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For Immediate Release
Office of the Press Secretary
November 26, 2008
Press Briefing by Deputy Press Secretary Tony Fratto
James S. Brady Press Briefing Room
10:08 A.M. EST
MR. FRATTO: Good morning, everyone. The President this morning recorded his weekly radio address. It is a message of thanksgiving to our men and women in uniform for their service and sacrifice to the American people, and to the American people for their heartfelt prayers for our men and women in service.
Later this morning, at 11:15 a.m., the President will mark the 61st anniversary of the National Thanksgiving Turkey Pardoning at the White House. This ceremony first took place in 1947, during the Truman administration. The Sixth Annual Contest to Name the National Thanksgiving Turkey and its alternate took place on the White House website. The President will announce the names of the turkeys during his remarks this morning in the Rose Garden.
Also later this afternoon, as you know, the President will be traveling to Camp David for the Thanksgiving holiday. This afternoon he'll -- he and Mrs. Bush will participate in an interview with Charlie Gibson at Camp David.
And one thing I'd like to clarify the date on -- I think Dana told you that the President and Mrs. Bush had recorded a StoryCorps interview on NPR, and I think Dana may have said that it would be broadcast tomorrow -- or I'm sorry -- Friday. It will actually be broadcast tomorrow, on Thanksgiving Day. And so we all look forward to listening to that interview.
And with that, I'll go to your questions. Ben.
Q Tony, two step-back questions on the economy. I'm trying to make sense of everything that's happened of late for the American people. Those watching at home first saw this intense debate over the rescue package through Congress, the negotiations. Finally that was passed and that was deemed as the key to getting the economy to rebound. Obviously a lot has happened since then, and now people see that the Fed on its own can take roughly $800 billion worth of action to try to make -- how do you make sense of it? How can the American people make sense of it?
MR. FRATTO: I can understand why it would be confusing. I think stepping back is good, to just try to remind everyone what was the problem that we were trying to solve. And the problem we were trying to solve, and continue to try to solve, is of the deteriorating capital position in our banks, banks not having enough capital to support lending. And we can get into all the reasons for that, but we'll leave that aside for now.
The original plan that Treasury Secretary Paulson talked about as a way to support the amount of capital that banks need to be able to make loans was the plan to purchase troubled assets from financial institutions. They're evaluating this -- this is something that had never been done before -- and at the same time, had authority in the legislation that was passed to be able to do direct equity injections, capital injections into banks, to support the amount of capital that they need.
They determined that the best way to do it was to do the capital injections. And that program seems to be working, has been successful in shoring up the balance sheets of these banks. And they're far more healthy today than they were a month ago, two months ago, and three months ago. And that's good for our whole financial system.
What the Fed did yesterday was to -- and I think this is why people get confused a little bit about it, because they hear that the Fed is purchasing mortgage-backed securities, and those were some of the assets that Secretary Paulson talked about purchasing in the TARP program. What the Fed's action is doing is purchasing these securities from the government housing -- government-sponsored enterprises that are -- that deal with mortgage financing and housing. So that's Fannie Mae, Freddie Mac, Ginnie Mae, and the federal home loan banks.
It is a much easier process than what was originally envisioned under the TARP program. These are all loans that generally conform to Freddie Mac and Fannie Mae standards, or the standards set by the Federal Housing Administration. They haven't been intertwined and sold off as derivatives and interest rates stripped from them and turned into lots of exotic products; they're on the books of Fannie Mae and Freddie Mac.
By the Fed taking those assets and giving cash to the lenders, they are able to go back out there and buy home loans in the secondary market, and that makes more money available for home loans. And as we've seen at least in the last 24 hours, and we hope there continues to be further improvement, when you make more supply available of cash for these things, interest rates on them tend to fall. And that's a good sign. And that's something that should contribute to supporting the housing sector. And that's what we all want to see.
Q Again, from the Americans' perspective, sitting at home heading into the holidays with tremendous struggles, it seems like another big government bailout that we'll end up paying the cost for. Is there any --
MR. FRATTO: Well, it's not a bailout.
Q Is there any end in sight for this?
MR. FRATTO: What this -- look, we said that we would use every tool and every authority that we have available to make sure that we don't have a collapse in our financial sector. We're doing that. We've also said that we're going to do everything we can do and use every tool and authority that we can use to make sure that banks have enough capital to lend to consumers and businesses. And we're doing that also.
So if you're an American sitting at home and you see the Federal Reserve and Treasury take this kind of action, I think you should have some confidence that they are, in fact, using all of those tools to try to support the financial sector for home loans, for auto loans, student loans, credit card lending. You've seen it also in the facilities that the Fed has created to deal with commercial paper, so that our businesses can get the liquidity that they need to do their daily operations. You've seen it in the actions that the Federal Deposit Insurance Corporation is doing in shoring up banks.
This is a -- these are extraordinary efforts to try to get this financial system in a healthy position to help the economy grow. And that's the goal that all of us want, and I think that's what the American people should take away from it.
Q This is also in the same vein. There's more evidence today of a deepening economic downturn -- durable good orders and consumer spending are down sharply. Does this give the administration any reason to take a more proactive role on a second stimulus package?
MR. FRATTO: I think we've been incredibly proactive, and I think the first question of the day was -- this was another big announcement of very large amounts of money being pumped into the economy to help the economy grow, and I think that's what you're seeing.
We need to focus on what are the real problems in the economy -- and that's housing and that's the credit markets and the financial system, generally. That's what will support growth in the entire economy for now. That's what we have the tools and the authority and the appropriated funds to be able to do, and we're trying to put them to use in the most creative and effective ways; ways that will have the biggest bang for the buck for this entire economy.
As for durable goods orders, they -- that was looking backward to last month, there's no question that this economy is going through a very, very difficult period because of this credit crisis that we're in. You heard Hank Paulson yesterday, Secretary Paulson, talk about the fact that the credit market for credit cards, auto loans, and other kinds of consumer financing essentially came to a stop in October. When that happens, the economy essentially grinds to a halt, and that's what reflected in the data that you're seeing today.
Q Tony, there's a big chart in the Post today that shows, if you add up every -- all the money committed by Treasury, the Fed, FDIC, and FHA, it adds up to $7 trillion committed. Now, that's a number we certainly have never heard at this podium, never seen approved by Congress. Is there -- is that, one, accurate? And two, is there a bait-and-switch going on here, that there's a lot more money, taxpayer money being committed than anyone ever bargained for?
MR. FRATTO: Well, look, a lot of that funding that you see -- that you saw in those charts -- it's a great chart; it's missing -- the presentation is missing some things, and it goes back as far as our first stimulus package back in February.
But getting to your point, it is a big number. A lot of this is on the Fed's balance sheet. And I think what everyone would want to see is the Fed using every tool that it has to try to deal with the magnitude of the problem confronting our economy right now. You say $7 trillion: That is a huge amount of money; it's enormous. But it is not even keeping pace with some of the declines we've seen in asset values in stock and equity markets and the housing market. So it is a big problem that calls for a very, very large response from this government.
I should also remind you that the overwhelming majority, if not all of that -- again, excepting the funding for stimulus and some of the tax items they had in there -- all of the investments made by the Fed and Treasury are done in a way to earn a return back for taxpayers. So those are investments in the American economy with American tax dollars, and we expect a return, and we expect that return to come within the next few years.
Q That $7 trillion is --
MR. FRATTO: That's not a number that I'm holding to. Like I said, it includes lots of different things. It's not a number that we use.
Q Those are actions taken independently by the Fed --
MR. FRATTO: The Fed is independent in setting monetary policy. When they do other economic policy activities we consult with them and work with them. As you know, Secretary Paulson and Chairman Bernanke and Timothy Geithner at the New York Fed work very closely together and communicate very closely on all of these issues.
Q Well, just to follow up, and so you can explain to the American people where their $7 trillion is coming from -- is it directly from their pockets? Are we borrowing from the Chinese? Are we printing new money? How does this materialize?
MR. FRATTO: Some of it comes from -- we say it comes from the Fed's balance sheet, and that's the Federal Reserve's ability to use its account with the federal government to make cash available to lending institutions. That's the traditional role of the Federal Reserve. It is using that authority in untraditional ways, but it's all fully within the laws and authorities that the Fed has available to it.
Q Some of it. Some of it is coming from the Fed's balance sheet.
MR. FRATTO: Some of it is coming from the appropriated funds from Congress. Congress passed the emergency economic --
Q They passed the $700 billion.
MR. FRATTO: That's right, yes. And the Fed uses its balance sheet to ensure a loan against assets brought to the Fed by lending institutions and financial institutions.
Q Do you anticipate going back to Congress to get the second part of that $700 billion?
MR. FRATTO: That's a decision that Secretary Paulson will make. He continues to work on programs that he thinks will be effective. If he feels that he needs to go back to Congress, he wouldn't hesitate to do so. But he's still working on the development of programs, depending on what the needs are in the financial crisis right now.
Q Tony, when you say the Fed is using its balance sheet, what does that mean?
MR. FRATTO: What that means is that the Fed has the authority -- if a bank brings to it collateral, it can exchange it for cash. That's the role -- that is one of the jobs that the Fed does.
All of these facilities that the Fed has created to get at this problem have different features to them. I could refer you to the Fed; they can explain each of them, how they work in more detail. But broadly speaking, they're exchanging cash for collateral, or purchasing assets out there using the cash on their balance sheet.
Q Right, and the cash from the balance sheets comes from essentially --
MR. FRATTO: Ultimately it's the taxpayer. That's right.
Q Tony, can I go back to the original line of questioning, in a sense? As Americans get set to go shopping on Friday, what is the message to them when they don't necessarily feel that their credit, their capital -- they're as capitalized as they should be, and that credit has been loosened up in any way -- what is the message to them?
MR. FRATTO: Look, these are complicated problems. Look, if you have a normal economy, normally functioning economy where the financial system -- where the banking system is operating in a normal way, the Fed uses its normal authority through the Federal Open Market Committee to change interest rates, all right, and they can lower interest rates or raise interest rates, and that has an impact through the rest of the economy. We're not in a normally functioning economy right now because the financial sector is, and has been, in distress.
So the Fed making money available hasn't necessarily translated into the availability of funds for consumers for their, like we said, for credit cards and auto loans and those kinds of things. That's why what the Fed is doing is taking direct action, and what Treasury is doing is taking direct action, to go directly at those markets and make sure that money is becoming available to the very people who lend to consumers and small businesses.
And so that's critical, and he's trying to get through this, what economists call a transmission mechanism, right -- try to essentially bypass the transmission mechanism and go directly to those people who are lending directly to consumers.
If you're an American and you're seeing your credit card rates go up, or you go to buy a car loan -- go to buy a car and you have trouble getting a loan, that is very concerning for you as an individual American. It's also very damaging to our economy as a whole. So what Americans should understand is that the announcements that came yesterday were to fix that problem, to make sure there is more money available for the people who lend them to buy goods and services, to buy homes, and that if more money is available, if there's more liquidity for those kinds of loans, that the rates will come down.
That's going to take time. None of this is going to happen overnight. Even what was announced yesterday is going to take a number of months to implement, because these are very complicated and complex markets and they need to be done the right way. But we're clearly trying to take very, very aggressive action to get at that problem.
Q Two questions, please. One, President-Elect Obama had been already talking during his campaign as far as Afghanistan and terrorism is concerned and bringing Osama bin Laden and the top of his advisors back to justice. Now he's thinking of keeping Secretary of Defense Gates as his next Defense Secretary. Does President have any problem, or is he supporting this move by President-Elect Obama?
MR. FRATTO: That's not something I can comment on, Goyal. I'll just tell you we're very proud of our Secretary of Defense.
And your second question?
Q My second is on immigration also -- recently he said that because of immigrants played a major role during the campaign, and he is supporting that the immigration bill may come back in the next Congress, which President Bush supported always. You think President Bush still supports that bill that -- which he already pushed?
MR. FRATTO: Yes, he does. Yes. And we would love to see Congress be able to get that done. A great deal of energy and thought went into that immigration effort. It's one of the efforts that we're most proud of in this administration and we wish we had been able to be successful with Congress. And we would encourage any future administration in Congress to take more action with immigration. It's a very, very important issue and something the President cares very deeply about.
Q I have a foreign policy question. Of course I understand you're not replying on a hypothetical question, but maybe the two following you can without talking about concrete names like the Jim Jones or Gates. We would like to understand what mixture of change and continuity the President Bush would like to see and the signals he would like to send? Is there as much exchange of views on foreign policy between the President-elect and the President in the field of security policy as you mentioned that there is on financial crisis, first off?
And the second question, what signals would President Bush like to see to be sent to the foreign partners in this term -- change, adjustment, continuity?
MR. FRATTO: I don't think we're going to try to give advice, certainly not publicly, to President-Elect Obama and his team. But we do communicate very closely, and especially during this time -- I think we've spoken about this at great length from here. It's very important that we're giving them as much information as they [sic] can to do their planning and their thinking about how -- what their priorities will be for President-Elect Obama's administration. And that's what we're doing. As I said before, I think we're doing it in extraordinarily effective ways, at many levels across this government. We are committed, the President is committed to having the smoothest transition in history.
So that's what we're doing every day. There are lots of communications in foreign policy and security, and also with respect to the economy, as you would expect.
Roger. Another bite?
Q Yes, another bite. I want to follow up on Matt's question. He asked about a second stimulus. Is the White House -- given the actions that had to be taken yesterday -- I recognize the $800 billion -- is there any softening in the White House's position toward a second stimulus package?
MR. FRATTO: I think that's something that the next administration and Congress will be working on; they've signaled that. Every President-elect during this period is out talking about their priorities as they introduce their Cabinet and talking about the things that they want to do. What we're focused on are, as I've said, the things that we can do right now, and these are very, very large, aggressive actions and we want to make sure that they're implemented properly.
Q You suggested in your opening remarks that these plans are working. And do you have any commitments for lending and so forth?
MR. FRATTO: Absolutely. I think it's clear that they are working. We've also said that none of this is going to change overnight; it is going to take time. But we have seen improvement in the commercial paper market. We've seen improvement in overnight lending. The action yesterday certainly had an impact in mortgage rates. I don't know what mortgage rates are going to do today or tomorrow, or over the coming months, but we hope that it will continue to improve conditions in those credit markets.
So, we are seeing that. We're seeing banks in healthier positions, and we are seeing banks looking for opportunities to lend in what is admittedly a difficult lending environment. The economy is going through a slowdown right now, and that's not the best time to be lending, but they are looking for opportunities. And they know that if they are participating in Treasury's program for the support of their capital positions, that they should be aggressively looking for opportunities to lend. And I think they've gotten that message.
Q Iraq -- the parliament once again --
MR. FRATTO: Is there anything else on the economy for right now? Let's go to John, and then Kevin.
Q On the automakers, the administration sent a letter to the Hill yesterday, I think, outlining some of the steps you think the automakers ought to consider taking. Can you talk a little bit more just about what you're looking for from them to show viability?
MR. FRATTO: The point of that letter -- and John is referring to a letter that came from Secretaries Bodman and Gutierrez, having to do with the issue of viability -- you remember last week when we were going through this, Congress -- Democratic congressional leaders asked the automakers to bring forth plans for viability, to show how they can be viable companies going forward if they're going to make use of taxpayer funds.
The letter from Secretary Gutierrez and Secretary Bodman -- and if you don't have it, we can make it available to you, or those departments can make it available -- lays out the things that we think ought to be considered if you're going to make a determination on viability.
And what we want to be sure is that if Congress is going to be discussing what viability is with respect to automakers that it is a comprehensive view, that it takes into account all costs of the automakers, short term and long term, that it deals with the full scope of that industry in making that determination.
So the legislation that we have always pointed to was the Department of Energy's plan for -- we call Section 136, the alternative technology vehicle loan program -- had very, very good language in there about viability, that firms need to be able to pay back the government for the funds that they accept, and that they need to be able to show a net -- a positive net present value, that they are a firm that's worth something greater than zero. And these are the kinds of things that we think Congress should consider if they're going to go forward and think about ways to use taxpayer dollars.
Q I just had a clarification. I know you said that the administration has been working through aides and directly with the Obama administration -- the Obama-elect administration. When is the last time President Bush spoke with him?
MR. FRATTO: They spoke -- to my knowledge, they spoke most recently on Monday morning, where President Bush called President-Elect Obama to discuss the Citibank actions that were taken the night before.
Q And a follow, on China. Again, there's some discussion that, to come up with the $7 trillion or whatever number we're not saying that we're referring to -- (laughter.)
MR. FRATTO: Look, I don't want to walk away from it. It's a very, very large number, and it should be.
Q Is there borrowing from China to get to that place?
MR. FRATTO: I think those are connecting dots that have no business being connected. The Treasury Department, when it raises money from the -- for government spending, it sells securities. And it sells them on a global market -- it sells them here in the United States, and it sells them globally. And countries purchase those securities because they provide the best risk-adjusted rate of return in the world, and that's how they sell them. There's not a sense of borrowing from any one country. They sell securities, and they'll sell them to anyone who's willing to pay the best price for those securities and provide the best return for taxpayers.
Q Can I connect some different dots on that, then? (Laughter.)
MR. FRATTO: And I promise to come back to you, Mark, don't worry.
Q We've seen estimates on budget deficit for next year of $1.5 trillion, even $2 trillion. What are the implications of such a large deficit? And are there fears that that could create a situation where it would be hard to raise that money --
MR. FRATTO: There are theories about that. I know there are economists who have different views on it. We've seen very large borrowing as a percentage of the federal government in the past, much larger than this. I don't know what the future is going to hold, but they are very large numbers. But the market for securities is now, much more than ever before, a global market, and so far it's been able to show that it can absorb this kind of borrowing.
So there are experts out there who can tell you what the impact would be of putting more Treasury securities out there; the Treasury Department can give you their best views on that. But that's something that's very, very hard to predict and people have views on different sides on it.
Q And it was just earlier this year we were anticipating, or you were, a balanced budget by 2012. Where do we think that date is now?
MR. FRATTO: Yes, that's going to be put off for some time, no question about it. But this is what you want to see -- when you're in an economic downturn, you want to see the government be able to take the actions that it can take to help to support growth. And we're in a -- not just an economic downturn, but one that's accompanied by and occurring at the same time as a financial crisis.
Now, there are -- there can be problems in the future of putting that kind of lending -- making that kind of lending available, and with all of the actions that are being taken by Treasury and the Fed, you have to be very, very careful about unintended consequences. But there's one thing we are absolutely certain of, and that is if we fail to take these actions we would be dealing with a much, much more dire situation today. And so we need to balance those risks. And I think everybody's thinking of those risks, certainly the Treasury and the Fed.
Q Back to Iraq, if I may, the parliament's decision to once again put off a vote on the agreement, the security agreement. Your reaction to it -- are you dismayed by this? And specifically, does this show that political progress in Iraq still lags very far behind military progress?
MR. FRATTO: Well, I don't know if I can make that judgment. They're having lots of discussions on how they can get this agreement across the goal line, and we have faith that everyone is trying to do that. Look, Iraq has been practicing democracy for a couple years. We've been practicing it for a couple hundred years, and we have sometimes delays in the things that we try to do with our Congress, also. They're going to keep working at it. We're hopeful that it will get done. We think it should get done. It's a very good agreement. It's good for both Iraq and the United States. And so we'll keep an eye on what they're doing and hopefully they'll be able to get it across the goal line.
Brianna, did you have a question?
Q I did. It's actually about the inauguration. Americans tightening their belts; it seems like the bipartisan Presidential Inauguration Committee kind of doing the same -- taking donations to a limit of $50,000, where it's been as much as a quarter million in the past. I'm just wondering sort of what you think about the idea of paring down at a time when something could be very lavish, but the economy is obviously not doing well.
MR. FRATTO: I think I'm going to have to let the Inaugural Committee speak for themselves. But everyone is making those kinds of decisions and that's what you expect to see in an economic downturn, people readjusting their thinking on these kinds of things.
Q Is it something the White House is kind of feeling? I mean, especially in this season of parties and celebrations, that can be very -- it can be increasingly lavish, or not, depending on how you orchestrate it.
MR. FRATTO: Well, we still want Americans to be able to celebrate their holidays. Lots of Americans will be doing it tomorrow. Lots of Americans will be getting help from other Americans to celebrate their holidays tomorrow. And there are governments that do it, there's great philanthropy and charity work that helps Americans during the holiday season. And that's what we really like to see.
Q Can I change the subject entirely and ask a question I was asked to ask? (Laughter.)
MR. FRATTO: A question you were asked -- you're disowning the question preemptively. (Laughter.)
Q I'm stepping away from asking you to give me a few more details about the turkey pardon. (Laughter.) But I do wonder, now that I think about it --
MR. FRATTO: I was going to --
Q -- has the President ever considered not pardoning the turkeys?
MR. FRATTO: I think on instruction from White House Counsel I have to refer all turkey pardoning questions to the Office of the Pardon Attorney. (Laughter.)
Has he ever considered not -- you want that turkey, don't you?
Q Shouldn't it be USDA?
MR. FRATTO: Exactly.
Q Tony, do you have any reaction to Hamid Karzai saying that the international community should set a time line to end the war in Afghanistan?
MR. FRATTO: I don't. I saw those reports and I haven't had a chance to discuss it with anyone this morning.
Q Thank you, Tony. Two questions. It's just been announced that Governor Sarah Palin will begin a weekly show on radio, the senior electronics medium --
MR. FRATTO: Competition for you. (Laughter.)
Q Would the President be willing to do this for one or more of the many Texas or national radio shows?
MR. FRATTO: I haven't had that conversation with the President; I don't know.
Q Okay. The op-ed page of this morning's Washington Post has a headline, "Send Bill Clinton to the Senate." Would the President rule out any consideration of Texas sending him to the Senate?
MR. FRATTO: Yes. He will rule that out, yes.
Wait, there's one last question. I'm sorry.
Q Even though we're in an economic downturn, has there been any consideration of putting money in the hands of the taxpayer directly?
MR. FRATTO: Well, that's what we did, obviously, during the -- earlier this year. Right now --
Q Will we see it again?
MR. FRATTO: I'm sorry?
Q Could we see it again?
MR. FRATTO: Well, look, I think right now we are using the tools of government to put more money available for taxpayers into places that are most needed, and that's in housing and our consumer credit markets. So that's what we're focused on.
Q Happy Thanksgiving.
MR. FRATTO: You, too.
END 10:40 A.M. EST