For Immediate Release
Office of the Press Secretary
October 17, 2008
Fact Sheet: Plan To Stabilize Financial System Is Limited In Size, Scope, And Duration
The Federal Government Is Acting Swiftly To Preserve Our System Of Free Market Capitalism And Return Our Nation To A Path Of Prosperity, Job Creation, And Long-Term Economic Growth
President Bush Discusses the Economy
In Focus: Economy
Today, President Bush visited the United States Chamber of Commerce and discussed the actions that the Federal Government has taken in response to the financial crisis. The President explained that the government took swift action to protect the financial security of the American people. One important element, the equity purchase program, is designed with strong protections to ensure the government's involvement is limited in size, limited in scope, and limited in duration:
We must never lose sight of the enormous benefits delivered by the free enterprise system. Democratic capitalism remains the greatest system ever devised. Around the world, free market policies have lifted millions of people out of poverty and given them the opportunity to build a more hopeful life. In the United States, it has given our large and dynamic economy the flexibility and resilience to absorb shocks, adjust, and bounce back.
The Government Is Focused On Preserving The Stability Of The Financial System
The Federal Government has responded to the financial crisis with systematic and aggressive measures to protect the financial security of the American people. These actions will take time to have their full impact, but they are decisive measures and big enough to work. As these actions take effect, they will help restore stability to our markets and confidence to our financial institutions; they will allow small businesses to return to a path of prosperity; and they will make it easier for Americans to borrow for cars, college education, and homes.
The government has taken unprecedented action to boost liquidity:
The government has provided substantial new protections for responsible consumers, businesses, and investors:
The government prevented a disorderly failure of large, interconnected firms, and did so in a way that protects taxpayers and does not shield executives from the consequences of their irresponsible decisions. For example, out of concern that the failure of Bear Stearns, Fannie Mae, Freddie Mac, and AIG could collapse our financial system, the government moved to protect the American people. Failed executives will not be eligible to receive a windfall from hard-earned taxpayer dollars.
The United States is cooperating closely with partners overseas who are also feeling the effects of this global financial crisis. Last week, President Bush met with finance ministers from the G-7 and the G-20 groups, which include some of the world's largest and fastest-growing economies. On Wednesday, leaders of the G-8 issued a statement calling for a leaders meeting with a broader group of countries developed and developing to work together to improve the regulatory and institutional structures of our nations' financial systems. Earlier this week, leaders in Europe announced steps to purchase equity in major banks and provide temporary government guarantees for bank loans. And last week, the Federal Reserve and other central banks around the world enacted a joint cut in interest rates, which will help ease the pressure on credit markets around the world. Tomorrow, President Bush will meet with French President Nicolas Sarkozy and European Commission President Jose Barroso.
The Government Has Undertaken An Extraordinary Effort To Help Banks Get Loans Flowing To American Consumers And Businesses
This week, President Bush announced that the Treasury Department will use a portion of the $700 billion rescue package to inject capital directly into banks by purchasing equity shares. This new capital will help banks fill the gap created by losses during the financial crisis, so they can make loans to businesses and consumers. Large banks, as well as smaller community and regional banks, will be able to participate. Additionally, the Treasury Department will use some of the $700 billion to purchase troubled assets that are weighing down banks' balance sheets and clogging the financial system.
It Is Vital That We Update Our Financial Regulations To Meet The Realities Of Today's Global Financial System
In the long term, we need to update America's system of financial regulations. Many of the regulations governing America's markets were written in a different era, patched together over the past 75 years in response to market conditions that may no longer exist. Secretary Paulson has proposed a detailed blueprint for modernizing regulations. The blueprint recommends creating a new objectives-based approach to regulation that includes a market stability regulator, a prudential regulator, and a business conduct regulator that focuses on consumer protection. Enacting these ideas into law should be a top priority for the next President and the next Congress.
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