The Last Days . . .

. . . no, not in the Biblical sense . . . I'm talking economy, recession, jobs . . .

What do you think about government reform? How about a Continental Convention? You know . . . the provision in the U.S. Constitution by which the people can jerk Congress into line. Sure, everyone's Senator and Congressman is doing a great job. However, collectively the U.S. Congress, and the U.S. Government in general, is failing the people and the spirit of the U.S. Constitution.

The following is not a celebration of misery but just how I see the facts . . . a rant you could say.

We are not just robbing ourselves, our children really. We are robbing the rest of the world, or at least those foreigners owning dollars . . . on second thought, the whole world is going to pay the price one way or another.

The last phase . . . the last bullet for the U.S. Government . . . is to print money. It has been doing it for years, even decades now. The difference this time is the U.S. Government is ever so proudly announcing to the world it will print money to no end.

No need to worry about inflation they say, at least not for now. Maybe the U.S. Government will get lucky and get it right by turning off the printing presses at the precisely correct moment this time. Look how well the Bailout has gone after all. Yes, Sir! That's it. Isn't it just impossible for things to get worse?

My to-do list:

1. Gold . . . especially the precious metals stocks, they are the cheapest ever with the current high price of gold and energy costs so low . . . only consider selling when one ounce of gold equals the Dow 30 index . . . my guess is 3,000 to 5,000.
   
2. Materials . . . can't have everything in gold . . . Obama's stimulus plan should use a lot of materials . . . now is simply not the time for the virtual (financial) world . . . if real stuff becomes worthless then there's no place to hide and it's all over.
3. A few U.S. Government bonds . . . always side with the one calling shots, at least for now . . . inflation is running about 15% to 20% but the U.S. Government says there is none so we are in a bond bubble (that word sound familiar?) . . . half of all U.S. Government money/debt (one in the same) is in foreign hands . . . so a big thank you to the "Suckers of the World" for paying half the bill . . . "The Business of America is Business"! . . . dump bonds when you hear the first pundit say the bubble will/is/has burst.
   
4. A veggie garden . . . please don't think you can "just plant a garden" and feed yourself . . . a subsistence garden takes a lot of know-how, time, resources, and land . . . I just want a little garnish to take along to the soup line.
5. Ammo . . . no, not for the starving neighbors beating down my door to get to my veggie garden . . . with 25% unemployment there is bound to be plenty of time to go hunting.
   

If I'm wrong, then I win! Hang in there . . . LIVING in these times beats the alternative.

Here's some so you can get some more.

Treasury Announces TARP Investment in GMAC

Washington, DC –The Treasury Department today announced that it will purchase $5 billion in senior preferred equity with an 8% dividend from GMAC LLC as part of a broader program to assist the domestic automotive industry in becoming financially viable.

Under the agreement GMAC must be in compliance with the executive compensation and corporate governance requirements of Section 111 of the Emergency Economic Stabilization Act, as well as enhanced restrictions on executive compensation.

GMAC will issue warrants to Treasury in the form of additional preferred equity in an amount equal to 5% of the preferred stock purchase that will pay a 9% dividend if exercised.

Additionally, the Treasury has agreed to lend up to $1 billion to General Motors so that GM can participate in a rights offering at GMAC in support of GMAC's reorganization as a bank holding company. This commitment is in addition to the assistance previously announced for GM on Dec. 19. This loan will be exchangeable at any time, at Treasury's option, into the GMAC equity interests being acquired by GM in the rights offering. Furthermore, this loan will be secured and will have other terms and conditions as outlined in the attached term sheet. The ultimate level of funding under this facility will be dependent upon the level of current investor participation in the rights offering at GMAC.

Treasury exercised this funding authority under the Emergency Economic Stabilization Act's Troubled Asset Relief Program (TARP). The preferred stock purchase and the loan to support GMAC's rights offering are part of an auto industry-focused TARP program that will include the $17.4 billion in assistance for domestic automakers announced earlier this month.

As previously indicated, Treasury will work with Congress and the President-elect's transition team on the appropriate timing for release of the remainder of the TARP funds to support financial market stability.

Trickle down Bailout-onomics

Treasury Provides TARP Funds to Local Banks

Washington- The U.S. Treasury Department announced today details of a $2.8 billion investment in 49 banks made on Friday, December 19 through its Capital Purchase Program. Treasury also closed $1.9 billion in transactions with 43 banks today. Full details of today's transactions will be released in accordance with the Emergency Economic Stabilization Act on Monday, December 29, two business days after their closing.

Treasury created the Capital Purchase Program, a part of the Troubled Asset Relief Program, to help to stabilize and strengthen the U.S. financial system. Treasury allocated $250 billion under TARP's Capital Purchase Program to invest in U.S. financial institutions. To date, the Department has made $162 billion of investments, receiving preferred stock and warrants from participating institutions. Investments have ranged from as small as $1.5 million to as large as $25 billion, financing community banking and Community Development Financial Institutions in 41 states and Puerto Rico.

Institutions that sell shares to the government must comply with restrictions on executive compensation during the period that Treasury holds equity issued through this program and agree to limitations on dividends and stock repurchases. Information about Treasury's Troubled Asset Relief Program can be found at . . .

I TARP, therefore I TALF.

Secretary Paulson Statement on Stabilizing the Automotive Industry

Washington- Today, we have acted to support General Motors and Chrysler, with the requirement that they move quickly to develop and adopt acceptable plans for long term viability. This step will prevent significant disruption to our economy, while putting the companies on a path to the significant restructuring necessary to achieve long-term viability. At the same time, we are including loan provisions to protect the taxpayers to the maximum extent possible.

Treasury will make these loans using authority provided for the Troubled Asset Relief Program. While the purpose of this program and the enabling legislation is to stabilize our financial sector, the authority allows us to take this action. Absent Congressional action, no other authorities existed to stave off a disorderly bankruptcy of one or more auto companies.

As a result of this decision, Treasury effectively has allocated the first $350 billion from the TARP. The actual disbursement of this amount is subject to approval of bank capital applications, many of which remain with the regulators and will not reach Treasury for review until early next year. Disbursement is also subject to finalizing the structure for the Federal Reserve-Treasury consumer credit program (TALF). In the very short-term, the allocated but not yet disbursed TARP balances, in conjunction with the powers of the Federal Reserve and the FDIC, give me confidence that we have the necessary resources to address a significant financial market event. It is clear, however, that Congress will need to release the remainder of the TARP to support financial market stability. I will discuss that process with the congressional leadership and the President-elect's transition team in the near future.

U.S. Citizens get a piece of the (Bankruptcy) action.

Treasury Releases Term Sheet for Automotive Plan

Washington- The U.S. Treasury Department today released the term sheet and appendices for the Administration's plan for stabilizing the automotive industry.

Update to the old joke "Dewey, Cheatum, and Howe".

Treasury Hires Legal Firm Under the Emergency Economic Stabilization Act

Washington- The U.S. Treasury Department today announced that Thacher, Proffitt & Wood, LLP will assist the Department with its investments in the Federal Reserve's Term Asset Backed Securities Loan Facility authorized under the Emergency Economic Stabilization Act. Treasury awarded the contract for legal services on Wednesday, December 10.

The firm will help the Department with investments in any entities for the purpose of purchasing asset-backed securities from a lending facility, such as the Federal Reserve facility announced on November 25. The procured services could include the negotiation and drafting of relevant documents, such as investment agreements, debt agreements, security agreements or other documentation necessary to implement such investments under the Troubled Asset Relief Program.

The agreement with the firm is effective until June 9, 2009. Treasury issued a request for proposals to seven firms on November 26. The Department received three proposals in response. The total cost for the firm's services is not expected to exceed approximately $500,000. More information on these contracts will be posted at [the] (Federal Procurement Data System).

If we just keep saying it enough, it will make it the truth.

Interim Assistant Secretary for Financial Stability Neel Kashkari Testimony before the U.S. House of Representatives Financial Services Committee

Washington - Good morning. Mr. Chairman, Ranking Member Bachus, and Members of the Committee, thank you for asking me to testify before you today regarding oversight of the Troubled Asset Relief Program.

We are in an unprecedented period and market events are moving rapidly and unpredictably. We at Treasury have responded quickly to adapt to events on the ground. Throughout the crisis, we have always acted with the following critical objectives in mind: one, to stabilize financial markets and reduce systemic risk; two, to support the housing market by avoiding preventable foreclosures and supporting mortgage finance; and three, to protect taxpayers. The authorities and flexibility granted to us by Congress have been essential to developing the programs necessary to meet these objectives.

Today, I will focus my remarks on compliance and oversight of the TARP and on measuring the results of this program, which are two very critical issues to the Treasury Department (Treasury). The American people provided Treasury with broad authorities to stabilize the financial system and it is essential we communicate our actions in an open and transparent manner to maintain their trust. I will describe the many steps we are taking to ensure compliance with both the letter and spirit of the law and what measurements we look at to gauge the success of our programs. A program as large and complex as the TARP would normally take many months or years to establish. But, we don't have the luxury of first building the operation, then designing our programs and then executing them. Given the severity of the financial crisis, we must build the Office of Financial Stability, design our programs, and execute them - all at the same time. We have made remarkable progress since the President signed the law only 68 days ago.

Oversight

The first topic I will address is oversight of the TARP. In addition to the normal oversight provided by Congressional committees of jurisdiction, the Congress established four important avenues of oversight: one, the Financial Stability Oversight Board; two, the Special Inspector General; three, the Government Accountability Office; and four, the Congressional Oversight Panel. I will review Treasury's interaction with each body in detail.

First, we moved immediately to establish the Financial Stability Oversight Board, which, by law, includes: the Secretary of the Treasury, the Chairman of the Federal Reserve Board, the Chairman of the Securities and Exchange Commission, the Secretary of Housing and Urban Development, and the Director of the Federal Housing Finance Agency.

The law required the first board meeting to take place within fourteen days. We moved very quickly, and the Oversight Board met within four days. At that initial meeting, the members of the Board selected Chairman Bernanke to be Chairman of the Oversight Board. The law requires the Board to meet once a month, but it has already met five times in the just two months since the law was signed, with numerous staff calls between meetings, and expects to meet again this week. We have also posted the bylaws and minutes of the Board meetings on Treasury's website. In addition, the Oversight Board has interacted with other oversight bodies, such as the GAO and the Congressional Oversight Panel.

Second, the law also requires appointment of a Senate-confirmed Special Inspector General to oversee the program. We welcome the Senate's confirmation on Monday December 8 of Neil M. Barofsky as the Special Inspector General. I spoke with him on Tuesday December 9 and we look forward to working closely with his office. In the interim, we have been coordinating closely with Treasury's Inspector General. We held our first meeting with Treasury's IG on Monday, October 6, and have had numerous meetings since then to keep Treasury's Inspector General apprised of all TARP activity. We look forward to continuing our active dialogue with both the Treasury IG and with the Special IG as he builds up his office.

Third, the law calls for the Government Accountability Office to establish a physical presence at Treasury to monitor the program. Treasury provided workspace for our auditors within days of the President signing the law and Secretary Paulson had his first call with the Acting Comptroller General, Gene Dodaro, on Tuesday, October 7. The Acting Comptroller General and his team met with our team for the first time on Thursday, October 9. Since then, I have participated in multiple briefings with the GAO and our respective staffs are meeting almost daily for program updates and also to review contracts.

The GAO published its first report on TARP to Congress on December 2, which the law required within 60 days of enactment. The GAO met with our team on Saturday, November 22, before their report was finalized. They provided a thorough review of the TARP programs and progress – essentially a snapshot at the 60 day mark of a large, complex project that continues to be a successful work in progress. As I noted above, given the intensity of the financial crisis, we must build our operation, design our programs and execute them all at the same time. The GAO report identified nine "areas that warrant Treasury's ongoing attention." We are pleased with our auditors' recommendations because the GAO had identified topics that we already had focused on. The report was quite helpful because it provided us with thoughtful, independent verification that Treasury is, indeed, focused on the right topics and Treasury agrees with the GAO on the importance of these issues.

Given the importance of the GAO's feedback, I want to spend a few minutes going through the nine areas that GAO identified and describe what we are doing in each case:

1. Monitoring and reporting of financial institutions activities

As the report indicated, given the number and variety of financial stability actions being put in place by multiple entities, it will be challenging to view the impact of the Capital Purchase Program in isolation and at the institutional level. Moreover, each individual financial institution's circumstances are different, making comparisons challenging at best, and it is difficult to track where individual dollars flow through an organization. Nonetheless, we are working with the banking regulators to develop appropriate measurements and we are focused on determining the extent to which the CPP is having its desired effect.

2. Compliance of CPP participants with program requirements

The key first step to effective compliance was developing effective program agreements and we have already accomplished that for publicly traded institutions and most private institutions. The CPP agreements are designed to require that the participants comply fully with the executive compensation restrictions set out by Congress in the legislation. We are now developing procedures to ensure that compliance with these restrictions is maintained.

3. Formalize existing communication strategies to keep people informed about our strategy

Treasury recognizes the importance of a more comprehensive communication strategy and we are looking at ways to enhance our communications, while recognizing that the TARP program is just one piece of a comprehensive response to the financial market crisis. Very detailed updates, such as this testimony, are part of that strategy.

4. Develop a definitive transition plan

Our team has been meeting regularly with the transition team and discussing our ongoing activities to ensure a smooth transition. We intend to have a fully functioning TARP organization in place as the new Administration takes office.

5. Expedite hiring efforts to ensure the Office of Financial Stability has the needed personnel

From day one, hiring has been a key focus area for the entire TARP team and we are making concrete progress every day as we staff up our team. Our Chief Operating Officer is coordinating an intense effort with our human resources office to identify and fill critical staff needs both for the immediate and long terms.

6. Ensure sufficient personnel are assigned to oversee performance of contractors

Working with the Treasury procurement staff, we are implementing a comprehensive process for monitoring contractors. We view staffing in this area as a high priority and are bringing staff on board now to make sure it is done right.

7. Continue to develop a comprehensive system of internal controls

Here, we appreciate the acknowledgement by GAO of the work we are doing in this area. Internal controls were one of the first areas that we addressed. For example, we contracted Price Waterhouse Coopers to help us develop a system of internal controls, and we contracted Ernst and Young to advise us on accounting procedures. While we have more to do, we are making excellent progress.

8. Issue final regulations on conflicts of interest

Treasury has drafted conflict of interest regulations and expects to publish them soon. We will then work diligently with our existing service providers to make any necessary adjustments to bring their mitigation plans into conformance with these regulations. In the meantime, Treasury is confident that our conflict of interest requirements are some of the toughest out there.

9. Institute a system to manage and monitor the mitigation of conflicts of interest

Treasury is requiring firms to provide detailed information about their compliance programs, potential conflicts, and their mitigation plans before any contracts are signed, and we are using this information to select the best vendors. In addition, we will soon have regulations in place with rigorous monitoring and certification requirements and we are considering third party reviews and audits as well.

The GAO report is just one example of our compliance with the tough oversight Congress has appropriately established over the TARP. Treasury will continue to have an open dialogue with the GAO through regular briefings to keep them informed of our progress and welcome their additional feedback as we move forward.

Finally, the law called for the establishment of a Congressional Oversight Panel to review the TARP. That Oversight Panel was recently formed and we had our first meeting with its initial members on Friday, November 21. We look forward to future discussions with the Panel.

Reporting and Transparency

Next, I would like to discuss reporting requirements and transparency. Reporting results to the Congress and the American people is a critical responsibility of the TARP. People need to see what we are doing, understand why we are doing it, and know the effects of our actions. The law defined numerous reporting requirements for the TARP, which I will review here in detail. Treasury has met all of our reporting requirements on time, and we will continue to do so. All of our reports are posted on the Treasury website.

First, the law requires Treasury to publish a Transaction Report within two business days of completing each transaction. Many of our transactions are executed on the same day and so we have published four transaction reports on October 29, November 17, 25 and 26 for the 54 transactions we have completed so far. We will issue another transaction report tomorrow for the investments completed last Friday.

Second, the law requires Treasury to publish a Tranche Report to Congress within 7 days of each $50 billion commitment that is made. The comprehensive report must provide details on the following topics: the transactions made to date, the impact on the financial system, the challenges that remain, and additional actions that may be necessary to address those challenges. To date, Treasury has published three Tranche Reports on November 3 and 21 and December 2.

Finally, the law requires Treasury to provide a detailed report on the overall program within 60 days of the first exercise of the TARP purchase authority. We sent that report to Congress last Friday, December 5, and it is available on our website.

Measuring Results

People often ask: how do we know our program is working? First, we did not allow the financial system to collapse. That is the most direct, important information. Second, the system is fundamentally more stable than it was when Congress passed the legislation. While it is difficult to isolate one program's effects given policymakers' numerous actions, one indicator that points to reduced risk of default among financial institutions is the average credit default swap spread for the eight largest U.S. banks, which has declined more than 200 basis points since before Congress passed the EESA. Another key indicator of perceived risk is the spread between LIBOR and OIS: 1 month and 3-month LIBOR-OIS spreads have each declined about 100 basis points since the law was signed and about 180 basis points from their peak levels before the CPP was announced.

People also ask: when we will see banks making new loans? First, we must remember that just over half the money allocated to the Capital Purchase Program has been received by the banks. Although we are executing at record speed, it will take a few months to process all the remaining applications. The money needs to get into the system before it can have the desired effect. Second, we are still at a point of low confidence – both due to the financial crisis and the economic downturn. As long as confidence remains low, banks will remain cautious about extending credit, and consumers and businesses will remain cautious about taking on new loans. As confidence returns, we expect to see more credit extended.

The increased lending that is vital to our economy will not materialize as fast as any of us would like, but it will happen much faster as a result of having used the TARP to stabilize the system and increase capital in our banks.

We firmly believe that healthy banks of all sizes should use this program to continue making credit available in their communities. Treasury expects banks to continue their lending in a safe and sound manner as a result of these investments and we firmly support the statement issued by bank regulators on November 12 to that effect. The statement emphasized that the extraordinary government actions taken to strengthen the banking system are not one-sided; all banks – not just those participating in the CPP – have benefited from the government's actions. Banks, in turn, have obligations to their communities to continue making credit available to creditworthy borrowers and to work with struggling borrowers to avoid preventable foreclosures. At the same time, Treasury believes institutions must not repeat the poor lending practices that were a root cause of today's problems.

In addition, we are actively engaged with regulators to determine the best way to monitor CPP investments and bank lending. We may utilize a variety of supervisory information for insured depositories, including existing Home Mortgage Disclosure Act (HMDA) data, Community Reinvestment Act (CRA) data, call report data, examination information contained in the CRA Public Evaluations, as well as broader financial conditions.

Conclusion

Treasury is committed to an open and transparent program with appropriate oversight. We look forward to continuing to work with the Financial Stability Oversight Board, the Special Inspector General, the Comptroller General, and the Congressional Oversight Panel as we execute this important program. Transparency will not only give the American people comfort in our stewardship of these funds, it will give the markets confidence that we are stabilizing and strengthening the financial system.

While we have made significant progress, we recognize challenges lie ahead. As Secretary Paulson has said, there is no single action the federal government can take to end the financial market turmoil and the economic downturn, but the new authorities that you and your colleagues provided in October dramatically expanded the tools available to address the needs of our system. We are confident that we are pursuing the right strategy to stabilize the financial system and support the flow of credit to our economy. Thank you and I would be happy to take your questions.

We are hiding the details just like we said we would.

Interim Assistant Secretary for Financial Stability Neel Kashkari
Update on the TARP Program

Washington - Good afternoon, thank you John for that kind introduction and for the invitation to address this audience today. We are in an unprecedented period and market events are moving rapidly and unpredictably. We at Treasury have responded quickly to adapt to events on the ground. Throughout the crisis, we have always acted with the following critical objectives in mind: one, to stabilize financial markets and reduce systemic risk; two, to support the housing market by avoiding preventable foreclosures and supporting mortgage finance; and three, to protect taxpayers. The authorities and flexibility granted to us by Congress have been essential to developing the programs necessary to meet these objectives.

Today, I will focus my remarks on a couple of very important issues -- compliance and oversight of the TARP and on measuring the results of this program. The American people provided Treasury with broad authorities to stabilize the financial system and it is essential we communicate our actions in an open and transparent manner to maintain their trust. I will describe the many steps we are taking to ensure compliance with both the letter and spirit of the law and what measurements we look at to gauge the success of our programs. A program as large and complex as the TARP would normally take many months or years to establish. But, we don't have the luxury of first building the operation, then designing our programs and then executing them. Given the severity of the financial crisis, we must build the Office of Financial Stability, design our programs, and execute them - all at the same time. We have made remarkable progress since the President signed the law only 66 days ago.

Oversight

The first topic I will address is oversight of the TARP. In addition to the normal oversight provided by Congressional committees of jurisdiction, the Congress established four important avenues of oversight: one, the Financial Stability Oversight Board; two, the Special Inspector General; three, the Government Accountability Office; and four, the Congressional Oversight Panel. I will review Treasury's interaction with each body in detail.

First, we moved immediately to establish the Financial Stability Oversight Board, which, by law, includes: the Secretary of the Treasury, the Chairman of the Federal Reserve Board, the Chairman of the Securities and Exchange Commission, the Secretary of Housing and Urban Development, and the Director of the Federal Housing Finance Agency.

The law required the first board meeting to take place within fourteen days. We moved very quickly, and the Oversight Board met within four days. At that initial meeting, the members of the Board selected Chairman Bernanke to be Chairman of the Oversight Board. The law requires the Board to meet once a month, but it has already met five times in the just two months since the law was signed, with numerous staff calls between meetings, and expects to meet again this week. We've also posted the bylaws and minutes of the Board meetings on Treasury's website. In addition, the Oversight Board has interacted with other oversight bodies, such as the GAO and the Congressional Oversight Panel.

Second, the law also requires appointment of a Senate-confirmed Special Inspector General to oversee the program. On November 17, the President nominated a candidate who is awaiting confirmation in the Senate. In the interim, we are coordinating closely with Treasury's Inspector General. We held our first meeting on Monday, October 6, and have had numerous meetings since then to keep the Inspector General apprised of all TARP activity. We look forward to continuing our active dialogue with the Treasury IG, and with the Special IG, upon his confirmation.

Third, the law calls for the Government Accountability Office to establish a physical presence at Treasury to monitor the program. Treasury provided workspace for our auditors within days of the President signing the law and Secretary Paulson had his first call with the Acting Comptroller General, Gene Dodaro, on Tuesday, October 7. The Acting Comptroller General and his team met with our team for the first time on Thursday, October 9. Since then, I have participated in multiple briefings with the GAO and our respective staffs are meeting almost daily for program updates and also to review contracts.

The GAO published its first report on TARP to Congress on December 2, which the law required within 60 days of enactment. The GAO met with our team on Saturday, November 22, before their report was finalized. They provided a thorough review of the TARP programs and progress – essentially a snapshot at the 60 day mark of a large, complex project that continues to be a successful work in progress. As I noted above, given the intensity of the financial crisis, we must build our operation, design our programs and execute them all at the same time. The GAO report identified nine "areas that warrant Treasury's ongoing attention." We are pleased with our auditors' recommendations because the GAO had identified topics that we already had focused on. The report was quite helpful because it provided us with thoughtful, independent verification that Treasury is, indeed, focused on the right topics and Treasury agrees with the GAO on the importance of these issues.

Given the importance of the GAO's feedback, I want to spend a few minutes going through the nine areas that GAO identified and describe what we are doing in each case:

1. Monitoring and reporting of financial institutions activities

• As the report indicated, given the number and variety of financial stability actions being put in place by multiple entities, it will be challenging to view the impact of the Capital Purchase Program in isolation and at the institutional level. Moreover, each individual financial institution's circumstances are different, making comparisons challenging at best, and it is difficult to track where individual dollars flow through an organization. Nonetheless, we are working with the banking regulators to develop appropriate measurements and we are focused on determining the extent to which the CPP is having its desired effect.

2. Compliance of CPP participants with program requirements

• The key first step to effective compliance was developing effective program agreements and we have already accomplished that for publicly traded institutions and most private institutions. The CPP agreements are designed to require that the participants comply fully with the executive compensation restrictions set out by Congress in the legislation. We are now developing procedures to ensure that compliance with these restrictions is maintained.

3. Formalize existing communication strategies to keep people informed about our strategy

• Treasury recognizes the importance of a more comprehensive communication strategy and we are looking at ways to enhance our communications, while recognizing that the TARP program is just one piece of a comprehensive response to the financial market crisis. Very detailed updates, such as this speech, are part of that strategy.

4. Develop a definitive transition plan

Our team has been meeting regularly with the transition team and discussing our ongoing activities to ensure a smooth transition. We intend to have a fully functioning TARP organization in place as the new Administration takes office.

5. Expedite hiring efforts to ensure the Office of Financial Stability has the needed personnel

From day one, hiring has been a key focus area for the entire TARP team and we are making concrete progress every day as we staff up our team. Our Chief Operating Officer is coordinating an intense effort with our human resources office to identify and fill critical staff needs both for the immediate and long term.

6. Ensure sufficient personnel are assigned to oversee performance of contractors

Working with the Treasury procurement staff, we are implementing a comprehensive process for monitoring contractors. We view staffing in this area as a high priority and are bringing staff on board now to make sure it is done right.

7. Continue to develop a comprehensive system of internal controls

Here, we appreciate the acknowledgement by GAO of the work we are doing in this area. Internal controls were one of the first areas that we addressed. For example, we contracted Price Waterhouse Coopers to help us develop a system of internal controls, and we contracted Ernst and Young to advise us on accounting procedures. While we have more to do, we are making excellent progress.

8. Issue final regulations on conflicts of interest

Treasury submitted conflict of interest regulations to OMB for review and expects to publish them soon. We will then work diligently with our existing service providers to make any necessary adjustments to bring their mitigation plans into conformance with these regulations. In the meantime, we are proud that some of our conflict of interest requirements have been described by commentators as some of the "toughest" out there.

9. Institute a system to manage and monitor the mitigation of conflicts of interest

• Treasury is requiring firms to provide detailed information about their compliance programs, potential conflicts, and their mitigation plans before any contracts are signed, and we are using this information to select the best vendors. In addition, we will soon have regulations in place with rigorous monitoring and certification requirements and we are considering third party reviews and audits as well.

The GAO report is just one example of our compliance with the tough oversight Congress has correctly established over the TARP. Treasury will continue to have an open dialogue with the GAO through regular briefings to keep them informed of our progress and welcome their additional feedback as we move forward.

Finally, the law called for the establishment of a Congressional Oversight Panel to review the TARP. That Oversight Panel was recently formed and we had our first meeting with them on Friday, November 21. We look forward to future discussions with the Panel.

Reporting and Transparency

Next, I would like to discuss reporting requirements and transparency. Reporting results to the Congress and the American people is a critical responsibility of the TARP. People need to see what we are doing, understand why we are doing it, and know the effects of our actions. The law defined numerous reporting requirements for the TARP, which I will review here in detail. Treasury has met all of our reporting requirements on time, and we will continue to do so. All of our reports are posted on the Treasury website.

First, the law requires Treasury to publish a Transaction Report within two business days of completing each transaction. Many of our transactions are executed on the same day and so we have published four transaction reports on October 29, November 17, 25 and 26 for the 54 transactions we have completed so far. We will issue another transaction report tomorrow for the investments completed last Friday.

Second, the law requires Treasury to publish a Tranche Report to Congress within seven days of each $50 billion commitment that is made. The comprehensive report must provide details on the following topics: the transactions made to date, the impact on the financial system, the challenges that remain, and additional actions that may be necessary to address those challenges. To date, Treasury has published three Tranche Reports on November 3 and 21 and December 2.

Finally, the law requires Treasury to provide a detailed report on the overall program within 60 days of the first exercise of the TARP purchase authority. We sent that report to Congress last Friday, December 5. It is available on our website today.

Measuring Results

People often ask: how do we know our program is working? First, we did not allow the financial system to collapse. That is the most direct, important information. Second, the system is fundamentally more stable than it was when Congress passed the legislation. While it is difficult to isolate one program's effects given policymakers' numerous actions, one indicator that points to reduced risk of default among financial institutions is the average credit default swap spread for the eight largest U.S. banks, which has declined more than 200 basis points since before Congress passed the EESA. Another key indicator of perceived risk is the spread between LIBOR and OIS: one-month and three-month LIBOR-OIS spreads have each declined about 100 basis points since the law was signed and about 180 basis points from their peak levels before the CPP was announced.

People also ask: when we will see banks making new loans? First, we must remember that just over half the money allocated to the Capital Purchase Program has been received by the banks. Although we are executing at record speed, it will take a few months to process all the remaining applications. The money needs to get into the system before it can have the desired effect. Second, we are still at a point of low confidence – both due to the financial crisis and the economic downturn. As long as confidence remains low, banks will remain cautious about extending credit, and consumers and businesses will remain cautious about taking on new loans. As confidence returns, we expect to see more credit extended.

This lending won't materialize as fast as any of us would like, but it will happen much faster as a result of having used the TARP to stabilize the system and increase capital in our banks.

We firmly believe that healthy banks of all sizes should use this program to continue making credit available in their communities. Treasury expects banks to increase their lending as a result of these investments and we firmly support the statement issued by bank regulators on November 12 to that effect. The statement emphasized that the extraordinary government actions taken to strengthen the banking system are not one-sided; all banks – not just those participating in the CPP – have benefited from the government's actions. Banks, in turn, have obligations to their communities to continue making credit available to creditworthy borrowers and to work with struggling borrowers to avoid preventable foreclosures. At the same time, Treasury believes institutions must not repeat the poor lending practices that were a root cause of today's problems.

Conclusion

Treasury is committed to an open and transparent program with appropriate oversight. We look forward to continuing to work with the Financial Stability Oversight Board, the Inspector General, the Comptroller General, and the Congressional Oversight Panel as we execute this important program. Transparency will not only give the American people comfort in our stewardship of these funds, it will give the markets confidence that we are stabilizing and strengthening the financial system.

While we have made significant progress, we recognize challenges lie ahead. As Secretary Paulson has said, there is no single action the federal government can take to end the financial market turmoil and the economic downturn, but the new authorities Congress provided in October dramatically expanded the tools available to address the needs of our system. We are confident that we are pursuing the right strategy to stabilize the financial system and support the flow of credit to our economy. Thank you and I would be happy to take your questions.

"We are giving it away! . . . in other words.

Interim Assistant Secretary for Financial Stability Neel Kashkari Remarks on Financial Markets and TARP Update

Washington - Good morning and thank you for the opportunity to address you today. I am going to give a few minutes of prepared remarks and then I look forward to taking your questions. We are in an unprecedented period and market events are moving rapidly and unpredictably. We at Treasury have responded quickly to adapt to events on the ground. Throughout the crisis, we have consistently acted with the following three critical objectives: one, to stabilize financial markets and reduce systemic risk; two, to support the housing market by avoiding preventable foreclosures and supporting mortgage finance; and three, to protect taxpayers. The authorities and flexibility granted to us by Congress have been essential to developing the programs to meet these objectives.

Today, I will focus my remarks on one of our vital programs, the Capital Purchase Program, which Treasury launched on October 14 to stabilize the financial system by increasing the capital in banks. I cannot think of an example where a program of this scale and complexity has been launched and executed as quickly and as effectively as the Capital Purchase Program – in either the public or private sectors.

Backdrop to the Capital Purchase Program

Before we launched this program in October, we were at a tipping point. Credit markets were largely frozen, denying businesses and consumers access to vital funding and credit. Financial institutions were under extreme pressure, and investor confidence in our system was dangerously low. A number of institutions had failed or been re-structured. Throughout the crisis, we have been strongly encouraging financial institutions to raise capital and to recognize losses. However, as markets continued to deteriorate, it was clear to Secretary Paulson that we needed to use the authority and flexibility granted by Congress as aggressively as possible to quickly stabilize the system. And we believed that purchasing equity in healthy banks would be the fastest and most effective way to inject much-needed capital to the financial system and restore confidence and the flow of credit.

On October 24, Secretary Paulson announced that we would allocate $250 billion of the financial rescue package for a voluntary capital purchase program for banks and savings institutions of all sizes. We did this in combination with a guarantee of senior bank debt by the FDIC.

Goals of the Capital Purchase Program

The Capital Purchase Program was designed to first stabilize the financial system by increasing the capital in our banks, and then to restore confidence so credit could flow to our consumers and businesses.

As we have seen throughout this crisis, the loss of confidence in and between financial institutions can happen with lightning speed and with devastating effects. Increasing capital levels helps banks retain the confidence of depositors, investors and counterparties alike.

A stronger capital base stabilizes the system by enabling banks to take losses as they write down or sell troubled assets. With higher capital levels and restored confidence, our banks can continue to play their role as lenders in our communities; while difficult to achieve during times like this, this lending is essential to economic recovery.

Program Success

It has been 51 days since Secretary Paulson announced the Capital Purchase Program. In those seven weeks, the CPP has gone from an idea to a fully-functioning program. We started from scratch, recruited and built a world class team, designed the program details, hired necessary outside vendors, and implemented a complex, but efficient processing model: Applications are submitted to and reviewed by regulators. They recommend them to Treasury, where we review them before a final decision is made. And numerous transaction agreements are processed for each investment before it is funded. In just under two months, the CPP has achieved operational speed and quality that few government or private sector programs have ever reached. And our program is becoming more efficient each day.

Let me briefly touch upon the process, which is quite important because we are focused on meticulous execution, transparency and compliance with all oversight requirements set out by Congress.

Treasury created a standard investment agreement for all banks, regardless of size. We worked with the regulators to develop a consistent process for the regulators to review applications and make recommendations.

The Treasury Investment Committee meets daily and reviews dozens of applications per meeting and Treasury makes the final decision on all investments. It is typically less than a week between when a regulator submits a recommendation to Treasury and when Treasury makes an investment decision. It sometimes takes as little as two days.

We often close transactions in a couple weeks - which is a record for either the private or public sector.

• On October 28, we funded eight transactions for $115 billion to banks in four states.
  
  
• On November 14, we funded 21 transactions for $33.5 billion to banks in 16 states.
  
  
• On November 21, we funded 23 transactions for $2.9 billion to banks in 16 states.

In just over one month, we have disbursed an estimated $151 billion to 52 institutions in 25 states across the country, which means that over half the money is already out the door. We are ramping up quickly from here.

We have more applications under-review in the pipeline and many others have already been pre-approved from depositories across the country. Often banks need more time to complete their legal requirements than Treasury needs to execute the investments.

This progress is remarkable not only in its speed and quality, but also in its scope. We have touched almost every banking market in the nation with applications representing small and large banks alike. The largest investment has been $25 billion. The smallest investment has been $9 million.

Measuring Results

People often ask: how do we know our program is working? First, we did not allow the financial system to collapse. That is the most direct, important information. Second, we know the system is more stable than it was when Congress passed the legislation. While it is difficult to isolate one program's effects given regulators' numerous actions, one indicator that has pointed to reduced risk in the system is the average credit default swap spread for the eight largest U.S. banks, which has declined almost 207 basis points since before Congress passed the EESA. Another key indicator of perceived risk that we are tracking is LIBOR: 1 month LIBOR has declined 217 basis points and 3 month LIBOR 202 basis points.

People also ask: when we will see banks making new loans? First, we must remember that just over half the money is out the door. Although we are executing at record speed, it will take a few months to process all the remaining applications. The money needs to get into the system before it can have the desired effect. Second, we are still at a point of low confidence – both due to the credit crisis and due to the economic downturn. While confidence is low, banks will remain cautious about extending credit, and consumers and businesses will remain cautious about taking on new loans. As confidence returns, we expect to see more credit extended.

This lending won't materialize as fast as any of us would like, but it will happen much faster as a result of having used the TARP to stabilize the system and to increase the capital in our banks.

We firmly believe that healthy banks of all sizes should use this program to continue making credit available in their communities. As Secretary Paulson has said, we expect banks to increase their lending as a result of these efforts and it is important that they do so. As such, Treasury supports the statement issued by bank regulators on November 12 to that effect. The statement emphasized that the extraordinary government actions taken to stabilize and strengthen the banking system are not merely one-sided; all banks – not just those participating in the Capital Purchase Program – have benefited from the government's actions to restore confidence in the financial system. Banks, in turn have obligations to their communities, particularly in this time of economic disruption. They have an obligation to continue making credit available to creditworthy borrowers and an obligation to work with borrowers who are struggling to avoid preventable foreclosures. At the same time, institutions must not repeat the poor lending practices that were a root cause of today's problems.

Treasury is focused on determining the extent of the CPP's desired effect and contributions to our policy objectives, an issue raised by the GAO's first report on the program. As noted by the GAO, given the number and variety of financial stability actions being put in place by multiple entities, it will be extremely difficult to view the CPP effects in isolation. Moreover, each individual financial institution's circumstances are different making comparisons challenging at best. Tracking where individual dollars flow through an organization is also difficult. However, we are working with the regulators to try to develop ways to determine the effectiveness of the program.

Conclusion

While we have made significant progress, we recognize challenges lie ahead. As Secretary Paulson has said, there is no single action the Federal Government can take to end the financial market turmoil and the economic downturn, but the new authorities Congress provided in October dramatically expanded the tools available to address the needs of our system. In these extraordinary times, we must focus on developing the most effective combination of our tools to further stabilize our financial system and speed the process of recovery. We are confident that we are pursuing the right strategy to stabilize the financial system and support the flow of credit to our economy. Thank you and I would be happy to take your questions.

The U.S. Government will keep itself informed . . . but not the Citizens!

Interim Assistant Secretary for Financial Stability Neel Kashkari
Testimony Before the Senate Appropriations
Subcommittee on Financial Services and General Government

Washington - Chairman Durbin, Members of the Subcommittee, good morning and thank you for the opportunity to appear before you. I would like to provide an update on the Treasury Department's actions to work through the financial crisis and restore the flow of credit to the economy. We have taken multiple actions with the following three critical objectives: one, to provide stability to financial markets; two, to support the housing market by preventing avoidable foreclosures and supporting the availability of mortgage finance; and three, to protect taxpayers. Before we acted, we were at a tipping point. Credit markets were largely frozen, denying financial institutions, businesses and consumers access to vital funding and credit. Financial institutions were under extreme pressure, and investor confidence in our system was dangerously low.

We have acted quickly and creatively in coordination with the Federal Reserve, the FDIC, OTS, and the OCC to help stabilize the financial system and it is clear that our coordinated actions have made an impact. Our coordinated effort to strengthen our financial institutions so they can support our economy is critical to working through the current economic downturn. Strong financial institutions and a stable financial system will smooth the path to recovery and an eventual return to prosperity.

We believe we have taken the necessary steps to prevent a financial collapse and the authorities and flexibility granted to us by Congress are key to this. I will briefly discuss some of Treasury's policies and priorities today.

Recent Actions

First, I will start by discussing some of our most recent actions. Consistent with our commitment to stabilize the financial system and strengthen our financial institutions, while also protecting U.S. taxpayers, we took two recent actions in coordination with our regulators. On November 9, Treasury announced an investment to support the restructuring of the American Insurance Group (AIG), together with the Federal Reserve Bank of New York. On November 23, the U.S. government – Treasury, the Fed and the FDIC – entered into an agreement with Citigroup to provide a package of guarantees, liquidity and capital. We will continue to take the necessary steps to protect the financial system and believe these actions, together with others we have taken since the onset of the financial crisis, demonstrate a decisive use of tools to strengthen our financial institutions and increase confidence in our system.

Equity Program

Next, I will discuss the Capital Purchase Program, one of the most significant and effective programs we have implemented to stabilize financial markets and improve the flow of credit to businesses and consumers. As the markets rapidly deteriorated in October, it was clear to Secretary Paulson and Chairman Bernanke that the most timely, effective way to improve credit market conditions was to strengthen bank balance sheets quickly through direct purchases of equity. Secretary Paulson announced that we would commit $250 billion of the financial rescue package granted by Congress to purchase equity directly from a range of financial institutions. With a stronger capital base, our banks will be more confident and better positioned to continue lending which, although difficult to achieve during times like this, is essential to economic recovery. Moreover, a stronger capital base also enables banks to take losses as they write down or sell troubled assets.

In just over one month, Treasury has already disbursed an estimated $151 billion to 52 institutions and has pre-approved many additional applications from public depositories across the country. This progress is remarkable not only in its speed and efficacy but also in its scope. We have touched every banking market in the nation already with applications representing small and large banks alike. Taking into account the needs of the range of institutions across the country, on November 17, Treasury released a term sheet for privately-held institutions, and we have provided even more streamlined terms to facilitate capital investment into community development financial institutions. Regulators are already receiving and reviewing many applications from these private depositories, another important source of credit in our economy.

We strongly believe that healthy banks of all sizes, both public and private, should use this program to continue making credit available in their communities. Therefore, Treasury strongly supports the statement issued by bank regulators on November 12 in support of this goal. The inter-agency statement emphasized that the extraordinary government actions taken to stabilize and strengthen the banking system are not merely one-sided; all banks – not just those participating in the Capital Purchase Program – have benefited from the government's actions to restore confidence in the U.S. banking sector. Banks, in turn have obligations to their communities, particularly in this time of economic disruption. They have an obligation to continue to make credit available to creditworthy borrowers and an obligation to work with borrowers who are struggling to avoid preventable foreclosures.

The statement also urges banks to carefully review their dividend and compensation policies during this time of scarce resources. We fully support this regulatory initiative and believe it is crucial to focus on prudent lending so that institutions do not repeat the poor lending practices that were a root cause of today's problems. Restoring a vibrant economy won't materialize as quickly as all of us would like, but it will happen much quicker as confidence in our financial sector is restored in part due to the TARP

Housing/Mortgage Finance

Our other critical and related objective is to support the housing market and avoid preventable foreclosures. We have worked aggressively to avoid preventable foreclosures, keep mortgage financing available and develop new tools to help homeowners. Here, I will briefly highlight three key accomplishments:

First, in October 2007, Treasury helped establish the HOPE NOW Alliance, a coalition of mortgage servicers, investors and counselors, to help struggling homeowners avoid preventable foreclosures. Through coordinated, industry-wide action, HOPE NOW has significantly increased the outreach and assistance provided to homeowners. HOPE NOW estimates that nearly 2.7 million homeowners have been helped by the industry since July 2007; the industry is now helping about 225,000 homeowners a month avoid foreclosure.

Second, we acted earlier this year before enactment of the EESA to prevent the failure of Fannie Mae and Freddie Mac, the housing GSEs that affect over 70 percent of mortgage originations. These institutions are systemically critical to financial and housing markets, and their failure would have materially exacerbated the recent market turmoil and profoundly impacted household wealth. We have stabilized the GSEs and limited systemic risk.

Third, on November 11, HOPE NOW, FHFA and the GSEs achieved a major industry breakthrough with the announcement of a streamlined loan modification program that builds on the mortgage modification protocol developed by the FDIC for IndyMac. The adoption of this streamlined modification framework is an additional tool that servicers now have to help avoid preventable foreclosures. Potentially hundreds of thousands more struggling borrowers will be enabled to stay in their homes.

An important complement to those guidelines was the GSEs' announcement on November 20^th that they will suspend all foreclosures for 90 days. The foreclosure suspension will give homeowners and servicers time to utilize the new streamlined loan modification program and make it possible for more families to work out terms to stay in their homes.

Term Asset Backed Securities Loan Facility

Next, I will discuss our most recent program, the Term Asset Backed Securities Loan Facility (TALF). As Secretary Paulson noted on November 12, support of the consumer finance sector is a high priority for Treasury because of its fundamental role in fueling economic growth. Like other forms of credit, the availability of affordable consumer credit depends on ready access to a liquid and affordable secondary market – in this case, the asset backed credit market. Additionally, consumer finance relies on the non-bank financial sector as a source of finance. However, recent credit market stresses essentially brought this market to a halt in October, resulting in climbing credit card rates. As a result, millions of Americans cannot find affordable financing for their basic credit needs and everyday purchases.

Last week, on November 25, Treasury and the Federal Reserve announced an aggressive program aimed at supporting the normalization of credit markets and making available affordable credit for all consumers. Under the TARP, Treasury will provide $20 billion to invest in a Federal Reserve facility that will provide liquidity to issuers of consumer asset backed paper, enabling a broad range of institutions to step up their lending, and enabling borrowers to have access to lower-cost consumer finance and small business loans. The facility may be expanded over time and eligible asset classes may be expanded later to include other assets, such as commercial mortgage-backed securities, non-agency residential mortgage-backed securities or other asset classes.

Priorities for TARP

On December 1, Secretary Paulson underscored the critical priorities for the most effective deployment of remaining TARP funds, foremost of which is to ensure our banking sector has the necessary capital base to continue lending to consumers and businesses and support economic growth, and to help homeowners avoid preventable foreclosures.

I will briefly discuss these priorities:

One, in order to continue their critical role as providers of credit, both banks and non-banks may need more capital given their troubled asset holdings, continued high rates of foreclosures, and stagnant global economic conditions. We continue to look at additional capital strategies and, as we do so, we will assess the impact of the first capital program and also take into consideration existing economic and market conditions.

Two, we continue to aggressively examine strategies to mitigate foreclosures and maximize loan modifications, which are a necessary part of working through the necessary housing correction and maintaining the strength of our communities. The new program which I highlighted above with the FHFA, the GSEs, and HOPE NOW is just one example and we will continue working hard to make progress here.

Finally, as we consider potential new TARP programs, we must also maintain flexibility and firepower for this Administration and the next, to address new challenges as they arise.

Oversight

Concurrently, we recognize that a program as large and important as the TARP demands appropriate oversight and we are committed to transparency and oversight in all aspects of the program. We continue to take necessary measures to ensure compliance with the letter and the spirit of the requirements established by the Congress, including regular briefings with the Government Accountability Office, the Financial Stability Oversight Board, the Inspector General and the Congressional Oversight Panel. We will also continue to meet all of the reporting requirements established by the Congress.

Conclusion

Our system is stronger and more stable due to our actions. Although a lot has been accomplished, we have many challenges ahead of us. We will focus on the goals outlined by Secretary Paulson and develop the right strategies to meet those objectives. Thank you and I would be happy to answer your questions.

Sure . . . we'll take another pig in the poke.

Secretary Paulson Remarks on the U.S. Economy and Financial System

Washington- Good afternoon. Thank you for the opportunity to provide an update on the current state of the U.S. economy, our implementation of the financial rescue package and strategies for use of the remaining TARP funds.

Today we continue to work through a severe financial crisis. While we are making progress, the journey ahead will continue to be a difficult one. But I have confidence that we are pursuing the right strategy to stabilize the financial system and support the flow of credit into our economy. The new authorities Congress provided in October dramatically expanded the tools available to the federal government to address the needs of our system. As I and my fellow regulators stated clearly at the time, we now have a set of tools - new authorities in addition to our existing ones- that we can deploy in creative combinations to maximize their impact on our system. And we have taken significant collaborative actions that demonstrate that strategy in action.

This consistent effort to strengthen our financial institutions so they can support our economy is critical to our progress through the current economic downturn. Strong financial institutions and a stable financial system will smooth the path to recovery and an eventual return to prosperity.

The root of this financial turmoil is the housing correction that began and accelerated throughout 2007. As home prices have declined and foreclosures have risen, housing-related assets have been hit particularly hard. Fifteen months ago the housing correction spilled over into the financial sector, pushing the banking system into stress. Consequently, the overall economy has suffered. Third quarter GDP this year showed negative 0.5 percent growth. The unemployment rate has risen to a level not seen in 15 years, with a loss of 240,000 jobs in October alone. Data released last week showed that through September, home prices in 10 major cities had fallen 19 percent over the previous year, demonstrating that the housing correction has not abated. And as the economy slows further, it threatens to prolong the housing correction.

There is no single action the Federal Government can take to end the financial market turmoil and the economic downturn. In these extraordinary times, we must instead focus on developing the most effective combination of our tools to further stabilize our financial system and speed the process of recovery.

Financial System Recovery Efforts

We have implemented several programs aimed at improving the flow of credit to businesses and consumers, so they can spend and invest and restore our economy.

Most significantly, we devoted $250 billion to increasing the capital of our banks. A stronger capital base enables banks to take losses as they write down or sell troubled assets. Stronger capitalization is also essential to increasing lending which, although difficult to achieve during times like this, is essential to economic recovery.

Treasury has received hundreds of applications from the regulators, and hundreds more are under review by the regulators. To date we have purchased preferred shares in 52 institutions, putting $150 billion in additional capital into the financial system. And we will work through the remaining applications in the coming weeks and months.

We have announced the terms for participation for most non-publicly traded banks, another important source of credit in our economy. Regulators are already receiving many applications from private banks and are reviewing and processing those now.

In a powerful joint statement on November 12^th, our banking regulators have emphasized that the extraordinary government actions taken to stabilize and strengthen the banking system are not merely one-sided; all banks – not just those participating in the Capital Purchase Program – have benefited, so they all also have responsibilities in the areas of lending, dividend and compensation policies, and foreclosure mitigation. We strongly support this regulatory initiative.

We expect banks to increase their lending as a result of these efforts and it is important that they do so. This lending won't materialize as fast as any of us would like, but it will happen much, much faster as confidence is restored as a result of having used the TARP to stabilize our system and to increase the capital in our banks.

As we all know, the non-bank financial sector is a critical source of finance for the consumer spending that fuels our economy. Consumer credit is critical for many households as they consider purchasing a car, new appliances, or other big ticket items. Like other forms of credit, the availability of affordable consumer credit depends on ready access to a liquid and affordable secondary market – in this case, the asset backed credit market. Recent credit market stresses essentially brought this market to a halt in October. As a result, millions of Americans cannot find affordable financing for their basic credit needs. And credit card rates are climbing, making it more expensive for families to finance everyday purchases. The Federal Reserve and the Treasury last week announced an aggressive program to support the normalization of credit markets and the availability of affordable consumer credit to support economic recovery.

To support the return of consumer lending, the Treasury will provide $20 billion in TARP resources to back a Federal Reserve facility that will provide liquidity to issuers of consumer asset backed paper, enabling a broad range of institutions to step up their lending, and enabling borrowers to have access to lower cost consumer finance and small business loans. The facility may be expanded over time and eligible asset classes may be expanded later to include other assets, such as commercial mortgage-backed securities, non-agency residential mortgage-backed securities or other asset classes.

This consumer lending facility is one example of the creative combination of federal government authorities to ease a major obstruction to the flow of credit into our economy. The actions taken last week to support Citigroup similarly demonstrate the creative combination of tools to most effectively strengthen our financial institutions and confidence in our system.

We are actively engaged in developing additional programs to strengthen our financial system so that lending flows into our economy. When these programs are ready for implementation, we will discuss them with the Congress and the next Administration.

We continue to look at additional capital strategies, and as we do so we will assess the impact of the first capital program, and use this information to evaluate the size and focus of an additional program in light of existing economic and market conditions.

And we are continuing to examine potential foreclosure mitigation ideas that may be an appropriate and effective use of TARP resources. This Administration has used a variety of authorities to reduce avoidable foreclosures, through HUD programs, through the FDIC's program with IndyMac, through our support and leadership of the HOPE NOW Alliance, and through the new GSE servicer guidelines announced November 11^th that will set a new standard for the entire industry for streamlined modification procedures.

An important complement to those guidelines was the GSEs' announcement on November 20^th that they will suspend all foreclosures for 90 days. The foreclosure suspension will give homeowners and servicers time to utilize the new streamlined loan modification program and make it possible for more families to work out terms to stay in their homes.

And of course, as we consider potential new TARP programs, we must also maintain flexibility and firepower for this Administration and the next, to address new challenges as they arise.

As I have said for some time, the housing correction is at the root of our economic and market difficulties. The most important thing we can do to mitigate foreclosures and progress through the housing correction is to reduce the cost of mortgage finance, so more families can afford to buy a home, and so homeowners can refinance into more affordable mortgages. The actions we have taken to stabilize and strengthen Fannie Mae and Freddie Mac, and through them to increase the flow of mortgage credit have insulated mortgage rates from the rapid increases and fluctuations in the cost of other credit. But given that we have essentially guaranteed Fannie Mae and Freddie Mac securities, the rates on those securities – and corresponding mortgage rates – have not come down as much as we may have hoped. The Federal Reserve's announcement that it will purchase $100 billion in GSE debt and half a trillion dollars in GSE mortgage backed securities should have a strongly positive impact on the cost of mortgage finance. And we continue to look for additional ways to make mortgage credit more affordable, which will stimulate purchases, help to stabilize prices and end this housing correction.

Conclusion

Until the financial crisis is behind us, we must remain vigilant, ready to respond and to manage unpredictable events as they occur. Our first priority is on recovery. We work every day fully aware of our awesome responsibility to the American people who depend on the financial system to save for college and retirement, for financing homes, cars and companies. I am confident that we will work through this difficult period, and opportunity and prosperity will again flourish. Thank you.

Tell 'em what you told 'em Paul.

Secretary Paulson Remarks on Consumer ABS Lending Facility

Washington-- Today the Treasury and the Federal Reserve are announcing a facility to finance the issuance of non-mortgage asset-backed paper in order to support lending to consumers and small businesses that is vital to our economy.

The consumer asset backed securities market is a source of liquidity to financial institutions that provide federally-guaranteed small business loans and consumer lending such as auto loans, student loans and credit cards. Issuance of ABS in these areas reached $240 billion in 2007, but credit market stresses led to a steep decline in the third quarter of 2008, and the market essentially came to a halt in October. As a result, millions of Americans cannot find affordable financing for their basic credit needs. And credit card rates are climbing, making it more expensive for families to finance everyday purchases. This lack of affordable consumer credit undermines consumer spending and as a result weakens our economy.

To address this need and support the return of consumer lending, the Treasury will provide $20 billion of credit protection to the Federal Reserve in connection with its $200 billion Term Asset Backed Securities Loan Facility. By providing liquidity to issuers of consumer asset backed paper, the Federal Reserve facility will enable a broad range of institutions to step up their lending, enabling borrowers to have access to lower cost consumer finance and small business loans. The facility may be expanded over time and eligible asset classes may be expanded later to include other assets, such as commercial mortgage-backed securities, non-agency residential mortgage-backed securities or other asset classes.

Throughout this financial market turmoil, our focus has been to stabilize the system and support the lending that is vital to our economy. Toward that end we've taken steps to strengthen the capital position of our financial institutions, to stabilize the system and to enable them to increase lending to American consumers and businesses. Similarly, we've acted to stabilize the GSEs and to purchase GSE mortgage-backed securities, in order to increase the availability of affordable mortgage credit throughout our nation. Today's initiative to support the small business and consumer finance market is similarly aimed at increasing the availability of affordable lending. Today's announcement by the Fed that it will purchase direct debt obligations of Fannie Mae, Freddie Mac and the Federal Home Loan Banks, and also mortgage backed securities guaranteed by Fannie, Freddie and Ginnie Mae, underscores our support for the housing market. Nothing is more important to getting through this housing correction than the availability of affordable mortgage finance.

It will take time to work through the difficulties in our markets and our economy, and new challenges will continue to arise. I and my regulatory colleagues are committed to using all the tools at our disposal to preserve the strength of our financial institutions and stabilize our financial markets, to minimize the spillover into the rest of the economy.

One man's junk is the U.S. Government's Treasure!

Treasury Provides TARP Funds to Federal Reserve
Consumer ABS Lending Facility

Washington-- The U.S. Treasury Department today announced it will allocate $20 billion to back a lending facility for the consumer asset backed securities market established by the Federal Reserve Bank of New York.

The asset backed securities market provides liquidity to financial institutions that provide small business loans and consumer lending such as auto loans, student loans, and credit cards. While ABS issuances in these categories were roughly $240 billion in 2007, issuance of consumer ABS declined precipitously in the third quarter of 2008 before essentially coming to a halt in October. Continued disruption in the ABS market could further deteriorate credit availability for consumers and increase the prospects for further deterioration in the economy generally.

This facility, the Term Asset Backed Securities Loan Facility, is intended to assist the credit markets in accommodating the credit needs of consumers and small businesses by facilitating the issuance of ABS and improving ABS market conditions. The underlying credit exposures of eligible securities initially must be newly or recently originated auto loans, student loans, credit card loans or small business loans guaranteed by the U.S. Small Business Administration. The facility may be expanded over time and eligible asset classes may be expanded later to include other assets, such as commercial mortgage-backed securities, non-agency residential mortgage-backed securities or other asset classes.

Under the new facility, the Federal Reserve Bank of New York will lend up to $200 billion on a non-recourse basis to holders of newly issued AAA-rated ABS for a term of at least one year. The Federal Reserve will lend an amount equal to the market value of the ABS less a haircut and will be secured at all times by the ABS. The U.S. Treasury Department will provide a $20 billion of credit protection to the Federal Reserve in connection with the facility, using its authorities in the Emergency Economic Stabilization Act of 2008. The attached term sheet describes the basic terms and operational details of the facility.

Please . . . when can I, Joe Citizen, get a loan!

Joint Statement by Treasury, Federal Reserve and the FDIC on Citigroup

Washington, DC-- The U.S. government is committed to supporting financial market stability, which is a prerequisite to restoring vigorous economic growth. In support of this commitment, the U.S. government on Sunday entered into an agreement with Citigroup to provide a package of guarantees, liquidity access and capital.

As part of the agreement, Treasury and the Federal Deposit Insurance Corporation will provide protection against the possibility of unusually large losses on an asset pool of approximately $306 billion of loans and securities backed by residential and commercial real estate and other such assets, which will remain on Citigroup's balance sheet. As a fee for this arrangement, Citigroup will issue preferred shares to the Treasury and FDIC. In addition and if necessary, the Federal Reserve stands ready to backstop residual risk in the asset pool through a non-recourse loan.

In addition, Treasury will invest $20 billion in Citigroup from the Troubled Asset Relief Program in exchange for preferred stock with an 8% dividend to the Treasury. Citigroup will comply with enhanced executive compensation restrictions and implement the FDIC's mortgage modification program.

With these transactions, the U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy.

We will continue to use all of our resources to preserve the strength of our banking institutions and promote the process of repair and recovery and to manage risks. The following principles guide our efforts:

• We will work to support a healthy resumption of credit flows to households and businesses.
  
  
• We will exercise prudent stewardship of taxpayer resources.
  
  
• We will carefully circumscribe the involvement of government in the financial sector.
  
  
• We will bolster the efforts of financial institutions to attract private capital.

Is anyone listening anymore . . . other than the Robber Banks?

Interim Assistant Secretary Neel Kashkari Remarks
on Implementation of the Emergency Economic Stabilization Act

Washington- Good afternoon. Thank you, Faith, for that kind introduction. I have really enjoyed working with you over the past year. You are doing an excellent job leading HOPE NOW, getting servicers who are fierce competitors by day, to work together and with counselors toward the common goal of foreclosure prevention. The organization of Women in Housing and Finance is fortunate to have you as their President-Elect.

It is an honor for me to be here. Rather than give a long, formal speech, I would like to use this unique opportunity to do something a little different. I would like to give you a brief overview of our response to the credit crisis, and then spend most of the time taking your questions and having a thoughtful discussion.

The Treasury, the Federal Reserve and regulators in the U.S. and abroad have taken numerous unprecedented actions since the beginning of the crisis to reduce systemic risk and stabilize financial markets. Throughout the crisis, we have been strongly encouraging financial institutions to raise capital and to recognize losses. We have worked hard to adapt our policies to the rapidly changing circumstances on the ground.

Secretary Paulson and Chairman Bernanke recognized early that there may come a time when the private markets would become unwilling to provide the necessary capital to our financial system to deal with the large expected losses from the housing correction. In such a scenario, only the Federal government would be in a position to support the financial system – to step in to provide the needed capital to prevent collapse. Government intervention was not our first choice, as it often has unintended, far-reaching consequences.

We evaluated numerous alternatives and focused on a program to buy illiquid mortgage assets in very large scale to attract private capital to recapitalize our financial system.

We all hoped it would not come to this, but recognized the possibility and began contingency planning in early 2008.

In late summer, after the failure of Bear Stearns, the crisis intensified and our financial institutions came under even more pressure from deteriorating market conditions and the loss of confidence. In a very short period of time, some of our largest financial institutions failed or changed structure. In July, IndyMac bank failed. In the month of September alone, we witnessed the following: conservatorship of Fannie Mae and Freddie Mac, the sale of Merrill Lynch to Bank of America, the bankruptcy of Lehman Brothers, the rescue of AIG by the Fed, the conversion to bank holding companies by Morgan Stanley and Goldman Sachs, the distressed sale of Wachovia, and the failure of Washington Mutual.

As a result, in September, credit markets effectively froze. The commercial paper market shut down, 3-month Treasuries dipped below zero, and a money market mutual fund "broke the buck" for only the second time in history, precipitating a $200 billion net outflow of funds from that market.

Recognizing the threat to our financial system, Secretary Paulson and Chairman Bernanke knew the time had come and on September 18, they went to the Congress to ask for unprecedented authority to prevent a collapse of our financial system. Congress recognized the threat that frozen credit markets pose to the economy and to every American. Just two weeks later, on October 3, the Congress passed and President Bush signed into law the Emergency Economic Stabilization Act of 2008. We worked hard with the Congress to build tremendous flexibility into the legislation because the one constant throughout the credit crisis has been its unpredictability.

In our discussions with the Congress, we focused on our initial plan to purchase illiquid mortgage assets. In the two weeks between the time we submitted the draft legislation and the time the bill passed, credit markets deteriorated more quickly than we had expected. One key measure we looked at was LIBOR-OIS spread – a measure of perceived credit risk in the financial system. Typically, 5 – 10 basis points, on September 1, the one month spread was 47 basis points. By the 18th, when we first went to Congress, the spread had climbed 88 basis points to 135 basis points. By the time the bill passed, just two week later on October 3, the spread had climbed another 128 basis points to 263 basis points.

It was clear to Secretary Paulson and Chairman Bernanke, we needed to use the authority and flexibility granted under the EESA as aggressively as possible to quickly stabilize the system. We began immediately designing a capital program in addition to our asset purchase programs. We believed that purchasing equity in healthy banks would be the fastest way to inject much-needed capital into the financial system and restore confidence, which would restore the flow of credit. Illiquid asset purchases, which would take longer to implement, would follow.

Meanwhile, credit markets continued to deteriorate. On October 10, LIBOR-OIS spread had risen another 75 basis points to 338 basis points. So, four days later, on October 14, when our Capital Purchase Program was ready, we announced a plan to invest up to $250 billion in banks and savings institutions of all sizes, in combination with a guarantee of senior bank debt by the FDIC. These combined actions were taken to prevent a collapse of the financial system. We believe these actions were successful.

At the same time, we continued working hard on our illiquid asset purchase programs. We were keenly aware that, while $700 billion is a large sum of money, it is a finite amount. We needed to use the available funds to provide the maximum benefit to the system, while leaving enough dry powder to deal with contingencies. Throughout the process, we carefully monitored how the markets were responding to our actions and conditions in the broader economy. We asked ourselves: Would banks apply for the capital? Would credit markets respond? What was happening in the economy?

We were pleased that healthy banks of all sizes were signing up for the capital program and credit markets were showing signs of thawing. But the economic indicators were less positive. On October 31, data on third quarter GDP showed negative 0.3 percent growth. In addition, data released on October 28 showed that through August, home prices in 10 major cities had fallen 18 percent over the previous year.

It became clear we may need additional capital for both banks and non-bank financial institutions. To prevent the collapse of the financial system, we also had to restructure the Federal Reserve's loan to AIG, using $40 billion of TARP funds. With about half the original $700 billion available for asset purchases, would such a program still be the best approach? For an asset purchase program to be effective, it must be done in very large scale.

While we have taken actions to stabilize the banking sector, supporting the non-banking market is also important to helping consumers, businesses and our economy get the credit they need. The consumer securitization market appears to be a promising opportunity. This would help bring down rates of auto loans, credit cards and student loans and could be achieved with a more modest allocation from the TARP. And although we are not currently planning to initiate another capital program beyond those already announced, an emphasis on additional capital seems to us to be an appropriate focus today.

The EESA is not an economic stimulus plan, nor is it an economic growth plan. It was designed to stabilize the financial system. Today, the LIBOR-OIS spread has fallen 238 basis points from its peak to 100 basis points. We believe the combined actions of Treasury, the Federal Reserve and FDIC have stabilized the financial system and prevented a financial collapse. Nonetheless, the current crisis took years to build up and will take time to work through, and we still face some real economic challenges.

We will remain focused on ensuring the stability of the financial system and have begun working with our successors as we transition to the next Administration. With that brief overview, I would be happy to take your questions.

Blah, Blah, Blah . . .

Testimony by Treasury Secretary Henry M. Paulson, Jr.
before the House Committee on Financial Services

Washington, DC-- Good morning and thank you for the opportunity to testify this morning on implementation of the Emergency Economic Stabilization Act. I am grateful and everyone in this country should be grateful, for the efforts of Chairman Frank, ranking member Bachus, this committee and other members of Congress toward adoption of the financial rescue legislation, which created critically important authorities and financial capacity to stabilize our financial system. Before Congress provided these tools, we were facing a financial crisis without the authorities and resources necessary to meet the challenge. At the risk of oversimplification, the financial rescue package is about restoring confidence – restoring the confidence of depositors and investors in our financial institutions, and restoring the confidence that our financial institutions need so that they will get back to normal lending practices.

This law has already allowed us to take decisive action to prevent the collapse of our financial system. But more needs to be done, and it is my responsibility to use the authorities Congress provided to protect and strengthen the financial system, and in so doing, protect the taxpayer.

Let me summarize what the U.S. financial system has had to digest in just a few months' time. We have not in our lifetime dealt with a financial crisis of this severity and unpredictability. We have seen the failures, or the equivalent of failures, of Bear Stearns, IndyMac Bank, Lehman Brothers, Washington Mutual, Wachovia, Fannie Mae, Freddie Mac, and AIG – institutions with a collective $4.7 trillion in assets when this year began. Each of these failures would be tremendously consequential in their own right under normal market conditions – but our economy and our financial system faced them in succession while at the same time the economy was weakening. Other large financial institutions were under significant pressure and market participants around the world were speculating about which institution would be next to fall.

And as you well recall, in September, after 13 months of market stress, the financial system essentially seized up and we had a system-wide crisis. Our markets were frozen, banks had pulled back very substantially from interbank lending. Confidence in our financial system and a number of our financial institutions had been seriously compromised. That was the background against which Chairman Bernanke and I met with the Congressional bipartisan leadership to explain the need for emergency legislation.

Our objectives in asking Congress for a financial rescue package were to first stabilize a financial system on the verge of collapse, and then to get lending going again to support the American people and businesses. We warned that the frozen credit markets were already severely damaging the U.S. economy and costing jobs. If the financial system were to collapse, it would significantly worsen and prolong the economic downturn that was already underway.

We needed the financial rescue package so we could intervene, stabilize our financial system, and minimize further damage to our economy. The rescue package was not intended to be an economic stimulus or an economic recovery package; it was intended to shore up the foundation of our economy by stabilizing the financial system, and it is unrealistic to expect it to reverse the damage that had already been inflicted by the severity of the crisis.

During the two weeks Congress worked on the legislation, market conditions worsened significantly. Many Americans look at the stock market as an indicator of the economy, and during this period they saw tremendous volatility. The Dow Jones Industrial Average fell more than 700 points on one single day, and over 9 percent during the two weeks the legislation was debated – stock market losses amounted to slightly more than $2 trillion.

But we were focused on the credit markets because they provide our basic economic fuel – borrowing and lending capital – that supports and creates jobs. The confidence in banks and of banks continued to diminish, as did the flow of funds between them. Interbank lending rates relative to policy rates were at the highest level this decade, indicating banks' lack of confidence in one another and in the financial system.

And the problems extended well beyond the banks. Corporate bond spreads continued to increase, as did corporate credit default spreads and overall market volatility. Industrial company access to all aspects of the bond market was dramatically curtailed. For example, blue chip industrial companies were frequently unable to issue commercial paper with maturities greater than a few days as the commercial paper market became severely impaired. We received reports of small and medium-sized companies, with no direct connection to the financial sector, losing access to the normal credit needed to meet payrolls, pay suppliers and buy inventory.

Investor concerns became most evident in the "flight to quality" in the Treasury market, with short-term Treasury bill yields dropping to near zero.

During that same period, the government intervened to protect the financial system. The FDIC acted to mitigate the failure of Washington Mutual by facilitating its sale, and made clear that it would intervene to prevent Wachovia's failure. And turmoil had developed in European markets. In a two-day period at the end of September the governments of Ireland, the UK, Germany, Belgium, France and Iceland intervened to prevent the failure of one or more financial institutions in their countries.

By the time legislation had passed on October 3, the global market crisis was so broad and so severe, we knew we needed to move quickly and take powerful steps to stabilize our financial system and to get credit flowing again. Our initial intent had been to strengthen the banking system by purchasing illiquid mortgages and mortgage-related securities. But by this time, given the severity and magnitude of the situation, an asset purchase program would not be effective enough, quickly enough. Therefore we exercised the authority granted by Congress in this legislation to develop and quickly deploy a $250 billion capital injection program, fully anticipating we would follow that with a program for troubled asset purchases.

There is no playbook for responding to turmoil we have never faced We adjusted our strategy to reflect the facts of a severe market crisis always keeping focused on Congress's goal and our goal – to stabilize the financial system that is integral to the everyday lives of all Americans.

By mid-October, our actions, in combination with the FDIC's guarantee of certain debt issued by financial institutions, helped us to accomplish the first major priority, which was to immediately stabilize the financial system. And, as we worked to hire contractors and prepare our mortgage asset purchase plan for implementation, we continued to assess the economic and market conditions here and around the world.

As we had seen and communicated to Congress and the American people, much damage had already been done to our economy. The economic data since the legislation passed underscored the challenges we were facing: On October 31, third quarter GDP showed negative 0.3 percent growth. Jobs data showed a rise in the unemployment rate to a level not seen in 15 years, and a loss of 240,000 jobs in October alone. Data released on October 28 showed that through August, home prices in 10 major cities had fallen 18 percent over the previous year, demonstrating that the housing correction had not abated.

The slowing of European economies has been even more dramatic, as have the actions taken to rescue failing European banks and nationwide banking systems such as those in Iceland and Hungary.

Throughout this period, we continued to assess how best to use the remaining TARP funds, given the uncertainties around the deteriorating economic situation in the U.S. and globally, and the continuing financial market stresses. We have always said that the housing correction is at the root of the economic downturn and our financial market stress. And as the economy slows further, it threatens to prolong the housing correction, as well as the stress on our financial institutions and financial markets.

We recognized that a troubled asset purchase program, to be effective, would require a massive commitment of TARP funds. It became clear that, while in mid-September, before economic conditions worsened, $700 billion in troubled asset purchases would have had a significant impact. Half of that sum, in a worse economy, simply isn't enough firepower.

If we have learned anything throughout this year we have learned that this financial crisis is unpredictable and difficult to counteract. So early last week, we concluded it was only prudent to reserve our TARP capacity, maintaining not only our flexibility, but that of the next Administration.

We have identified other priorities that I believe the government will need to address through the TARP and other existing authorities. In particular, by investing only a relatively modest share of TARP funds in a Federal Reserve liquidity facility, we can improve securitization in this market and have a significant impact on the availability of consumer credit.

And we need to continue our efforts to use a variety of authorities to reduce avoidable foreclosures. The government has made substantial progress on that front, through HUD programs, through the FDIC's program with IndyMac, through our support and leadership of the HOPE NOW Alliance, and through the new GSE servicer guidelines announced last week that will set a new standard for the entire industry. While I understand the interest in spending TARP resources on other approaches, the efforts already underway will do more to prevent foreclosures than might have been achieved through very large purchases of mortgage-related securities through the TARP.

Although we are not planning to initiate another capital program beyond those already announced, an emphasis on capital seems to us to be the better strategy going forward. In the weeks since enactment of EESA, we have seen that capital purchases are clearly powerful in terms of impact per dollar of investment, which is a major advantage under the current circumstances. More capital enables banks to take losses as they write down or sell troubled assets. And stronger capitalization is also essential to increasing lending which, although difficult to achieve during times like this, is essential to economic recovery.

Our current Capital Purchase Program for banks and thrifts has already dispersed $148 billion, and we are processing many more applications. And yesterday we posted the term sheet for participation for non-publicly traded banks, another important source of credit in our economy. We are developing a matching program for possible future use which could apply to banks and/or non-bank financial institutions.

Recently I've been asked two questions. First, Congress gave you the authorities you requested, and the economy has only gotten worse. What went wrong and why won't you use this authority for other industries? Second, if housing and mortgages are at the root of our economic difficulties, why aren't you addressing this?

The answer to the first is that the purpose of the financial rescue legislation was to stabilize our financial system and to strengthen it. It is not a panacea for all our economic difficulties. The crisis in our financial system had already spilled over into our economy and hurt it. It will take a while to get lending going and repair our financial system, which is essential to an economic recovery. This won't happen as fast as any of us would like, but it will happen much, much faster than it would have had we not used the TARP to stabilize our system. Put differently, if Congress had not given us the authority for TARP and the Capital Purchase Program and our financial system had continued to shut down, our economic situation would be far worse today.

The answer to the second question is that the most important thing we can do to mitigate the housing correction and reduce the number of foreclosures is to increase access to lower cost mortgage lending. The actions we have taken to stabilize and strengthen Fannie Mae and Freddie Mac, and through them to increase the flow of mortgage credit, together with our bank capital program, are powerful actions to promote mortgage lending. We are also working actively to reduce preventable foreclosures.

In summary, I am very proud of the decisive actions by Treasury, the Fed and the FDIC to stabilize our financial system. We have done what was necessary as facts and conditions in the market and economy have changed, adjusting our strategy to most effectively address the urgent crisis and preserving the flexibility of the President-elect and the new Secretary of the Treasury to address the challenges in the economy and capital markets they will face in the coming months.

While difficult challenges lie ahead, the new administration will begin with two significant advantages: a significantly more stable banking system where the failure of a systemically relevant institution is no longer a pressing concern rattling the markets; and the resources, authorities, and potential programs available to deal with the future capital and liquidity needs of credit providers. Deploying these new tools and programs to restore our financial institutions and financial markets is critical to restoring the flow of lending and credit - which will determine, to a large extent, the speed and trajectory of our economic recovery. I am confident in a successful outcome, because our economy is flexible and resilient, rooted in the entrepreneurial spirit and productivity of the American people. And of course, I will focus intensely on the challenges before me and on making this a seamless transition during my remaining nine weeks.

Thank you again for your efforts and for the opportunity to appear today.