THE WHITE HOUSE

Office of the Press Secretary

__________________________________________________________________________________________________________________

March 30, 2009

Remarks of President Barack Obama—As prepared for delivery

Announcement on the Auto Industry

March 30, 2009

Washington, DC

One of the challenges we have confronted from the beginning of this administration is what to do about the state of our struggling auto industry. In recent months, my Auto Task Force has been reviewing requests by General Motors and Chrysler for additional government assistance as well as plans developed by each of these companies to restructure, modernize, and make themselves more competitive. Our evaluation is now complete. But before I lay out what needs to be done going forward, I want to say a few words about where we are, and what led us to this point.

It will come as a surprise to no one that some of the Americans who have suffered most during this recession have been those in the auto industry and those working for companies that support it. Over the past year, our auto industry has shed over 400,000 jobs, not only at the plants that produce cars but at the businesses that produce the parts that go into them, and the dealers that sell and repair them. More than one in ten Michigan residents is out of work – the most of any state. And towns and cities across the great Midwest have watched unemployment climb higher than it’s been in decades.

The pain being felt in places that rely on our auto industry is not the fault of our workers, who labor tirelessly and desperately want to see their companies succeed. And it is not the fault of all the families and communities that supported manufacturing plants throughout the generations. Rather, it is a failure of leadership – from Washington to Detroit – that led our auto companies to this point.

Year after year, decade after decade, we have seen problems papered-over and tough choices kicked down the road, even as foreign competitors outpaced us. Well, we have reached the end of that road. And we, as a nation, cannot afford to shirk responsibility any longer. Now is the time to confront our problems head-on and do what’s necessary to solve them.

We cannot, we must not, and we will not let our auto industry simply vanish. This industry is, like no other, an emblem of the American spirit; a once and future symbol of America ’s success. It is what helped build the middle class and sustained it throughout the 20^th century. It is a source of deep pride for the generations of American workers whose hard work and imagination led to some of the finest cars the world has ever known. It is a pillar of our economy that has held up the dreams of millions of our people. But we also cannot continue to excuse poor decisions. And we cannot make the survival of our auto industry dependent on an unending flow of tax dollars. These companies – and this industry – must ultimately stand on their own, not as wards of the state.

That is why the federal government provided General Motors and Chrysler with emergency loans to prevent their sudden collapse at the end of last year – only on the condition that they would develop plans to restructure. In keeping with that agreement, each company has submitted a plan to restructure. But after careful analysis, we have determined that neither goes far enough to warrant the substantial new investments that these companies are requesting. And so today, I am announcing that my administration will offer GM and Chrysler a limited period of time to work with creditors, unions, and other stakeholders to fundamentally restructure in a way that would justify an investment of additional tax dollars; a period during which they must produce plans that would give the American people confidence in their long-term prospects for success.

What we are asking is difficult. It will require hard choices by companies. It will require unions and workers who have already made painful concessions to make even more. It will require creditors to recognize that they cannot hold out for the prospect of endless government bailouts. Only then can we ask American taxpayers who have already put up so much of their hard-earned money to once more invest in a revitalized auto industry. But I am confident that if we are each willing to do our part, then this restructuring, as painful as it will be in the short-term, will mark not an end, but a new beginning for a great American industry; an auto industry that is once more out-competing the world; a 21^st century auto industry that is creating new jobs, unleashing new prosperity, and manufacturing the fuel-efficient cars and trucks that will carry us toward an energy independent future. I am absolutely committed to working with Congress and the auto companies to meet one goal: the United States of America will lead the world in building the next generation of clean cars.

No one can deny that our auto industry has made meaningful progress in recent years. Some of the cars made by American workers are now outperforming the best cars made abroad. In 2008, the North American Car of the Year was a GM. This year, Buick tied for first place as the most reliable car in the world. And our companies are investing in breakthrough technologies that hold the promise of new vehicles that will help America end its addiction to foreign oil.

But our auto industry is not moving in the right direction fast enough to succeed. So let me discuss what measures need to be taken by each of the auto companies requesting taxpayer assistance, starting with General Motors. While GM has made a good faith effort to restructure over the past several months, the plan they have put forward is, in its current form, not strong enough. However, after broad consultations with a range of industry experts and financial advisors, I’m confident that GM can rise again, provided that it undergoes a fundamental restructuring. As an initial step, GM is announcing today that Rick Wagoner is stepping aside as Chairman and CEO. This is not meant as a condemnation of Mr. Wagoner, who has devoted his life to this company; rather, it’s a recognition that it will take a new vision and new direction to create the GM of the future.

In this context, my administration will offer General Motors adequate working capital over the next 60 days. During this time, my team will be working closely with GM to produce a better business plan. They must ask themselves: have they consolidated enough unprofitable brands? Have they cleaned up their balance sheets or are they still saddled with so much debt that they can’t make future investments? And above all, have they created a credible model for how to not only survive, but succeed in this competitive global market? Let me be clear: the United States government has no interest or intention of running GM. What we are interested in is giving GM an opportunity to finally make those much-needed changes that will let them emerge from this crisis a stronger and more competitive company.

The situation at Chrysler is more challenging. It is with deep reluctance but also a clear-eyed recognition of the facts that we have determined, after a careful review, that Chrysler needs a partner to remain viable. Recently, Chrysler reached out and found what could be a potential partner – the international car company Fiat, where the current management team has executed an impressive turnaround. Fiat is prepared to transfer its cutting-edge technology to Chrysler and, after working closely with my team, has committed to building new fuel-efficient cars and engines here in America . We have also secured an agreement that will ensure that Chrysler repays taxpayers for any new investments that are made before Fiat is allowed to take a majority ownership stake in Chrysler.

Still, such a deal would require an additional investment of tax dollars, and there are a number of hurdles that must be overcome to make it work. I am committed to doing all I can to see if a deal can be struck in a way that upholds the interests of American taxpayers. That is why we will give Chrysler and Fiat 30 days to overcome these hurdles and reach a final agreement – and we will provide Chrysler with adequate capital to continue operating during that time. If they are able to come to a sound agreement that protects American taxpayers, we will consider lending up to $6 billion to help their plan succeed. But if they and their stakeholders are unable to reach such an agreement, and in the absence of any other viable partnership, we will not be able to justify investing additional tax dollar to keep Chrysler in business.

While Chrysler and GM are very different companies with very different paths forward, both need a fresh start to implement the restructuring plans they develop. That may mean using our bankruptcy code as a mechanism to help them restructure quickly and emerge stronger. Now, I know that when people even hear the word “bankruptcy” it can be a bit unsettling, so let me explain what I mean. What I am talking about is using our existing legal structure as a tool that, with the backing of the U.S. government, can make it easier for General Motors and Chrysler to quickly clear away old debts that are weighing them down so they can get back on their feet and onto a path to success; a tool that we can use, even as workers are staying on the job building cars that are being sold. What I am not talking about is a process where a company is broken up, sold off, and no longer exists. And what I am not talking about is having a company stuck in court for years, unable to get out.

It is my hope that the steps I am announcing today will go a long way toward answering many of the questions people may have about the future of GM and Chrysler. But just in case there are still nagging doubts, let me say it as plainly as I can – if you buy a car from Chrysler or General Motors, you will be able to get your car serviced and repaired, just like always. Your warrantee will be safe. In fact, it will be safer than it’s ever been. Because starting today, the United States government will stand behind your warrantee.

But we must also recognize that the difficulties facing this industry are due in no small part to the weakness in our economy. Therefore, to support demand for auto sales during this period, I’m directing my team to take several steps. First, we will ensure that Recovery Act funds to purchase government cars go out as quickly as possible and work through the budget process to accelerate other federal fleet purchases as well. Second, we will accelerate our efforts through the Treasury Department’s Consumer and Business Lending Initiative. And we are working intensively with the auto finance companies to increase the flow of credit to both consumers and dealers. Third, the IRS is today launching a campaign to alert consumers of a new tax benefit for auto purchases made between February 16th and the end of this year – if you buy a car anytime this year, you may be able to deduct the cost of any sales and excise taxes. This provision could save families hundreds of dollars and lead to as many as 100,000 new car sales.

Finally, several members of Congress have proposed an even more ambitious incentive program to increase car sales while modernizing our auto fleet. Such fleet modernization programs, which provide a generous credit to consumers who turn in old, less fuel efficient cars and purchase cleaner cars have been successful in boosting auto sales in a number of European countries. I want to work with Congress to identify parts of the Recovery Act that could be trimmed to fund such a program, and make it retroactive starting today.

Let there be no doubt, it will take an unprecedented effort on all our parts – from the halls of Congress to the boardroom, from the union hall to the factory floor – to see the auto industry through these difficult times. But I want every American to know that the path I am laying out today is our best chance to make sure the cars of the future are built where they’ve always been built – in Detroit and across the Midwest; to make America’s auto industry in the 21^st century what it was in the 20^th century – unsurpassed around the world. This path has been chosen after consulting with other governments that are facing this crisis. We have worked closely with the Government of Canada on GM and Chrysler, as both companies have extensive operations there. The Canadian Government has indicated its support for our approach and will be announcing their specific commitments later today.

While the steps I am talking about will have an impact on all Americans, some of our fellow citizens will be affected more than any others. And so I’d like to speak directly to all those men and women who work in the auto industry or live in the countless communities that depend on it. Many of you have been going through tough times for longer than you’d care to remember. And I will not pretend the tough times are over. I cannot promise you there isn’t more pain to come. But what I can promise you is this – I will fight for you. You are the reason I am here today. I got my start fighting for working families in the shadows of a shuttered steel plant and I wake up every single day asking myself what I can do to give you and working people all across this country a fair shot at the American dream.

When a community is struck by a natural disaster, the nation responds to put it back on its feet. While the storm that’s hit our auto towns is not a tornado or a hurricane, the damage is clear, and we must respond. That is why today, I am designating a new Director of Recovery for Auto Communities and Workers to cut through red tape and ensure that the full resources of our federal government are leveraged to assist the workers, communities, and regions that rely on our auto industry. Edward Montgomery, a former Deputy Labor Secretary, has agreed to serve in this role. Together with Labor Secretary Solis and my Auto Task Force, Ed will help provide support to auto workers and their families, and open up opportunity in manufacturing communities. Michigan , Ohio , Indiana , and every other state that relies on the auto industry will have a strong advocate in Ed. He will direct a comprehensive effort that will help lift up the hardest hit areas by using the unprecedented levels of funding available in our Recovery Act and throughout our government to create new manufacturing jobs and new businesses where they are needed most – in your communities. And he will also lead an effort to identify new initiatives we may need to help support your communities going forward.

These efforts, as essential as they are, will not make everything better overnight. There are jobs that cannot be saved. There are plants that will not reopen. And there is little I can say that can subdue the anger or ease the frustration of all whose livelihoods hang in the balance because of failures that weren’t theirs.

But there is something I want everyone to remember. Remember that it is precisely in times like these – in moments of trial, and moments of hardship – that Americans rediscover the ingenuity and resilience that makes us who we are. That made the auto industry what it once was. That sent those first mass-produced cars rolling off assembly lines. That built an arsenal of democracy that propelled America to victory in the Second World War. And that powered our economic prowess in the first American century.

Because I know that if we can tap into that same ingenuity and resilience right now; if we can carry one another through this difficult time and do what must be done; then we will look back and say that this was the moment when America’s auto industry shed its old ways, marched into the future, and remade itself, once more, into an engine of opportunity and prosperity, not only in Detroit, and not only in our Midwest, but all across America.

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GM CEO Wagoner To Step Down at

White House Request

DETROIT – General Motors Corp. Chairman and CEO Rick Wagoner will step down immediately at the request of the White House, administration officials said Sunday. The news comes as President Obama prepares to unveil additional restructuring efforts designed to save the domestic auto industry.

The officials asked not to be identified because details of the restructuring plan have not yet been made public. On Monday, Obama is to announce plans to restructure GM and Chrysler LLC in exchange for additional government loans. The companies have been living on $17.4 billion in government aid and have requested $21.6 billion more.

Wagoner's departure indicates that more management changes may be part of the deal. Wagoner, 56, has repeatedly said he felt it was better for the company if he led it through the crisis, but he has faced sharp criticism on Capitol Hill for what many lawmakers regard as years of missteps, mistakes and arrogance by the Big Three automakers.

Wagoner joined GM in 1977, serving in several capacities in the U.S., Brazil and Europe. He became president and chief executive in 2000 and has served as chairman and CEO since May 2003.

Obama said Sunday that GM and Chrysler and all those with a stake in their survival need to take more hard steps to help the struggling automakers restructure for the future. In an interview with CBS' "Face the Nation" broadcast Sunday, Obama said the companies must do more to receive additional financial aid from the government.

"They're not there yet," he said.

A person familiar with Obama's plans said last week they would go deeper than what the Bush administration demanded when it approved the initial loans last year.

Wagoner, in an interview with The Associated Press in December, had declined to speculate on suggestions from some members of Congress that GM's leadership team should step down as part of any rescue package.

"I'm doing what I do because it adds a lot of value to the company," Wagoner said in a Dec. 4 interview as GM sought federal aid from the Bush administration. "It's not clear to me that experience in this industry should be viewed as a negative but I'm going to do what's right for the company and I'll do it in consultation with the (GM) board (of directors)."

Wagoner has been credited by auto industry analysts with doing more to restructure the giant, bureaucratic automaker than any other executive. But given that he has been at GM's helm for so long, many of his critics say he moved far too slowly to take on the United Auto Workers and shrink the company as its market share tumbled.

While GM has improved its cars in the last two years, critics say the company relied for too long on sales of pickup trucks and sport utility vehicles for its profits and was unprepared for a drastic market shift when gasoline prices hit $4 per gallon last year.

During the Congressional debate over whether to give GM and Chrysler loans last year, many lawmakers criticized Wagoner, including Sen. Chris Dodd, D-Conn., chairman of the Banking Committee.

He accused automakers' top management of having a "head-in-the-sand" approach to problems and said Wagoner "has to move on" as part of a government-run restructuring that should be a condition of financial life support for the auto industry.

___

Associated Press Writer Ken Thomas reported from Washington, D.C.

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THE WHITE HOUSE

Office of the Press Secretary

______________________________________________________________________________________________ March 27, 2009

REMARKS BY THE PRESIDENT

ON A NEW STRATEGY FOR AFGHANISTAN AND PAKISTAN

Room 450

Dwight D. Eisenhower Executive Office Building

9:40 A.M. EDT

THE PRESIDENT: Good morning. Please be seated.

Before I begin today, let me acknowledge, first of all, Your Excellencies, all the ambassadors who are in attendance. I also want to acknowledge both the civilians and our military personnel that are about to be deployed to the region. And I am very grateful to all of you for your extraordinary work.

I want to acknowledge General David Petraeus, who's here, and has been doing an outstanding job at CENTCOM, and we appreciate him. I want to thank Bruce Reidel -- Bruce is down at the end here -- who has worked extensively on our strategic review. I want to acknowledge Karl Eikenberry, who's here, and is our Ambassador-designate to Afghanistan . And to my national security team, thanks for their outstanding work.

Today, I'm announcing a comprehensive, new strategy for Afghanistan and Pakistan . And this marks the conclusion of a careful policy review, led by Bruce, that I ordered as soon as I took office. My administration has heard from our military commanders, as well as our diplomats. We've consulted with the Afghan and Pakistani governments, with our partners and our NATO allies, and with other donors and international organizations. We've also worked closely with members of Congress here at home. And now I’d like to speak clearly and candidly to the American people.

The situation is increasingly perilous. It's been more than seven years since the Taliban was removed from power, yet war rages on, and insurgents control parts of Afghanistan and Pakistan . Attacks against our troops, our NATO allies, and the Afghan government have risen steadily. And most painfully, 2008 was the deadliest year of the war for American forces.

Many people in the United States -- and many in partner countries that have sacrificed so much -- have a simple question: What is our purpose in Afghanistan ? After so many years, they ask, why do our men and women still fight and die there? And they deserve a straightforward answer.

So let me be clear: Al Qaeda and its allies -- the terrorists who planned and supported the 9/11 attacks -- are in Pakistan and Afghanistan . Multiple intelligence estimates have warned that al Qaeda is actively planning attacks on the United States homeland from its safe haven in Pakistan . And if the Afghan government falls to the Taliban -- or allows al Qaeda to go unchallenged -- that country will again be a base for terrorists who want to kill as many of our people as they possibly can.

The future of Afghanistan is inextricably linked to the future of its neighbor, Pakistan . In the nearly eight years since 9/11, al Qaeda and its extremist allies have moved across the border to the remote areas of the Pakistani frontier. This almost certainly includes al Qaeda's leadership: Osama bin Laden and Ayman al-Zawahiri. They have used this mountainous terrain as a safe haven to hide, to train terrorists, to communicate with followers, to plot attacks, and to send fighters to support the insurgency in Afghanistan . For the American people, this border region has become the most dangerous place in the world.

But this is not simply an American problem -- far from it. It is, instead, an international security challenge of the highest order. Terrorist attacks in London and Bali were tied to al Qaeda and its allies in Pakistan , as were attacks in North Africa and the Middle East, in Islamabad and in Kabul . If there is a major attack on an Asian, European, or African city, it, too, is likely to have ties to al Qaeda's leadership in Pakistan . The safety of people around the world is at stake.

For the Afghan people, a return to Taliban rule would condemn their country to brutal governance, international isolation, a paralyzed economy, and the denial of basic human rights to the Afghan people -- especially women and girls. The return in force of al Qaeda terrorists who would accompany the core Taliban leadership would cast Afghanistan under the shadow of perpetual violence.

As President, my greatest responsibility is to protect the American people. We are not in Afghanistan to control that country or to dictate its future. We are in Afghanistan to confront a common enemy that threatens the United States , our friends and our allies, and the people of Afghanistan and Pakistan who have suffered the most at the hands of violent extremists.

So I want the American people to understand that we have a clear and focused goal: to disrupt, dismantle and defeat al Qaeda in Pakistan and Afghanistan , and to prevent their return to either country in the future. That's the goal that must be achieved. That is a cause that could not be more just. And to the terrorists who oppose us, my message is the same: We will defeat you.

To achieve our goals, we need a stronger, smarter and comprehensive strategy. To focus on the greatest threat to our people, America must no longer deny resources to Afghanistan because of the war in Iraq . To enhance the military, governance and economic capacity of Afghanistan and Pakistan , we have to marshal international support. And to defeat an enemy that heeds no borders or laws of war, we must recognize the fundamental connection between the future of Afghanistan and Pakistan -- which is why I've appointed Ambassador Richard Holbrooke, who is here, to serve as Special Representative for both countries, and to work closely with General Petraeus to integrate our civilian and military efforts.

Let me start by addressing the way forward in Pakistan .

The United States has great respect for the Pakistani people. They have a rich history and have struggled against long odds to sustain their democracy. The people of Pakistan want the same things that we want: an end to terror, access to basic services, the opportunity to live their dreams, and the security that can only come with the rule of law. The single greatest threat to that future comes from al Qaeda and their extremist allies, and that is why we must stand together.

The terrorists within Pakistan 's borders are not simply enemies of America or Afghanistan -- they are a grave and urgent danger to the people of Pakistan . Al Qaeda and other violent extremists have killed several thousand Pakistanis since 9/11. They've killed many Pakistani soldiers and police. They assassinated Benazir Bhutto. They've blown up buildings, derailed foreign investment, and threatened the stability of the state. So make no mistake: al Qaeda and its extremist allies are a cancer that risks killing Pakistan from within.

It's important for the American people to understand that Pakistan needs our help in going after al Qaeda. This is no simple task. The tribal regions are vast, they are rugged, and they are often ungoverned. And that's why we must focus our military assistance on the tools, training and support that Pakistan needs to root out the terrorists. And after years of mixed results, we will not, and cannot, provide a blank check.

Pakistan must demonstrate its commitment to rooting out al Qaeda and the violent extremists within its borders. And we will insist that action be taken -- one way or another -- when we have intelligence about high-level terrorist targets.

The government's ability to destroy these safe havens is tied to its own strength and security. To help Pakistan weather the economic crisis, we must continue to work with the IMF, the World Bank and other international partners. To lessen tensions between two nuclear-armed nations that too often teeter on the edge of escalation and confrontation, we must pursue constructive diplomacy with both India and Pakistan . To avoid the mistakes of the past, we must make clear that our relationship with Pakistan is grounded in support for Pakistan 's democratic institutions and the Pakistani people. And to demonstrate through deeds as well as words a commitment that is enduring, we must stand for lasting opportunity.

A campaign against extremism will not succeed with bullets or bombs alone. Al Qaeda's offers the people of Pakistan nothing but destruction. We stand for something different. So today, I am calling upon Congress to pass a bipartisan bill co-sponsored by John Kerry and Richard Lugar that authorizes $1.5 billion in direct support to the Pakistani people every year over the next five years -- resources that will build schools and roads and hospitals, and strengthen Pakistan 's democracy. I'm also calling on Congress to pass a bipartisan bill co-sponsored by Maria Cantwell, Chris Van Hollen and Peter Hoekstra that creates opportunity zones in the border regions to develop the economy and bring hope to places plagued with violence. And we will ask our friends and allies to do their part -- including at the donors conference in Tokyo next month.

I don't ask for this support lightly. These are challenging times. Resources are stretched. But the American people must understand that this is a down payment on our own future -- because the security of America and Pakistan is shared. Pakistan 's government must be a stronger partner in destroying these safe havens, and we must isolate al Qaeda from the Pakistani people. And these steps in Pakistan are also indispensable to our efforts in Afghanistan , which will see no end to violence if insurgents move freely back and forth across the border.

Security demands a new sense of shared responsibility. And that's why we will launch a standing, trilateral dialogue among the United States , Afghanistan and Pakistan . Our nations will meet regularly, with Secretaries Clinton and Secretary Gates leading our effort. Together, we must enhance intelligence sharing and military cooperation along the border, while addressing issues of common concern like trade, energy, and economic development.

This is just one part of a comprehensive strategy to prevent Afghanistan from becoming the al Qaeda safe haven that it was before 9/11. To succeed, we and our friends and allies must reverse the Taliban's gains, and promote a more capable and accountable Afghan government.

Our troops have fought bravely against a ruthless enemy. Our civilians have made great sacrifices. Our allies have borne a heavy burden. Afghans have suffered and sacrificed for their future. But for six years, Afghanistan has been denied the resources that it demands because of the war in Iraq . Now, we must make a commitment that can accomplish our goals.

I've already ordered the deployment of 17,000 troops that had been requested by General McKiernan for many months. These soldiers and Marines will take the fight to the Taliban in the south and the east, and give us a greater capacity to partner with Afghan security forces and to go after insurgents along the border. This push will also help provide security in advance of the important presidential elections in Afghanistan in August.

At the same time, we will shift the emphasis of our mission to training and increasing the size of Afghan security forces, so that they can eventually take the lead in securing their country. That's how we will prepare Afghans to take responsibility for their security, and how we will ultimately be able to bring our own troops home.

For three years, our commanders have been clear about the resources they need for training. And those resources have been denied because of the war in Iraq . Now, that will change. The additional troops that we deployed have already increased our training capacity. And later this spring we will deploy approximately 4,000 U.S. troops to train Afghan security forces. For the first time, this will truly resource our effort to train and support the Afghan army and police. Every American unit in Afghanistan will be partnered with an Afghan unit, and we will seek additional trainers from our NATO allies to ensure that every Afghan unit has a coalition partner. We will accelerate our efforts to build an Afghan army of 134,000 and a police force of 82,000 so that we can meet these goals by 2011 -- and increases in Afghan forces may very well be needed as our plans to turn over security responsibility to the Afghans go forward.

This push must be joined by a dramatic increase in our civilian effort. Afghanistan has an elected government, but it is undermined by corruption and has difficulty delivering basic services to its people. The economy is undercut by a booming narcotics trade that encourages criminality and funds the insurgency. The people of Afghanistan seek the promise of a better future. Yet once again, we've seen the hope of a new day darkened by violence and uncertainty.

So to advance security, opportunity and justice -- not just in Kabul , but from the bottom up in the provinces -- we need agricultural specialists and educators, engineers and lawyers. That's how we can help the Afghan government serve its people and develop an economy that isn't dominated by illicit drugs. And that's why I'm ordering a substantial increase in our civilians on the ground. That's also why we must seek civilian support from our partners and allies, from the United Nations and international aid organizations -- an effort that Secretary Clinton will carry forward next week in The Hague .

At a time of economic crisis, it's tempting to believe that we can shortchange this civilian effort. But make no mistake: Our efforts will fail in Afghanistan and Pakistan if we don't invest in their future. And that's why my budget includes indispensable investments in our State Department and foreign assistance programs. These investments relieve the burden on our troops. They contribute directly to security. They make the American people safer. And they save us an enormous amount of money in the long run -- because it's far cheaper to train a policeman to secure his or her own village than to help a farmer seed a crop -- or to help a farmer seed a crop than it is to send our troops to fight tour after tour of duty with no transition to Afghan responsibility.

As we provide these resources, the days of unaccountable spending, no-bid contracts, and wasteful reconstruction must end. So my budget will increase funding for a strong Inspector General at both the State Department and USAID, and include robust funding for the special inspector generals for Afghan Reconstruction.

And I want to be clear: We cannot turn a blind eye to the corruption that causes Afghans to lose faith in their own leaders. Instead, we will seek a new compact with the Afghan government that cracks down on corrupt behavior, and sets clear benchmarks, clear metrics for international assistance so that it is used to provide for the needs of the Afghan people.

In a country with extreme poverty that's been at war for decades, there will also be no peace without reconciliation among former enemies. Now, I have no illusion that this will be easy. In Iraq , we had success in reaching out to former adversaries to isolate and target al Qaeda in Iraq . We must pursue a similar process in Afghanistan , while understanding that it is a very different country.

There is an uncompromising core of the Taliban. They must be met with force, and they must be defeated. But there are also those who've taken up arms because of coercion, or simply for a price. These Afghans must have the option to choose a different course. And that's why we will work with local leaders, the Afghan government, and international partners to have a reconciliation process in every province. As their ranks dwindle, an enemy that has nothing to offer the Afghan people but terror and repression must be further isolated. And we will continue to support the basic human rights of all Afghans -- including women and girls.

Going forward, we will not blindly stay the course. Instead, we will set clear metrics to measure progress and hold ourselves accountable. We’ll consistently assess our efforts to train Afghan security forces and our progress in combating insurgents. We will measure the growth of Afghanistan ’s economy, and its illicit narcotics production. And we will review whether we are using the right tools and tactics to make progress towards accomplishing our goals.

None of the steps that I've outlined will be easy; none should be taken by America alone. The world cannot afford the price that will come due if Afghanistan slides back into chaos or al Qaeda operates unchecked. We have a shared responsibility to act -- not because we seek to project power for its own sake, but because our own peace and security depends on it. And what’s at stake at this time is not just our own security -- it's the very idea that free nations can come together on behalf of our common security. That was the founding cause of NATO six decades ago, and that must be our common purpose today.

My administration is committed to strengthening international organizations and collective action, and that will be my message next week in Europe . As America does more, we will ask others to join us in doing their part. From our partners and NATO allies, we will seek not simply troops, but rather clearly defined capabilities: supporting the Afghan elections, training Afghan security forces, a greater civilian commitment to the Afghan people. For the United Nations, we seek greater progress for its mandate to coordinate international action and assistance, and to strengthen Afghan institutions.

And finally, together with the United Nations, we will forge a new Contact Group for Afghanistan and Pakistan that brings together all who should have a stake in the security of the region -- our NATO allies and other partners, but also the Central Asian states, the Gulf nations and Iran; Russia, India and China. None of these nations benefit from a base for al Qaeda terrorists, and a region that descends into chaos. All have a stake in the promise of lasting peace and security and development.

That is true, above all, for the coalition that has fought together in Afghanistan , side by side with Afghans. The sacrifices have been enormous. Nearly 700 Americans have lost their lives. Troops from over 20 countries have also paid the ultimate price. All Americans honor the service and cherish the friendship of those who have fought, and worked, and bled by our side. And all Americans are awed by the service of our own men and women in uniform, who've borne a burden as great as any other generation’s. They and their families embody the example of selfless sacrifice.

I remind everybody, the United States of America did not choose to fight a war in Afghanistan . Nearly 3,000 of our people were killed on September 11, 2001, for doing nothing more than going about their daily lives. Al Qaeda and its allies have since killed thousands of people in many countries. Most of the blood on their hands is the blood of Muslims, who al Qaeda has killed and maimed in far greater number than any other people. That is the future that al Qaeda is offering to the people of Pakistan and Afghanistan -- a future without hope or opportunity; a future without justice or peace.

So understand, the road ahead will be long and there will be difficult days ahead. But we will seek lasting partnerships with Afghanistan and Pakistan that promise a new day for their people. And we will use all elements of our national power to defeat al Qaeda, and to defend America , our allies, and all who seek a better future. Because the United States of America stands for peace and security, justice and opportunity. That is who we are, and that is what history calls on us to do once more.

Thank you. God bless you, and God bless the United States of America . (Applause.)

END 10:02 A.M. EDT

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Administration Unveils Financial System Overhaul

WASHINGTON (AP) — The Obama administration is proposing an extensive overhaul of financial regulations in an effort to prevent a repeat of the banking crisis last fall that toppled once-mighty institutions and wiped out trillions of dollars in investor wealth.

Officials said the administration will seek to regulate the market for credit default swaps and other types of derivatives and require hedge funds to register with the Securities and Exchange Commission.

Treasury Secretary Timothy Geithner was scheduled to outline the proposals in testimony Thursday before the House Financial Services Committee.

Administration officials provided details of the administration's plan before the testimony only on condition of anonymity.

The program the administration was presenting to Congress will also include a recommendation for creation of a systemic risk regulator, possibly at the Federal Reserve, to monitor risks to the entire system.

The plan also includes a measure that Geithner and Federal Reserve Chairman Ben Bernanke discussed before the committee on Tuesday to give the administration expanded powers to take over major nonbank financial institutions, such as insurance companies and hedge funds that were teetering on the brink of collapse.

That power was aimed at preventing a repeat of the problems surrounding insurance giant American International Group Inc., which sparked a furor last week when it was revealed the company had distributed $165 million in bonuses to employees of its financial products group. The unit specialized in trading credit default swaps, the instruments that drove the company to near-collapse last fall.

The administration, pushing Congress to act quickly on its reform agenda, sent Congress a 61-page bill dealing with the expanded powers to seize control of nonbank institutions late Wednesday. The House Financial Services Committee, chaired by Rep. Barney Frank, D-Mass., has indicated it could move on the measure as early as next week.

However, it was unclear how fast the rest of the financial reform agenda might move through Congress. Geithner was providing only a broad outline of the other proposals, with many thorny details remaining to be worked out.

Administration officials promised that the remaining issues would be hammered out in consultation with Congress with the goal of getting legislation approved as quickly as possible.

The administration is proposing that hedge funds and other private pools of capital, including private equity funds and venture capital funds, be required to register with the SEC if their assets exceed a certain size. The threshold amount has yet to be determined, officials said.

The proposal on credit default swaps and other derivatives would require the markets on which they are traded to be regulated for the first time, and for the buying and selling of these instruments to be conducted in ways that will foster greater oversight.

Credit default swaps, which trade in a $60 trillion global market without government oversight, are contracts to insure against the default of financial instruments like bonds and corporate debt. They played a prominent role in the credit crisis that brought the downfall of investment banking giant Lehman Brothers Holdings Inc. last fall and nearly unraveled AIG, forcing the government to provide more than $180 billion in support.

Hedge funds, vast pools of capital holding an estimated $1.5 trillion in assets, operate mostly outside of government supervision. As the market crisis deepened last fall, hedge fund selling was widely cited as one of the reasons for increased volatility that pounded stocks and bonds. Hedge funds also suffered huge losses last year, notably from investments in securities tied to subprime mortgages.

The outline of the regulatory reform was being unveiled a week before President Barack Obama was scheduled to meet for discussions among the Group of 20 major industrialized and developing countries in London to assess what needs to be done to deal with the global financial crisis.

While the administration is pushing other nations to follow the U.S. lead in putting together sizable economic stimulus programs to jump-start global growth, many in Europe are resisting those calls and arguing that the United States needs to do more to toughen financial regulations. They believe the current troubles can be traced to lax regulation in the United States in such key areas as hedge funds and credit default swaps.

Requiring hedge funds to register would open their books to inspection by regulators. The SEC sought that authority several years ago but was stymied by a federal appeals court in 2006.

Hedge funds have grown explosively in recent years while operating secretively. They have lured an increasing number of ordinary investors, pension funds and university endowments — meaning millions of people now unwittingly invest in hedge funds indirectly.

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THE WHITE HOUSE

Office of the Press Secretary

__________________________________________________________________________________________________________________

March 25, 2009

President Obama Announces More Key Administration Posts

WASHINGTON, DC – Today, President Barack Obama announced his intent to nominate the following individuals to key administration posts: Dr. Howard Koh, Assistant Secretary for Health, Department of Health and Human Services; Phyllis C. Borzi, Assistant Secretary of Labor for Employee Benefits Security, Department of Labor; Helen R. Kanovsky, General Counsel, Department of Housing and Urban Development; Rhea Suh, Assistant Secretary for Policy Management and Budget, Department of Interior; and Hilary Tompkins, Solicitor, Department of Interior.

President Obama said, “At a time when our nation faces many challenges, it gives me confidence that these fine individuals have agreed to give their talents to serving the American people. They will be a valuable addition to my administration, and I look forward to working with them in the coming months.”

President Obama made the following announcement today:

Dr. Howard Koh, Nominee for Assistant Secretary for Health, Department of Health and Human Services

Dr. Howard Koh is the Harvey V. Fineberg Professor of the Practice of Public Health, Associate Dean for Public Health Practice, and Director of the Division of Public Health Practice at the Harvard School of Public Health (HSPH). At HSPH, he has served as the Principal Investigator of multiple research grants related to community-based participatory research, cancer prevention, health disparities, tobacco control, and emergency preparedness. He is also Director of the HSPH Center for Public Health Preparedness. Koh previously served as Commissioner of Public Health for the Commonwealth of Massachusetts (1997-2003) where he emphasized the power of prevention for the Massachusetts Department of Public Health, which included four public health hospitals and a staff of over 3000 professionals. Koh graduated from Yale College , Yale University School of Medicine and completed his postgraduate training and chief residencies at Boston City Hospital and Massachusetts General Hospital . He has earned board certification in internal medicine, hematology, medical oncology, and dermatology, as well as a Master of Public Health degree. He is an elected member of the Institute of Medicine and Chair of the Board of Scientific Counselors for the CDC’s Coordinating Office for Terrorism Preparedness and Emergency Response. Koh has published over 200 articles in the medical and public health literature. He has received numerous awards and honors including the Distinguished Service Award from the American Cancer Society. President Bill Clinton appointed Koh to the National Cancer Advisory Board (2000-2002). In recognition of his contributions to early detection and prevention of melanoma, the Boston Red Sox designated Koh as a “Medical All-Star” (2003), and invited him to throw the ceremonial first pitch at Fenway Park . He and his wife, Dr. Claudia Arrigg, are the proud parents of three children.

Phyllis C. Borzi, Nominee for Assistant Secretary of Labor for Employee Benefits Security, Department of Labor

Phyllis C. Borzi is currently a research professor in the Department of Health Policy, School of Public Health and Health Services, The George Washington University Medical Center, where she is involved in research and policy analysis involving employee benefit plans, the uninsured, managed care, and legal barriers to the development of health information technology. In addition, she is of counsel with the Washington , D.C. law firm of O’Donoghue & O’Donoghue, LLP where she specializes in ERISA and other legal areas affecting employee benefit plans, including pensions and retirement savings, health plans, and discrimination based on age or disability. Until January 1995, Borzi served as pension and employee benefit counsel for the U.S. House of Representatives, Subcommittee on Labor-Management Relations of the Committee on Education and Labor. She was on the Committee staff for 16 years. In 1993, in connection with the Presidential Task Force on Health Care Reform, chaired by former First Lady Hillary Rodham Clinton, Borzi served on working groups dealing with insurance reform, workers’ compensation and employer coverage. She holds a Master of Arts degree in English from Syracuse University and received her law degree from Catholic University Law School , where she was editor-in-chief of the law review. Borzi is a charter member and a former President of the American College of Employee Benefit Counsel; she served as a member of its Board of Governors from 2000-2008. Borzi is also a current member of the Advisory Board of the BNA Pension & Benefits Reporter (and a former co-chair of the Board) and a former member of the Advisory Committee of the Pension Benefit Guaranty Corporation. She is also a member of the Advisory Board of the Pension Research Council, The Wharton School, The University of Pennsylvania and a member of the Board of the Women’s Institute for a Secure Retirement (WISER). In 2008, Borzi was appointed by the U.S. District Court for the Northern District of Ohio to serve as a public member of the Administrative Committee for the Goodyear VEBA, an entity that was judicially established pursuant to a negotiated settlement agreement between the company, the Steelworkers and class representatives for the Steelworkers retirees. Borzi has published numerous articles on ERISA, health care law and policy and retirement security issues and is a frequent speaker on programs sponsored by legal, professional, business, consumer and state and local governmental organizations. An active member of the American Bar Association, Borzi is the current chair of the ABA ’s Joint Committee on Employee Benefits (representing the Health Law Section) and a member of the CLE committee of the D.C. Bar Association. She is a member of the District of Columbia Bar and has been admitted to practice before the U.S. Court of Appeals for the District of Columbia Circuit and the U.S. Supreme Court.

Helen R. Kanovsky, Nominee for General Counsel, Department of Housing and Urban Development

Helen R. Kanovsky is currently the chief Operating Officer of the AFL-CIO Housing Investment Trust. She has been with the Trust nearly 13 years. The Trust is a $3.4 billion registered investment company which invests in housing securities for its institutional investors, who are union and public pension plans. The AFL-CIO Housing Investment Trust has provided over $5.25 billion to finance 86,000 units of multifamily housing creating over 58,000 union jobs in the construction industry. Kanovsky previously served as Chief of Staff to U.S. Senator John Kerry. She was Executive Vice President and General Counsel of GE Capital Asset Management and its predecessor, Skyline Financial Services Corporation. She was a partner and associate at Dickstein, Shapiro and Morin. She served as Special Assistant to Secretary Patricia Roberts Harris at HUD, HEW and HHS. For the past three years she has been the Chair of the National Housing Conference and she is a member of the Boards of the Center for Housing Policy and the Special Olympics of the District of Columbia , as well as a Trustee of the National Labor College . She holds an A.B. cum laude from Cornell University where she was Phi Beta Kappa and a J.D. cum laude from Harvard Law School . Kanovsky has two children, Dr. Jennifer Dorfman, a resident in emergency medicine; and Emily Dorfman, union organizer.

Rhea Suh, Nominee for Assistant Secretary for Policy Management and Budget, Department of Interior

Most recently, Rhea Suh was a Program Officer at the William and Flora Hewlett Foundation, where she managed the program’s portfolio of grants designed to protect the ecosystems of the western part of North America . Suh has served as a consultant for the US National Park Service where she wrote educational strategy & developed educational programs for under-served constituencies (such as low-income communities) to bring National Park lessons to a broader audience in public schools. She served as Senior Legislative Assistant to Senator Ben Nighthorse Campbell where she drafted & developed legislative initiatives, staffed the Senator at meetings & events, and regularly met with constituents. Prior to her work for Senator Nighthorse Campbell, Suh was a high school science teacher in New York City . Rhea serves on the board of the Environmental Grantmakers Association and is on its inclusive practices committee. She is also a member of the Asian-American Pacific Islanders in Philanthropy Association. Rhea holds an undergraduate degree in Environmental Science and Education from Columbia University and a masters’ degree in Education from Harvard. Suh’s graduate school project at the Kennedy School of Government focused on helping the US Park Service think through the options for how they could create a formalized educational program that could help bring the parks into classrooms around the country.

Hilary Tompkins, Nominee for Solicitor, Department of Interior

Hilary Tompkins has been Chief Counsel & Deputy Counsel in the Governor's office in New Mexico to Governor Bill Richardson from 2003 - 2008. Tompkins advised Governor Richardson on such legal and policy issues as legislation, political appointments, executive orders, constitutional authority, civil litigation, statutory interpretation, and intergovernmental affairs. Tompkins also managed the legal staff in the Governor's office as well as the general counsels in over twenty state executive agencies. She served as the Governor's liaison to the NM Attorney General's office as well as serving on several state commissions on the Governor's behalf. Tompkins provided expertise to the Governor in Native American affairs. From 2000 - 2002 she was an associate at Sonosky, Chambers, et al where the focus of her practice was water and environmental law although she also practiced in areas such as employment, taxation, gaming, lands, constitutional issues, torts and tribal jurisdiction. Additionally, Tompkins served as general counsel to several Indian tribes nationwide and was responsible for federal and tribal court litigation practice. From 1998 - 1999 Tompkins worked as Special Assistant US Attorney in Brooklyn , New York . There she was responsible for the defense and prosecution of civil actions on behalf of federal agencies in several legal areas including torts, constitutional law, employment, discrimination, forfeiture, bankruptcy, social security, environmental law and taxation. From 1996 - 1998 Tompkins was an Honors Program Trial Attorney with the US Department of Justice in the Environment and Natural Resources Division. There she practiced enforcement of environmental statutes and regulations on behalf of client agencies. Tompkins was a Law Clerk and Extern for the Navajo Nation Supreme Court in 1995 where she analyzed complex questions of law raised upon appeal. She drafted bench memos, legal memoranda and court opinions. She also conducted an advanced research project on gender roles under traditional Navajo common law principles. Prior to that experience Tompkins was a legal intern at both the US Department of Justice and the Office of the White House Counsel. Tompkins is an enrolled member of the Navajo Nation and both her study and practice of law reflects her passion to provide legal assistance to other Native Americans as well as those in her home state of New Mexico .

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China Wants New Currency to

Replace Dollar as Global Standard

By ANDREW BATSON

THE WALL STREET JOURNAL

BEIJING -- China called for the creation of a new currency to eventually replace the dollar as the world's standard, proposing a sweeping overhaul of global finance that reflects developing nations' growing unhappiness with the U.S. role in the world economy.

The unusual proposal, made by central bank governor Zhou Xiaochuan in an essay released Monday in Beijing, is part of China's increasingly assertive approach to shaping the global response to the financial crisis.

China's a Bellwether

David Semple of Van Eck Emerging Markets Fund outlines opportunities in China's real-estate and retail sectors, along with greater stability in Russia. But the situation in Eastern Europe is still uncertain. Polya Lesova reports.

Mr. Zhou's proposal comes amid preparations for a summit of the world's industrial and developing nations, the Group of 20, in London next week. At past such meetings, developed nations have criticized China's economic and currency policies.

This time, China is on the offensive, backed by other emerging economies such as Russia in making clear they want a global economic order less dominated by the U.S. and other wealthy nations.

However, the technical and political hurdles to implementing China's recommendation are enormous, so even if backed by other nations, the proposal is unlikely to change the dollar's role in the short term. Central banks around the world hold more U.S. dollars and dollar securities than they do assets denominated in any other individual foreign currency. Such reserves can be used to stabilize the value of the central banks' domestic currencies.

Monday's proposal follows a similar one Russia made this month during preparations for the G20 meeting. Like China, Russia recommended that the International Monetary Fund might issue the currency, and emphasized the need to update "the obsolescent unipolar world economic order."

Chinese officials are frustrated at their financial dependence on the U.S., with Premier Wen Jiabao this month publicly expressing "worries" over China's significant holdings of U.S. government bonds. The size of those holdings means the value of the national rainy-day fund is mainly driven by factors China has little control over, such as fluctuations in the value of the dollar and changes in U.S. economic policies. While Chinese banks have weathered the global downturn and continue to lend, the collapse in demand for the nation's exports has shuttered factories and left millions jobless.

In his paper, published in Chinese and English on the central bank's Web site, Mr. Zhou argued for reducing the dominance of a few individual currencies, such as the dollar, euro and yen, in international trade and finance. Most nations concentrate their assets in those reserve currencies, which exaggerates the size of flows and makes financial systems overall more volatile, Mr. Zhou said.

Moving to a reserve currency that belongs to no individual nation would make it easier for all nations to manage their economies better, he argued, because it would give the reserve-currency nations more freedom to shift monetary policy and exchange rates. It could also be the basis for a more equitable way of financing the IMF, Mr. Zhou added. China is among several nations under pressure to pony up extra cash to help the IMF.

Reuters

Zhou Xiaochuan, governor of the People's Bank of China.

John Lipsky, the IMF's deputy managing director, said the Chinese proposal should be treated seriously. "It reflects officials' concerns about improving the stability of the financial system," he said. "It's interesting because of China's unique position, and because the governor put it in a measured and considered way."

China's proposal is likely to have significant implications, said Eswar Prasad, a professor of trade policy at Cornell University and former IMF official. "Nobody believes that this is the perfect solution, but by putting this on the table the Chinese have redefined the debate," he said. "It represents a very strong pushback by China on a number of fronts where they feel themselves being pushed around by the advanced countries," such as currency policy and funding for the IMF.

A spokeswoman for the U.S. Treasury Department declined to comment on Mr. Zhou's views. In recent weeks, senior Obama administration officials have sought to reassure Beijing that the current U.S. spending spree is a short-term effort to restart the stalled American economy, not evidence of long-term U.S. profligacy.

"The re-establishment of a new and widely accepted reserve currency with a stable valuation benchmark may take a long time," Mr. Zhou said. In remarks earlier Monday, one of his deputies, Hu Xiaolian, also said the dollar's dominant position in international trade and investment is unlikely to change soon. Ms. Hu is in charge of reserve management as the head of China's State Administration of Foreign Exchange.

Mr. Zhou's comments -- coming on the heels of Mr. Wen's musing about the safety of China's dollar holdings -- appear to be a warning to the U.S. that it can't expect China to finance its spending indefinitely.

The central banker's proposal reflects both China's desire to hold its $1.95 trillion in reserves in something other than U.S. dollars and the fact that Beijing has few alternatives. With more U.S. dollars continuing to pour into China from trade and investment, Beijing has no realistic option other than storing them in U.S. debt.

Mr. Zhou argued, without mentioning the dollar by name, that the loss of the dollar's de facto reserve status would benefit the U.S. by avoiding future crises. Because other nations continued to park their money in U.S. dollars, the argument goes, the Federal Reserve was able to pursue an irresponsible policy in recent years, keeping interest rates too low for too long and thereby helping to inflate a bubble in the housing market.

"The outbreak of the crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system," Mr. Zhou said. The increasing number and intensity of financial crises suggests "the costs of such a system to the world may have exceeded its benefits."

Mr. Zhou isn't the first to make that argument. "The dollar reserve system is part of the problem," Joseph Stiglitz, the Columbia University economist, said in a speech in Shanghai last week, because it meant so much of the world's cash was funneled into the U.S. "We need a global reserve system," he said in the speech.

Mr. Zhou's idea is to expand the use of "special drawing rights," or SDRs -- a kind of synthetic currency created by the IMF in the 1960s. Its value is determined by a basket of major currencies. Originally, the SDR was intended to serve as a shared currency for international reserves, though that aspect never really got off the ground.

These days, the SDR is mainly used in the IMF's accounting for its transactions with member nations. Mr. Zhou suggested countries could increase their contributions to the IMF in exchange for greater access to a pool of reserves in SDRs.

Holding more international reserves in SDRs would increase the role and powers of the IMF. That indicates China and other developing nations aren't hostile to international financial institutions -- they just want to have more say in running them. China has resisted the U.S. push to make an immediate loan to the IMF because that wouldn't give China a bigger vote. Ms. Hu said Monday that China, which encourages the IMF to explore other fund-raising options, would consider buying into a bond issue.

The IMF has been working on a proposal to issue bonds, probably only to central banks. Bond purchases are one way for the organization to raise money and meet its goal of at least doubling its lending war chest to $500 billion from $250 billion. Japan has loaned the IMF $100 billion and the European Union has pledged another $100 billion.

—Terence Poon in Beijing, James T. Areddy in Shanghai, and Bob Davis and Michael M. Phillips in Washington contributed to this article.

Write to Andrew Batson at andrew.batson@wsj.com

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My Plan For Bad Bank Assets

By TIMOTHY GEITHNER

THE WALL STREET JOURNAL

The American economy and much of the world now face extraordinary challenges, and confronting these challenges will continue to require extraordinary actions.

AP

No crisis like this has a simple or single cause, but as a nation we borrowed too much and let our financial system take on irresponsible levels of risk. Those decisions have caused enormous suffering, and much of the damage has fallen on ordinary Americans and small-business owners who were careful and responsible. This is fundamentally unfair, and Americans are justifiably angry and frustrated.

The depth of public anger and the gravity of this crisis require that every policy we take be held to the most serious test: whether it gets our financial system back to the business of providing credit to working families and viable businesses, and helps prevent future crises.

Over the past six weeks we have put in place a series of financial initiatives, alongside the Recovery and Reinvestment Program, to help lay the financial foundation for economic recovery. We launched a broad program to stabilize the housing market by encouraging lower mortgage rates and making it easier for millions to refinance and avoid foreclosure. We established a new capital program to provide banks with a safeguard against a deeper recession. By providing confidence that banks will have a sufficient level of capital even if the outlook is worse than expected, more credit will be available to the economy at lower interest rates today -- making it less likely that the more negative economy they fear will take place.

Getty Images

We started a major new lending program with the Federal Reserve targeted at the securitization markets critical for consumer and small business lending. Last week, we announced additional actions to support lending to small businesses by directly purchasing securities backed by Small Business Administration loans.

Together, actions over the last several months by the Federal Reserve and these initiatives by this administration are already starting to make a difference. They have helped to bring mortgage interest rates near historic lows. Just this month, we saw a 30% increase in refinancing of mortgages, which means millions of Americans are taking advantage of the lower rates. This is good for homeowners, and it's good for the economy. The new joint lending program with the Federal Reserve led to almost $9 billion of new securitizations last week, more than in the last four months combined.

However, the financial system as a whole is still working against recovery. Many banks, still burdened by bad lending decisions, are holding back on providing credit. Market prices for many assets held by financial institutions -- so-called legacy assets -- are either uncertain or depressed. With these pressures at work on bank balance sheets, credit remains a scarce commodity, and credit that is available carries a high cost for borrowers.

Today, we are announcing another critical piece of our plan to increase the flow of credit and expand liquidity. Our new Public-Private Investment Program will set up funds to provide a market for the legacy loans and securities that currently burden the financial system.

The Public-Private Investment Program will purchase real-estate related loans from banks and securities from the broader markets. Banks will have the ability to sell pools of loans to dedicated funds, and investors will compete to have the ability to participate in those funds and take advantage of the financing provided by the government.

The funds established under this program will have three essential design features. First, they will use government resources in the form of capital from the Treasury, and financing from the FDIC and Federal Reserve, to mobilize capital from private investors. Second, the Public-Private Investment Program will ensure that private-sector participants share the risks alongside the taxpayer, and that the taxpayer shares in the profits from these investments. These funds will be open to investors of all types, such as pension funds, so that a broad range of Americans can participate.

Third, private-sector purchasers will establish the value of the loans and securities purchased under the program, which will protect the government from overpaying for these assets.

The new Public-Private Investment Program will initially provide financing for $500 billion with the potential to expand up to $1 trillion over time, which is a substantial share of real-estate related assets originated before the recession that are now clogging our financial system. Over time, by providing a market for these assets that does not now exist, this program will help improve asset values, increase lending capacity by banks, and reduce uncertainty about the scale of losses on bank balance sheets. The ability to sell assets to this fund will make it easier for banks to raise private capital, which will accelerate their ability to replace the capital investments provided by the Treasury.

This program to address legacy loans and securities is part of an overall strategy to resolve the crisis as quickly and effectively as possible at least cost to the taxpayer. The Public-Private Investment Program is better for the taxpayer than having the government alone directly purchase the assets from banks that are still operating and assume a larger share of the losses. Our approach shares risk with the private sector, efficiently leverages taxpayer dollars, and deploys private-sector competition to determine market prices for currently illiquid assets. Simply hoping for banks to work these assets off over time risks prolonging the crisis in a repeat of the Japanese experience.

Moving forward, we as a nation must work together to strike the right balance between our need to promote the public trust and using taxpayer money prudently to strengthen the financial system, while also ensuring the trust of those market participants who we need to do their part to get credit flowing to working families and businesses -- large and small -- across this nation.

This requires those in the private sector to remember that government assistance is a privilege, not a right. When financial institutions come to us for direct financial assistance, our government has a responsibility to ensure these funds are deployed to expand the flow of credit to the economy, not to enrich executives or shareholders. These provisions need to be designed and applied in a way that does not deter the participation by the private sector in generally available programs to stabilize the housing markets, jump-start the credit markets, and rid banks of legacy assets.

We cannot solve this crisis without making it possible for investors to take risks. While this crisis was caused by banks taking too much risk, the danger now is that they will take too little. In working with Congress to put in place strong conditions to prevent misuse of taxpayer assistance, we need to be very careful not to discourage those investments the economy needs to recover from recession. The rule of law gives responsible entrepreneurs and investors the confidence to invest and create jobs in our nation. Our nation's commitment to pursue economic policies that promote confidence and stability dates back to the very first secretary of the Treasury, Alexander Hamilton, who first made it clear that when our government gives its word we mean it.

For all the challenges we face, we still have a diverse and resilient financial system. The process of repair will take time, and progress will be uneven, with periods of stress and fragility. But these policies will work. We have already seen that where our government has provided support and financing, credit is more available at lower costs.

But as we fight the current crisis, we must also start the process of ensuring a crisis like this never happens again. As President Obama has said, we can no longer sustain 21st century markets with 20th century regulations. Our nation deserves better choices than, on one hand, accepting the catastrophic damage caused by a failure like Lehman Brothers, or on the other hand being forced to pour billions of taxpayer dollars into an institution like AIG to protect the economy against that scale of damage. The lack of an appropriate and modern regulatory regime and resolution authority helped cause this crisis, and it will continue to constrain our capacity to address future crises until we put in place fundamental reforms.

Our goal must be a stronger system that can provide the credit necessary for recovery, and that also ensures that we never find ourselves in this type of financial crisis again. We are moving quickly to achieve those goals, and we will keep at it until we have done so.

Mr. Geithner is the U.S. Treasury secretary.

MUST READ :
The Most Complete Breakdown of AIG/Wallstreet's Con of America
(The Facts You NEVER Hear in MSM)

The Big Takeover
The global economic crisis isn't about money - it's about power. How Wall Street insiders are using the bailout to stage a revolution

MATT TAIBBI
Rolling Stone.com

It's over — we're officially, royally fu**ed. No empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far. It happened when Treasury Secretary Timothy Geithner was forced to admit that he was once again going to have to stuff billions of taxpayer dollars into a dying insurance giant called AIG, itself a profound symbol of our national decline — a corporation that got rich insuring the concrete and steel of American industry in the country's heyday, only to destroy itself chasing phantom fortunes at the Wall Street card tables, like a dissolute nobleman gambling away the family estate in the waning days of the British Empire.

The latest bailout came as AIG admitted to having just posted the largest quarterly loss in American corporate history — some $61.7 billion. In the final three months of last year, the company lost more than $27 million every hour. That's $465,000 a minute, a yearly income for a median American household every six seconds, roughly $7,750 a second. And all this happened at the end of eight straight years that America devoted to frantically chasing the shadow of a terrorist threat to no avail, eight years spent stopping every citizen at every airport to search every purse, bag, crotch and briefcase for juice boxes and explosive tubes of toothpaste. Yet in the end, our government had no mechanism for searching the balance sheets of companies that held life-or-death power over our society and was unable to spot holes in the national economy the size of Libya (whose entire GDP last year was smaller than AIG's 2008 losses).

So it's time to admit it: We're fools, protagonists in a kind of gruesome comedy about the marriage of greed and stupidity. And the worst part about it is that we're still in denial — we still think this is some kind of unfortunate accident, not something that was created by the group of psychopaths on Wall Street whom we allowed to gang-rape the American Dream. When Geithner announced the new $30 billion bailout, the party line was that poor AIG was just a victim of a lot of shitty luck — bad year for business, you know, what with the financial crisis and all. Edward Liddy, the company's CEO, actually compared it to catching a cold: "The marketplace is a pretty crummy place to be right now," he said. "When the world catches pneumonia, we get it too." In a pathetic attempt at name-dropping, he even whined that AIG was being "consumed by the same issues that are driving house prices down and 401K statements down and Warren Buffet's investment portfolio down."

Liddy made AIG sound like an orphan begging in a soup line, hungry and sick from being left out in someone else's financial weather. He conveniently forgot to mention that AIG had spent more than a decade systematically scheming to evade U.S. and international regulators, or that one of the causes of its "pneumonia" was making colossal, world-sinking $500 billion bets with money it didn't have, in a toxic and completely unregulated derivatives market.

Nor did anyone mention that when AIG finally got up from its seat at the Wall Street casino, broke and busted in the afterdawn light, it owed money all over town — and that a huge chunk of your taxpayer dollars in this particular bailout scam will be going to pay off the other high rollers at its table. Or that this was a casino unique among all casinos, one where middle-class taxpayers cover the bets of billionaires.

People are pissed off about this financial crisis, and about this bailout, but they're not pissed off enough. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.

The crisis was the coup de grâce: Given virtually free rein over the economy, these same insiders first wrecked the financial world, then cunningly granted themselves nearly unlimited emergency powers to clean up their own mess. And so the gambling-addict leaders of companies like AIG end up not penniless and in jail, but with an Alien-style death grip on the Treasury and the Federal Reserve — "our partners in the government," as Liddy put it with a shockingly casual matter-of-factness after the most recent bailout.

The mistake most people make in looking at the financial crisis is thinking of it in terms of money, a habit that might lead you to look at the unfolding mess as a huge bonus-killing downer for the Wall Street class. But if you look at it in purely Machiavellian terms, what you see is a colossal power grab that threatens to turn the federal government into a kind of giant Enron — a huge, impenetrable black box filled with self-dealing insiders whose scheme is the securing of individual profits at the expense of an ocean of unwitting involuntary shareholders, previously known as taxpayers.

The best way to understand the financial crisis is to understand the meltdown at AIG. AIG is what happens when short, bald managers of otherwise boring financial bureaucracies start seeing Brad Pitt in the mirror. This is a company that built a giant fortune across more than a century by betting on safety-conscious policyholders — people who wear seat belts and build houses on high ground — and then blew it all in a year or two by turning their entire balance sheet over to a guy who acted like making huge bets with other people's money would make his di*k bigger.

That guy — the Patient Zero of the global economic meltdown — was one Joseph Cassano, the head of a tiny, 400-person unit within the company called AIG Financial Products, or AIGFP. Cassano, a pudgy, balding Brooklyn College grad with beady eyes and way too much forehead, cut his teeth in the Eighties working for Mike Milken, the granddaddy of modern Wall Street debt alchemists. Milken, who pioneered the creative use of junk bonds, relied on messianic genius and a whole array of insider schemes to evade detection while wreaking financial disaster. Cassano, by contrast, was just a greedy little turd with a knack for selective accounting who ran his scam right out in the open, thanks to Washington's deregulation of the Wall Street casino. (read rest of article)

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VIDEO:
President Obama On '60 Minutes'

Part 1

Conclusion

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