[Weekly Compilation of Presidential Documents Volume 44, Number 37 (Monday, September 22, 2008)]
[Pages 1225-1227]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Remarks on the National Economy

September 19, 2008

    Good morning. I thank the Treasury Secretary Hank Paulson, Federal 
Reserve Chairman Ben Bernanke, and SEC Chairman Chris Cox for joining me 
today.
    This is a pivotal moment for America's economy. Problems that 
originated in the credit markets--and first showed up in the area of 
subprime mortgages--have spread throughout our financial system. This 
has led to an erosion of confidence that has frozen many financial 
transactions, including loans to consumers and to businesses seeking to 
expand and create jobs. As a result, we must act now to protect our 
Nation's economic health from serious risk.
    There will be ample opportunity to debate the origins of this 
problem. Now is the time to solve it. In our Nation's history, there 
have been moments that require us to come together across party lines to 
address major challenges. This is such a moment. Last night, Secretary 
Paulson and Chairman Bernanke and Chairman Cox met with congressional 
leaders of both parties, and they

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had a very good meeting. I appreciate the willingness of congressional 
leaders to confront this situation head on.
    Our system of free enterprise rests on the conviction that the 
Federal Government should interfere in the marketplace only when 
necessary. Given the precarious state of today's financial markets--and 
their vital importance to the daily lives of the American people--
Government intervention is not only warranted, it is essential.
    In recent weeks, the Federal Government has taken a series of 
measures to help promote stability in the overall economy. To avoid 
severe disruptions in the financial markets and to support home 
financing, we took action to address the situation at Fannie Mae and 
Freddie Mac. The Federal Reserve also acted to prevent the disorderly 
liquidation of the insurance company AIG. And in coordination with 
central banks around the world, the Fed has injected much needed 
liquidity into our financial system.
    These were targeted measures designed primarily to stop the problems 
of individual firms from spreading even more broadly. But more action is 
needed. We must address the root cause behind much of the instability in 
our markets--mortgage assets that have lost value during the housing 
decline and are now restricting the flow of credit. America's economy is 
facing unprecedented challenges, and we are responding with 
unprecedented action.
    Secretary Paulson, Chairman Bernanke, and Chairman Cox have briefed 
leaders on Capitol Hill on the urgent need for Congress to pass 
legislation approving the Federal Government's purchase of illiquid 
assets, such as troubled mortgages from banks and other financial 
institutions. This is a decisive step that will address underlying 
problems in our financial system. It will help take pressure off the 
balance sheets of banks and other financial institutions. It will allow 
them to resume lending and get our financial system moving again.
    Additionally, the Federal Government is taking several other steps 
to address the trouble of our financial markets.
    The Department of the Treasury is acting to restore confidence in a 
key element of America's financial system--money market mutual funds. In 
the past, government insurance was not available for these funds, and 
the recent stresses on the markets have caused some to question whether 
these investments are safe and accessible. The Treasury Department's 
actions address that concern by offering government insurance for money 
market mutual funds. For every dollar invested in an insured fund, you 
will be able to take a dollar out.
    The Federal Reserve is also taking steps to provide additional 
liquidity to money market mutual funds, which will help ease pressure on 
our financial markets. These measures will act as grease for the gears 
of our financial system, which were at risk of grinding to a halt. They 
will support the flow of credit to households and businesses.
    The Securities and Exchange Commission has issued new rules 
temporarily suspending the practice of short selling on the stocks of 
financial institutions. This is intended to prevent investors from 
intentionally driving down particular stocks for their own personal 
gain. The SEC is also requiring certain investors to disclose their 
short selling and has launched rigorous enforcement actions to detect 
fraud and manipulation in the market. Anyone engaging in illegal 
financial transactions will be caught and persecuted [prosecuted]. *
    * White House correction.
    Finally, when we get past the immediate challenges, my 
administration looks forward to working with Congress on measures to 
bring greater long-term transparency and reliability to the financial 
system, including those in the regulatory blueprint submitted by 
Secretary Paulson earlier this year. Many of the regulations governing 
the functioning of America's markets were written in a different era. It 
is vital that we update them to meet the realities of today's global 
financial system.
    The actions I've just outlined reflect the considered judgment of 
Secretary Paulson, Chairman Bernanke, and Chairman Cox. We believe that 
this decisive government action is needed to preserve America's 
financial system and sustain America's overall economy. These measures 
will require us to put a significant amount of taxpayer dollars on the

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line. This action does entail risk, but we expect that this money will 
eventually be paid back. The vast majority of assets the Government is 
planning to purchase have good value over time, because the vast 
majority of homeowners continue to pay their mortgages. And the risk 
is--of not acting would be far higher. Further stress on our financial 
markets would cause massive job losses, devastate retirement accounts, 
and further erode housing values, as well as dry up loans for new homes 
and cars and college tuitions. These are risks that America cannot 
afford to take.
    In this difficult time, I know many Americans are wondering about 
the security of their finances. Every American should know that the 
Federal Government continues to enforce laws and regulations protecting 
your money. Through the FDIC, every savings account, checking account, 
and certificate of deposit is insured by the Federal Government for up 
to $100,000. The FDIC has been in existence for 75 years, and no one has 
ever lost a penny on an insured deposit, and this will not change.
    America's financial system is intricate and complex. But behind all 
the technical terminology and statistics is a critical human factor: 
confidence. Confidence in our financial system and in its institutions 
is essential to the smooth operation of our economy, and recently that 
confidence has been shaken. Investors should know that the United States 
Government is taking action to restore confidence in America's financial 
markets so they can thrive again.
    In the long run, Americans have good reason to be confident in our 
economic strength. America has the most talented, productive, and 
entrepreneurial workers in the world. This country is the best place in 
the world to invest and do business. Consumers around the world continue 
to seek out American products, as evidenced by record-high exports. We 
have a flexible and resilient system that absorbs challenges and makes 
corrections and bounces back.
    We've seen that resilience over the past 8 years. Since 2001, our 
economy has faced a recession, the bursting of the dot-com bubble, major 
corporate scandals, an unprecedented attack on our homeland, a global 
war on terror, a series of devastating natural disasters. Our economy 
has weathered every one of these challenges and still managed to grow.
    We will weather this challenge too, and we must do so together. This 
is no time for partisanship. We must join to move urgently needed 
legislation as quickly as possible, without adding controversial 
provisions that could delay action. I will work with Democrats and 
Republicans alike to steer our economy through these difficult times and 
get back to the path of long-term growth. Thank you very much.

Note: The President spoke at 10:45 a.m. in the Rose Garden at the White 
House. The Office of the Press Secretary also released a Spanish 
language transcript of these remarks.