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For Immediate Release
Office of the Press Secretary
September 29, 2008
Press Briefing by Tony Fratto
James S. Brady Press Briefing Room
12:21 P.M. EDT
MR. FRATTO: Good afternoon, everyone. Let me make a couple quick announcements and then we can get to questions -- and I'm sure questions of the day.
Obviously, you know the President early this morning, at 11:10 a.m., met with the President of Lithuania. I think you may have his comments by now. President Adamkus has been one of Europe's most principled leaders in defending the sovereignty and independence of all Europe's nations, including through policies to strengthen Europe's energy security. He and the President had a very good meeting, talking about regional security issues.
And at 2:25 p.m. this afternoon the President meets with the President of Ukraine. The President and President Yushchenko will discuss how to reinforce democracy, security and national sovereignty in Ukraine and throughout the region; and steps to advance Ukraine's efforts to integrate into the Euro-Atlantic community.
And then in about 35 minutes or so, members of the House of Representatives will have an opportunity to take an incredibly consequential vote on legislation that's critical to our nation's economic future. Over the past 10 days we've had an extensive amount of debate and discussion, hearings, hours upon hours of negotiations -- some that went well into the wee hours of the morning; and I know on Saturday night, drafters up on the Hill actually worked all the way through the night to get the legislative language of this bill.
It is not a perfect bill. Anyone looking for a perfect bill won't find it. It wasn't a perfect bill when the administration sent it up to Capitol Hill a week ago. But over the past 10 days, and certainly over this weekend, the work that went into it made it a much improved bill and, in fact, we think a very strong bill. It gives the Treasury Secretary the tools he needs to address the credit crisis that is now confronting our economy.
The way they improved the bill was listening to members of Congress and others who had ideas out there. This bill now has very, very strong taxpayer protection provisions in it, to make sure that taxpayer money is used carefully and wisely, that we can feel with good confidence that the proceeds from the asset purchase program will go to -- over the long-term, should we see a positive return, to even reducing the deficit. That language is in the legislation.
We have incredibly strong oversight in the program. In fact, I'd say there may be challenge to find another federal program that has more oversight and supervision than this program will have once it's in place. Congressional Oversight Committee is a special bipartisan oversight committee, a special inspector general, a Treasury Department inspector general, regular reporting, so -- reporting on the Internet of the actions involving the purchase program. So I think there will be a great deal of sunshine in how this program is operated by the Secretary of the Treasury.
Also in recent days the bipartisan group that worked on this legislation listened to the members of the Republican Caucus who had ideas that they wanted included in this bill. The bill includes a strong mandate that the Treasury Secretary will put in place -- and insurance guarantee program -- an alternate idea that was raised by members. So over this time, the bill has been greatly improved. We'll never have a perfect bill, but we think this is a very, very strong bill, and is critically needed by our economy right now.
The President this morning -- you saw he made a statement early this morning from the South Lawn. Throughout the morning the President has been on the phone talking to Republican members of Congress, encouraging them to support this bill. It's no question this is a very difficult vote for members of Congress. It is very tough to vote to try to prevent a crisis and get credit for it, and so this is -- the President recognizes this; the Vice President has been calling; other members of the President's staff here at the White House -- Chief of Staff Josh Bolten, and the Assistant to the President for Legislative Affairs Dan Meyers, Ed Gillespie, Secretary Paulson and others -- are talking to members to try to ensure that we get a successful vote in the House.
I appreciate all the work of the leadership, Speaker Pelosi, the Minority Leader John Boehner, Roy Blunt and other members of the negotiating team for the extraordinary work that they did to get the bill to this point. And like all of you, we'll be watching the vote here shortly, and we hope to see it pass, and we're confident that it will pass.
Q Two things. Can you talk a little bit more about the President's phone call -- how many people he's talked to, how those conversations have gone? And then secondly, assuming -- this is probably not a safe thing to do, but assuming that they'll pass this by mid-week, how quickly will the Treasury Department start actually taking action?
MR. FRATTO: Yes, I think Treasury -- oh, I'm sorry, your last question first -- I think Treasury said they will need a week or two to actually be able to start up the program. But I'm going to have to refer you to them for questions on how to implement the program.
Of course, we'll still be waiting for the Senate to vote on Wednesday, should the House pass the legislation today.
The President had a list of a couple dozen members. I'm not sure how far he was able to get through that list. But reporting back from those calls was -- you know, some people committed to voting for the bill, others remain skeptical. The President promised them that the questions that they have, we'll try to address them, try to get them more information. We've tried to do this with lots of members at various different levels. There still are questions out there, and we're not surprised that there's skepticism about the bill.
Like I said, we put this program before the Congress in very short order, and it's an incredibly complex issue that we're trying to deal with. I think everyone has had challenges. You all have had challenges sometimes trying to explain this in your reporting. It's hard to explain the problem and the solution and what the various impacts will be. And we've tried to do this with members of Congress as well. We think we're going to be able to get there and have a successful vote.
Q Tony, can you drill down a little bit, though, into the skepticism? Maybe it's being felt outside of Washington, because a lot of the Republican House members, in particular, are reporting back from their district and saying, look, it's just a -- there's a "no sale" out there. What is the disconnect, or what don't people understand, in your view?
MR. FRATTO: I think one of the big things is, if you look at any headline across the country, or the scrolls along your screens and the leaders into a lot of your stories, is the reference to this as simply a bailout and a bailout for Wall Street. I think a lot of the reporting in recent days that I've seen has gone into a lot more -- a lot better explanation of what exactly we're trying to solve here. I think the President's address to the nation the other night did a very good job of laying out what the problem is and why it is important to Americans.
But when you call something a bailout, there aren't a whole lot of people who are out there who are in favor of a bailout. We're trying to change everyone's understanding of this; that what we're trying to do is deal with a systemic problem in our economy that is affecting Americans in their daily lives far removed from Wall Street. We need to make sure that Wall Street is healthy and functioning because we need our entire financial system functioning.
But when you have small businesses in Illinois and Missouri who are having trouble getting overnight credit to meet their payrolls and to get credit to purchase equipment and to ship their goods, that's a problem. That's where our economy can grind to a halt. And that's what we're trying to prevent.
Q Is there enough leadership coming off of the Hill, enough education back home in the district to constituents about precisely these points?
MR. FRATTO: I hope so. I mean, I think so. I've seen a lot of information flying around over the last couple days and certainly this morning. I think members of Congress will have more than enough information that -- to go out and speak to people in their districts and explain to them why this vote was critical. The information is there, and I think it's clear to everyone. We heard it from Secretary Paulson and Chairman Bernanke when they testified on Capitol Hill.
I think members of Congress will certainly have that challenge. And I understand that challenge. I worked in the House of Representatives and understand what it's like to deal with constituent calls coming in. But we do believe that there is leadership in the House of Representatives right now on both sides of the aisle to do the best thing for the economy and the country.
Q Tony, earlier today the governments of Belgium, the Netherlands and Luxembourg partly nationalized a major financial services group. Britain did the same with a mortgage lender. There are other banking bailouts that are in the works in Russia, Iceland, Denmark. Obviously, the contagion is spreading internationally. What is the administration -- how concerned is the administration about this spread and what more can they do?
MR. FRATTO: It's something that I know Secretary Paulson and his Undersecretary for International Affairs, Dave McCormick, is spending a lot of time with, talking to the G7 partners and the G10 countries who deal a lot with financial issues and central banks. Chairman Bernanke is spending a lot of time with his central bankers discussing ways to deal with the -- it's a global liquidity crisis. Some of it's contagion; some of it is simply countries who are experiencing the very same root causes that we had, in terms of the mortgage markets and increases in foreclosures.
So, you know, we need all hands on deck on it, and I think that's what Treasury and the Fed are trying to do.
Q Is the President getting on the line to any foreign leaders, especially G8 leaders, to try to coordinate better?
MR. FRATTO: He has spoken to G8 leaders in recent weeks and this issue has come up. And of course you know Gordon Brown was here just last week and they discussed this as well, and talked about the way forward.
What the President is focused on right now is dealing with our most immediate crisis here in the United States, and we'll continue to deal with the international -- the global economy with other leaders as we go forward.
Q Tony, you said the President convinced some lawmakers and not others. Do you have the hundred votes you need from Republicans in the House to pass this?
MR. FRATTO: I think we're going to have a sufficient vote to pass this. We're certainly confident that we are; we're not taking it for granted. These are very legitimate concerns and questions that members have. We're going to keep working with them right up to the vote. We will not take a single vote for granted. And we'll be watching the members' vote, just like all of you will.
Q To follow up on Matt's question about the global problems -- the Fed today acted to pump an additional $630 billion to flood the world with cash to try and --
MR. FRATTO: Coordinated with other banks.
Q Coordinated with other banks. Was the President informed of this beforehand and --
MR. FRATTO: That's not something that -- that's not something that we share. I mean, I can tell you that the President -- the President was briefed on the actions that the Fed took. I can't tell you the specific timing; it's not something we would ordinarily do.
Q And in addition, the action yesterday to try and get an agreement was partly timed to try and persuade the Asian markets that opened overnight. We saw what the Asian markets did and subsequent markets throughout the world --
MR. FRATTO: I'm not going to try to interpret what happens in markets. The agreement was out before the Asian markets opened, and lots of people can speculate what it would have been had the agreement not been out. I'm not going to try to do that. I know that that was a focus of the Majority Leader and the Speaker, and rightly so. And we're glad that it was out at that time.
Q Well, doesn't it suggest, though, that the crisis is even deeper than what people --
MR. FRATTO: I would not try to make that kind of explanation. There are lots of things going on in the global economy right now, and you're seeing lots of activity in Europe and here. And I'm not going to try to psychoanalyze investors right now, with one exception -- I think I have a fairly good sense of what international investors' reaction would be were this legislation to fail. And so we're focused on trying to have this legislation passed.
Q Tony, when this package was announced, I think the idea behind it was that it would be so overwhelming, so massive, that it would stabilize things. It would stabilize the credit and the financial markets; it would sort of -- someone described it as financial shock and awe. Is it still the feeling, given this uncertainty that we're now seeing around the world, that this package will be enough to stabilize the crisis?
MR. FRATTO: This package will deal with a very specific problem in our economy and provide an anchor for our financial institutions and help to support a market for these mortgage-backed securities that are causing problems for our financial institutions.
I don't want to try to oversell it or undersell it. It is very large. It should have a substantial impact in increasing stability among our financial institutions. We think it will. Secretary Paulson thinks it will, and so does the Chairman of the Federal Reserve.
So we think it is the right size, and we think Secretary Paulson would be able to carry it out in a way that would be very, very effective.
Q Tony, I just have a follow to that. I mean, can you assure taxpayers that this is going to be it, after Fannie and Freddie and AIG? I mean, is this one in a series or is this the final step?
MR. FRATTO: That's -- I don't think it does any good to try to speculate as to where things will go next. Obviously our experts and analysts are doing a great deal of analysis, looking at where our financial institutions will be and ways we can ensure that they're going to be healthy.
They've just gone through an incredible transition period. We now have a New York financial district without a single independent investment bank. We're seeing lots of consolidation. There are a number of banks out there -- as the President said this morning, a lot of our financial institutions even with this package will continue to be under stress. And I know the FDIC and the Fed and Secretary Paulson are keeping an eye on those institutions.
So I'm not going to try to speculate. Like I said, I think this will make a very important, substantial contribution to increasing stability in our financial markets. It will prevent a great deal of instability and uncertainty that threatened our credit markets, that could do great damage to our economy. And so that's what we're focused on right now, and we'll see where the future goes from there.
Q Treasury had been working on a contingency plan for an economic meltdown for over a year. Treasury told me that. Did the White House know this? Did you ever see details of this plan?
MR. FRATTO: We work very closely with Treasury.
Q So why is it so complex? I mean, why --
MR. FRATTO: It's a complex -- it is an incredibly complex problem. And I think you can see that Treasury was dealing with some very difficult issues: the failure of a major investment bank, the failure of the world's largest insurance company, the failure of two government-sponsored enterprises that needed to go into conservatorship. I think Treasury was ahead of this, but -- I think we said this last week, your first choice isn't a $700-billion-program commitment of taxpayer dollars. That is, I think, a last choice, a major government intervention into the financial sector. That's not what you lead with. You see if there are ways that we can try to contain the problem. That's what Treasury and the Fed tried to do. It had some limited success. But we've seen an incredible transformation in our financial sector right now.
But we're in -- we're in a point where because of the tightness in credit, the extreme illiquidity in credit markets, that something major had to be done. And it was the decision of Secretary Paulson.
Q But Treasury saw this happening, the possibility --
MR. FRATTO: No. No, the Treasury -- the Treasury was aware of a lot of different potential solutions, and this was one of them.
Q They knew a problem was coming, that's why they were looking for solutions a year ago. I mean, why didn't they --
MR. FRATTO: I don't know about a year ago, if that's what they -- if that's what they've told you. But I know that they were looking at different ideas for a long time. But I -- still, I think the point that I made is the right point. You don't -- you don't do this kind of major intervention as a first choice.
Q My point is they could have warned the public a year ago that something was coming; they could have talked to Congress.
MR. FRATTO: They were warning the public. And they were talking a great deal about the problems in credit markets. And I know it's something Secretary Paulson had been focused on for a great deal of time. And in particular, his focus on Fannie Mae and Freddie Mac as the -- one of the largest players in mortgage backed securities, he had been focused on that for a great deal of time. The administration had been focused on it for six years, even long before the Secretary came to Treasury.
Q Tony, you said you're hoping that this bill will have a large impact; it's a 110-page bill. But is it impact enough to stave off a recession, or is this country -- again I'm going back to the same question we've talked about -- is this country in a recession? And someone at the Joint Centers for Political and Economic Studies, Roderick Harrison, has said at the very least, this country is in a jobs recession at the very least.
MR. FRATTO: That's -- I know there's a fascination with what --
Q No, it's not a fascination, it's embracing what this country is dealing with --
MR. FRATTO: Well, with -- whether you use the word or not, we've been through this question and answer for a number of times over the past year. We don't put those labels on the economy until the official people who do that, the Bureau of Economic Analysis do it. And I know there are people who talk about different kinds of recessions, but what we're focused on right now in this week and today is to prevent a real crisis, a deepening of a crisis in our financial industry that could put us into a recession, whether we're in one or not.
Q Okay, the reason why I bring that up, Tony, is because the President in his address to the nation did use the "R" word, and we are dealing with a time when we're not using traditional markers. This is something, you know, you didn't see 70 years ago, even in the Depression. So that's why, you know --
MR. FRATTO: That you didn't see --
Q What's going on now, this time. You saw --
MR. FRATTO: You saw much worse, actually.
Q Just wondering if you can expand a little bit more on the strategy that you're employing with these hours to get the votes -- how was it decided who the President would call, who others would call, and what his final message is?
MR. FRATTO: Our Legislative Affairs team and Treasury's Legislative Affairs team have been up on the Hill for almost around the clock for the past couple of weeks. They have a very good sense of which members out there are undecideds; which ones are leaning opposed; which ones are solidly opposed. And so they put together the list for the President to identify people that he can be persuasive with, and what their concerns were, and that maybe he can address them, and maybe if he learns a little bit more about their concerns if he can direct his staff at Treasury or elsewhere to get back with them or work with their staff before the vote so that they can make an informed vote. Maybe their concerns are easily addressed and he wanted to be able to speak to them personally that way.
Also, the Vice President and, as I said, Secretary Paulson and others here -- I think everyone with a phone -- is calling to see if we can shore up a member who may be skeptical of the proposal.
Q It's been estimated we already have between 1 and 1.5 million foreclosures, and that it could go upwards to five million before all is said and done. What are people who are losing their homes that aren't able to renegotiate, where are they supposed to go?
MR. FRATTO: Well, look, Paula, there are -- nobody wants to see anyone be foreclosed on in a home. But even in the best of times, you see average rates of 600,000 to 700,000 Americans who are -- their homes are foreclosed on. Not all of those numbers are actually people living in homes. A lot of -- some portion of those numbers are people who have second homes or bought investment and condominium properties that are foreclosed on.
But for those people who are living in their home and want to stay in that home, there are government programs -- there's the HOPE NOW Alliance, FHA Secure. This piece of legislation has foreclosure mitigation language in it that requires the Treasury Secretary to work with mortgage-holders to find a way to renegotiate their loan terms to stay in their homes.
So I think everyone has an interest in Americans who are in their home, who want to stay in their home, to be able to stay in their home, and to try to find creative ways for them to do that.
Now, there are some people out there who received loans who never should have received those loans. Their income could never support a loan for the property for which they were given a mortgage. And it's unfortunate that those people will lose their homes, and there are other options. You know, they can rent, but -- or find a more affordable home to live in. But it is not a monolithic population of Americans.
Q But one of the national problems has been, particularly since housing has escalated, there is a severe shortage of affordable housing. Section 8 vouchers don't really work. A lot of people have them but can't find affordable rental places to go. So are there any --
MR. FRATTO: I know that's something that HUD is focused on, and so I'll refer you to them for more.
Q Can I ask two questions, please?
MR. FRATTO: I'm sorry?
Q I have two questions on all this.
MR. FRATTO: Okay.
Q One of the reasons there's so much outrage in this country is because of the multi-multi-million-dollar golden parachutes. Will this legislation prevent existing golden parachutes for executives who had it written in their contract that they're entitled to these millions?
MR. FRATTO: Yes, it depends on how they participate in the program. But I think I'll have to refer you to Treasury for details on how exactly that will work. But I think there are very strong measures in here to prevent the so-called "golden parachutes." I think Speaker Pelosi spoke to that last night.
Q But there is a possibility that people will get government money for these $20, $40-million parachutes?
MR. FRATTO: I'm not sure that it's the CEO getting the government money. I know this was something that was part of the debate over the weekend with members, and informed a very big part of the debate, as they tried to determine the best way to do this that would not inhibit companies from coming in, but would still provide some measure of accountability on CEOs and senior corporate executive teams at financial firms that participate in this program.
I think it is pretty substantial. I think it's like nothing that you've seen before, except in the case of failed institutions where, when we come in with assistance, we actually clean out -- as you've seen it at Bear Stearns and others, where the entire management team is removed and shareholders are wiped out.
So I think it is pretty strong protections that Americans' tax dollars will not go to -- will not be a windfall for CEOs.
Q Well, we're not talking about future ones, we're talking about existing.
MR. FRATTO: Right, and like I said, you might have to go to Treasury for the specific details on how that will work.
Q How about oil, you never mentioned oil as a cause of part of this crisis.
MR. FRATTO: It is. Yes, high energy prices have been a drag on our economy, you're right.
Q Tony, last week in the President's speech, he put the consequences of inaction on very personal terms. He said things like "your retirement account could lose value," "banks in your community could fail." I'm wondering, when he talks to members, is he using this kind of personal language, or what --
MR. FRATTO: Sure.
Q -- what is he saying to them to make his case?
MR. FRATTO: Sure. Yes, absolutely. I think that is a big part of the case is for everyone to understand. People have an image of this that this money is going to support executives on Wall Street, and what we're really trying to do is to fix a systemic problem in our economy.
By the way, it's a problem that already exists. We want to prevent it from getting much, much worse in a way that would shut down our economy. But you can go out and look at regional newspapers across the country and see what's happening with especially small businesses who may have more limited options for obtaining financing, and they are having difficult times getting the credit that they need to be efficient in operating their businesses. And some are not getting the credit at all.
Q So can you give us an example of the kinds of things that the President is saying?
MR. FRATTO: Sure. Actually, I know -- I think SBA -- I think we put out a document -- I apologize, I don't have it with me; I can get it to you -- where we cited a number of the small businesses. You mean in terms of what the President might be saying? I think he's making that -- I can't give you a specific quote from what he might have said to a particular member, but he is making it clear that this is about Americans in their communities; that's what this is about. It's about family finances; it's about 401(k) retirement plans; it's about small businesses; it's about even larger businesses that do a great deal of hiring and are a strength in our economy, and we want to keep them strong. So that's certainly part of the message.
Q Thank you.
Q Quick little follow-up, please.
MR. FRATTO: Okay, quick one.
Q You said the President had about a couple dozen names to call. Do you know about how many did Cheney have and Paulson have? I was looking for some sort of total number --
MR. FRATTO: Yes, I don't know Paulson or --
Q Twenty or 50 or 60?
MR. FRATTO: It may be -- in total; it's probably on that order of 40 or 50 names combined.
END 12:49 P.M. EDT