Urgency on financial bailout

[0:10] ..." The bipartisan emergency economic stabilization act. The ESA provides is treasury. The Federal Reserve and the FDIC was important to authorities. To complement existing ones. We will continue to coordinate with the other federal regulators. In"...

[3:48] ..." And departures for purchase any troubled assets at the treasury and the Federal Reserve. Deem necessary. To promote financial market stability. The new law also gives a thought to reserve the authority to pay interest on"...

[5:57] ..." term success. I will also consult with congressional leaders and Senator McCain Senator Obama during this process. It is our intent cabinet appointee confirmed by the Senate as soon as possible. And I look forward to"...

[8:46] ..." our banks. We must also address the liquidity and our markets. The Federal Reserve has introduced into a -- of its facilities and policies. To enhance the liquidity that is vital to market stability. And is"...

[9:26] ..." interest -- depository institutions require an excess reserve balances held at the Federal Reserve. This will allow the Fed to expand its balance sheet to support financial stability while maintaining its monetary policy priorities. In recent"...

[10:21] ..." of the fear of not having access to liquid markets. Yesterday the Federal Reserve announced a new facility to provide the liquidity backstop the US issues of commercial paper. -- US -- to me through a"...

[11:15] ..." turmoil. We must continue to keep mortgage credit available. And support the housing market so that we can more quickly turn the corner on the housing correction. To provide critical additional funding to our mortgage markets."...

[13:30] ..." ongoing financial turmoil. The acute stress is facing a financial institutions. Continuing housing market adjustments in the United States and other countries. And volatile albeit moderating commodity prices. Emerging markets are also beginning to show signs"...

[16:39] ..." money market funds. Actions to stabilize his -- season drive down mortgage rates. And the Fed's new program to provide ninety do you liquidity to commercial paper issuers. It is a policy of the federal"...

[17:11] ..." capital available. And to strengthen the balance sheets of individual institutions. The Federal Reserve has also been given new authority to ensure that the system has sufficient liquidity. The FDIC as -- authority and the access to resources necessary to protecting the banking system. The treasury the Federal Reserve in the FDIC. We use all of their authorities to promote the process of repair and recovery. And to contain rest of"...

[0:00]" Good afternoon everyone. Last Friday. Congress finalized and President Bush signed into law. The bipartisan emergency economic stabilization act. The ESA provides is treasury. The Federal Reserve and the FDIC was important to authorities. To complement existing ones. We will continue to coordinate with the other federal regulators. In use these tools to implement our strategy. To redress of four key challenges in our financial markets today. Confidence. Capital. Systemic risk and liquidity. Although we are basing particularly difficult circumstances. I remain confident that we will work through this challenge. As we have always successfully worked through every economic challenge in the history of the United States. We are strong and wealthy nation. With the resources to address the needs we face. I am confident that with the right policy response. Time and effort. We will conquer these challenges as well. US and global financial markets continue to be severely strained. The chain of events caused by the ongoing housing correction. Has reverberated throughout through US banks international institutions. And is seriously impacted the underlying economy. Reaching American households. And businesses. A root cause of this situation is a housing correction. And a lack of confidence in mortgage assets as well as a lack of confidence in many of the financial institutions. That hold these assets. Because of this widespread uncertainty. Investors are hesitant to commit capital to financial institutions. Investor confidence is critical to restore liquidity. In enhances stability of our financial system. This financial turmoil is now directly affecting more families and businesses. When banks cannot finance a reasonable levels. And cannot or not willing to land. Everyone in our economy who depends on credit suffers. The capital markets are the pipes through which money flows. To finance student loans car loans home loans as small businesses payrolls in the inventory. And uncertainty in a lack of confidence or clogged -- basic financial plumbing. -- actions have been aimed at restoring financial markets and institutions. Our purpose is to prevent financial market difficulties. From further impacting businesses and families across the country. Over the last six months the US government has addressed a number of significant problems on a case by case basis. In my judgment. These actions a number of which were quite significant. Or necessary but not sufficient. By September. Uncertainty had led to her credit market freeze and became clear that we you to take a systemic approach a significant scale. To get at the underlying cause of much of this turmoil. We want to congress and asked for broad new authorities to address -- current troubles affecting our financial markets. Including the root cause of the financial system frees. The illiquid mortgage assets weighing on balance sheets. And congress met the very difficult challenge of providing these authorities. Bypassing the GSA. Specifically. The GSA empowers treasury. To use up to 700 billion. To inject capital into financial institutions. To purchase or insure -- mortgage assets. And departures for purchase any troubled assets at the treasury and the Federal Reserve. Deem necessary. To promote financial market stability. The new law also gives a thought to reserve the authority to pay interest on reserves. And temporarily increases. FDIC NN ANC UA deposit insurance from a 100000. To 250000. Dollars. Two days ago the members of the president's working group on financial markets and PWG. Make clear that we will coordinate the use of our existing and new authorities to restore market confidence by strengthening financial institutions. Preventing systemic impact from bank failures. Increasing liquidity to financial markets and keeping mortgage or credit available and affordable. The Treasury Department is moving rapidly to implement ESA can help strengthen financial institutions. While also protecting taxpayer interest. As I've said before. The ultimate taxpayer protection will be a stable financial system that supports normal economic activity. Towards that goal PSA. As broad flexible authorities for treasury to -- or insure troubled assets. Provide guarantees and inject capital we will use all the tools we being given to a maximum effectiveness. Including strengthening the capitalization of financial institutions -- sonics. We will design programs to encourage healthy institutions to participate. Much attention is focused on the use of auctions to purchase troubled assets from financial institutions. We are moving as quickly as possible to organize and implement the most effective process possible. We expect it will be several weeks for 41 purchase. Consistent with the -- I have appointed an interim assistant secretary to manage a program and begin its rapid implementation. I'm currently working with the president to identify a leader to submit for confirmation. As called for in the legislation. To manage a program and help ensure its long term success. I will also consult with congressional leaders and Senator McCain Senator Obama during this process. It is our intent cabinet appointee confirmed by the Senate as soon as possible. And I look forward to working with the Senate when they return in November to ensure we maintain strong leadership in continuity. For this unprecedented. Effort. -- also a terrified and retained other very experienced in an interim leaders for the office including an interim chief financial officer. We have published guidelines are procurement and conflict management process she's. We have already sent out several essential request for proposals to require 48 hour turn around so we can contract with private sector experts. Some even as early as later this week who will bring complementary skills and expertise to the treasury team. We have several policy teams this is designing detail programs. To purchase mortgage backed securities whole loans. And other instruments. In addition. We have begun work on compliance. Executive compensation guidelines. Foreclosure mitigation. In oversight. Our teams have already been working with Treasury's inspector general are scheduled to meet with the general accounting office. Yesterday we held our first meeting of the program's oversight board and we're committed to transparency. In all aspects of the program. We will implement our new authorities with a one simple goal. To restore capital flows to the consumers and businesses that form the core of our economy. One thing we must recognize. Even with the new treasury authorities. Some financial institutions will fail. The EE ESA doesn't exist to savor every financial institution for its own sake. There for a second prong of our strategy is designed to mitigate financial market disruption when a bank fails. In addition to insuring deposits up to the new temporary level of 250000. Dollars. The FDIC has ability to use its insurance fund. Any substantial lines of credit -- treasury to address systemic financial risks that may be posed by a bank failure. It is a policy of our federal government to use all resources at its disposal. To make our financial system stronger. In light of current conditions the FDIC with a full support of the Fed and the treasury will use its authorities and resources. As appropriate to mitigate systemic risk. By as appropriate protecting depositors protecting uninsured claims. Guaranteeing liabilities and adopting other measure it measures to support the banking system. As we address issues of capital and financial strength in our banks. We must also address the liquidity and our markets. The Federal Reserve has introduced into a -- of its facilities and policies. To enhance the liquidity that is vital to market stability. And is frequently done so in coordination with the European Central Bank. Today's announcement of a coordinated rate cut. Including Europe China and other large economies. As a welcome sign the central banks around the world are prepared to take the necessary steps to support the global economy during this difficult time. The GSA granted the Fed permanent authority to pay interest -- depository institutions require an excess reserve balances held at the Federal Reserve. This will allow the Fed to expand its balance sheet to support financial stability while maintaining its monetary policy priorities. In recent weeks a commercial paper market has suffered severe stress and a liquidity. Businesses ranging from financial institutions to industrial companies rely on the commercial paper market every day to fund their business activities. In particular financial institutions sell commercial paper -- use of funds to -- to millions of consumers and businesses across the nation. In the wake of the uncertainties surrounding financial institutions balance sheets many investors are reluctant to buy commercial paper from financial institutions. In essence unwilling to hold this unsecured debt for any significant length of time. Even when the particular institution is healthy because of that this is because of the fear of not having access to liquid markets. Yesterday the Federal Reserve announced a new facility to provide the liquidity backstop the US issues of commercial paper. -- US -- to me through a special purpose vehicle the federal purchase three month unsecured. An asset backed commercial paper directly from eligible issuers. I expect this initiative to significantly improve the availability of funding for financial institutions and corporations. The depend on the commercial paper market. Until those Independent commercial paper can issue and again is significant maturities. Funding pressures will continue to ripple through our economy. Dramatically shrinking availability of credit to support families and businesses. This I have long said the housing correction is a root cause of the current financial market turmoil. We must continue to keep mortgage credit available. And support the housing market so that we can more quickly turn the corner on the housing correction. To provide critical additional funding to our mortgage markets. -- FHA FA. Has directed Fannie Mae and Freddie Mac to increase their purchases of agency mortgage backed securities. Supporting the availability of mortgage finance is a mission of the -- There's headroom over 150 billion between the current GSA portfolios and the regulatory limit. FH FA will supervisor growth of these portfolios under his current expanded authorities to monitor GSE risk management. We also expect Fannie and Freddie to increase direct support the mortgage market through their ongoing securitization activities. To further support the availability of mortgage credit treasury is also established a program to purchase agency MVS directly. The program began in September. This will compliment the capital provided by the GO -- and help facilitate mortgage availability and affordability. Stabilizing Fannie and Freddie to support mortgage availability has been constructive. As arrest of our markets experienced increased turmoil. The interest rate on thirty year fixed rate mortgages has come down from its peak of six point 6% or -- earlier this year. Two to a low as five point 9%. This week. A decrease it helps American households reduced from monthly mortgage payments. And increase the potential for more homeowners to refinance mortgages. And lower rates. -- treasury in the GS CC increase their purchases. Mortgages that they'll affordability issue and improve for Americans. We were not actively engaged -- the geocities we would have expected the rate to increase and further slow the progress of housing correction. We see the evidence every day of the world economies and financial markets are more connected. And inner dependent. Then at any time in history. Economic momentum -- slow substantially across the industrialized countries as a consequence of ongoing financial turmoil. The acute stress is facing a financial institutions. Continuing housing market adjustments in the United States and other countries. And volatile albeit moderating commodity prices. Emerging markets are also beginning to show signs of slowing. We see evidence of -- freezing -- credit markets is having a tangible impact and every day lives of citizens all around the world. Addressing these challenges requires a dramatic steps we're taking your the United States. And it requires strong international partnerships. Governments have a must continue to take individual and collective actions to provide much needed liquidity. Strengthened financial institutions of the provisions of capital and the deposition. Teachers we disposition of troubled assets. Prevent market abuse and protect this the savings are citizens. We must also take care to ensure that our actions are closely coordinated in communicated. So that the action of one country does not come at the expense of others or the stability of the system as a whole. Over the past twelve months President Bush and I have been in regular contact their international counterparts and we have collaborated in a variety of ways. This weekend -- will be meeting with my G seven colleagues to discuss the steps each of us are taking to confront this crisis. In ways to further enhance our collective efforts. In addition in consultation with -- Brazil. The G twenty president I'm calling for a special meeting of the G twenty. The will include senior financial effect officials central bankers and regulators from key emerging economies. To discuss how we might coordinate to lessen the effects of the global turmoil. Any economic slowdown and all of our country's. Although the tests are not easy. I am regularly partners are working might international colleagues who were also committed to securing stability and growth in the domestic economies. And to promoting orderly functioning of the international financial system. While most Americans understand that economic cycles occur we are experiencing some extraordinary. And difficult challenges at home and abroad. Challenges and make it clear that congress was correct take swift and bold action and that we have no time to waste in implementing the new law. We also know that getting it right is as important as getting it done quickly. We can and we will do both. The president's working group on financial markets and all financial regulators are working together to achieve -- necessary goal of restoring stability or relate to our. She's an orderly distort financial markets. Every effort will require careful of that analysis. Deliberation transparency. And some measure of patients from the American people as we create the most effective process possible. We have already taken a number of extraordinary bold actions on the liquidity front. That I am convinced have been exactly the right policy steps including the emergency action. To provide a guarantee to -- money market funds. Actions to stabilize his -- season drive down mortgage rates. And the Fed's new program to provide ninety do you liquidity to commercial paper issuers. It is a policy of the federal government to use all resources at its disposal. To make our financial system stronger. To safeguard depositors and savers to help ensure an adequate flow of capital in to minimize systemic risk. The congress has recently provided the treasury were broad powers to acquire financial assets and to make capital available. And to strengthen the balance sheets of individual institutions. The Federal Reserve has also been given new authority to ensure that the system has sufficient liquidity. The FDIC as -- authority and the access to resources necessary to protecting the banking system. The treasury the Federal Reserve in the FDIC. We use all of their authorities to promote the process of repair and recovery. And to contain rest of the financial system that might arise from problems at individual institutions. But patience has also needed -- because of turmoil will not end quickly. And significant challenges remain ahead. Neither passage of this new law. Nor the implementation of these initiatives will bring an immediate end to current difficulties. It'll take time and bipartisan leadership. Cooperation and collaboration. As well as well conceived and executed policies to overcome the challenges our nation is facing. And we will overcome them. To start despite our problems the US economy as the largest and wealthiest in the world. We will as we have in the past emerge stronger and better able to provide new opportunities for our workers and increased prosperity for our families. Thank you."