answer this question with your honest opinion it would be much appreciated. Do you believe that the problems with the economy are due to the mistakes of this presidency, or were built up over time with past presidencies.
Keith Hennessey I believe that mistakes were made by investors and people on Wall Street, and by people in government. Many of those problems built up over time. We called attention to some of them and tried to solve them, like trying to get Congress to address problems that had been building for years with Fannie Mae and Freddie Mac, and Congress didn't act. Other things we learned about after bad things happened -- so, for instance, the banking regulators have now strengthened the requirements placed on a mortgage lender to make sure that they give you good information, and that they don't give you a loan you can't afford.
I'm sure that there will be plenty of discussion about what caused the current situation, and that academics will be analyzing this for years to come. But right now, we're focused on doing what we need to do to fix the immediate problems we face.
Bruce, from Manitowoc Wi writes: What is the goverment going to do when all our savings have vanished and we can no longer see a future of prosperity?
Keith Hennessey It won't vanish, and we still see a future of prosperity. This is a tough time, and it's painful for most everyone. But here's what the President said this morning:
"Here's what the American people need to know: that the United States government is acting; we will continue to act to resolve this crisis and restore stability to our markets. We are a prosperous nation with immense resources and a wide range of tools at our disposal. We're using these tools aggressively.
The plan we are executing is aggressive. It is the right plan. It will take time to have its full impact. It is flexible enough to adapt as the situation changes. And it is big enough to work."
Keith Hennessey Thanks everyone for joining this chat. Ive got to get back to work.
For Immediate Release Office of the Press Secretary October 4, 2008
President's Radio Address
THE PRESIDENT: Good morning. This week, Congress passed a bipartisan rescue package to address the instability in America's financial system. This was a difficult vote for many members of the House and Senate, but voting for it was the right choice for America's economy and for taxpayers like you. I appreciate their efforts to help stop the crisis in our financial markets from spreading to our entire economy. And I appreciate their willingness to work across party lines in the midst of an election season.
The legislation Congress passed provides the necessary tools to address the underlying problem in our financial system. The root of this problem is that, as assets that banks hold have lost value, their ability to provide credit has been restricted, making it more difficult for businesses and consumers to obtain affordable loans. Without decisive action, this credit crunch threatens to harm our entire economy. With this legislation, the Federal government can help banks and other financial institutions resume lending. This will allow them to continue providing the capital that is essential to creating jobs, financing college educations, and helping American families meet their daily needs.
Though the $700 billion dedicated to this plan is a large amount, the final cost to taxpayers will actually be much lower. Many of the assets that the government will be purchasing still have significant underlying value. As time passes, they will likely go up in price. And this means that the government should eventually be able to recoup much, if not all, of the original expenditure.
This package will also increase the safety of Americans' personal finances. For 75 years, the FDIC has provided insurance for savings accounts, checking accounts, and certificates of deposit. A similar insurance program is in effect for deposits in credit unions. And since these programs were instituted, no one has ever lost a penny on an insured deposit. The rescue package expands this protection by temporarily increasing the amount insured by the Federal government in banks and credit unions from $100,000 to $250,000. These steps should reassure Americans, especially small business owners, that their money is safe -- and it should restore confidence in the health of our banking system.
In addition to addressing the immediate needs of our financial system, this package will also help to spur America's long-term economic growth. This week, we learned that our Nation lost more jobs in September. Under these circumstances, it is essential for the government to reduce the burdens on workers and business owners. And that is why the rescue package includes relief from the Alternative Minimum Tax, which would otherwise increase taxes for 26 million taxpayers by an average of $2,200. And that is why it includes tax relief for businesses, which can use these savings to hire new employees and finance new investment.
By taking all these steps, we can begin to put our economy on the road to recovery. While these efforts will be effective, they will also take time to implement. My Administration will move as quickly as possible, but the benefits of this package will not all be felt immediately. The Federal government will undertake this rescue plan at a careful and deliberate pace to ensure that your tax dollars are spent wisely.
I know many of you listening this morning are anxious about the state of our economy and what it means for your personal finances. I am confident that the implementation of this relief package can begin to address those concerns. I'm confident by getting our markets moving, we will help unleash the key to our continued economic success: the entrepreneurial spirit of the American people.
Thank you for listening.
# # #
For Immediate Release October 3, 2008
President Bush Discusses Emergency Economic Stabilization Act of 2008 Rose Garden, 2:03 P.M. EDT
THE PRESIDENT: A short time ago, the House of Representatives passed a bill that is essential to helping America's economy weather the financial crisis. The Senate passed the same legislation on Wednesday night. And when Congress sends me the final bill, I'm going to sign it into law.
There were moments this week when some thought the federal government could not rise to the challenge. But thanks to the hard work of members of both parties in both Houses -- and a spirit of cooperation between Capitol Hill and my administration -- we completed this bill in a timely manner. I'm especially grateful for the contributions of Speaker Nancy Pelosi, Minority Leader John Boehner, Majority Leader Steny Hoyer, Minority Whip Roy Blunt, Chairman Barney Frank, Ranking Member Spencer Bachus.
By coming together on this legislation, we have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country. We have shown the world that the United States of America will stabilize our financial markets and maintain a leading role in the global economy.
A major problem in our financial system is that banks have restricted the flow of credit to businesses and consumers; many of the assets these banks are holding have lost value. The legislation Congress passed today addresses this problem head on by providing a variety of new tools to the government -- such as allowing us to purchase some of the troubled assets, and creating a new government insurance program that will guarantee the value of others. The bill also ensures that these new programs are carried out in a way that protects taxpayers. It prevents failed executives from receiving windfalls from taxpayers' dollars. It establishes a bipartisan board to oversee the plan's implementation.
Taken together, these steps represent decisive action to ease the credit crunch that is now threatening our economy. With a smoother flow of credit, more businesses will be able to stock their shelves and meet their payrolls. More families will be able to get loans for cars and homes and college education. More state and local governments will be able to fund basic services.
The bill includes other provisions to help American consumers and businesses. It includes tax incentives for businesses to invest and create jobs. It temporarily expands federal insurance for bank and credit union deposits from $100,000 to $250,000 -- a vital safeguard for consumers and small businesses. It provides families with relief from the Alternative Minimum Tax, which would otherwise increase taxes for 26 million taxpayers by an average of $2,200.
I know some Americans have concerns about this legislation, especially about the government's role and the bill's cost. As a strong supporter of free enterprise, I believe government intervention should occur only when necessary. In this situation, action is clearly necessary. And ultimately, the cost -- ultimately, the cost to taxpayers will be far less than the initial outlay. See, the government will purchase troubled assets and once the market recovers, it is likely that many of the assets will go up in value. And over time, Americans should expect that much -- if not all -- of the tax dollars we invest will be paid back.
Americans should also expect that it will take some time for this legislation to have its full impact on our economy. Exercising the authorities in this bill in a responsible way will require a careful analysis and deliberation. This will be done as expeditiously as possible, but it cannot be accomplished overnight. We'll take the time necessary to design an effective program that achieves its objectives -- and does not waste taxpayer dollars.
Our economy continues to face serious challenges. This morning, we learned that America lost jobs again in September -- disappointing news that underscores the urgency of the bill that Congress passed today. It will take more time and determined effort to get through this difficult period. But with confidence and leadership and bipartisan cooperation, we'll overcome the challenges we face, return our nation to a path of growth, and job creation, and long-term economic prosperity. Thank you.
END 2:08 P.M. EDT
Fact Sheet: Safeguarding The Financial Future Of American Workers And Families
Emergency Economic Stabilization Act Is Vital To Help America Get Back On The Path To Growth And Job Creation
Today, the Bureau of Labor Statistics released new jobs figures for September. Nonfarm payroll employment decreased by 159,000 jobs in September and the unemployment rate remained at 6.1 percent.
The House of Representatives must pass the Senate financial rescue package immediately. We are in the midst of a serious financial crisis the financial system is clogged, and credit is not available to many families and business owners who need it. Problems that originated in the credit markets and first showed up in the area of subprime mortgages have spread throughout our financial system and are threatening Main Street. To protect the broader economy from the financial crisis, President Bush proposed legislation to remove troubled assets from the financial markets as the housing market recovers.
Bipartisan Legislation Will Protect Taxpayers And Ensure Credit Flows To American Businesses And Families
The Senate version of this legislation added important provisions. This new version, in addition to addressing the financial crisis, protects millions of taxpayers from the Alternative Minimum Tax (AMT), extends tax incentives for businesses and tax relief for families and individuals, extends renewable energy tax credits, and increases federally insured deposits.
The AMT patch will protect about 26 million American taxpayers from an unwelcome tax increase.
The bill will extend the research and experimentation tax credit, which provides an important incentive for businesses to invest in the development of new products and technologies. The legislation also improves and extends tax incentives for charitable giving by individuals and businesses.
The bill extends deductions for State and local sales taxes and for tuition expenses, and it extends an additional standard deduction for property taxes paid.
This bill will extend broad-based tax incentives for renewable investments in wind, solar, biofuels, and other renewable energy investments.
The legislation includes a provision that would temporarily raise the cap on federally insured deposits from $100,000 to $250,000. That provision would expire at the end of 2009.
This legislation will grant tax relief for victims of floods, storms, and tornadoes between May 20 and August 1 in Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, and Wisconsin.
The President commends the Senate for its strong bipartisan vote in favor of the financial rescue plan. This bill is essential to the financial security of every American. It is aimed at helping American families, small businesses, and State and local governments. The original proposal was revised to include strong oversight that strengthened the legislation:
This legislation places limits on executive compensation. When the Treasury Department buys assets directly, the financial institution selling them must observe standards limiting incentives and prohibiting golden parachutes. When the Treasury Department buys more than $300 million in assets at auction from a single institution, executive compensation above $500,000 will not be tax-deductible and the institution will be subject to penalties for golden parachute payments triggered by events other than retirement.
The Treasury Department will receive warrants for non-voting stock from participating financial institutions, if needed, to cover losses and administrative costs while allowing taxpayers to benefit from equity appreciation.
Under this bipartisan agreement, the Treasury Secretary would be authorized to remove troubled assets in stages. Initially, the Treasury Secretary will have the ability to immediately purchase or insure up to $250 billion. In order to access the next $100 billion, the President must certify the need for the authority and report to Congress. For the final $350 billion, the President must request the authority through a written report to Congress. The Treasury Secretary will then have the authority unless Congress passes a joint resolution of disapproval within 15 days.
It is projected that much, if not all, of the tax dollars invested by the Federal government into these troubled financial institutions will be paid back over time. Under the purchase program, the government would sell or hold the acquired assets, with the proceeds going back to the Treasury, to offset much, if not all, of the initial cost. Under the program to guarantee troubled assets, the Treasury Department would charge risk-based premiums to cover any anticipated claims.
Our Economy Is Depending On Decisive Action By The Government
In recent weeks, the Federal government has taken a series of measures to help promote stability in the overall economy. We have boosted confidence in money market mutual funds and acted to prevent major investors from intentionally driving down stocks for their own personal gain. But more action is needed. We must address the root cause behind much of the instability in our markets the mortgage assets that have lost value during the housing decline.
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