For Immediate Release
Office of the Press Secretary
September 15, 2008
Press Briefing by Dana Perino and Secretary of the Treasury Henry Paulson
James S. Brady Press Briefing Room
1:42 P.M. EDT
MS. PERINO: Good afternoon. Obviously, one of the biggest stories of the day is what's happening in our financial market. Secretary Paulson has graciously given us some of his time today -- he doesn't have an endless supply of it, so please keep that in mind, and we'll try to let him answer as many questions as he can before he needs to go. And then I'll come back up and finish up the briefing.
SECRETARY PAULSON: Good afternoon, everyone. And I hope you all had an enjoyable weekend. (Laughter.)
Well, as you know, we're working through a difficult period in our financial markets right now as we work off some of the past excesses. But the American people can remain confident in the soundness and the resilience of our financial system.
I commend the SEC and the Fed for their work over the weekend, convening leaders of financial institutions from around the world to meet the current challenges and put measures in place to reduce market stresses. I'm particularly pleased that these major market participants were willing to make extraordinary commitments to market stability as we manage through this turmoil.
Their actions will complement the important steps taken by the Fed and the SEC that will help to minimize disruptions to our markets and to our broader economy. As you've heard me say before, the strength and stability of our financial markets is important to every American, to their household budget, to their ability to find affordable financing for a home, a car, a college tuition and to finance small business expansion.
Let me step back a bit and provide a little perspective. As I've long said, the housing correction is at the root of the challenges facing our markets and our financial institutions. I believe that we've taken very important steps with respect to Fannie Mae and Freddie Mac, and they're amongst the most important actions we can take to work through this turmoil.
Lastly, I'm committed to working with regulators here and abroad, as well as policymakers in Congress, to take additional necessary steps to maintain the stability and orderliness of our financial markets.
Thank you, all -- now let me take your questions.
Q Thank you, sir. Can you talk about what the federal role should be going forward? And are we likely to see any more federal involvement in rescues, like you did with Fannie, Freddie and Bear Stearns?
SECRETARY PAULSON: Well, the federal role is obviously very important, because as you've heard me say, nothing is more important right now than the stability of our capital markets. And so I think it's important that regulators remain very vigilant. We're very vigilant, but we do not take, and I don't take, lightly ever putting the taxpayer on the line to support an institution.
Q Should we read that as no more?
SECRETARY PAULSON: Don't read it as no more; read it as that it's important, I think, for us to maintain the stability and orderliness of our financial system. Moral hazard is something I don't take lightly. The other thing I think I'd like to focus you on is the way our financial system came together, those institutional leaders coming together to do things to support the markets. And that's what I'd like to see continue to happen here.
Q Mr. Secretary, could you just put aside for a second the specifics of AIG or Merrill or Lehman Brothers and can you just tell us how this happened and how did we get there? I mean, beyond housing correction, take us back and explain to the American people, how did we get here?
SECRETARY PAULSON: Okay. I would say, first of all, we have excesses, and excesses that have built up for a long period of time, number one. Number two, we have an archaic financial regulatory structure that came in place a long time, after the Depression; it really needs to be rebuilt. And then there are certain things like, for instance, Fannie and Freddie. The roots of that, they're -- what we're doing is really living up to our responsibilities, which were rooted in congressional charters that go back decades and that have been perpetuated by Washington.
But again, what we're focused on right now I think is the future, and the future is stability, orderliness in our financial markets, and working through this period, and that's what we're doing.
Q And specifically, a future with what kind of regulation?
SECRETARY PAULSON: Well, I think there's got to be a balance between regulation and market discipline. You can't rely on one to solve the problem, but it's going to have to be streamlined and more effective regulation. And there's major changes that we need, and we also need major authorities to wind down financial institutions that aren't banks, aren't deposit -- aren't federal institutions with deposit insurance. We need resolutions and authorities to let us deal with situations like Lehman Brothers.
Q How concerned are you about commercial banks? And what reassurance can you offer the American people who may be concerned about their savings account and their checking account?
SECRETARY PAULSON: Well, I've got to say our banking system is a safe and a sound one. And since the days when we've had federal deposit insurance in place, we haven't had a depositor who's got less than $100,000 in an account lose a penny. So the American people can be very, very confident about their accounts in our banking system.
Q And when you talk about the future --
SECRETARY PAULSON: Excuse me, let me just make sure -- yes.
Q Sure. I'd like to ask two things if I can. Could you explain a little bit more about the additional authorities that you think might be needed? Is there going to be additional regulation or additional legislation?
SECRETARY PAULSON: Well, let me say, in the intermediate and longer term, clearly we need a -- we're going to need major regulatory changes, and I've spoken a lot about that. And we could use additional authorities to deal with non-bank financial institutions. But again, that's going to take longer for Congress to do. And right now we're working with the tools we have, and what you're finding is that the Fed, the SEC, Treasury, the FDIC -- we're all working together and we're going to do what's necessary to protect this system with the tools we have.
Q Mr. Secretary, this morning in speeches, Senator McCain promised in regards to the economy, "We will never put America in this position again." His running mate, Sarah Palin, said, "Washington, when it comes to the economy, has been asleep at the switch and ineffective." What blame should the Bush administration take for the current economic situation in the United States, and have you been asleep at the switch and ineffective?
SECRETARY PAULSON: Let me say, we're in the middle of a presidential campaign and we're going to let the campaigns fight it out, make their cases to the American people. I'm not focused on politics right now. I'm not looking back, I'm looking forward. This President is very committed to the stability of the financial system, to its importance to the economy, and that's where I'm focused.
Q But don't you accept some of the blame, sir? You've taken steps and the economy hasn't gotten better; the situation is getting worse.
SECRETARY PAULSON: Well, I would say this: I'm playing the hand that was dealt me. A lot of what I'm dealing with, you know, I'm dealing with the consequences of things that were done, often many years ago -- as I said with the case to Freddie and Fannie, that's congressional charters going back decades, that's what Washington has put in place. What we're dealing with there, for instance, is living up to our responsibilities; in other cases we're dealing with, again, the situation as we see it. And again, I'm focused on the stability of the markets and the importance to the American people.
Q Why did you agree to support the bailout of Bear Stearns but not Lehman?
SECRETARY PAULSON: The situation in March and the situation and the facts around Bear Stearns were very, very different to the situation we are looking at here in September. And I never once considered that it was appropriate to put taxpayer money on the line in resolving Lehman Brothers.
And here, again, I want to commend the financial institutions from around the world for coming together and really taking some very constructive, positive steps to make our market work here. And that's how I'm going to leave that one.
Q What impact will the problems in the capital markets have on rebuilding efforts along the Gulf Coast, where they're going to need a big infusion of capital to rebuild?
SECRETARY PAULSON: Well, I've got to say our capital markets, our response have a big impact on our economy overall, that's why they're important. It's important, as I said in my remarks to the American people, to the growth in our economy, to jobs. And so the capital markets have a big role to play there and so that's why it's so important that we maintain stability there.
Q Is the rebuilding effort being made more difficult by this?
SECRETARY PAULSON: What we're going through in the short term doesn't make anything easier. But in the longer term it's going to make things better because we've got excesses we need to work through and we need to work through them as quickly as possible. And I think we're making progress.
Q Mr. Secretary, you said you're playing the hand that was dealt you. The President has been in office for six years longer than you have. Is the administration playing the hand that it was dealt, or is it to blame in any way for what's happening today?
SECRETARY PAULSON: I've got to tell you, the President has been a great boss as we worked through here. He's been focused on the right thing. I strongly support his economic policies. He knows how important stability in the capital markets are. He's encouraging me to do the right things. And I'm going to leave history to the historians and focus on what we need to do today.
Q Mr. Secretary, it seems like your policy right now is that of a triaging some of the investment banks and hoping that that will solve the situation. Nevertheless, there are a lot of commercial banks that have their investment banking also probably exposed in many of the debt that is represented by the investment houses. Isn't the problem really much bigger than simply the investment banks? And isn't it really impossible to try and bail out that? And that if you go in that direction for the commercial banks, that you're still going to be facing the same problems in spite of what you do today?
SECRETARY PAULSON: Let me -- your question says, "Where is the root of the problem?" And I think I've consistently said that when we looked at our financial institutions the root of the problem lies in this housing correction. And until we stem the housing correction, until the biggest part of that is behind us and we have more stability in housing prices, we're going to continue to have turmoil in the financial markets.
And that is why the actions with respect to Freddie Mac and Fannie Mae are so extraordinarily important, not only to our capital markets, but to making sure we have plenty of financing in housing, because that, in my judgment, is going to be the key to turning the corner here.
Q -- Federal Reserve giving AIG a bridge loan?
SECRETARY PAULSON: Let me say, what is going on right now in New York has got nothing to do with any bridge loan from the government. What's going on in New York is a private sector effort, again focused on dealing with an important issue that is, I think, important that the financial system work on right now. And there's not more I can say than that.
Q Mr. Secretary, when are we going to see the bottom of this? Where are we in the process overall?
SECRETARY PAULSON: Where are we in the process overall? I want to remind you of one thing, which is, when I look around the world and look at the long-term economic fundamentals we have in this country I think they compare favorably with what I see in any major developed country in the world. So we've got a strong basis in terms of where we are, in terms of working through this.
I think we've got to go back to the housing correction and where are we in the housing correction. And I believe that there is a reasonable chance that the biggest part of that housing correction can be behind us in a number of months. I'm not saying two or three months, but in months as opposed to years. I think we're going to have housing issues in this country for -- and mortgage issues for years, but in terms of getting by the biggest part of this correction, if we can make this Fannie Mae-Freddie Mac effort work the way I would like to see it work, I think we'll make real progress here.
I've got time for one more question -- the woman in the middle there.
Q Secretary Paulson, despite the injection of $70 billion in overnight repos this morning and the extension of the credit lending facilities you still saw Fed funds rate spike to two or three times the target today. What does that spike tell you about the health of the banking system today?
SECRETARY PAULSON: Well, again, I don't look at any one day, any one indicator, any one week. As I've said, we're not going to move through this in a straight line. There are going to be some real rough spots along the road, but I believe we're making progress. And when I look at the way the markets are performing today, I think it's a testament to the way the financial industry has come together because they're dealing with an extraordinary set of circumstances and they're dealing in a way we should all be proud of.
Thank you very much.
MS. PERINO: All right. I think that was good. I did -- I neglected to mention at the beginning, Secretary Paulson came at 1:15 p.m. for a meeting with the President, that's why we were a bit late getting to the briefing. And the President expressed a lot of concern for the employees who had lost their jobs because of these changes and his thoughts are with them, and I wanted to make sure I pointed that out to you before we keep going.
Q Two questions. One, a lot of overseas wealth funds say they are less willing to invest in the U.S. because of this crisis. How concerned is the administration about that? Are you reaching out? And I have a follow-up.
MS. PERINO: I know Secretary Paulson has been in touch with his counterparts from across the world, and I would just have to refer you to Treasury Department for specifics on whether or not a government has expressed concern about investing in America. I think you heard Secretary Paulson talk about how our economy compares to that of others - developing* countries around the world, and that he expressed that ours is stronger than most.
Q And Democrats are pushing ahead with a second stimulus bill. Is there any change in the administration's view on that? Do you see that as a vehicle for some of the things that the Secretary mentioned is needed to --
MS. PERINO: What the Secretary mentioned was something that he outlined last spring, as I recall, or even in the winter, which he called the regulatory blueprint for how to move forward. So Congress has had his road map for how to make these changes for quite some many months and they haven't done that yet.
But I think what Secretary Paulson just said is that it's going to take Congress more time -- they're not going to be able to do it in the three weeks that they're going to be here in session -- or actually now I guess it's just two before they leave for recess. But he does have a regulatory blueprint from which Congress can continue to try to work through. And Secretary Paulson has had extensive conversations with members of Congress over the past several months, but certainly over the past weekend, and he's had favorable conversations with them.
Q And on the stimulus?
Q But, Dana, what's the position of the administration now --
MS. PERINO: On the stimulus?
Q -- on an economic stimulus? Has it changed any since before?
MS. PERINO: I don't think that it's -- no, I don't know of any change. I think what we want to -- what we want is a stimulus bill that would actually be stimulus, and that doesn't necessarily mean it has to come in the form of a stimulus two package. It could come in the form of energy legislation, and that's what we will be focusing on. And thankfully, the House is going to take it up this week. However, it's just not in the format that we would like to see, and in fact, I don't know even if the Democrats have solidified behind a final product yet that they're going to push forward. I think that the Republicans and many others think that it falls short of what we could do for this economy to actually stimulate it in the area of energy.
Q Thank you.
MS. PERINO: I'll go over here. Paula.
Q The very definition of stimulus is to have a short-term boost to the economy. Provisions in energy, aren't those mostly just long-term in terms of creating jobs?
MS. PERINO: I think that there could be a lot of different effects from it. But I would ask you to go back and look at whatever proposals that the Democrats are thinking about for a stimulus two package and tell me where any of those projects -- any of those products are actually stimulative in the short run. I don't think there are many.
Q Well, wouldn't some of the infrastructure that they're supposed --
MS. PERINO: Not necessarily. And the Department of Transportation has many different statistics; Secretary Peters is one of the foremost experts in the country on infrastructure projects. And, no, we do not believe that that would have short-term positive economic stimulus impacts on the economy.
Q What is the administration's position on the request from Detroit for aid to automakers --
MS. PERINO: I know that we're aware of it. And I think that they're still talking with industry about it. I don't have an update for you this morning.
Q Leaving the door open for some rescue of some sort?
MS. PERINO: I just haven't seen a -- I don't know if we've seen a detailed proposal from them. But we're aware that they are trying to work through that and talking to members of Congress about it.
Q You don't mind changing topics?
MS. PERINO: Not at all.
Q The IAEA has a report saying that Iran has refused to freeze uranium enrichment; says it's basically at a gridlock, the investigation. The White House, in response, has talked about new sanctions. I'm wondering two things: Are you talking about U.S. or U.N. sanctions? And what hopes do you have for U.N. Security Council action considering the current relations between the United States and Russia?
MS. PERINO: Well, I think the IAEA report underscores once again that Iran is refusing to cooperate with the international community. These are choices that Iran has made, and we are working to find out, with our allies, what the next course of action would be.
I take your point that things might be slightly more complicated now, but I don't have an update for you from the Secretary of State's office on that. But what I will tell you is that the action that Iran continues to take further isolates its people and its country from the rest of the international community. And I actually don't think that that has changed, despite what may or may not have happened in regards to the U.N. Security Council makeup, with Russia being on the U.N. Security Council.
Q Can you shed any light on the shooting incident on the Pakistan border today of either Pakistani troops or locals who were shooting at American forces on the Afghan side?
MS. PERINO: I could share with you the same light that Bryan Whitman, the spokesperson at the Department of Defense did, which is that they've checked every source that they could possibly find and that believe that that is a false report.
Go ahead, Goyal.
Q Dana, two quick questions. One, as far as the U.S. economy or U.S. market is concerned, it affects the global market around the globe. Now many leaders are now coming to the United Nations, and also including the Prime Minister of India here at the White House on the 25th. What message you think President has for these leaders, or including the Prime Minister of India on the economy?
MS. PERINO: I think there is no doubt that the way that our system -- our financial system works in a world now that everything is much more globalized and they are dependent on one another, which is why Secretary Paulson has been talking with his counterparts so frequently in the past several months. And increasingly over the past weekend, they did that with more frequency.
I'm sure that the economy is going to be a topic at the UNGA meeting, which is going to take place next week. It was a topic at the G8 meeting, and the G7 ministers continue to talk about it, as well. So we'll just keep you updated as we move forward.
Q And as far as terrorism is concerned now, India yet another attack -- terrorism and bombings around Delhi and many other cities. What -- do you think President will discuss this issue with the Prime Minister of India?
MS. PERINO: Absolutely. We were distressed to see the terrorist attacks against innocent civilians in India this weekend. We obviously stand with the Indians in trying to fight against terrorism and extremists, and we would help them in any way that we can to fight back against them. And I know that he and Secretary -- I'm sorry, he and the Prime Minister will talk about it when he's here.
Q Dana, a question on Hurricane Ike.
MS. PERINO: Yes.
Q One of the lessons learned in Katrina was to preposition supplies. Was the President at all disappointed to hear the reports of some confusion and delay in the distribution of those supplies? And is he now satisfied that that has been addressed?
MS. PERINO: President Bush was pleased that the state, local, and federal organizers worked as closely as they possibly could in the preparations for this storm. I think if you remember, the forecast for this storm had it hitting in several different places and it wasn't known until several hours before the hurricane hit where exactly it would hit.
And so we're working right now, and that's what the President's focused on, to make sure that everybody has what they need. Additional evacuations are now happening in Galveston because of the devastation there and so people are going to continue to need water, food, ice. President Bush will head down to the region tomorrow. The details of that trip are firming up right now. He will be in both Houston and Galveston, and we'll provide you more details later on today.
Q Thank you.
END 2:05 P.M. EDT