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Fact Sheet: Plan To Stabilize Financial System Is Limited In Size, Scope,
And Duration
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For Immediate Release Office of the Press Secretary October 17, 2008

Fact Sheet: Plan To Stabilize Financial System Is Limited In Size, Scope,
And Duration The Federal Government Is Acting Swiftly To Preserve Our
System Of Free Market Capitalism And Return Our Nation To A Path Of
Prosperity, Job Creation, And Long-Term Economic Growth

ÿÿWhite House News

ÿÿÿÿÿ President Bush Discusses the Economy ÿÿÿÿÿ In Focus: Economy

Today, President Bush visited the United States Chamber of Commerce and
discussed the actions that the Federal Government has taken in response to
the financial crisis. The President explained that the government took
swift action to protect the financial security of the American people. One
important element, the equity purchase program, is designed with strong
protections to ensure the government's involvement is limited in size,
limited in scope, and limited in duration:
  þ The government's involvement is limited in size. The government's
    investment is capped for any individual firm that chooses to
    participate in this voluntary program, so that private investors retain
    control.
  þ The government's involvement is limited in scope. The government will
    not exercise control over any private firm. The shares owned by the
    government will have voting rights that can be used only to protect the
    taxpayer's investment _ not to direct the firm's operations.
  þ The government's involvement is limited in duration. This program
    includes provisions to encourage banks to buy back their shares from
    the government when the markets stabilize and they can raise money from
    private investors.

We must never lose sight of the enormous benefits delivered by the free
enterprise system. Democratic capitalism remains the greatest system ever
devised. Around the world, free market policies have lifted millions of
people out of poverty and given them the opportunity to build a more
hopeful life. In the United States, it has given our large and dynamic
economy the flexibility and resilience to absorb shocks, adjust, and bounce
back.

The Government Is Focused On Preserving The Stability Of The Financial
System

The Federal Government has responded to the financial crisis with
systematic and aggressive measures to protect the financial security of the
American people. These actions will take time to have their full impact,
but they are decisive measures and big enough to work. As these actions
take effect, they will help restore stability to our markets and confidence
to our financial institutions; they will allow small businesses to return
to a path of prosperity; and they will make it easier for Americans to
borrow for cars, college education, and homes.

The government has taken unprecedented action to boost liquidity:
  þ The Federal Reserve has used a variety of tools to inject hundreds of
    billions of dollars in new liquidity into the financial system.
  þ The Federal Deposit Insurance Corporation (FDIC) is temporarily
    guaranteeing most new debt issued by insured banks, which will make it
    easier for banks to borrow needed funds from each other, and protecting
    taxpayers by charging banks an appropriate fee for the additional
    insurance coverage.
  þ The Federal Reserve has announced a new program to provide support for
    commercial paper _ a key source of short-term financing for American
    businesses and financial institutions.

The government has provided substantial new protections for responsible
consumers, businesses, and investors:
  þ The Federal Government has temporarily expanded the amount of money
    insured in bank and credit union savings accounts, checking accounts,
    and certificates of deposit from $100,000 to $250,000.
  þ The FDIC has created a new short-term program to grant unlimited
    insurance for non-interest bearing transaction accounts, which are used
    by many small businesses.
  þ The Treasury Department has offered temporary government insurance for
    money market mutual funds.
  þ The Securities and Exchange Commission (SEC) is vigorously
    investigating fraud, manipulation, and abuse in the markets.

The government prevented a disorderly failure of large, interconnected
firms, and did so in a way that protects taxpayers and does not shield
executives from the consequences of their irresponsible decisions. For
example, out of concern that the failure of Bear Stearns, Fannie Mae,
Freddie Mac, and AIG could collapse our financial system, the government
moved to protect the American people. Failed executives will not be
eligible to receive a windfall from hard-earned taxpayer dollars.

The United States is cooperating closely with partners overseas who are
also feeling the effects of this global financial crisis. Last week,
President Bush met with finance ministers from the G-7 and the G-20 groups,
which include some of the world's largest and fastest-growing economies. On
Wednesday, leaders of the G-8 issued a statement calling for a leaders
meeting with a broader group of countries _ developed and developing _ to
work together to improve the regulatory and institutional structures of our
nations' financial systems. Earlier this week, leaders in Europe announced
steps to purchase equity in major banks and provide temporary government
guarantees for bank loans. And last week, the Federal Reserve and other
central banks around the world enacted a joint cut in interest rates, which
will help ease the pressure on credit markets around the world. Tomorrow,
President Bush will meet with French President Nicolas Sarkozy and European
Commission President Jose Barroso.

The Government Has Undertaken An Extraordinary Effort To Help Banks Get
Loans Flowing To American Consumers And Businesses

This week, President Bush announced that the Treasury Department will use a
portion of the $700 billion rescue package to inject capital directly into
banks by purchasing equity shares. This new capital will help banks fill
the gap created by losses during the financial crisis, so they can make
loans to businesses and consumers. Large banks, as well as smaller
community and regional banks, will be able to participate. Additionally,
the Treasury Department will use some of the $700 billion to purchase
troubled assets that are weighing down banks' balance sheets and clogging
the financial system.
  þ The taxpayer money spent on the economic rescue package will be subject
    to strong oversight by a bipartisan board.
  þ The Administration and many other experts, including the Congressional
    Budget Office, believe that the final cost of this package could be
    significantly less than the initial investment. Many troubled assets
    that the government purchases will increase in value as the market
    recovers, and the government will eventually have the ability to resell
    these assets at a higher price. Also, the government will receive
    quarterly dividends from the equity shares it purchases in financial
    institutions, and if banks do not repurchase these shares within five
    years, the annual dividend they owe the government will increase.

It Is Vital That We Update Our Financial Regulations To Meet The Realities
Of Today's Global Financial System

In the long term, we need to update America's system of financial
regulations. Many of the regulations governing America's markets were
written in a different era, patched together over the past 75 years in
response to market conditions that may no longer exist. Secretary Paulson
has proposed a detailed blueprint for modernizing regulations. The
blueprint recommends creating a new objectives-based approach to regulation
that includes a market stability regulator, a prudential regulator, and a
business conduct regulator that focuses on consumer protection. Enacting
these ideas into law should be a top priority for the next President and
the next Congress.
  þ We also must ensure that efforts to prevent a recurrence of this global
    financial crisis do not lead us to give in to false temptations such as
    economic isolationism. The best way to demonstrate America's commitment
    to open markets is for Congress to approve the Colombia, Panama, and
    South Korea free trade agreements this year.


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