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For Immediate Release
Office of the Press Secretary
September 23, 2008
Press Gaggle Via Conference Call with Deputy Press Secretary Tony Fratto on the Economy
New York, New York
MR. FRATTO: Okay, great, thank you, and thanks for coming on the line this morning. I just wanted to take an opportunity this morning to give you an update on where things stand right now with the effort to get legislation passed to help our credit markets right now and stabilize financial markets.
As you probably know, Secretary Paulson, Fed Chairman Bernanke and the Chairman of the SEC Chris Cox are all preparing to testify at Congress this morning -- I think that starts at about 9:30 a.m. -- so, obviously point to their testimony this morning, and I'm sure they'll have extensive Q&A.
Secretary Paulson and his team are still negotiating with members of Congress, with Senator Dodd and Financial Services -- House Financial Services Chairman Barney Frank. Those negotiations are still ongoing. I'm going to try to avoid getting in the way of those negotiations on some of the specific issues that you might have questions on, but be happy to take a lot of your questions.
The President is, as you know, up in New York. You probably just -- maybe saw the coverage of comments that he made before meeting with the Pakistani Prime Minister Zardari. He's up there for the U.N. General Assembly meetings. The President will be giving a speech to the General Assembly shortly. You can expect that he'll have some passage in there about the challenges that we're facing in our financial markets.
Obviously, the President said he's seeing lots of leaders up there. Many economies around the world are affected or even dependent on the U.S. economy, and so there's a great deal of interest in how we're dealing with it. And I think, as the President said, he wants to assure the other leaders of the world that we're working together in a bipartisan way to get this legislation passed, and there is a great sense of urgency to get this accomplished and get it done quickly.
The President spoke to Secretary Paulson also this morning, about a couple of hours ago, and Secretary Paulson updated the President on where things stand. The President is also staying in regular contact with his Chief of Staff Josh Bolten and Ed Gillespie here, and his other economic advisors, on the progress of the talks with Congress and the status of our financial markets this week.
I think it's clear to everyone, anyone who's been paying attention to the markets for the last couple of weeks, that our markets are dealing with some very serious challenges. One of those challenges that we're hearing from the market is a little bit of uncertainty as to how the policy response from Washington will take place; whether it will take place as quickly as needed. I think we want to be confident that it will get done this week; that we will come together in a bipartisan way; that there is sufficient leadership in the House and Senate and from the committee chairmen and ranking members in the Republican Party to get this thing done.
Obviously the legislative process can be bumpy sometimes and there are lots of members who, rightly, have questions about how a program like this will be implemented, and whether it's the best way. We believe it is the best way to solve this problem. It gets at the real, root cause of what has been affecting our markets and our broader economy for some time.
We also think it is, by far, the best way to tackle it in a comprehensive and robust way that will protect the American economy -- not just the financial institutions in New York, but the ability of our economy to get the financing they need to continue to operate businesses, to protect retirement accounts, to make sure that there's available liquidity and credit for home loans, for auto loans and consumer financing and student loans -- that this is the best way to do it. And as I think you'll hear Secretary Paulson say this morning, the best taxpayer protection plan we can have is to have stable markets where our financial institutions can function in a normal way.
This is not a step that we have taken lightly. It's a very big plan. It was something we felt we had no choice but to do at this point. But we're going to move forward with it with great confidence that it will have the impact that we expect it to have and to allow growth to continue in this economy. But it is critical that we move quickly, that we get a clean bill out of the Congress, and that market participants and the American people can see that Washington is acting on this problem in a very forthright way.
Some of the issues that have come up out there -- maybe I can just tackle them a little bit and maybe we can get into them a little bit more in your questions. First is this issue of how it impacts Main Street. I know that there's a -- the image out there that this is a rescue plan for Wall Street financial institutions. This is a rescue plan for the American economy. Our economy does not function properly unless we have well-functioning financial institutions.
What we saw last week was a freezing in our credit markets. This had very, very real impacts on numerous businesses around the country, even in just their ability to get overnight financing for their ongoing operations, to pay employees and to purchase equipment and the things that go into the products they make. That is a dire situation if our credit markets can freeze up that way.
There was some comment on -- out there about the need to do more for homeowners and, of course, we're talking to members of Congress about how this legislation impacts homeowners and mortgage markets. It will have a very positive impact for homeowners and mortgage markets. It will ensure that we have the mortgage financing availability in the system so that we can continue to go out and make home loans for Americans.
Remember that the root of this problem is the housing correction. We don't want to see housing finance freeze up or be restricted. We want to see increasing amounts of funds available for Americans who want to go out and begin to reduce the overhang of homes that we have out there in the market; but also just want to remind everyone that it was just recently that we passed a very large housing bill to help homeowners. We have a number of plans out there that are directed at preventing foreclosures.
And just very quickly, the third item is that we're hearing questions about transparency and oversight. Just want to say up front, transparency and oversight is very important to us. This is a very big program.* It's never been done before, and we will insist that there be very strong and robust transparent oversight and review of this program.
Let me stop there, and then I'll be happy to take any questions you have.
Q Good morning, Tony.
MR. FRATTO: Hi, Ann.
Q Hi. How does the President specifically address the concerns of Senator Shelby and others, both about the size of the program and exactly whether it will work? And does the President reach out directly to any of those with deep concerns?
MR. FRATTO: Well, I think the President is obviously aware of the concerns that are being raised by a number of members. He gets regular updates on them. Secretary Paulson is our point person on dealing with these issues and explaining them to members and staffs so that they fully understand the full scope of not only the policy response, but also the problem that we're dealing with.
We feel very strongly that this is a very comprehensive plan. It is not just this plan to deal with buybacks of these assets. The Treasury Secretary and Chairman Bernanke outlined a number of issues. We're talking to Senator Shelby and his staff. I would also note that the Vice President and Josh Bolten, Keith Hennessey, the Director of the National Economic Council, are up on the Hill today talking to lots of Republicans. They're addressing the Republican Study Committee this morning over on the House side. So we're trying to address all of the issues that are being raised, and I think once we have this conversation over the next day or two as we started over the weekend, I think people will see that this is the best way to proceed.
Q To confirm, you say that Vice President Cheney is on the Hill, as well?
MR. FRATTO: Yes. He's up there right now.
Q Hey, Tony, how are you?
MR. FRATTO: Hey, Olivier.
Q I've a question about the comments yesterday that this was not the President's first instinct. What was his first instinct?
MR. FRATTO: Well, you want to have a light hand in dealing with some of these issues. I mean, nobody -- not the President and no one believes that the first instinct should be to do a massive rescue plan involving hundreds of billions of dollars. We do that as a last resort. If you're going to commit upwards of $700 billion of taxpayer money to a problem, you better be pretty sure that you absolutely need to do it. So that was nobody's initial instinct to go forward with this kind of plan.
We wanted to see if there were ways to contain this problem in the financial markets, and to deal with it very directly with the root causes with a lot of the housing programs that we initiated, shoring up Fannie May and Freddie Mac, which took far longer than we certainly hoped. You've heard us talk about the fact that we've tried to shore up Fannie Mae and Freddie Mac for years now. And I'll remind you, going back to August of 2007, the President personally came out where he announced a number of housing related reforms that we were proposing, called on Congress to reform Fannie Mae and Freddie Mac. It took nearly a year to get the housing bill that he called for and the reform of Fannie Mae and Freddie Mac passed through Congress.
Now, we would have preferred that that happened a lot earlier, but that's what we were dealt with, and that's the way we were trying to deal with this issue. But it was nobody's instinct that you would go in with a very large plan involving hundreds of billions of dollars as a first resort.
Q And another one for you. I know the President spoke to Hu Jintao about the program -- about the rescue plan. Are there any other plans to contact other countries with massive investments in U.S. Treasury bills?
MR. FRATTO: I see the connection you're making with countries who have investments in U.S. assets, and I wouldn't limit yourself to that. There are lots of economies that are very, very interested in the health of the U.S. economy. This is a global economy that is interconnected, involving trillions of dollars of financial flows between countries, involving things like sovereign debt, which you mentioned, but also trillions of dollars in trade and private sector finance. And it's critical that that system works for our economy and for all the other economies.
The President mentioned that he's heard from some members and he expects to see more there. If there are any calls that we make specifically that we can read out, we will and we'll let you know.
Q Thanks, Tony.
Q Hi. Good morning.
MR. FRATTO: Hey, Barb.
Q The issue of oversight, there's been talk on the Hill about creating an entire panel for oversight. How does the administration feel about that?
MR. FRATTO: Like I said earlier, I'm not going to negotiate on the specifics of what oversight would encompass and what the specific mechanism would be. But I think everyone should understand that we fully recognize how important it is to have robust, transparent oversight of this program. We're asking the American taxpayer to essentially front an investment here that will help us fix the economy. As we've said, it involves a lot of money. We think we're going to be able to return a lot of that money to the American taxpayer over time, and get the benefit of stable markets and a better functioning American economy. But we understand that there is a lot of interest in how the program will be run, how effective it will be, what will be the safeguards in it, and we will -- we insist, as much as anybody does, on a robust system of oversight.
Q Yes, Tony. The dollar has already taken a beating today, and the hype is that, of course, it's because there may -- people fear that there may be difficulties in getting this program through. However, there's also the issue of the massive increase of the U.S. government deficit, the fact that the government is going to go in to support the money markets and to back up a lot of what is considered speculative debt. It reduces the credibility in the dollar.
Is the President not afraid also of the fact that by putting in such a program he might have a hyper-inflationary takeoff in the U.S., which would destroy the value of the dollar, which is really the only way that the government has means of controlling the prices, is the credibility in the dollar? Isn't that a consideration?
MR. FRATTO: I'm just not going to comment on dollar policy. That's something that we let the -- the Treasury Secretary is the administration's spokesman on the dollar, and maybe he'll get that question this morning and can address it in an appropriate way.
But just to hit on two things. Number one, there should be no question out there that this plan will get done this week. There is bipartisan consensus that it needs to get done. We are negotiating over some elements of the plan, but we are very, very confident that it will get done this week. We believe it needs to get done this week, and that's our goal.
With respect to inflation, inflation is a monetary phenomenon. The Fed is focused on price stability, we have great confidence in Chairman Bernanke to address inflation and price stability.
Q Yes, hello. Just without getting into too many of the specifics with regard to the negotiations -- I mean, this clause over executive pay, or possibly changing the bankruptcy laws -- I mean, are those bottom-line deal-breakers for the White House, or are you still open to compromise on that? And also with regard to the $700 billion figure, I know there's talk it could go higher, it could be less, we're not sure, but at this point what are you hearing? Are you still kind of sticking with that figure?
MR. FRATTO: Well, I'm going to stick with the figure that's in Secretary Paulson's legislation that he sent up, and it was -- and that was $700 billion. And I have no reason to believe that we think that isn't the best estimate of what's needed for this program; that it's large enough to have the impact that the economy needs right now.
What was the first part of your question?
Q Just with regard to the provision about executive pay and possibly changing --
MR. FRATTO: Oh, right, right, right.
Q -- the bankruptcy laws. Are those deal-breakers for the White House or are you open to talking about that?
MR. FRATTO: Like I said earlier, I'm not going to get in the way of Secretary Paulson's negotiations with the Hill. He and his staff will have those discussions on specific elements and I'm not going to lay those lines out right now.
Q I appreciate your confidence that this will get done this week. What if it doesn't? What are the stakes here? And what if Congress fails to act this week?
MR. FRATTO: Well, I mean, I think you should think of that as unthinkable. I mean, every business, every employer, and so every employee in America depends every day on the flow of money coming through our financial system to sustain their normal business operations. That includes financing payrolls, maintaining their inventories. These are Main Street businesses that rely on a functioning banking system -- not just to expand their businesses and create jobs, but just to maintain their very normal business operations to preserve the jobs they have.
So this is very much about Main Street America and preserving the operations of those businesses. So I don't think anyone wants to contemplate the possibility that this doesn't get done. I think we are all arm-in-arm focused on the need to get it done.
Q Are you saying the choice is getting it done or essentially economic meltdown? (Laughter.)
MR. FRATTO: I'm not going to use your language on that. I think it would be a very, very serious situation for our economy were we not to get this legislation passed.
Q Any reaction to the idea that's been floated of essentially breaking this package into two parts so that you would do some of the operation this year and I guess some of the operation next year when you see how the first part worked?
MR. FRATTO: I'll be honest, John, I hadn't heard that, so I'm not sure that I have a reaction to it. That's the first I'm hearing of it.
Q I'd just like to ask you to follow up on one of the earlier answers that you gave. You indicated broad support for the idea of oversight and transparency. Do you have firm opposition to the idea of any curbs of executive pay, on executive pay of companies that are helped under this plan? And why is it important that it's this week that the legislation get passed? After all, Congress is likely to go on sitting next week, as well. Why is it so important that it should be this week?
MR. FRATTO: Well, I mean, in terms of this week, it shouldn't take much of analysis to remember what happened last week, which was a very serious freeze-up in our credit markets. So this is a present concern and it's something that needs to be dealt with urgently and quickly. As I said earlier, what our -- our financial markets right now do not need uncertainty; they need increased certainty as to how this rescue plan is going to go forward and that they can be sure that there is a plan to go forward and that will begin the correction in our financial markets. So we do need to get it done quickly and urgently and would oppose efforts to delay it.
With respect to executive pay, again, I'm not going to get into specific, point-by-point details on what our views are on that, other than the Secretary of Treasury said it would make more difficult to make this plan work and effective if you provide disincentives for companies and firms out there who are holding mortgage-backed securities and other securities from participating in the program. You have to remember, these are not all weak or troubled firms that own mortgage-backed securities. A lot of them are very successful banks and investment houses that have done very well, have been responsible, are holding performing assets that have value. They were not necessarily irresponsible players, and so you have to be careful about how you deal with them.
Q Hi, Tony. Tony, I wonder -- two things. First, if you could elaborate a little bit on what Vice President Cheney and Josh Bolten and Keith Hennessey are doing today. Maybe if you can tell us, are they attending the Republican lunches, are they seeing Republican and Democratic leaders? Or what's their --
MR. FRATTO: We have a number of staff up there from Treasury, but also from the White House, who are meeting with lots of Republicans up there. What the Vice President is doing with the Chief of Staff, Josh Bolten, and Keith, are meeting with the Republican Study Committee. So they're up there right now. I understand that the Vice President will also attend the Senate policy lunch today.
Q And as you know, the members of the Republican Study Committee are nervous about this kind of government intervention. They feel that it's the wrong way to go. Some have alternative plans involving suspension of the capital gains tax perhaps. What is the message that the Vice President and the others are sending to them to tamp down those concerns?
MR. FRATTO: We certainly understand a lot of the questions out there. It should not be unexpected that members of Congress on either side of the aisle have questions about how to move forward with this program. I think what the Vice President and others will emphasize is that this is absolutely necessary to do right now. In no way does it -- should it signal any abandonment of the belief that our markets work and our free market system works. We had a very unique problem in our economy and this is the best way to deal with it.
So that will be the message. It's urgent, it's needed. It's needed to prevent harm to the broader economy, to retirement accounts, and as I mentioned earlier, about the practices of businesses out there able to do their ongoing operations. So it's a critical time, and that's what they'll be helping to explain to members. We've seen those concerns raised, and I think the Vice President and others will be able to work through them and explain why, even given those concerns, this is still the best way to move forward.
Q And then if I could just follow: A lot of Americans have concerns, too, and I'm wondering, are there any plans for the President perhaps to address Americans directly at length to explain to ordinary people this complicated topic? Many people don't understand it. They don't -- they're nervous, but they don't know why this is happening and why it's needed. So do you have plans for the President to talk directly to Americans on this?
MR. FRATTO: I don't have anything on that right now.
Q Is it possible we'll see that later in the week or after the legislation gets passed?
MR. FRATTO: If we have a scheduling change, we'll announce it.
Q Thank you.
Q Hi, I was just wondering, the Republicans are proposing an alternative to this bill. Have you seen that bill, and what's your response to them wanting to do the -- something very different from the bailout?
MR. FRATTO: I have not seen that. I'm sure Secretary Paulson's team has, and they're out there talking about all the concerns that members on both sides of the aisle will have, and we'll let Secretary Paulson and his team deal with those. And again, I know they're about to -- they probably just started the hearing, and so I'm probably going to end this call here in a minute or two, maybe take two questions -- two more questions -- and then we can all watch Secretary Paulson and Chairman Bernanke, and they may be able to give more on some of these questions.
Q Tony, why are you so confident that you're going to get a bill this week? I mean, are you basically signaling administration openness to the proposals that are coming from the Democratic side, that you're likely to incorporate them?
MR. FRATTO: No, I'm not making any comment on that at all. I would say two reasons why we have confidence is, one, is the voiced commitments to the White House from leaders on both sides of the aisle that they intend to get it done this week, and that they are confident also that they can get it done this week -- so that's first of all. Second is just the urgency of it, that we believe everyone understands that it needs to get done as quickly as possible.
I'll take one last question.
Q I'm just trying to reconcile two points here. On the one hand, you said that there are a lot of members who rightly have questions and acknowledge that this is obviously a huge package, but on the other hand, you've emphasized several times that it's critical that it be done quickly this week and that it be done clean. You know, for lawmakers who are -- I guess I'm asking, isn't there something to be said for being careful beyond the urgency and the haste? Is there a concern here that maybe the administration is being heavy-handed?
MR. FRATTO: No, well, look, I think I would reconcile it this way: This is -- this was not a program that was conceived of or put together hastily. There was an enormous amount of analysis and debate and discussion before we came forward with this program. I think we have anticipated a lot of the questions that members of Congress would naturally have about taking this step, but we have had -- some of the policy staff have had months to think about what a program like this would be like and how it would work. Others have had at least weeks to think about it. Members of Congress have had days to think about it. And it's very, very complex and takes time to think through all of the implications of it and why some alternative ideas might not work as well as this one.
So I think that's really the issue here. We have thought through a lot of the concerns that some members have in advance, and I think we can address them on a member-to-member basis, on a committee-to-committee basis. I think Secretary Paulson and Chairman Bernanke will be able to help in that effort today. I think when people see their extensive discussion of the details and the implications and the consequences, I think more people will understand why this is the appropriate way to address this problem.
Q Well, I guess that's exactly my point, real quickly, is that you're saying the administration and its staff has had months to think about this and lawmakers have only had days. I mean, doesn't Congress get its turn? Doesn't it have its own right?
MR. FRATTO: And they are, and we're taking this time. I mean, I don't -- I'll concede that it is a lot of information to take in in a relatively short period of time, but I think they can -- I think it's enough time. At any rate, there is an urgent need here to get it done and I think members recognize that also -- the overwhelming number of members of Congress recognize that.
Okay? All right, thank you every one. I really appreciate you jumping on. If we see a need or opportunity to do this again in the coming days we'll let you know, but thanks for joining this morning.
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