Showing posts with label Bus Econ Subprime Mortgage Crisis. Show all posts
Showing posts with label Bus Econ Subprime Mortgage Crisis. Show all posts

Saturday, January 24, 2009

My recent columns in The Tentacle on the economy by Kevin Dayhoff

My recent columns in The Tentacle on the economy by Kevin Dayhoff

January 24, 2009

I have had a number of folks recently ask where they may find my recent columns in The Tentacle on the economy:

October 3, 2008
Congress and The Rattlesnake – Part 3
Kevin E. Dayhoff
On May 13, 2008, Democratic presidential nominee Barack Obama compared the current housing crisis in the U.S. to the Great Depression in a campaign stop in Missouri.

October 2, 2008
Congress and The Rattlesnake – Part 2
Kevin E. Dayhoff
For several weeks the nation and the world have been watching the financial news emanating from Washington and Wall Street with that “deer in headlights” look as everyone holds their breath in disbelief and worries another shoe will drop.

October 1, 2008
Congress and the Rattlesnake – Part 1
Kevin E. Dayhoff
In response to the increasing wrath of the American voter, the U.S. House of Representatives came to its senses on Monday and voted 288 to 205 to kill the rash and ill-conceived proposed $700 billion bailout of Wall Street.

November 5, 2008
It’s the Congress, Stupid!
Kevin E. Dayhoff
When historians look back on the 670-day, $2.5 billion 2008 presidential campaign, the observations, analysis, second-guessing, and finger pointing will fill volumes. In the end, it was once again, “the economy, stupid” that ruled the day.

November 19, 2008
Rewarding Bad Behavior
Kevin E. Dayhoff
Instead of tooling down the highway in the fast lane, two months after General Motors celebrated its 100th Birthday on September 16, it found itself huddled over at an intersection with fate, harassing passers-by with a tin pan in hand.

November 26, 2008
“The Eight Years War”
Kevin E. Dayhoff
At high noon on Monday, amid cries of alarm that this is the worst economic crisis since the Great Depression, President-elect Barack Obama rolled out his all-star economic team and a call for an economic stimulus package that could cost as much as $1 trillion.

20090124 my recent columns in The Tentacle on the economy

Kevin Dayhoff
E-mail him at: kdayhoff AT
His columns appear in The Tentacle,;
The Westminster Eagle /Eldersburg Eagle The Sunday Carroll Eagle - Opinion:

Kevin Dayhoff
Kevin Dayhoff: Westminster Maryland Online

Sunday, September 28, 2008

Washington Examiner: Politicians never learn they can't change the facts by Bill Wilson

Washington Examiner: Politicians never learn they can't change the facts by Bill Wilson


All the back and forth over the proposed $700 billion bailout of New York financial firms has degenerated into gibberish, incomprehensible to most voters.


While a few elected officials try to figure out a way to deal with the crisis, many on Capitol Hill, in the media, and in the partisan salons are busy doing what they do best - playing the blame-game and looking to escape exposure of their culpability.

House Banking Committee chairman Rep. Barney Frank, D-MA, led off the spin effort by stating, “The private sector got us into this mess. The government has to get us out of it.”

Notice that Frank doesn’t say “Wall Street” got us in to this mess. For him and all too many of his allies, it is the “private sector” that is evil. A chorus of lesser voices have been dutifully parroting Frank ever since.

What Frank, Senate Banking Committee chairman Sen. Chris Dodd, D-CN, and others of their ilk are afraid of is that the public will learn the facts of this debacle. And the facts are clear.

The crisis we face is not a failure of the private sector. This crisis was conceived, manufactured, nurtured and defended by government and the horde of apologists who feed off of it.

As Deep Throat admonished a generation ago, let’s follow the money. In 1995, the Clinton Administration issued rules that required banks and lending institutions to give loans to people who could not afford them. The lending standards were essentially gutted. This was an overt act of government.

The banks complied and gave the loans. They got the money to lend by selling the bad mortgages to Fannie Mae and Freddie Mac. These semi-government entities “bought” the bad mortgages from the banks. But where did Fannie and Freddie get the money to buy the bad debt?


Read Mr. Wilson’s entire opinion here: Washington Examiner: Politicians never learn they can't change the facts by Bill Wilson

20080928 Washington Examiner: Politicians never learn they cant change the facts by Bill Wilson

Tapscott's Copy Desk: Comparison of original Paulson bailout to compromise proposal

Tapscott's Copy Desk: Comparison of original Paulson bailout to compromise proposal

More from Tapscott's Copy Desk RSS Feed

POSTED September 28, 2008

House Republican Whip Roy Blunt's office provides this side-by-side comparison of Treasury Secretary Henry Paulson's original Wall Street bailout proposal with the final compromise agreed to over the weekend by congressional and Treasury negotiators:

Click here: Side-by-Side Comparison of Rescue Legislation on Tapscott's Copy Desk

20080928 Tapscott: Comparison original Paulson bailout to compromise prop

Saturday, September 27, 2008

President's Radio Address

For Immediate ReleaseOffice of the Press SecretarySeptember 27, 2008

President's Radio Address

In Focus: Economy
THE PRESIDENT: Good morning. This is an extraordinary period for America's economy. Many Americans are anxious about their finances and their future. On Wednesday, I spoke to the Nation, and thanked Congress for working with my Administration to address the instability in our financial system. On Thursday, I hosted Senator McCain, Senator Obama, and congressional leaders from both parties at the White House to discuss the urgency of passing a bipartisan rescue package for our economy.

The problems in our economy are extremely complex, but at their core is uncertainty over "mortgage-backed securities." Many of these financial assets relate to home mortgages that have lost value during the housing decline. In turn, the banks holding these assets have restricted credit, and businesses and consumers have found it more difficult to obtain affordable loans. As a result, our entire economy is in danger. So I proposed that the Federal government reduce the risk posed by these troubled assets, and supply urgently needed money to help banks and other financial institutions avoid collapse and resume lending.

I know many of you listening this morning are frustrated with the situation. You make sacrifices every day to meet your mortgage payments and keep up with your bills. When the government asks you to pay for mistakes on Wall Street, it does not seem fair. And I understand that. And if it were possible to let every irresponsible firm on Wall Street fail without affecting you and your family, I would do it. But that is not possible. The failure of the financial system would mean financial hardship for many of you.

The failure of the financial system would cause banks to stop lending money to one another and to businesses and consumers. That would make it harder for you to take out a loan or borrow money to expand a business. The result would be less economic growth and more American jobs lost. And that would put our economy on the path toward a deep and painful recession.

The rescue effort we're negotiating is not aimed at Wall Street -- it is aimed at your street. And there is now widespread agreement on the major principles. We must free up the flow of credit to consumers and businesses by reducing the risk posed by troubled assets. We must ensure that taxpayers are protected, that failed executives do not receive a windfall from your tax dollars, and that there is a bipartisan board to oversee these efforts.

Under the proposal my Administration sent to Congress, the government would spend up to $700 billion to buy troubled assets from banks and other financial institutions. I know many Americans understand the urgency of this action, but are concerned about such a high price tag. Well, let me address this directly:

The final cost of this plan will be far less than $700 billion. And here's why: As fear and uncertainty have gripped the market for mortgage-related assets, their price has dropped sharply. Yet many of these assets still have significant underlying value, because the vast majority of people will eventually pay off their mortgages. In other words, many of the assets the government would buy are likely to go up in price over time. This means that the government will be able to recoup much, if not all, of the original expenditure.

Members of Congress from both sides of the aisle have contributed constructive proposals that have improved this plan. I appreciate the efforts of House and Senate Democratic and Republican leaders to bring a spirit of bipartisan cooperation to these discussions. Our Nation's economic well-being is an issue that transcends partisanship. Republicans and Democrats must continue to address it together. And I am confident that we will pass a bill to protect the financial security of every American very soon.

Thank you for listening.

# # #

20080927 President’s Radio Address

Thursday, September 25, 2008

John McCain’s Remarks on the Economy

John McCain’s Remarks on the Economy

September 24, 2008

"It is time for both parties to come together to solve this problem. We must meet as Americans, not as Democrats or Republicans, and we must meet until this crisis is resolved. I am directing my campaign to work with the Obama campaign and the commission on presidential debates to delay Friday night's debates until we have taken action to address this crisis."

Watch the Speech

John McCain’s remarks on the economy

September 24, 2008

America this week faces an historic crisis in our financial system. We must pass legislation to address this crisis. If we do not, credit will dry up, with devastating consequences for our economy. People will no longer be able to buy homes and their life savings will be at stake. Businesses will not have enough money to pay their employees. If we do not act, every corner of our country will be impacted. We cannot allow this to happen.

Last Friday, I laid out my proposal and I have since discussed my priorities and concerns with the bill the Administration has put forward. Senator Obama has expressed his priorities and concerns. This morning, I met with a group of economic advisers to talk about the proposal on the table and the steps that we should take going forward. I have also spoken with members of Congress to hear their perspective.

It has become clear that no consensus has developed to support the Administration’s proposal. I do not believe that the plan on the table will pass as it currently stands, and we are running out of time.

Tomorrow morning, I will suspend my campaign and return to Washington after speaking at the Clinton Global Initiative. I have spoken to Senator Obama and informed him of my decision and have asked him to join me.

I am calling on the President to convene a meeting with the leadership from both houses of Congress, including Senator Obama and myself. It is time for both parties to come together to solve this problem.

We must meet as Americans, not as Democrats or Republicans, and we must meet until this crisis is resolved. I am directing my campaign to work with the Obama campaign and the commission on presidential debates to delay Friday night’s debate until we have taken action to address this crisis.

I am confident that before the markets open on Monday we can achieve consensus on legislation that will stabilize our financial markets, protect taxpayers and homeowners, and earn the confidence of the American people. All we must do to achieve this is temporarily set politics aside, and I am committed to doing so.

Following September 11th, our national leaders came together at a time of crisis. We must show that kind of patriotism now. Americans across our country lament the fact that partisan divisions in Washington have prevented us from addressing our national challenges. Now is our chance to come together to prove that Washington is once again capable of leading this country.

20080924 John McCain’s remarks on the economy

economy mortgage Wall Main Street legislation McCain Palin financial Congress credit derivatives traunch bipartisan Dayhoff jobs small business

Joint Statement Of Senator John McCain And Senator Barack Obama

Joint Statement Of Senator John McCain And Senator Barack Obama

For Immediate Release

September 24, 2008

ARLINGTON, VA -- Today, U.S. Senators John McCain and Barack Obama issued the following statement:

"The American people are facing a moment of economic crisis. No matter how this began, we all have a responsibility to work through it and restore confidence in our economy. The jobs, savings, and prosperity of the American people are at stake.

"Now is a time to come together -- Democrats and Republicans -- in a spirit of cooperation for the sake of the American people. The plan that has been submitted to Congress by the Bush Administration is flawed, but the effort to protect the American economy must not fail.

"This is a time to rise above politics for the good of the country. We cannot risk an economic catastrophe. Now is our chance to come together to prove that Washington is once again capable of leading this country."

20080924 Jt St Of Senators McCain Obama

President Bush’s address to the nation on the economic crisis

President Bush’s address to the nation on the economic crisis

For Immediate Release
Office of the Press Secretary
September 24, 2008
President's Address to the Nation
State Floor

Video (Windows) /news/releases/2008/09/20080924-10.wm.v.html

Presidential Remarks
In Focus: Economy

9:01 P.M. EDT

THE PRESIDENT: Good evening. This is an extraordinary period for America's economy. Over the past few weeks, many Americans have felt anxiety about their finances and their future. I understand their worry and their frustration. We've seen triple-digit swings in the stock market. Major financial institutions have teetered on the edge of collapse, and some have failed. As uncertainty has grown, many banks have restricted lending. Credit markets have frozen. And families and businesses have found it harder to borrow money.

We're in the midst of a serious financial crisis, and the federal government is responding with decisive action. We've boosted confidence in money market mutual funds, and acted to prevent major investors from intentionally driving down stocks for their own personal gain.

Most importantly, my administration is working with Congress to address the root cause behind much of the instability in our markets. Financial assets related to home mortgages have lost value during the housing decline. And the banks holding these assets have restricted credit. As a result, our entire economy is in danger. So I've proposed that the federal government reduce the risk posed by these troubled assets, and supply urgently-needed money so banks and other financial institutions can avoid collapse and resume lending.

This rescue effort is not aimed at preserving any individual company or industry -- it is aimed at preserving America's overall economy. It will help American consumers and businesses get credit to meet their daily needs and create jobs. And it will help send a signal to markets around the world that America's financial system is back on track.

I know many Americans have questions tonight: How did we reach this point in our economy? How will the solution I've proposed work? And what does this mean for your financial future? These are good questions, and they deserve clear answers.

First, how did our economy reach this point?

Well, most economists agree that the problems we are witnessing today developed over a long period of time. For more than a decade, a massive amount of money flowed into the United States from investors abroad, because our country is an attractive and secure place to do business. This large influx of money to U.S. banks and financial institutions -- along with low interest rates -- made it easier for Americans to get credit. These developments allowed more families to borrow money for cars and homes and college tuition -- some for the first time. They allowed more entrepreneurs to get loans to start new businesses and create jobs.

Unfortunately, there were also some serious negative consequences, particularly in the housing market. Easy credit -- combined with the faulty assumption that home values would continue to rise -- led to excesses and bad decisions. Many mortgage lenders approved loans for borrowers without carefully examining their ability to pay. Many borrowers took out loans larger than they could afford, assuming that they could sell or refinance their homes at a higher price later on.

Optimism about housing values also led to a boom in home construction. Eventually the number of new houses exceeded the number of people willing to buy them. And with supply exceeding demand, housing prices fell. And this created a problem: Borrowers with adjustable rate mortgages who had been planning to sell or refinance their homes at a higher price were stuck with homes worth less than expected -- along with mortgage payments they could not afford. As a result, many mortgage holders began to default.

These widespread defaults had effects far beyond the housing market. See, in today's mortgage industry, home loans are often packaged together, and converted into financial products called "mortgage-backed securities." These securities were sold to investors around the world. Many investors assumed these securities were trustworthy, and asked few questions about their actual value. Two of the leading purchasers of mortgage-backed securities were Fannie Mae and Freddie Mac. Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk.

The decline in the housing market set off a domino effect across our economy. When home values declined, borrowers defaulted on their mortgages, and investors holding mortgage-backed securities began to incur serious losses. Before long, these securities became so unreliable that they were not being bought or sold. Investment banks such as Bear Stearns and Lehman Brothers found themselves saddled with large amounts of assets they could not sell. They ran out of the money needed to meet their immediate obligations. And they faced imminent collapse. Other banks found themselves in severe financial trouble. These banks began holding on to their money, and lending dried up, and the gears of the American financial system began grinding to a halt.

With the situation becoming more precarious by the day, I faced a choice: To step in with dramatic government action, or to stand back and allow the irresponsible actions of some to undermine the financial security of all.

I'm a strong believer in free enterprise. So my natural instinct is to oppose government intervention. I believe companies that make bad decisions should be allowed to go out of business. Under normal circumstances, I would have followed this course. But these are not normal circumstances. The market is not functioning properly. There's been a widespread loss of confidence. And major sectors of America's financial system are at risk of shutting down.

The government's top economic experts warn that without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold:

More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically. And if you own a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors, and millions of Americans could lose their jobs. Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And ultimately, our country could experience a long and painful recession.

Fellow citizens: We must not let this happen. I appreciate the work of leaders from both parties in both houses of Congress to address this problem -- and to make improvements to the proposal my administration sent to them. There is a spirit of cooperation between Democrats and Republicans, and between Congress and this administration. In that spirit, I've invited Senators McCain and Obama to join congressional leaders of both parties at the White House tomorrow to help speed our discussions toward a bipartisan bill.

I know that an economic rescue package will present a tough vote for many members of Congress. It is difficult to pass a bill that commits so much of the taxpayers' hard-earned money. I also understand the frustration of responsible Americans who pay their mortgages on time, file their tax returns every April 15th, and are reluctant to pay the cost of excesses on Wall Street. But given the situation we are facing, not passing a bill now would cost these Americans much more later.

Many Americans are asking: How would a rescue plan work?

After much discussion, there is now widespread agreement on the principles such a plan would include. It would remove the risk posed by the troubled assets -- including mortgage-backed securities -- now clogging the financial system. This would free banks to resume the flow of credit to American families and businesses. Any rescue plan should also be designed to ensure that taxpayers are protected. It should welcome the participation of financial institutions large and small. It should make certain that failed executives do not receive a windfall from your tax dollars. It should establish a bipartisan board to oversee the plan's implementation. And it should be enacted as soon as possible.

In close consultation with Treasury Secretary Hank Paulson, Federal Reserve Chairman Ben Bernanke, and SEC Chairman Chris Cox, I announced a plan on Friday. First, the plan is big enough to solve a serious problem. Under our proposal, the federal government would put up to $700 billion taxpayer dollars on the line to purchase troubled assets that are clogging the financial system. In the short term, this will free up banks to resume the flow of credit to American families and businesses. And this will help our economy grow.

Second, as markets have lost confidence in mortgage-backed securities, their prices have dropped sharply. Yet the value of many of these assets will likely be higher than their current price, because the vast majority of Americans will ultimately pay off their mortgages. The government is the one institution with the patience and resources to buy these assets at their current low prices and hold them until markets return to normal. And when that happens, money will flow back to the Treasury as these assets are sold. And we expect that much, if not all, of the tax dollars we invest will be paid back.

A final question is: What does this mean for your economic future?

The primary steps -- purpose of the steps I have outlined tonight is to safeguard the financial security of American workers and families and small businesses. The federal government also continues to enforce laws and regulations protecting your money. The Treasury Department recently offered government insurance for money market mutual funds. And through the FDIC, every savings account, checking account, and certificate of deposit is insured by the federal government for up to $100,000. The FDIC has been in existence for 75 years, and no one has ever lost a penny on an insured deposit -- and this will not change.

Once this crisis is resolved, there will be time to update our financial regulatory structures. Our 21st century global economy remains regulated largely by outdated 20th century laws. Recently, we've seen how one company can grow so large that its failure jeopardizes the entire financial system.

Earlier this year, Secretary Paulson proposed a blueprint that would modernize our financial regulations. For example, the Federal Reserve would be authorized to take a closer look at the operations of companies across the financial spectrum and ensure that their practices do not threaten overall financial stability. There are other good ideas, and members of Congress should consider them. As they do, they must ensure that efforts to regulate Wall Street do not end up hampering our economy's ability to grow.

In the long run, Americans have good reason to be confident in our economic strength. Despite corrections in the marketplace and instances of abuse, democratic capitalism is the best system ever devised. It has unleashed the talents and the productivity, and entrepreneurial spirit of our citizens. It has made this country the best place in the world to invest and do business. And it gives our economy the flexibility and resilience to absorb shocks, adjust, and bounce back.

Our economy is facing a moment of great challenge. But we've overcome tough challenges before -- and we will overcome this one. I know that Americans sometimes get discouraged by the tone in Washington, and the seemingly endless partisan struggles. Yet history has shown that in times of real trial, elected officials rise to the occasion. And together, we will show the world once again what kind of country America is -- a nation that tackles problems head on, where leaders come together to meet great tests, and where people of every background can work hard, develop their talents, and realize their dreams.

Thank you for listening. May God bless you.

END 9:14 P.M. EDT

20080924 President Bush’s address to the nation on the economic crisis

McCain Discusses Financial Crisis, Rescue Plan by Steve Holland for Reuters

McCain Discusses Financial Crisis, Rescue Plan

By Steve Holland, Reuters September 24, 2008

NEW YORK (Reuters) -- Republican presidential nominee John McCain got an update on the Wall Street financial crisis from several economic experts on Wednesday and was cautious on whether he would vote for a $700 billion bailout.

The Arizona senator said Senate Majority Leader Harry Reid, a Nevada Democrat, was wrong to say on Tuesday that McCain planned to vote for the hotly debated rescue plan.

"I did not say that," McCain told reporters…

McCain's comment came as he met with several economic experts and current and former corporate executives, such as Cisco CEO John Chambers, former Massachusetts Gov. Mitt Romney, former eBay CEO Meg Whitman and former Merrill Lynch CEO John Thain…

"Most Americans feel very strongly that this isn't their fault but it's Wall Street and Washington and the cozy insider relationships that have caused a great part of the problems," McCain said.

He said any package must have "transparency, accountability, CEO responsibility and obviously be in the best interest of the people (of) this country who are going to pay $10,000 per household in order to take the necessary measures to restore our confidence."

While Obama was in Florida getting prepared for his first debate with McCain on Friday in Mississippi, McCain was engaged in a round of meetings with foreign leaders in New York on the sidelines of the U.N. General Assembly.

The list included a joint session with the presidents of Georgia and Ukraine, both of whom are concerned about Russia after Moscow's invasion of Georgia last month. He was also to meet Indian Prime Minister Manmohan Singh.

Read the entire article here.

20080924 McCain Discusses Financial Crisis Rescue Plan

Sunday, September 21, 2008

President Bush Discusses Economy

President Bush Discusses Economy

For Immediate Release Office of the Press Secretary September 19, 2008

Rose Garden

Video (Windows) /news/releases/2008/09/20080919-2.wm.v.html
Presidential Remarks
En Español
Fact Sheet: Confronting Economic Challenges Head On
In Focus: Economy

THE PRESIDENT: Good morning. I thank Treasury Secretary Hank Paulson, Federal Reserve Chairman Ben Bernanke, and SEC Chairman Chris Cox for joining me today.

This is a pivotal moment for America's economy. Problems that originated in the credit markets -- and first showed up in the area of subprime mortgages -- have spread throughout our financial system. This has led to an erosion of confidence that has frozen many financial transactions, including loans to consumers and to businesses seeking to expand and create jobs. As a result, we must act now to protect our nation's economic health from serious risk.

There will be ample opportunity to debate the origins of this problem. Now is the time to solve it. In our nation's history, there have been moments that require us to come together across party lines to address major challenges. This is such a moment. Last night, Secretary Paulson and Chairman Bernanke and Chairman Cox met with congressional leaders of both parties -- and they had a very good meeting. I appreciate the willingness of congressional leaders to confront this situation head on.

Our system of free enterprise rests on the conviction that the federal government should interfere in the marketplace only when necessary. Given the precarious state of today's financial markets -- and their vital importance to the daily lives of the American people -- government intervention is not only warranted, it is essential.

In recent weeks, the federal government has taken a series of measures to help promote stability in the overall economy. To avoid severe disruptions in the financial markets and to support home financing, we took action to address the situation at Fannie Mae and Freddie Mac. The Federal Reserve also acted to prevent the disorderly liquidation of the insurance company AIG. And in coordination with central banks around the world, the Fed has injected much-needed liquidity into our financial system.

These were targeted measures designed primarily to stop the problems of individual firms from spreading even more broadly. 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 and are now restricting the flow of credit. America's economy is facing unprecedented challenges, and we are responding with unprecedented action.

Secretary Paulson, Chairman Bernanke, and Chairman Cox have briefed leaders on Capitol Hill on the urgent need for Congress to pass legislation approving the federal government's purchase of illiquid assets, such as troubled mortgages, from banks and other financial institutions. This is a decisive step that will address underlying problems in our financial system. It will help take pressure off the balance sheets of banks and other financial institutions. It will allow them to resume lending and get our financial system moving again.

Additionally, the federal government is taking several other steps to address the trouble of our financial markets.

The Department of the Treasury is acting to restore confidence in a key element of America's financial system -- money market mutual funds. In the past, government insurance was not available for these funds, and the recent stresses on the markets have caused some to question whether these investments are safe and accessible. The Treasury Department's actions address that concern by offering government insurance for money market mutual funds. For every dollar invested in an insured fund, you will be able to take a dollar out.

The Federal Reserve is also taking steps to provide additional liquidity to money market mutual funds, which will help ease pressure on our financial markets. These measures will act as grease for the gears of our financial system, which were at risk of grinding to a halt. They will support the flow of credit to households and businesses.

The Securities and Exchange Commission has issued new rules temporarily suspending the practice of short selling on the stocks of financial institutions. This is intended to prevent investors from intentionally driving down particular stocks for their own personal gain. The SEC is also requiring certain investors to disclose their short selling, and has launched rigorous enforcement actions to detect fraud and manipulation in the market. Anyone engaging in illegal financial transactions will be caught and persecuted [sic].

Finally, when we get past the immediate challenges, my administration looks forward to working with Congress on measures to bring greater long-term transparency and reliability to the financial system -- including those in the regulatory blueprint submitted by Secretary Paulson earlier this year. Many of the regulations governing the functioning of America's markets were written in a different era. It is vital that we update them to meet the realities of today's global financial system.

The actions I just outlined reflect the considered judgment of Secretary Paulson, Chairman Bernanke, and Chairman Cox. We believe that this decisive government action is needed to preserve America's financial system and sustain America's overall economy. These measures will require us to put a significant amount of taxpayer dollars on the line. This action does entail risk. But we expect that this money will eventually be paid back. The vast majority of assets the government is planning to purchase have good value over time, because the vast majority of homeowners continue to pay their mortgages. And the risk of not acting would be far higher. Further stress on our financial markets would cause massive job losses, devastate retirement accounts, and further erode housing values, as well as dry up loans for new homes and cars and college tuitions. These are risks that America cannot afford to take.

In this difficult time, I know many Americans are wondering about the security of their finances. Every American should know that the federal government continues to enforce laws and regulations protecting your money. Through the FDIC, every savings account, checking account, and certificate of deposit is insured by the federal government for up to $100,000. The FDIC has been in existence for 75 years, and no one has ever lost a penny on an insured deposit -- and this will not change.

America's financial system is intricate and complex. But behind all the technical terminology and statistics is a critical human factor -- confidence. Confidence in our financial system and in its institutions is essential to the smooth operation of our economy, and recently that confidence has been shaken. Investors should know that the United States government is taking action to restore confidence in America's financial markets so they can thrive again.

In the long run, Americans have good reason to be confident in our economic strength. America has the most talented, productive, and entrepreneurial workers in the world. This country is the best place in the world to invest and do business. Consumers around the world continue to seek out American products, as evidenced by record-high exports. We have a flexible and resilient system that absorbs challenges and makes corrections and bounces back.

We've seen that resilience over the past eight years. Since 2001, our economy has faced a recession, the bursting of the dot-com bubble, major corporate scandals, an unprecedented attack on our homeland, a global war on terror, a series of devastating natural disasters. Our economy has weathered every one of these challenges, and still managed to grow.

We will weather this challenge too, and we must do so together. This is no time for partisanship. We must join to move urgently needed legislation as quickly as possible, without adding controversial provisions that could delay action. I will work with Democrats and Republicans alike to steer our economy through these difficult times and get back to the path of long-term growth. Thank you very much.

END 10:54 A.M. EDT

20080919 President Bush Discusses Economy

Declaraciones del Presidente Sobre la Economía

Declaraciones del Presidente Sobre la Economía
19 de septiembre de 2008

Para su publicación inmediata
Oficina del Secretario de Prensa

Rose Garden

10:45 A.M. EDT

EL PRESIDENTE: Buenos días. Les agradezco al secretario del Tesoro, Hank Paulson, al presidente de la Reserva Federal, Ben Bernanke, y al presidente de la Comisión de Valores y Cambio Bursátil (Security and Exchange Commission), Chris Cox, por acompañarme hoy.

Éste es un momento importante para la economía de Estados Unidos. Problemas que se originaron en el mercado de crédito -y se presentaron inicialmente en el sector de préstamos hipotecarios no preferenciales- se han propagado por todo nuestro sistema financiero. Esto ha llevado a una pérdida de confianza que ha congelado muchas transacciones financieras, entre ellas préstamos a consumidores y a empresas con planes de expandirse y generar empleo. Como resultado, debemos tomar medidas ahora para proteger de serios peligros el bienestar económico de nuestra nación.

Habrá abundantes oportunidades de debatir el origen de este problema. Éste es el momento de resolverlo. En la historia de nuestra nación, ha habido ocasiones que han requerido que nos unamos, independientemente de partido, para hacerles frente a desafíos importantes. Ésta es una ocasión tal. Anoche, el secretario Paulson y el presidente Bernanke y el presidente Cox se reunieron con líderes del Congreso de ambos partidos... y tuvieron una muy buena reunión. Agradezco que los líderes del Congreso estén dispuestos a hacerle frente directamente a esta situación.

Nuestro sistema de libre empresa se basa en la convicción de que el gobierno federal debe interferir en el mercado sólo cuando es necesario. Dada la situación precaria de los mercados financieros de hoy -y su vital importancia en la vida cotidiana del pueblo estadounidense- la intervención del gobierno no sólo se justifica; es esencial.

En semanas recientes, el gobierno federal ha tomado una serie de medidas para ayudar a promover la estabilidad en la economía en general. A fin de evitar alteraciones severas en el mercado financiero y apoyar la financiación de viviendas, tomamos medidas para hacerle frente a la situación en Fannie Mae y Freddie Mac. La Reserva Federal también dio pasos para evitar la liquidación desordenada de la compañía de seguros AIG. Y en coordinación con bancos centrales en todo el mundo, la Reserva ha inyectado liquidez muy necesaria en nuestro sistema financiero.

Esas fueron medidas específicas y concebidas principalmente para evitar que los problemas de firmas individuales se propagaran más extensamente. Pero es necesario hacer más. Debemos abordar la causa de gran parte de la inestabilidad de nuestro mercado: los activos hipotecarios que se devaluaron durante la desaceleración del sector de vivienda y que ahora restringen el flujo de crédito. La economía de Estados Unidos enfrenta desafíos sin precedente, y estamos respondiendo con medidas sin precedente.

El secretario Paulson, el presidente Bernanke y el presidente Cox les han informado a los líderes en el Capitolio de la urgente necesidad de que el Congreso apruebe legislación que dé el visto bueno a que el gobierno federal les compre a bancos y otras instituciones financieras activos ilíquidos como malos préstamos hipotecarios. Éste es un paso decisivo que abordará los problemas subyacentes de nuestro sistema financiero. Ayudará a disminuir la presión en los balances de los bancos y otras instituciones financieras. Permitirá que reanuden sus préstamos y que nuestro sistema financiero se vuelva a poner en marcha.

Además, el gobierno federal está dando pasos adicionales para abordar los problemas de nuestro mercado financiero.

El Departamento del Tesoro está tomando medidas para reestablecer la confianza en un elemento clave del sistema financiero de Estados Unidos: los fondos mutuos de inversión (en activos) del mercado del dinero. En el pasado, no había seguro gubernamental para estos fondos, y las recientes presiones en el mercado han causado que algunos se pregunten si estas inversiones son seguras y asequibles. Las medidas del Departamento del Tesoro abordan esa inquietud ofreciendo seguro gubernamental para los fondos mutuos de inversión en el mercado de dinero. Por cada dólar invertido en un fondo asegurado, podrán sacar un dólar.

La Reserva Federal también está tomando medidas para proporcionar liquidez adicional a los fondos mutuos de inversión en el mercado de dinero, lo que ayudará a disminuir la presión en nuestro mercado financiero. Estas medidas servirán como la grasa de los engranajes de nuestro sistema financiero, que corrían el peligro de detenerse completamente. Contribuirán al flujo de crédito a hogares de familia y empresas.

La Securities and Exchange Commission ha emitido normas nuevas de forma temporal que suspenden la práctica de venta al descubierto de acciones de instituciones financieras. Esto tiene como propósito evitar que los inversionistas reduzcan el valor de ciertas acciones para lucro personal. La SEC también está requiriendo que ciertos inversionistas divulguen sus ventas al descubierto y ha puesto en práctica estrictas medidas de control para detectar el fraude y la manipulación en el mercado. Cualquier persona que participe en transacciones financieras ilegales será detectada y perseguida [sic].

Finalmente, mi gobierno está deseoso de, una vez superados los desafíos inmediatos, cooperar con el Congreso en medidas para darle mayor transparencia y fiabilidad a largo plazo al sistema financiero, entre ellas las incluidas en el plan normativo presentado por el secretario Paulson anteriormente este año. Muchas de las reglamentaciones que rigen el funcionamiento del mercado estadounidense fueron redactadas en otra era. Es de vital importancia que las actualicemos para que conformen con la realidad actual del sistema financiero mundial.

Las medidas que acabo de describir reflejan el buen criterio del secretario Paulson, el presidente Bernanke y el presidente Cox. Creemos que es necesario que el gobierno tome medidas decisivas para resguardar el sistema financiero de Estados Unidos y sustentar la economía en general de Estados Unidos. Estas medidas requerirán que arriesguemos una cantidad significativa de dinero de los contribuyentes. Estas medidas, de hecho, implican riesgo. Pero tenemos previsto que este dinero se devuelva, a fin de cuentas. Los activos que el gobierno está planeando comprar, en su gran mayoría, retienen su valor con el tiempo, porque los propietarios de vivienda, en su gran mayoría, continúan pagando sus préstamos hipotecarios. Y el peligro de la inacción sería mucho mayor. Presión adicional en nuestros mercados financieros causaría la pérdida masiva de empleos, devastaría las cuentas para la jubilación y devaluaría más el sector de vivienda, además de hacer que se agoten los préstamos para casas y autos nuevos, y matrículas universitarias. Estos son peligros que Estados Unidos no puede darse el lujo de correr.

En este difícil momento, sé que muchos estadounidenses se preguntan sobre la seguridad de sus finanzas. Todos los estadounidenses deben saber que el gobierno federal continúa velando por el cumplimiento de las leyes y las normas que protegen su dinero. Por medio de la Corporación de Seguro Federal para Depósitos (Federal Deposit Insurance Corporation o FDIC), todas las cuentas de ahorro, cuentas corrientes y certificados de depósito están asegurados hasta $100,000 por el gobierno federal. El FDIC existe desde hace 75 años, y nadie jamás ha perdido un centavo de un depósito asegurado, y eso no cambiará.

El sistema financiero de Estados Unidos es intrincado y complejo. Pero detrás de toda la terminología técnica y los datos estadísticos está un factor humano muy importante: la confianza. La confianza en nuestro sistema financiero y sus instituciones es esencial para que nuestra economía opere sin trabas, y recientemente esta confianza ha flaqueado. Los inversionistas deben saber que el gobierno de Estados Unidos está tomando medidas para reestablecer la confianza en el mercado financiero de Estados Unidos de modo que podamos volver a prosperar.

A largo plazo, los estadounidenses tienen buen motivo para tener seguridad en nuestra solidez económica. Estados Unidos cuenta con los trabajadores más hábiles, productivos y emprendedores del mundo. Este país es el mejor lugar del mundo para invertir y hacer negocios. Consumidores alrededor del mundo continúan escogiendo productos estadounidenses, como lo prueba el nivel récord de exportaciones. Tenemos un sistema flexible y resistente que absorbe desafíos y hace correcciones y rebota.

Hemos visto esa resistencia durante los últimos ocho años. Desde el 2001, nuestra economía ha enfrentado una recesión, el reventón de la burbuja de los puntocom, grandes escándalos empresariales, un ataque sin precedente contra nuestro territorio nacional, una guerra mundial contra el terrorismo, una serie de desastres naturales devastadores. Nuestra economía ha resistido cada uno de estos desafíos y aun así, ha logrado crecer.

También resistiremos este desafío y debemos hacerlo juntos. No es momento de partidismo. Debemos unirnos para lograr cuanto antes la aprobación de legislación urgentemente necesaria, sin agregar estipulaciones polémicas que podrían postergar una decisión. Trabajaré con tanto demócratas como republicanos para dirigir nuestra economía durante este momento difícil y retomar el camino hacia el crecimiento a largo plazo. Muchísimas gracias.

END 10:54 A.M. EDT

20080919 Declaraciones del Presidente Sobre la Economía

Statement by Secretary Henry M. Paulson, Jr. on Comprehensive Approach to Market Developments

Statement by Secretary Henry M. Paulson, Jr. on Comprehensive Approach to Market Developments

From the
Press Room of the U.S. Department of the Treasury

September 19, 2008

Washington, DC-- Last night, Federal Reserve Chairman Ben Bernanke, SEC Chairman Chris Cox and I had a lengthy and productive working session with Congressional leaders. We began a substantive discussion on the need for a comprehensive approach to relieving the stresses on our financial institutions and markets.

We have acted on a case-by-case basis in recent weeks, addressing problems at Fannie Mae and Freddie Mac, working with market participants to prepare for the failure of Lehman Brothers, and lending to AIG so it can sell some of its assets in an orderly manner. And this morning we've taken a number of powerful tactical steps to increase confidence in the system, including the establishment of a temporary guaranty program for the U.S. money market mutual fund industry.

Despite these steps, more is needed. We must now take further, decisive action to fundamentally and comprehensively address the root cause of our financial system's stresses.

The underlying weakness in our financial system today is the illiquid mortgage assets that have lost value as the housing correction has proceeded. These illiquid assets are choking off the flow of credit that is so vitally important to our economy. When the financial system works as it should, money and capital flow to and from households and businesses to pay for home loans, school loans and investments that create jobs. As illiquid mortgage assets block the system, the clogging of our financial markets has the potential to have significant effects on our financial system and our economy.

As we all know, lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing. This simply put too many families into mortgages they could not afford. We are seeing the impact on homeowners and neighborhoods, with 5 million homeowners now delinquent or in foreclosure. What began as a sub-prime lending problem has spread to other, less-risky mortgages, and contributed to excess home inventories that have pushed down home prices for responsible homeowners.

A similar scenario is playing out among the lenders who made those mortgages, the securitizers who bought, repackaged and resold them, and the investors who bought them. These troubled loans are now parked, or frozen, on the balance sheets of banks and other financial institutions, preventing them from financing productive loans. The inability to determine their worth has fostered uncertainty about mortgage assets, and even about the financial condition of the institutions that own them. The normal buying and selling of nearly all types of mortgage assets has become challenged.

These illiquid assets are clogging up our financial system, and undermining the strength of our otherwise sound financial institutions. As a result, Americans' personal savings are threatened, and the ability of consumers and businesses to borrow and finance spending, investment, and job creation has been disrupted.

To restore confidence in our markets and our financial institutions, so they can fuel continued growth and prosperity, we must address the underlying problem.

The federal government must implement a program to remove these illiquid assets that are weighing down our financial institutions and threatening our economy. This troubled asset relief program must be properly designed and sufficiently large to have maximum impact, while including features that protect the taxpayer to the maximum extent possible. The ultimate taxpayer protection will be the stability this troubled asset relief program provides to our financial system, even as it will involve a significant investment of taxpayer dollars. I am convinced that this bold approach will cost American families far less than the alternative – a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion.

I believe many Members of Congress share my conviction. I will spend the weekend working with members of Congress of both parties to examine approaches to alleviate the pressure of these bad loans on our system, so credit can flow once again to American consumers and companies. Our economic health requires that we work together for prompt, bipartisan action.
As we work with the Congress to pass this legislation over the next week, other immediate actions will provide relief.

First, to provide critical additional funding to our mortgage markets, the GSEs Fannie Mae and Freddie Mac will increase their purchases of mortgage-backed securities (MBS). These two enterprises must carry out their mission to support the mortgage market.

Second, to increase the availability of capital for new home loans, Treasury will expand the MBS purchase program we announced earlier this month. This will complement the capital provided by the GSEs and will help facilitate mortgage availability and affordability.

These two steps will provide some initial support to mortgage assets, but they are not enough. Many of the illiquid assets clogging our system today do not meet the regulatory requirements to be eligible for purchase by the GSEs or by the Treasury program.

I look forward to working with Congress to pass necessary legislation to remove these troubled assets from our financial system. When we get through this difficult period, which we will, our next task must be to improve the financial regulatory structure so that these past excesses do not recur. This crisis demonstrates in vivid terms that our financial regulatory structure is sub-optimal, duplicative and outdated. I have put forward my ideas for a modernized financial oversight structure that matches our modern economy, and more closely links the regulatory structure to the reasons why we regulate. That is a critical debate for another day.

Right now, our focus is restoring the strength of our financial system so it can again finance economic growth. The financial security of all Americans – their retirement savings, their home values, their ability to borrow for college, and the opportunities for more and higher-paying jobs – depends on our ability to restore our financial institutions to a sound footing.

20080919 Sec Paulson st on Comprehensive Approach to Mrkt Dev

Federal Reserve Chairman Ben Bernanke, SEC Chairman Chris Cox, U.S. Department of the Treasury Secretary Henry M. Paulson, Jr.

People Bernanke-Ben, Business Econ Wall St SEC, People Cox-Chris, US Dept Treasury, People Paulson-Henry, Bus Econ Subprime Mortgage Market Crisis

Business Econ Wall St SEC Cox qv People, Business Econ Bernanke-B qv People, Business Econ US Dept Treasury qv US, Business Econ Paulson qv People, Subprime Mortgage Mrkt Crisis qv Bus, 2007 2008 Subprime Mort Crisis qv Bus