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tv   Financial Crisis 10th Anniversary  CSPAN  September 19, 2018 9:00pm-9:58pm EDT

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different being on this side of it. you do not have to go out there and advocate for someone else, whatever comes through my brain and out of my mouth is my own ideas. certainly that is a different part of it. i enjoy it. it is an opportunity for me to serve a great area of illinois, advocate for the 110,000 people i >> congress gives criticism for being dysfunctional. if the politics less dysfunctional? >> we are coming off a two-year budget impact as a highlight the dysfunction we have here in illinois. what i tell people all the time, and we are a big partisan divide in the state of illinois. we have differences between downstate illinois, the southern tip of illinois is adjacent to kentucky. the northern border is with wisconsin. we have a lot of regional differences in the state.
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at the end of the day, we are here to make a difference for the people that we represented. a think it is important that you have to work with folks on both sides of the aisle. on some of the bigger issues of the day you see some dysfunction. day in and day out you see opportunities in illinois where both republicans and democrats were together to try to get something done. the bill you just mentioned, the opioid bill where we allow people to get a medical marijuana card is a piece of legislation that is a bipartisan piece of legislation advocated by high ranking democrats and the general assembly and signed by a republican governor. you have a good amount of republican cosponsors. we try to find ways to work together but i think we are no difference -- different than washington. since 2015,served how long do you plan to serve in state politics? i will notl people, serve in this job forever.
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i enjoy what i do right now. i am wrapping up my first full term. my second term overall and the general assembly. i will be on the ballot this fall. i doubt if you ask me tenure's from now if i will be in the same position. i think there are plenty of good people that can do these jobs. little while and then do something else. ido not have a time frame but think it will not be a long-term career for me. i will certainly go on and do other things once i feel like i have done my time here. tim butler represents the 87th district in the illinois -- state house. we appreciate you stopping by the c-span busted a. also want to think as part of comcastan 50 west tour, in springville, illinois. stay tuned for our next stop on our tour in st. louis, missouri.
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>> live thursday on the c-span networks. at 10:00 a.m., survivors of sexual assault and representatives of women organizations talk about the sexual assault allegations against judge kavanagh. and new, the korea economic institute of north korea looks at strategies for dealing with north korea. at 7:00 p.m., tim kaine takes part in a forum with his republican challenger. on c-span 2 at 10:30 a.m., the center host a forum on refugee resettlement. 2018 marks the 10 year anniversary of the financial crisis, which saw the collapse of the u.s. housing market and brought the economy close to a second great depression. the month of september and october of 2008 included a number of important developments. the government took over the hee mortgage companies fan
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and freddie mac. lehman brothers declared they grip see, -- bankruptcy, prompting the stock market to drop more than 500 points, and the bush administration announced the troubled asset relief program, or tarp, which was initially rejected by the house of representatives, but later passed in early october. a are going to show you public officials were saying about the financial crisis at the time, followed by a recent discussion at the bookings institute marking the 10 year anniversary. secretaryith treasury henry paulson speaking with reporters at the white house on september 15, 2000 eight, the same day as the lehman brothers bankruptcy. >> good afternoon, everyone. i hope you all had an enjoyable weekend. [applause] well, as you know, we are working through a difficult period in our financial markets right now as we work off some of the past excesses. but the american people can
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remain confident in the resilience of our financial system. fedmmend the sec and the for their work over the weekend, convening leaders of financial institutions from around the world to meet the current challenges and put measures in place to reduce market stresses. i particularly in pleased with these major market participants who are willing to make extraordinary commitments to market stability as we managed to through this turmoil. their actions will complement the important steps taken by the fed and the sec that will help minimize disruption to our markets and broader economy. as you have heard me say before, the strength and stability of our financial markets is important to every american, to their household budget, to the ability to find affordable financing for a home, car, college tuition and to finance small business and expansion.
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let me step back a bit and provided little perspective. and i have long said, the housing correction is at the root of the challenges facing our markets and financial institutions. that we have taken very important steps with respects to freddie -- fannie mae and freddie mac and there are monks the most important actions we can take to work through this turmoil. committed to working with regulators here and abroad, as well as policymakers in congress to take additional necessary steps to maintain that the -- the stability and orderliness of our financial markets. thank you all and let me take your questions. can you talk about what the federal role should be going forward and are we likely to see anymore in the near terms? >> the federal role is very important? as you have heard me say,
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nothing is more important than our stability of our capital markets. i think it is important to regulators that we are very vigilant. we do not take lightly ever putting the taxpayers on the line to support an institution. should we read that as no more? >> it is important for us to orderly of our financial system. it is something i do not take like the dust likely. the other thing i want to focus on is the way our financial system came together that those institutional leaders coming together to do things to support the market and that is what i want to see continue to happen here. can you just tell us how this happened and how did we get there?
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beyond housing correction, take us back. how did we get here? accesst of all, we have that has built up for a long period of time. number two, we have an archaic financial structure. it came in place after the depression. it really needs to be rebuilt. then there are certain things like fannie and freddie. , what we arethat doing is living up to our responsibilities which were rooted in congressional charters. they go back and it has been perpetuated by washington. are focused on right now, i think is the future. the future is stability in our financial markets and working through this period and that is what we are doing. >> a future with what kind of regulation? >> there has got to be a balance
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between regulation and market discipline. you cannot rely on want to solve the problem but it will have to be streamlined and more effective regulation. there are major changes that we need and we also need major authorities to wind down financial institutions that are , are not federal institutions with deposit insurance. we need resolution that authorities to let us deal with situations like this. >> how concerned are you about commercial banks and what reassurance can you offer the checking account? our banking system is a safe and sound one. since the day when we have had federal deposit and insurance in place, we have added a depositor that has less than $100,000 in their account.
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people can be very confident about their accounts in our banking system. let me just make sure. ask twold like to things. can you explain more about the additional authorities that you think might be needed that will be additional regulation or legislation? in the intermediate longer term, we are going to need major regulatory change. i have spoken a lot about that. can use additional authorities to deal with financial institutions. that will take longer for congress to do. right now we are working with the tools that we have. what you are finding is the fed, the sec, the treasury, we are all working together and will do what is necessary to protect the system with the tools we have. secretary, this morning senator mccain promised in regards to the economy that they
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will never put america in this position again. the running mate sarah palin said when it comes to the economy, it is ineffective. what blame should the bush administration take for the economic system in the united states? >> we are in the middle of a presidential campaign. there going to let campaign's fight it out and make their cases to the american people. i am not focused on politics. i am not looking back, i am looking forward. this president is very committed to the stability of the financial system, it's important to the economy. the economy has not gotten better. hand thataying the has dealt me. i'm dealing what the consequences of things that were done many years ago. as i said with the case to
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freddie and fannie, that is congressional charters going back. that is what washington has put in place. what we are living with his dealing with our responsibilities. we are dealing with the situation as we see it and i'm focused on the stability and the importance to the american people. wattage you agree to support the bailout? march in theion in situation in the facts around bear stearns were very different to the situation we were looking at here in september. i never once considered that it was appropriate to put taxpayer money on the line with lehman brothers. i want to commend the financial institutions them around the world for coming together and really taking some very constructive, positive steps to make our market work here.
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>> on september 24, president bush addressed the nation in primetime, calling on congress to have a plan called tarp, which would expand the financial markets and stabilize the banking system. former pres. bush: this is an foraordinary period america's economy. many americans of felt anxiety about the finances and their future. i understand there were he and their frustration. we have seen triple digit swings in the stock market. major financial institutions have teetered on the edge of collapse and some have failed. as uncertainty has grown, many banks have restricted lending. reddit markets are frozen and families and businesses have found it harder to borrow money. we are in the midst of a serious financial crisis. the federal government is responding with decisive action.
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we boosted confidence in money market mutual funds and acted to prevent major investors from driving down stocks for their own personal gain. most importantly, my administration is working with congress to address the root cause behind much of the instability in our markets. reloaded tosets home mortgages have lost value during the housing decline. in the banks holding these assets have restricted credit. as a result, our entire economy is in danger. i propose that the federal government reduce the risk and supplythe assets urgently needed money so banks and other financial institutions can avoid collapse and resume lending. effort is not aimed at preserving any individual company or industry. it is aimed at preserving america's overall economy. it will help american consumers and businesses get credit to meet their daily needs and create jobs.
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it will help send a signal to markets around the world that america's financial system is back on track. i know many americans have questions tonight. how did we reach this point in our economy? how will the solution i propose work? and what does this mean for your financial future? these are good questions and they deserve clear answers. first, how did our economy reach this point? most economists agree that the problems we are witnessing today developed over a long period of time. for more than a decade a massive amount of money flowed into the united states from investors abroad because our country is an attractive and secure place to do business. large influx of money to u.s. banks and financial institutions, along with low interest rates, made it easier for americans to get credit. these developments allowed more families to world money for cars, homes and college tuition. some for the first time.
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entrepreneursore to get loans to create jobs. there were also some serious negative consequences, particularly in the housing market. with homet combined values would continue to rise. it led to access isn't bad decisions. lenders approve loans without carefully examining their ability to pay. many borrowers took out loans larger than they could afford, assuming they could sell or refinance their homes at a higher price later on. optimism about housing values led to a boom in home construction. the number of new houses exceeded a number of people willing to buy them. and with supply exceeding demand, housing prices failed. this created a problem. borrowers with adjustable rate mortgages planning to sell and refinance their homes at a higher price respect with homes
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worth less than expected. along with mortgage payments they could not afford. as a result, many mortgage holders began to default. these widespread defaults had effects far beyond the housing market. industry, mortgage home loans are often packaged together and converted into financial products called mortgage-backed securities. these securities were sold to investors around the world. many investors assume these securities were trustworthy. and asked a few questions about their actual value. two of the leading purchasers were fannie mae and freddie mac. because these companies were chartered by congress, many believed they were guaranteed by the federal government. them to borrow enormous sums of money, fueled the markets of questionable investments, and put our financial system at risk. the decline in the heisey -- in the housing market set off a domino effect across our economy. when home values to klein,
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borrowers defaulted on their mortgages and investors holding mortgage-backed securities again to incur serious losses. before long be securities became so unreliable that they were not being bought or sold. investment banks such as bear stearns and lehman brothers found themselves saddled with large amounts of assets they could not sell. they ran out of money needed to meet their immediate obligations . they face imminent collapse. other banks found themselves in severe financial trouble. these banks begin holding onto their money and lending dried up. in the news of the american financial system began grinding to a halt. with the situation becoming more precarious by the day, i faced a choice to step in with dramatic government action, or to stand back and allow irresponsible actions of some to undermine the financial security of all. i am a strong believer in free enterprise. my natural instinct is to oppose
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government intervention. i believe companies that make decisions should be allowed to go out of business. under normal circumstances i would have followed this course. but these are not normal circumstances. the market is not functioning properly. there has been a widespread loss of confidence and major sectors of america's financial system are at risk of setting down -- shutting down. the government's top economic investors warn immediate action slipngress, america could into a financial panic and a distressing scenario would unfold. more banks could fold including some in your community. the stock arc it would drop even more, which would reduce the value of your retirement account. the value of your home could plummet. falllosures would dramatically. you are fine it harder to get credit. more businesses would close their doors and millions of americans could lose their jobs.
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even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. ultimately, our country could experience a long and painful recession. fellow citizens, we must not let this happen. i appreciate the work of leaders from both parties and both houses of congress to address this problem. and to make improvements to the proposal my administration sent to them. there is a spirit of cooperation between democrats and republicans and maturing congress in this administration. i have invited senators mccain and senator obama to join progression of bull parties at the white house to mod to help speed our discussion towards a bipartisan bill. an economic rescue package would present a tough mode for many members of congress. it is difficult to pass a bill that commits so much of the taxpayers hard-earned money. i also understand the frustration of responsible
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americans who pay their mortgages on time, file their tax returns every april 15, and are reluctant to play the cost of excesses on wall street. but given the situation we are not passing a bill now would cost these americans much more later. asking howans are would a rescue plan worked. iser much discussion there widespread agreement on the principles such a plan would include. it wouldn't -- it would remove the risk of troubled assets, including mortgage-backed securities now causing the financial system. free banks resume the flow of credit to american families and businesses. any rescue plan should be designed to ensure that taxpayers are protected. it should welcome the participation of financial institutions large and small. it should make certain that failed executives do not receive a windfall from your tax dollars. should establish a bipartisan board to oversee the plans and
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implementation. it should be enacted as soon as possible. in close consultation with the treasury secretary, federal reserve chairman and sec chairman, i announced the plan on friday. first, the plan is big enough to solve a serious problem. under our proposal the federal government would put up to 700 billion taxpayer dollars on the line to purchase troubled assets that are clogging the financial system. in the short term this will free up banks to resume the flow of credit to american families and businesses, and this will help our economy grow. second, as markets have lost confidence in mortgage-backed securities, their prices have dropped sharply. the value of many of these assets will likely be higher than their current price because the vast majority of americans will ultimately pay off their mortgages. the government is the one the patientsith
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and resources to buy these assets at their current low prices and hold them until markets return to normal. when that happens, money will flow back to the treasury as these assets are sold. we expect that much, if not all of the tax dollars we invest will be paid back. 20 ninth 2008, the house of representatives failed to pass the trouble asset relief program, prompting the stock market crash of one and 700 points. on final passage came october 3 after the senate sent the bill to the house for a second vote. it is then senator and presidential candidate barack obama from the senate floor speaking on october 1. former pres. obama: the fact that we are even here voting on rescue our economy from greed and irresponsibility of wall street, and some in washington, is in outrage. it is an outrage to every american who works hard, pays their taxes and is doing the
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best every day to make a better life for themselves and their families. and understandably people are frustrated and angry. wall street's mistakes have put their tax dollars at risk and they should be. i am frustrated and angry as well. but while there is plenty of blame to go around, and many in washington and wall street who deserve it, all of us, all of us have a responsibility to solve this crisis because of the financial well-being of every single american. will be time to punish those who set this fire, but now is not the time to argue about how that happened, or the neighbor's sleeping in his bed, right now we want to put out the fire. now is the time for us to come together and do that.
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the house of representatives failed to act on monday. we saw the single largest decline in the stock market in two decades. over $1 trillion of wealth was lost by the time the markets closed. it was not just the wealth of a few ceos or wall street executives. the 401(k)s and retirement accounts of millions became smaller. the same pension funds, the government employees lost billions upon billions of dollars. hard-working americans who invested their nest egg to watch it grow side diminish and in some cases, disappear. while that the client was devastating, the consequences of the credit crisis will be even worse if we do not act now. it is a very dangerous situation. financial institutions across this country are afraid to lend money. if all that meant was a failure of a few banks in your, that
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would be one thing. that is not what it means. if we do not is act, it will be harder for americans to get a mortgage for their home, or loans they need to buy a car or send their children to college. willit means is businesses not be able to get the loans they need to open a new factory or make payroll. if they cannot make payroll on laidy, that workers are off on monday. if workers are laid off on monday then they cannot pay their hills were paid back their loans to somebody else. it will go on, and on, and on, rippling through the entire economy. potential he we could see thousands of businesses close. lost,ns of jobs could be and a long and painful recession could follow. in other words, this is not just a wall street crisis, is an american crisis. the american economy that needs this rescue plan.
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i understand completely why people would be skeptical when this president asked for a blank check to solve this problem. well, as was senator dodd and a whole bunch of us. that is why over a week ago i demanded that this plan include some specific proposal to .rotect taxpayers protection that the administration agreed to and thanks to the hard work of gray,r dodd and senator we here in the senate have agreed to and hopefully the house will agree to it as well. number one, i said we needed an independent board to provide oversight and accountability for how and where this money is spent every step of the way. number two, i said that we cannot help banks on wall street without helping the millions of innocent homeowners who are struggling to stay in their home. they deserve a plan as well. number three, i said i would not
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allow this plan to become a welfare program for wall street, whose greed and irresponsibility got us into this mess. finally, i said that the american taxpayers are financing dissolution and they have to be treated like investors. they should get every penny of their tax dollars back once the economy recovers. this last part is important because it has been the most misunderstood import the communicated part of this plan. this is not a planned to just hand over $700 billion of taxpayer money to a few banks. managed correctly, and that is an important if, we will hopefully get most or all of our money back and possibly even turn a profit on the government intervention. every penny of which will quote directly back to the american people. we fall short, we will limit a fiance financial institutions so that they can repay for the losses that they caused.
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let's acknowledge, even with all of these taxpayer protections this plan is not perfect. republicans in congress has legitimate concerns. some of my close colleagues, people i have the greatest respect for still have problems with it and they choose to vote against this bill and i think that we can respectfully disagree. i understand their frustration. i also know that many american share their concerns. , from myar that perspective, this is what we need to do right now to prevent the possibility of a crisis turning into a catastrophe. it is possible that if we did nothing, everything would turn out ok. there is a possibility that is true. there is no doubt that there may be other plans out there that had we had to, three or six months to develop, it might be more defined and serve our purposes. we do not have that kind of time.
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we cannot afford to take a risk that the economy of the united states of america two democrats and republicans who have opposed this plan, i say step up to the plate let's do what's right for the country at this time. the time to act is now. our program on the ten-year anniversary of the financial crisis continues with treasury secretary henry paulson and federal reserve chairman bernanke.e -- ben good morning. nation.is a strong andre a confident
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optimistic people. our confidence is born out of our long history of meeting every challenge we face. time and again our nation has faced adversity and time and again we have over, and risen to new heights. this time will be no different. today, there is a lack of confidence in our financial system. mustk of confidence that be conquered because it poses an enormous threat to our economy. investors are willing -- unwilling to lend to banks and healthy banks are unwilling to lend to each other. weeks, the american people have felt the effect of a frozen financial system. have seen reduced values in their retirement and investment accounts. they have worried about meeting payrolls and worried about losing their jobs. families all across our nation have gone through long days and long nights of concern about
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their financial situations today and their financial situations tomorrow. theirt confidence that most basic financial needs will be met, americans lose confidence in our economy and this is unacceptable. president bush has directed me to consider all necessary steps to restore confidence and stability to our financial markets and to get credit flowing again. 10 days ago congress gave important new tools to the treasury and federal reserve and fdic to meet the challenges posed by our economy. my colleagues and i are working creatively and collaboratively to deploy these tools and direct our powers at this disruption to our economy. today we are taking decisive actions to protect the u.s. economy. we regret having to take these actions. today's actions are not what we
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ever wanted to do. today's actions are what we must do to restore confidence in our financial system. announcing that the treasury will purchase equity stakes in a wide variety of banks and thrifts. government owning a stake in any private u.s. company is objectionable to most americans, me included. leavingrnative of businesses and consumers without access to financing is totally unacceptable. available,ing is consumers and businesses shrink tonding, which leads businesses cutting jobs and closing up shop. we must that outcome restore confidence in our financial system. the first step in that effort is a plan to make capital available
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on attractive terms to a broad array of banks and thrifts so they can provide credit to our economy. billion financial rescue package, treasury will make 250 billion in capital form ofe in the preferred stock. institutions that sell shares to the government will accept restrictions, including a crawl back position and a ban on golden parachutes during the. the treasury holds equity issue for the program. will noton, taxpayers only owns shares and should be paid back with a reasonable will also receive warrants for common shares in participating institutions. we expect all participating banks to continue and to strengthen their efforts to help struggling homeowners who can afford their homes avoid foreclosure.
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foreclosure has not only hurt the families who lose their bank homes that your neighborhoods, communities, and our economy as a whole. many banks have suffered significant losses during this. of market turmoil, many others have plenty of capital to get through the. you are not in position to wednesday -- to lend as widely as possible. our goal is to see an array of healthy institutions so preferred shares to treasury and raise climate capital so they can make more loans to businesses and consumers across the nation. at a time when events make the most daring investors are risk needs of our economy require that financial institutions not take this new toital to coordinate -- but to deploy.
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nine large institutions have agreed to participate. have agreed to sell preferred shares to the u.s. government on the same terms that will be available to a broad array of small and middle sized banks across our nation. these are healthy institutions and they have taken this step for the good of the u.s. economy. as these healthy institutions increase capital base, they will be able to increase funding to u.s. consumers and businesses. i am joined here this morning by chairman ben bernanke who has toen extraordinary action restore confidence in our financial system so that funds will flow through our banks to the u.s. economy. each of them will describe their actions. areined our actions extensive, powerful, and transformative. they demonstrate that the government will do what is necessary to restore it to where
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our economy depends and avoid where possible the failure of systemically important institution. --se three steps strengthen a significantly strengthen financial institutions and improve access to funding, enabling them to increase financing and consumption in business investment that drives economic growth. market participants here and around the world can take great confidence from the powerful action taken today in our broad commitment to help the global financial system. we are acting with unprecedented speed, taking unprecedented that we neverures thought would be necessary. they are necessary to get our economy back and secure the confidence of the future of our markets, our economy, and the economic well-being of all americans. thank you. i will turn the podium over to
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chairman ben bernanke. mr. bernanke: i want to express my thanks to my colleagues for what has been an extraordinary collaboration. challengens know, the is evident in the economy are large and complex. i believe that the steps taken today will help us overcome them. our strategy will continue to evolve and be refined as we adapt to new developments and inevitable setbacks. we will not stand down until we have achieved our goals of repairing and reforming our financial system and thereby restoring prosperity to our economy. year, the federal reserve has actively used its powers and authorities to help the economy through this difficult time.
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the worldnks around have consulted closely and cooperated in unprecedented ways to reduce strains in our financial markets and bolster our economies. we will continue to do so. however, clearly the time had come for a more comprehensive and broad-based solutions. history teaches us that government engagement in times of severe crisis often arrives very late, usually at a point where most financial institutions are insolvent. waiting too long to act has usually led to much later direct cost of intervention and more portly magnifies the painful effect of financial form oil -- turmoil on businesses. fortunately, the congress and administration have acted in a time of when the great majority of financial institutions, though stressed by highly volatile and difficult market remain capable in
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fulfilling critical functions of providing credit to our economy. the congress is prompt and decisive action in passing the financial rescue legislation made possible the critical steps we are announcing this morning. i also find it heartening that we are not seeing just the national but a global response to the crisis commensurate with its global nature. weekend, the ministers and central bankers of the g7 countries announced a set of principles and comprehensive approach to dealing with the crisis. the steps we're taking today are fully consistent with those principles. as in all past crisis is, the root of the problem is a loss of confidence by investors and the public and the strength of key financial institutions and has had cascading and unwelcome defects on availability of credit and value of saving. aimed atns today are
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restoring confidence in our institutions and markets to repair the capacity and meet credit needs of american households and businesses. equity purchase program will strengthen financial institutions capacity and willingness to lend. of guarantee of senior debt depository institutions and holding companies or restore confidence of the institutions creditors and reinvigorate the crucial bank lending markets. additionally, the federal reserve is pressing forward with its facility to provide a broad backstop in the commercial paper market, so vital to the functioning of our businesses. policy makers here and around the globe has taken a series of extraordinary steps. americans can be confident that every resources being brought to bear. technical expertise, economic analysis, and political leadership. i am not suggesting that the way forward will be easy.
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i strongly believe that the application of these tools, together with the underlying vitality and resilience of american economy will help to restore confidence to our financial system and place our economy back on a path to healthy and vigorous growth. thank you. >> former new york federal reserve bank president jim geithner or was appointed to serve as treasury secretary during the obama in administration. he announced a new effort and at stabilizing the financial markets. following his remarks we will show you an event with secretary geithner. last fall as the crisis intensified, congress acted quickly and courageously to give your government the emergency authority to help contain the damage. your government used that authority to help pull the financial system back from the edge of catastrophic failure. those actions were absolutely
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essential. they were inadequate though. the force of government support was not comprehensive or quick enough to understand acupressure brought on by a weakening economy. payerge amounts of tax assistance provided to the same institutions that help cross -- cause the crisis added to it. this turned to anger. boards of directors at some institutions continue to award rich compensation packages and lavish perks to senior executives. our challenge is much greater today. the american people have lost faith in the leaders of some of our financial institutions and they are skeptical that their government has used taxpayer money in ways that will benefit them. this has to change. again, todit flowing restore confidence in our markets, and to restore the faith of the american people we are going to fundamentally reshape our program to repair the financial system. our work will be guided by the
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lessons of the last 18 months and by the lessons of financial crises throughout history. the basic principles that will shape our strategy are the following. we believe that policy has to be comprehensive and forceful. risking greater cost in a gradualism than there is in aggressive action. bebelieve that action has to sustained until recovery is firmly established. the 1930's, ay in japan in the 1990's, and in many cases around the world, crises lasted longer and cost greater damage because government apply the brakes too early. --cannot make that a stake mistake. we believe access to public support is a privilege, not a right. when our government provide support to banks, it is not to benefit banks, it is for businesses and families who depend on banks. is for the benefit of the country. government support has to come the a strong conditions to
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taxpayer and with transparency to allow the american people to see the impact of those investments. we believe in our policies must be designed to mobilize and leverage private capital. not to supplant or discourage private capital. when government investment is necessary, it should be replaced with private capital as soon as that is possible. we believe that the united states has to send a clear and consistent message that we will act to defend catastrophic failure of financial institutions that would damage the broader economy. these principles, we will replace the current program with a new financial stability plan designed to stabilize and --air the system and to reap support the flow of credit necessary for recovery. this new plan will take a comprehensive approach. treasury,ment of federal reserve, fdic, and all the federal agencies in our country will bring the full force of the united states government to strengthen our financial system so we get the
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economy back on track. these agencies, each have different authorities, instruments, and responsibilities, but we are one government serving the american people. we will work together as one. with a newgins framework of oversight and governance on all aspects of our financial stability plan. the american people will be able to see where their tax dollars are going and the return on their governments investment. they will be able to see whether the conditions placed on banks are being met and enforced. they will be able to see where the boards of directors are being responsible with taxpayer dollars and how they are compensating their executives. they will be able to see how these actions are affecting the overall flow of funding and cost of borrowing. these new requirements, which will be available on a new website, will give the american people the transparency they deserve. these steps build on things we
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have already done. we have acted to ensure the integrity of the process that provides access to government support so that it is independent of influence from lobbyists and politics. we have committed to provide the american people with the information on how money is spent and under what conditions by posting contracts on the internet. importantly, we have outlined conditions on executive compensation. we arehis framework, establishing three new programs to clean up and strengthen the nations banks to bring in private capital to restart lending, and to go around the banking system directly to the markets and consumers and businesses depend on. we describe each of the steps. first, we are going to require banking institutions to go through a carefully designed comprehensive stress test. this borrows the medical term, we want balance sheets cleaner and stronger, we will help this process by providing a new program of capital support for
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those institutions that need it. will bring we together agencies with authority over our nation's banks and initiate a more consistent, abouttic assessment exposures on bank balance sheet sheets and introduce new improve disclosures. those institutions that need additional capital will be able to access a new funding mechanism that uses capital from the treasury as a bridge to private capital. the capital will come with conditions to help ensure that every dollar of taxpayer assistance is being used to generate a level of lending greater than what would have been possible in the absence of government support. withassistance will come terms that should encourage institutions to replace public assistance with private capital as soon as that is possible. the treasury's investments in these institutions will be placed in a new financial stability trust. will work together
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with the federal reserve, fdic, and private sector to establish a public-private investment front. as will provide government capital and government financing to help leverage private capital to help get private markets working again. this will be targeted to the legacy loans and assets that are bargaining many financial institutions by providing financing that private markets cannot now provide. this will help start a market for the real estate related absence that are at the center of this crisis. our objective is to use private capital and private asset managers to help provide a market mechanism to evaluate these assets. we are exploring a range of different structures and will seek input from the public as we designed this program. shouldeve this program ultimately provide up to $1 trillion in financing capacity and we tend to start it on a scale of $500 billion and will expand it based on what works. the third piece of this program, working jointly with the federal
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reserve, we are prepared to commit up to $1 trillion to support consumer and business lending. this will help kickstart the secondary lending markets, to bring down borrowing costs, and to help get credit flowing again. in our financial system, roughly 40% of consumer lending has been made available because people buy loans, put them together, and sell them. because this has frozen up, no plan will be successful unless it helps restart the securitization markets for sound loans made to consumers and businesses large and small. program will be built on the federal reserve's term asset securities loan stability. it was announced last november with capital from the treasury and financing from federal reserve. we have agreed to expand this program to target the markets critical for small business lending, for student loans, consumer and finance, and for commercial loan mortgages.
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because small businesses are so important to our economy, we will take additional steps to make it easier for them to get credit from unity banks and large banks. by increasing the federally guaranteed portion of small business association administration loans and by to execute power loan approvals, we believe we can turn around the dramatic decline in lending we have seen in recent months. finally, and this is critically important, we will launch a comprehensive housing program. millions of americans have lost their bank homes and millions more live with the risk that they will be unable to meet payments or refinance their mortgages. many of these families borrowed beyond their means. many others fell victim to terrible lending practices that -- exposed,plodes overextended, and with no way to refinance. homeowners across the country are seeing values fall because of force as they did not create and cannot control.
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this crisis in housing has had devastating consequences. our government should have moved more forcefully to help contain the damage. as housing prices fall, demand for housing will increase and conditions will ultimately find a new balance. you're seeing that happen in parts of the country today. now we risk and intensifying spiral in which lenders foreclosed, pushing house prices lower and making it harder for all families to refinance. -- the president has asked his economic team to come together with a plan to address this crisis and we will announce the details in the next few weeks. our focus will be on it using the full resources of the government to help bring down mortgage payments and to help reduce mortgage interest rates. we will do this with a substantial commitment of resources already authorized by congress under the emergency economic stabilization act. looking forward, president obama is committed to moving quickly to reform our entire system of
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financial regulation and so we never again face a crisis of this severity. we are consulting closely with chairman bonnie franken the house, and their colleagues on both sides of the aisle on the broad outlines of a comprehensive program of reforms. the president -- we will start working closely with the world's leading economies on a set of broader reforms to the international financial system in preparation for the g20 summit in london on april 22. the success of this plan, the success of our financial stability plan is going to require an unprecedented level of cooperation here in the united states and around the world. federal reserve chairman ben bernanke, fdic chair sheila ,air, john dugan, and john rich i want to thank them for helping shape this plan and i want to thank them for their commitment
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to making it work. this program will require a substantial and sustained commitment of public resources. congress has are the authorized substantial resources for this effort and we are going to use those resources as carefully and effectively as possible. we will consult closely with the congress as we move toward and we are going to work together to make sure we have the resources and authority to make this work. this week i'm going to travel to meet with the g7 finance ministers and central governors in italy, there we will start the process of working with international partners and make sure we are working together to strengthen the global economy and help repair the global financial system. we will work closely with the imf and world bank so they can deploy resources quickly to help countries around the world that are most at risk from this crisis. many of the programs i discussed involve very large numbers. it is important to recognize that these programs involve loans and investments with terms
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and conditions that will help protect the taxpayer and help compensate the government for the risk we are taking. because of these terms and conditions, the risk to the taxpayers will be less than he had nine -- headline numbers. we are designing these programs to achieve the largest benefits in terms of supporting recovery at the least cost to the taxpayer. we take that obligation extremely seriously. i want to be candid. this strategy will cost money, it will involve risk, and it will take time. maybe,ly as it has ever we know the cost of a complete collapse of our financial system would be incalculable for families and businesses and for our nation. are going to have to adapt our programs as conditions change. we will have to try things we have never tried before. we will make mistakes. we will go through periods in which things get worse and
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progress is uneven or interrupted. we will be guided by these core principles of transparency and accountability, dedicated to objective of restoring credit to families and businesses, and committed to moving our nation towards economic recovery that is as swift and widespread as possible. more complexllenge than any challenge our financial system has faced. it will require new programs and extraordinary action. and his entire administration are committed to seeing it through because we know how directly the future of our economy depends on it. thank you very much and thank you for coming. [applause] [captions copyright national cable satellite corp. 2018] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] watching a batch from 2008 financial crisis featuring treasury secretary henry paulson, the reserve care
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-- chair ben bernanke, and tim geithner. they sat down recently for a discussion with the new york times financial columnist. >> ladies and gentlemen, good morning and welcome to the brookings institution. i would like to welcome you to be here today for a very important event hosted by our hutchins center for fiscal and monetary policy. the hutchins center's mission is

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