    [Public Papers of the Presidents of the United States: George W. Bush (2008, Book II)]
    [October 17, 2008]
    [Pages 1315-1319]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Remarks to the United States Chamber of Commerce
    October 17, 2008

        Good morning. I am pleased to be back to the U.S. Chamber. I want to
    thank the members of this fine organization for your efforts to support
    the spirit of free enterprise and to advance the interests of
    businesses, large and small, across our great country. I'm grateful for
    the opportunity to talk to you about a subject that's on all our minds,
    and that's the economy.

    [[Page 1316]]

        Bruce, I want to thank you for your
    leadership and your friendship. I want to appreciate the other members
    of the U.S. Chamber leadership group that is with us. I welcome the
    entrepreneurs that are with us; fellow citizens.
         Our Nation is dealing with a serious financial crisis. Over the
    past month, Americans have witnessed fast-moving events involving
    complicated financial issues. I know many of our citizens are concerned
    about their finances. They're worried about the extent of Government
    intervention into the marketplace. In my conversations with business
    owners and workers and families across our country, I've heard the same
    message. The American people want a clear explanation of what this
    crisis means for them, what the Government is doing to fix it, and how
    this will affect the future of the free market that makes our economy so
    dynamic and prosperous. And that's what I've come to talk about.
         To understand how this crisis unfolded, you have to look back more
    than a decade. For many years, the combination of low interest rates and
    the inflow of capital from around the world produced a period of easy
    credit here in the United States. This trend was especially apparent in
    the booming housing market, where many lenders issued mortgages to
    borrowers who could not otherwise afford homes. Many of those loans were
    then packaged into complex financial assets, which were sold to banks
    and investors all across the world.
         These developments came together to set off a chain reaction when
    the housing market began to decline. With the supply of homes exceeding
    the demand from potential buyers, home values dropped. In addition, many
    homeowners with adjustable rate mortgages saw their interest rates
    suddenly reset to higher levels. Both these factors caused a number of
    borrowers to default on their mortgages. In turn, many institutions
    holding assets related to those mortgages suffered serious losses, which
    caused some of them to run short of capital. This led to high-profile
    bank failures, restrictions in lending, and widespread anxiety, all of
    which contributed to sharp swings in the stock market.
         These developments were most visible on Wall Street, but their
    impact has reached far beyond. The drops in the stock market have eroded
    the value of Americans' retirement accounts and 401(k)s. The tightening
    of credit has made it more expensive for many families to borrow money
    for cars and homes and college tuition. Many healthy businesses have
    found it harder to get loans to expand their operations and to create
    jobs for our workers.
         The Federal Government has responded to this crisis with systematic
    and aggressive measures to protect the financial security of the
    American people. People look at this crisis and say, ``Oh, it's only
    Wall Street.'' I don't think so. As a matter of fact, I know that if we
    had not acted, it could affect the American people directly. The actions
    will take more time to have their full impact. It took a while for the
    credit system to freeze up; it's going to take a while for the credit
    system to thaw. These are decisive measures aimed at the heart of our
    financial challenges. And they're big enough and bold enough to work.
    And the American people can be confident that they will.
         Let me explain this approach piece by piece.
         First, the Government has focused on preserving the stability of
    the overall financial system. 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. We prevented a disorderly failure of these large, interconnected
    firms, and we did so in a way that protects taxpayers and does not
    shield executives from the consequences of their irresponsible
    decisions.
         Second, the Government has taken unprecedented action to boost
    liquidity, the grease that keeps the gears of our financial

    [[Page 1317]]

    system turning. The Federal Reserve has used a variety of tools to
    inject hundreds of billions of dollars in new liquidity into the
    financial system. The Federal Deposit Insurance Corporation has
    temporarily guaranteed most new debt issued by insured banks, which will
    make it easier for banks to borrow needed money from each other. The
    Federal Reserve has announced a new program to provide support for
    commercial paper, which is a key source of short-term financing for
    American businesses and financial institutions.
        Third, the Government has provided substantial new protections for
    responsible consumers, businesses, and investors. The Federal Government
    has temporarily expanded the amount of money insured in bank and credit
    union savings accounts, checking accounts, and certificates of deposit
    from $100,000 to $250,000. The FDIC has created a new short-term program
    to grant unlimited insurance for noninterest-bearing transaction
    accounts used by many small businesses. The Treasury has offered
    temporary Government insurance for money market mutual funds. The
    Securities and Exchange Commission is vigorously investigating fraud,
    manipulation, and abuse in the markets. These steps being taken by all
    these Federal agencies: providing greater peace of mind for the American
    people and greater stability for our financial system.
        Fourth, the United States is cooperating closely with our partners
    overseas, who are also feeling the effects of this global crisis. 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.
        Last weekend, I met with finance ministers from the G-7 and G-20,
    groups representing some of the world's largest and fastest growing
    economies. On Wednesday, leaders of the G-8 issued a statement underscoring our commitment
    to work together to resolve the crisis. The statement calls 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. Tomorrow at Camp David, I'll continue our close
    consultations by meeting with President Sarkozy of France and President Barroso of the European Commission.
        Our European partners are taking bold steps. They show the world
    that we're determined to overcome this challenge together, and they have
    the full support of the United States.
        Finally, the Government has undertaken an historic effort to address
    the underlying problem behind the freeze in the credit markets. Earlier
    this month, Congress passed bipartisan legislation authorizing the
    Treasury Department to use up to $700 billion to help banks rebuild
    capital. This week, I announced that the Treasury will use a portion of
    that money to inject capital directly into banks by purchasing equity
    shares. Large banks, as well as smaller banks, community banks, and
    regional banks, will all be able to participate, at their choice. The
    new capital will help banks fill the gaps created by losses during the
    financial crisis, so they can make loans to businesses and consumers.
        In addition, the Treasury will use part of the $700 billion to
    purchase some of the troubled assets that are weighing down banks'
    balance sheets and clogging the financial system. This extraordinary
    effort is consistent with the G-7 action plan. It is designed with one
    overriding purpose: to help banks get money flowing, so small businesses
    can thrive and hire, so big businesses won't shut down operations. To
    help the American people is the goal of this plan.
        The actions I just outlined represent an extraordinary response to
    an extraordinary

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    crisis. Some of the steps may sound like technical matters, but they
    will contribute real benefits to the American people. As they take
    effect, they'll help restore stability and confidence in the financial
    markets. They'll make it easier for Americans to borrow money for their
    cars and for colleges and basic necessities. They will speed the day
    when communities across our Nation return to the path of prosperity, job
    creation, and long-term economic growth.
        I know many Americans have reservations about the Government's
    approach, especially about allowing the Government to hold shares in
    private banks. As a strong believer in free markets, I would oppose such
    measures under ordinary circumstances. But these are not ordinary
    circumstances. We took this measure as a last resort. Had the Government
    not acted, the hole in our financial system would have grown larger.
    Families and firms would have had an even tougher time getting loans,
    and ultimately, the Government would have been forced to respond with
    even more drastic and costly measures later on.
        Some have viewed this temporary measure as a step toward
    nationalizing banks. This is simply not the case. This program is
    designed with strong protections to ensure the Government's involvement
    in individual banks is limited in size, limited in scope, and limited in
    duration.
        The Government's involvement is limited in size. The Government will
    only buy a small percentage of shares in banks that choose to
    participate so that private investors retain majority ownership.
        The Government's involvement is limited in scope. The Government
    will not exercise control over any private firm. Federal officers will
    not have a seat around your local bank's boardroom table. The shares
    owned by the Government will have voting rights that can be used only to
    protect the taxpayers' investment, not to direct the firm's operations.
        The Government's involvement is limited in duration. It includes
    provisions to encourage banks to buy their shares back from the
    Government when markets stabilize and they can raise money from private
    investors. This will ensure that banks have an incentive to find private
    capital to replace the taxpayers' investment and to do so quickly.
        For those worried about the long-term consequences of the actions,
    our history offers some comfort. On several occasions over the past
    century, the Government has taken partial ownership of private companies
    in the banking industry during times of great financial challenge, most
    recently during the savings and loans failures of the 1980s and 1990s.
    In every case, the Government relinquished its ownership stakes after
    the crisis ended, and we will do so again. The Government intervention
    is not a Government takeover. Its purpose is not to weaken the free
    market, it is to preserve the free market.
        I know many are worried about the price tag of this rescue package.
    Every dollar spent will be subject to strong oversight by a bipartisan
    board. We will ensure that failed executives do not receive a windfall
    from hard-earned taxpayer dollars.
        Ultimately, we believe the final cost will be significantly less
    than the initial investment. This is true for two reasons. First, many
    of the troubled assets that the Government buys will increase in value
    as the market recovers. That means that the Government eventually will
    be able to resell them for a higher price. Second, the Government will
    receive quarterly dividends from the equity shares it purchases in
    financial institutions. If banks do not repurchase these shares within 5
    years, the dividends they owe the Government will increase
    substantially. This provides a clear incentive for banks to buy back
    their shares, thus returning the money to the taxpayers as soon as
    possible.

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        As we work to resolve the current crisis, we must also work to
    ensure that this situation never happens again. Above all, this requires
    updating the way we regulate America's financial system. Our 21st-
    century global economy continues to be regulated by laws written in the
    20th century. Secretary Paulson has
    proposed a detailed blueprint for modernizing these regulations; others
    have put forward good suggestions. Enacting these ideas into law must be
    a top priority for the next President and the next Congress.
        Just as importantly, we must guard against unintended consequences.
    We must ensure that new regulations aimed at Wall Street do not end up
    hurting responsible business owners, limiting the ability of American
    firms to raise capital, or putting American workers at a competitive
    disadvantage. We must ensure that this crisis does not become an excuse
    to raise taxes on hard-working Americans, which would only make the
    problem worse. We must ensure that our efforts to prevent a recurrence
    of this global crisis do not lead us to give in to false temptations of
    economic isolationism. The best way to demonstrate America's commitment
    to open markets is for Congress to approve the Colombia, Panama, and
    South Korea free trade agreements this year.
        We must also ensure that Government officials do not abuse our
    temporary position as shareholders in banks. We must not blur the line
    between the Government and the private sector. We must not supplant the
    profit motive with political motives.
        We must also never lose sight of the enormous benefits delivered by
    the free enterprise system. Despite corrections in the marketplace and
    instances of abuse, democratic capitalism remains the greatest system
    ever devised. It allows individuals to rise as high in their societies
    as their talents and ambition will take them. It rewards hard work,
    intelligent risk-taking, and the entrepreneurial spirit. 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. And
    here at home, it has given our large and dynamic economy the flexibility
    and resilience to absorb shocks, adjust, and bounce back stronger.
        In the long run, the American people have--can have confidence that
    this economy will recover. America is the best place in the world to
    start and run a business. America is the most attractive destination for
    investors around the globe. America is the home of the most talented and
    enterprising and creative workers in the world. We're a country where
    all people have the freedom to realize their potential and chase their
    dreams. This promise has defined our Nation since its founding, this
    promise will guide us through the challenges we face today, and this
    promise will continue to define our Nation for generations to come.
        Thank you for listening. God bless you.

    Note: The President spoke at 8:40 a.m. at the U.S. Chamber of Commerce.
    In his remarks, he referred to Bruce R. Josten, executive vice president
    of government affairs, U.S. Chamber of Commerce. The Office of the Press
    Secretary also released a Spanish language transcript of these remarks.