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For Immediate Release
Office of the Press Secretary
March 17, 2008
Press Briefing by Dana Perino
James S. Brady Press Briefing Room
12:45 P.M. EDT
MS. PERINO: I don't have anything to start with, so I can go straight to questions.
Q For people who are losing their homes, or losing their jobs, and then they see the government helping engineer this $30 billion line of credit for Bear Stearns, and help for other financial investment firms on Wall Street, how do you reconcile the two?
MS. PERINO: Well, the way I would answer that question is in two parts. One, this isn't about bailing anyone out. These actions are intended, as I said earlier today, to minimize financial market disruptions. And investors in Bear Stearns are taking large and significant losses in this transaction. And that's not what happens in a bail-out. They bought into a company, they took a financial risk -- and it had paid off quite well for them a while ago, but today they're looking at a stock that's only worth $2. And the Fed, what they did last night, is try to provide liquidity to the markets so it would stabilize, and we could have orderliness in the system.
But I would also say that a major market disruption would have very damaging consequences and be very painful for everybody, from the small business owner to the homeowner, for everybody all the way up and down the economic food chain. And the goal here is to prevent a major disruption in financial markets. And the Fed is taking decisive action when necessary, and that is what they saw last night.
In addition to that, homeowners and small business owners and everyone across America needs to know that we've acted on multiple fronts, starting back in August -- that was when the President recognized that we might be heading into some headwinds in the economy, with several different aspects of it. And if you look back consistently over those past several months, he has said that we needed to take some action. And over time, we proposed legislation, dealing with the housing market. We also worked with the private sector to help homeowners, through HOPE NOW, and then Project Lifeline. We supported legislation that would not penalize people for writing down mortgage debt when they did a refinancing. And that finally became law.
We haven't had Congress act on one of the most important things they could do, which is Federal Housing Administration -- changes in reforms that we've asked for. It's been about seven months since the President first announced that, and Congress is now and again on a two-week recess, and nothing is going to happen.
But at the same time, back in January, the President said, when we worked on the stimulus package, that the reason that we're doing that is because we could see in the future there could be a potential downturn in the economy. And so if things were to get worse, we would have a stimulus package in effect. We called that, remember, an insurance policy, a booster shot, that we said would take effect and have impact later in the summer. And the President and Congress were right to work together on that bipartisan package, because those tax rebates will be going out to people all across the country, including the homeowners that you talk about.
Q But, Dana, how does this square with sort of traditional conservative economic principles of limited government involvement in terms of, sort of, maybe culling the herd a little bit, letting the firms that are going to fail, fail, and thus more can sort of live on the back end?
MS. PERINO: Well, I would point out again that, remember, investors -- Bear Stearns basically went from a company that was doing quite well to failure, and at $2 a share, I should think that those investors are seeing -- feeling today the consequences of that risk in a marketplace. But I would remind you that what's right for the markets and stability for the financial system had to be taken into consideration. And that's what the Fed decided to do, is to act quickly, to act decisively, to make sure that we could provide what's needed right now, which is stability and liquidity and orderliness.
And the Treasury Department is able to answer lots more of detailed questions, and the Fed certainly on historical questions in this matter.
Q But people who are facing, say, foreclosure, the individuals, the little guys who are facing a foreclosure are looking at the big guys getting government, if not brokered, certainly they're overseeing deals that are engineered to sort of keep the big picture financial community afloat, and they're saying, well, where's my boost of liquidity?
MS. PERINO: They're going to get that boost of liquidity in the form of a stimulus package and a tax rebate that's coming to them the second week of May.
Q But that's not going to save their houses.
MS. PERINO: The other way to help work on the housing issues is to take advantage of some of the programs that we have in place, to talk with HOPE NOW or Project Lifeline, for those who are in more serious dire straits, and also to work -- for us to continue from the administration to call on Congress to finally take action on Federal Housing Administration reforms, which we think are necessary to help homeowners across-the-board.
But I would remind you, and remind consumers all across America, that the decisive action taken by the Fed yesterday was precisely to prevent long-term economic harm to everybody in the United States, including, as you said, the little guy.
Q Is there no American taxpayer money involved in this intervention?
MS. PERINO: Well, the details of the action taken last night by the Fed, I would have to refer you to the Fed, because the deal and the transaction are quite complicated. But the Fed will be focused on making sure that the federal taxpayer is protected.
Q To follow on that, the Fed did not consult the White House; is that correct?
MS. PERINO: I think we were kept informed, but --
Q Dana, does the President think that Bear Stearns is an isolated case, or are there other large companies that may be in the same situation as Bear Stearns?
MS. PERINO: I don't know, I'd have to refer you to the Fed when you ask if the Fed would know.
Q Did the President ask his economic advisors --
MS. PERINO: The President gets regularly updated, and in fact, in just an hour or two he'll be meeting with the Working Group on Financial Markets, his Working Group on Financial Markets.
But let me point out one thing also, Ann, which is that the Fed did not just take the action last night in terms of helping to structure this deal, but it also took two other steps -- which I'll let them explain in terms of the discount window. But those options that are now available to investment bankers were not available to Bear Stearns. And the whole purpose of taking that action is so that there would be options and availability for companies to right themselves if they're feeling like they're sliding.
Q Dana, is the U.S. economy in a crisis?
MS. PERINO: As we said, Elaine -- I don't know what kind of a question that is. Obviously, we're in a state where we have a weakened economy. And the President is extremely concerned. The Fed has taken action, decisive action, and they stand ready to do more if they need to. And we're going to continue to work with Congress, as we -- and we worked with them quite closely to get the stimulus package done. That will -- those checks will start coming to people's mailboxes the second week of May. And then they'll hopefully have the impact that the outside forecasters and the administration continue to see, which is that in the late summer we'll get a little bit of a boost out of that and it will help pull the economy out of a downturn.
But, obviously, the long-term fundamentals of the economy, as the President said this morning, remain strong. And that will be reflected over time.
Q I ask because obviously it's quite a remarkable move, what happened over the weekend, the talks. And Treasury Secretary Paulson obviously was quite involved in the whole process. I mean, it's unusual, to say the least.
MS. PERINO: But that's exactly what you would expect from the President's senior leadership. And one of the most important things a President can do is to make sure that you have the right type of leadership in those positions at the right time. And I would say certainly that Secretary Paulson and Fed Chairman Bernanke fit that bill.
Q The President, in his radio address Saturday, said that the housing crisis was the root of a lot of the troubles. Mr. Frank and Mr. Dodd have the legislation on the Hill that will call for a write-down on some of the principal, and then have FHA come in and guarantee the rest of those mortgages. The market is looking for a floor. Wouldn't that kind of legislation give the market a floor?
MS. PERINO: I'm not that detailed into it, Roger, that I could provide that. But I'll refer you to Treasury.
Q The administration opposes that legislation; is that correct?
MS. PERINO: I think we've said that we would not support -- I can't remember exactly what that legislation says, so let me go back and either get back to you or refer you to somebody who can.
Q The President said on Friday, in result -- about the initial Bear Stearns offer, that the Chairman of the Federal Reserve and Secretary of Treasury are on top of the situation. It turned out to require more. He said today, "You've shown the country and the world the United States is on top of the situation. This is essentially a crisis of confidence. I wonder if you can tell me whether the President believes --
MS. PERINO: In what? A crisis of confidence in?
Q Well, it appears to be a crisis of confidence in liquidity.
MS. PERINO: Okay. I thought you were talking about in the President's advisors.
Q I'm going to ask you if you can tell me whether the President feels we have seen the worst of it, whether there are likely to be any more effective failures of major financial institutions, and why the President said on Friday they were on top of the situation, when, in fact, it took a weekend of negotiations for them to get to the --
MS. PERINO: Wendell. Wendell, I would refer you to how they structured the deal, but this was -- it's not so easy to come up with a deal where you're taking a massive investment bank and trying to work with JPMorgan Chase in order to work all of that out. And in fact, I would daresay that between Friday and Sunday night, to get all of that done that quickly was quite remarkable. So I don't know where -- I disagree with your --
Q So are you telling me on Friday, when the President was trying to reassure the country about the state of the markets, he realized that the Bear Stearns bailout was -- or I shouldn't call it a "bailout" -- the deal was not completed then? He suggested --
MS. PERINO: He said they were on top of it, they were working on it, and they, in fact, were. And then they finalized the deal. And I think it was prudent and responsible that they finalized it in time to be able to announce it before the Asia markets opened, which they did last night.
Q What about Wendell's question -- have we seen the worst of -- does the President feel we've seen the worst of it?
MS. PERINO: I don't think we know. Obviously in a market economy, economies cycle and they go up and down, and the question is whether or not they are mild disruptions or sharp disruptions. What the President can do is make sure that his leadership is in place to take decisive action when they need to. And they will stand ready to do more if they think they need to.
But I would point you back to the fact that the action that the Fed took last night, being as unusual as it was, as Elaine said, now provides more options to investment banks across the board that weren't available to Bear Stearns before. So if the possibility arose that anybody else were facing dire straits such as that, then they could actually -- they have options in front of them now that weren't available before.
Q Does the White House believe that the administration was quick enough, going back over the last few months, several months, to recognize the role that securitization played in this economic crisis?
MS. PERINO: Yes, I think so. And I think that overall, I think that one of the most important things is recognizing in August the need for help in the housing market, so working with Congress to try to get a couple of things done. We got one big piece done in terms of the mortgage write-down, which was sponsored by Senator Stabenow, and the President greatly supported her idea. It became law.
But then I think the other most important thing to do in terms of timing was the stimulus package. And the President said that would be a piece of insurance that we would need in case the markets took a turn for the worse. They did take a turn for the worse, and the good news is that we already have that in place. And so that should have the impact that we asked for.
Q Do you feel like that was in the cross-hairs from the beginning, the role of taking the mortgages and assigning them to a third party?
MS. PERINO: No, I don't -- I don't follow your question.
Q Well, the President has talked often about how mortgages being packaged and sold to investment firms has been the problem, because they've defaulted.
MS. PERINO: Oh, I see what you're saying.
Q I mean, is that --
MS. PERINO: Well, I think that what Secretary Paulson has said, and I can refer you to his comments yesterday on all of the shows, which is that -- and the President has said that -- in the speech on Friday that the way that mortgages are handled now is very different from several decades ago when you knew who your lender was -- it was your guy down the street, at your local bank -- and now that's not the case anymore. The industry has changed. And one of the things that we'll have to do is consider whether any new policies or oversight is needed in that industry.
And I think that HUD announced on Friday changes to the RESPA rules, which should help -- mostly help borrowers, so that they have clear information as to what they are getting into when they sign up for a mortgage.
Go ahead, Les.
Q Thank you, Dana. On a different area, in his speech to the Economic Club in New York City on Friday --
MS. PERINO: That sounds like the same topic. Just kidding. I'm sorry, go ahead. Sorry. (Laughter.)
Q The President said: I firmly believe people in New York City are going to be driving automobiles on battery relatively quickly, and it's not going to be like a golf cart; it will be a full-sized vehicle you'll be driving in. And my question -- since that was on Friday, you can now tell us whether "relatively quickly" means months or how many estimated years, can't you?
MS. PERINO: Well, the Energy Department is working closely with industry on that, in terms of the incentives they have for battery technology. But it is exciting that we'll be able to drive our cars about 40 miles without having to stop for any type of traditional fuel -- but it's going to take a few years.
Q "A few years" -- how many, would you estimate?
MS. PERINO: A few. (Laughter.)
Q "A few." All right. At Hillsdale College, veteran journalist William Tucker noted that 50 percent of our electricity comes from coal and 20 percent from nuclear reactors, which percentages should, he contended, be reserved, as in France, but the main opposition, he said, is public fear. And my question: Does the President support or oppose such an expansion of nuclear power?
MS. PERINO: Where have you been, Les? Yes, he does -- extensively.
Q He supports it?
MS. PERINO: He definitely supports increases in nuclear power. I'm going to go to Elaine.
Q I'm delighted. Thank you very much.
MS. PERINO: We'll refer you to the seven years' worth of statements for more on that. (Laughter.)
Q Back on the Fed action. Would you at least concede that to some people there is the appearance of a disconnect here, when they hear that Bear Stearns, which engaged in risky -- or took risky, some would say imprudent financial steps -- is being given the assistance of the government, while the mortgage -- while the person who is facing a foreclosure at home -- that also may have taken risky financial steps, some would say unwise financial steps -- is not being necessarily given the same kind of immediate assistance in this --
MS. PERINO: I'm going to go back to what I said at the beginning, which is that this isn't about bailing out anyone. This was about making sure to prevent against market disruptions. And the investors in Bear Stearns are taking large, significant losses in this transaction, and that's not what happens in a bailout.
At the same time, the President has moved forward on parallel tracks in order to help the individual homeowners. We have a housing crisis in the country that we are trying to work through, and it's just going to take a little bit of time so that we can match the policies that we've now put in place -- or that we would like Congress to put in place, in terms of reforms of the Federal Housing Administration.
And until then, there's other measures that they could take. For example, Secretary Paulson and Secretary Jackson worked together with a large number of private sector companies to pull together both lenders and mortgage backers, to get together and try to help people. And so it's -- I think it's 1-888-HOPENOW -- I hope I don't say that wrong, like the President did before -- it's a 1-800 number. There's also -- you can get to them online.
And then in addition to that -- that was for people who are thinking that they might have a problem. In addition to that, they created Project Lifeline, which is to help people who are in serious arrears and are at risk of losing their house. So there are -- the action that the homeowner can take, as well, that can try to help them.
Q Dana, if I can try again. One reason this continues is that people don't know the exposure of these large investment houses to the subprime market. For example, let's -- I gather one reason that Bear Stearns' stock was worth $57 a share Thursday, $30 a share on Friday -- as the exposure of these firms becomes clear, the amount of loss they are subject to becomes clear, and the value of the firm goes down. Does the President support some kind of action that would more quickly make it clear to the country how much these large investment houses are exposed to the subprime market losses?
MS. PERINO: I haven't talked to him about it, but let me take your question and I'll get back to you. (*)
Q Is he going to talk about this tomorrow? What's his economic speech tomorrow?
MS. PERINO: The economic speech is based on -- is focused on the Colombia free trade agreement. But I'm not going to rule out him talking about the broader economy overall.
Q Dana, two quick questions. One, as far as crackdowns in Tibet by the Chinese, now U.S. Commission on International Religious Freedom and other human rights organizations are calling -- condemning. Do you think President is in touch with anybody or is concerned about it?
MS. PERINO: The administration has certainly been in touch with the Chinese, and we've called on them, as Secretary Rice did on Saturday, to exercise restraint in dealing with the protests, and we've urged an immediate end to the violence so that the people can get back to living a better life. But we're also very -- we're just very concerned of the overall long-term prospects of it. So we've been in touch with them, and I'll refer you to the Secretary of State's office for more.
Q Second, on Wednesday, when President talks about global war on terrorism, his speech, do you think he's going to talk about ongoing violence in Afghanistan and in Pakistan? Because before the democratic government form now, more and more every day there are some suicide bombings --
MS. PERINO: In what speech? I'm sorry, you're asking --
Q The global war on terror.
MS. PERINO: Will he talk about the global war on terrorism?
MS. PERINO: That is for sure. You can bet on that.
Q Dana, the cost of the contract for the new Marine Ones, the fleet of helicopters, has doubled since it was let in 2005. I know this is a Pentagon issue and it's a Defense Department issue, but this is sort of a symbol of the presidency, those white tops.
MS. PERINO: Sure.
Q Is there a concern here about that contract rising so much, at a time when the President is talking about constraining government spending?
MS. PERINO: Well, certainly no one is happy about the budget increasing on that, on the need for it. As you know, the presidency uses these helicopters quite a bit, and the next President, whoever it is, is going to need the access and the capabilities that a Marine One can provide. So these current helicopters are ones that are going to need to be replaced quite soon after the next President takes over from the President.
And so we have been encouraging early on that this contract be bid. And the White House did not add any additional requirements after the contract had already been signed, and we do remain concerned about it. But as I understand it, to rebid the contract would probably cost the taxpayers even more money and cost us -- waste a lot of time, as well.
Q Thank you.
END 1:05 P.M. EDT
(*) The President believes there needs to be greater transparency of investment risk generally. This is a shared responsibility: the risks of investments need to be disclosed, and investors need to be sure they know what they are investing in. Transparency is not only a question of fairness to investors; it serves as the foundation for the strength of our financial system. Also, it will take time for markets to adjust and it's important that firms recognize their losses as quickly and transparently as possible so the problem is not prolonged.