Secretary Ryan's Remarks at SIFMA Meeting

Acting Under Secretary for Domestic Finance Anthony Ryan
Remarks at the SIFMA Annual Meeting

New York - Good morning. I am pleased to represent the Treasury Department at the Annual Meeting of the Securities Industry and Financial Markets Association (SIFMA). I welcome this opportunity to update you on the state of the capital markets and the global economy, and on Treasury's efforts to implement the Emergency Economic Stabilization Act, the EESA, which was recently passed by Congress and signed into law by President Bush.

Our primary focus at Treasury is to strengthen U.S. financial institutions and restore the flow of financing that is necessary to support and build our economy. This conference presents the ideal venue and is particularly timely given the convergence of financial market events, the critical contributions of private sector participants, the broader policy perspectives that need to be addressed, and the breadth of SIFMA's reach to the financial community. Moreover, this discussion is also opportune given SIFMA's mission to enhance the public's trust and confidence in the markets, to deliver an efficient, enhanced member network of access and forward-looking services, and to be the premier educational resource for professionals in the industry. We at Treasury appreciate SIFMA's efforts on disclosure, securitization, credit ratings, the restoration of investor and public confidence, and securities fails in the Treasury market. But the work is not complete. SIFMA must continue to address the current challenges as well as provide material and meaningful input to future policy issues.

Financial Markets

The stresses on U.S. and world financial markets are the most serious in recent memory. The disruptions of recent months have their roots in the housing correction. As housing prices have declined and the values of mortgage loans became more opaque, uncertainty spread to the investors and institutions that owned these assets. While some argue that this uncertainty has its roots in the subprime and the Alt-A markets, there are numerous factors to review and to understand before coming to any conclusions. Credit as a whole – not just in the housing sector – has been plentiful over the past decade and we have benefited by being able to finance the spectrum of assets and services, from complex collateralized obligations, to tender option bonds, to student loans, and to household spending with credit cards. Today, we are experiencing the repercussions of this unbridled expansion and access to credit. We needed to strike a balance between strong market discipline and regulatory oversight and we have not. Investor confidence was undermined, illiquidity then compromised our credit markets, and now the housing and financial market turmoil has spilled over into the rest of the U.S. economy.

Equity, credit, and funding markets remain under considerable strain, as banks have been forced to delever aggressively and risk appetite has abated. However, policy measures enacted by the Treasury, the Federal Reserve, the FDIC, other U.S. policymakers and our counterparts around the world have helped relieve some pressures in the funding market.

For example, Treasury implemented the temporary Money Market Mutual Fund Guarantee Program, which has been well received by funds and has helped to relieve large-scale redemption pressure among money market mutual funds--a key buyer of commercial paper. The Federal Reserve also introduced three programs: (i) the Asset-Backed Commercial Paper (ABCP) Money Market Liquidity Facility (AMLF) to provide investors the opportunity to sell ABCP through broker/dealers to the Fed; (ii) the Commercial Paper Funding Facility to enhance the availability of 90-day term funding for issuers of both secured and unsecured paper; and (iii) the Money Market Investor Funding Facility to further restore liquidity to the money market mutual fund industry by purchasing commercial paper, certificates of deposits, and bank notes with maturities of 90 days or less. The first two Fed facilities are already operational, and indications are that they too are helping to stabilize financial institutions' access to the commercial paper market. Accordingly, commercial paper yields are adjusting, volumes across the maturity spectrum are expanding and maturities have lengthened, although we are still far from what might be called "normal" conditions.

Several other funding market sectors, including London Interbank Offer Rates (LIBOR), have also experienced improvements in response to the passage of the EESA and the announcement of the FDIC's guarantee of short-term bank debt.

In the longer term credit markets; however, conditions remain quite challenging and U.S. companies are finding it very difficult to issue long-term debt at attractive rates.

Mortgage markets are also continuing to experience strain. While the yield on the current coupon mortgage-backed security issued by Fannie Mae and Freddie Mac has increased, overall consumer mortgage rates have improved, and currently average around 6.04 percent on fixed rate 30-year mortgages according to Freddie Mac's weekly survey, down from 6.35 percent before the GSEs were placed into conservatorship by their regulator, the Federal Housing Finance Agency (FHFA).

It is important to remember that as part of the Treasury's actions regarding Fannie Mae and Freddie Mac and in consultation with FHFA, the GSEs entered into a Preferred Stock Purchase Agreement with Treasury that effectively guarantees all debt issued by the GSEs, both existing and to be issued. The U.S. Government stands behind these enterprises, their debt and the mortgage backed securities they guarantee. Their mission is critical to the housing markets in the United States and no one will deny the importance of these institutions in assisting our housing markets in this downturn.

To further address other market issues and offer a comprehensive plan for tackling challenges in the financial system, the President worked with Congress over the past 21 days to move quickly to grant the Treasury Department extraordinary authority to address these unprecedented situations facing Americans. Congress recognized that frozen credit markets pose a significant threat to our economy and to all Americans. With unprecedented speed, Congress enacted a rescue package with a broad set of tools ---including authority to purchase or insure troubled assets which in turn assists Americans by permitting the extension of credit, and implementing temporary increases in the FDIC deposit guarantee. These tools are being deployed aggressively to strengthen large and small financial institutions across the country that serve businesses and families and directly impact the well being of Americans.

Treasury is moving rapidly to implement these and other programs and is continuing collaborative efforts with the Federal Reserve, the FDIC, and other financial regulators to address the many challenges we face.

Let me summarize our actions thus far and provide some additional details.

Implementation

Treasury has moved quickly since the enactment of the EESA to implement programs that will provide stability to the markets and help enable our financial institutions to support consumers and businesses across the country. We are focused on applying the authorities Congress provided in ways that are highly effective and protect the taxpayer to the maximum extent possible. As Interim Assistant Secretary for Financial Stability Neel Kashkari recently testified before the Senate Committee on Banking, Housing and Urban Affairs, we have accomplished a great deal in a short time. A program this large and complex would normally take months or years to establish. We don't have months or years and so we are moving quickly, and methodically, to facilitate the necessary results. We are also moving with great transparency, communicating with Congress and the oversight authorities at every step.

Capital Purchase Program

Earlier this month we announced a capital purchase program under which Treasury will purchase up to $250 billion of senior preferred shares from qualifying U.S. controlled banks and financial institutions. Last week Treasury and financial regulators outlined a streamlined, systematic process for all banks wishing to voluntarily participate in the capital purchase program. Since that time, we have seen a broad range of interest. We signed final agreements with the initial nine major financial institutions that hold 50 percent of all U.S. deposits over this past weekend, and directed our custodian to deliver the capital to these institutions starting today. We also granted preliminary approval to several more regional banks over the weekend. There will be a rolling process for selecting financial institutions for capital injections as we go forward.

This program is aimed at healthy banks, and provides attractive terms to encourage lending. The minimum subscription amount available to a participating institution is one percent of risk-weighted assets. The maximum subscription amount is the lesser of $25 billion or three percent of risk-weighted assets. Treasury intends to fund the senior preferred shares purchased under the program by the end of this year. We worked with the four banking regulatory agencies to finalize the application process. Qualified and interested publicly-held financial institutions will use a single application form to submit to their primary regulator – the Federal Reserve, the FDIC, the OCC, or the OTS. These regulators have posted this common application form on their websites.

As Secretary Paulson said last week, this capital purchase program is an investment, not expenditure. This is an investment in Americans, in our community banks, credit unions, and main street banks.

As these banks and institutions are reinforced and supported with taxpayer funds, they must meet their responsibility to lend, and support the American people and the U.S. economy. It is in a strengthened institution's best financial interest to increase lending once it has received government funding.

Capital Purchase Program Disclosure

Treasury is committed to transparency and disclosure as we implement this program. Once a financial institution is granted preliminary approval, Treasury and the institution will work to complete the final agreement and final authorization of payments. Once the payment is authorized, within two business days Treasury will publicly disclose the name and capital purchase amount for the financial institution. We will disclose the names of financial institutions at the same time every day with postings on our EESA website.

Financing the Financial Rescue Package

Let me now focus on another topic that is just as important – the financing of the Troubled Asset Relief Program (TARP) as well as the various initiatives implemented this past year.

As you know, we make announcements regarding debt management policy at our Quarterly Refunding after consulting with our Treasury Borrowing Advisory Committee as well as after significant internal consultation. This year's financing needs will be unprecedented. We firmly believe that investors value greatly and pay a premium for Treasury's predictable actions, the certainty of supply, and the liquidity in the market. To the very best of our ability, we intend to stay the course.

However, specific policy actions or market conditions have recently caused us to take new actions.

For example, two weeks ago I stated that Treasury will continue to increase auction sizes of our bills and coupon securities and continue to issue cash management bills. As has been the case over the past year, some of these cash management bills may be longer-dated. Treasury is also considering its options regarding the frequency and issuance of additional nominal coupons, including a possible reintroduction of the three-year note, beginning in November 2008.

I noted at the time that the announcement was being made, outside the customary Quarterly Refunding announcements, to allow Treasury to adequately respond to the near-term increase in borrowing requirements and to give market participants notice of the potential changes.

Specifically, Treasury may need to address many different policy objectives, including TARP related programs and purchases, FDIC bank resolution measures, liquidity initiatives conducted by the Federal Reserve including the Supplementary Financing Program, the Agency MBS program, student loan program, and the GSE Senior Preferred Stock Agreement. All of these initiatives are not factored into the $482 billion FY 2009 deficit projected by the Office of Management and Budget in July's Mid-Session review. The potential for deterioration in economic conditions given the contraction in credit may also affect budget conditions this year.

In addition, Acting Assistant Secretary for Financial Markets Karthik Ramanathan recently issued a statement regarding dislocations in the Treasury market. Specifically, Treasury closely monitors conditions in the Treasury securities market as well as financing markets, and realizes that the depth and liquidity of the Treasury market benefits investors both domestically and globally. To address its borrowing needs and further enhance liquidity in the Treasury market, Treasury reopened multiple securities which relieved severe dislocations in the market causing acute, protracted shortages. In addition, Treasury stated that regulators will be monitoring situations in which aged settlement fails are not cleared and will encourage actions by market participants, including the use of netting and bilateral processes, cash settlement, negative rate repo trading, margining of aged settlement fails, and identifying pair-offs.

Once again, we are strongly urging the private sector to lead this effort. We all benefit from a deep, liquid Treasury market, and SIFMA and the Treasury Markets Practices Group have the opportunity to take a leadership role in devising and implementing private sector solutions to current challenges.

Efforts by the private sector to address challenges in the marketplace will go a long way to strengthen market discipline, improve market liquidity and enhance market confidence. It will also help build credibility with market regulators.

Addressing the Challenges and Disequilibrium in the Markets

Our financial market system rests on a balanced tension between private-sector market discipline and public-sector regulatory oversight. However, that balance has been weakened by deficiencies on both sides; market discipline failed and regulatory efforts were compromised. Rules, guidance, and oversight did not mitigate the failures of market discipline. From a public policy perspective, we must restore equilibrium to financial markets, which in this context means market stability. We must strike the optimal balance between market discipline and supervision. Aligning the interests of the private sector and the public sector is critical to the long term success of our economy. When discipline and oversight are balanced, market participants better manage risks, financial institutions operate in a safer and sounder manner, and our economy is served by more competitive, innovative, and efficient capital markets. In March, Treasury released its Blueprint for a Modernized Financial Regulatory Structure. This report outlines a series of steps to improve the U.S.'s antiquated regulatory system. Both market practices and regulatory practices must be reviewed with a critical eye towards improvement and material strengthening. We need to focus on moving forward, with all parties contributing to the collective effort.

President's Working Group on Financial Markets

In order to address the unprecedented and extraordinary disequilibrium and challenges that our financial markets have experienced, the President's Working Group on Financial Markets, or "PWG" as it is known, has been taking proactive steps to mitigate systemic risk, restore investor confidence, and facilitate stable economic growth. The PWG issued a policy statement on the financial market turmoil last March, which contained an analysis of underlying factors that contributed to the market turmoil.

The PWG identified weaknesses in global markets, financial institutions, and regulatory policies, and made a set of comprehensive recommendations to address those weaknesses. The analysis focused on six areas: mortgage origination, improving investors' contributions to market discipline, reforming the ratings process and practices regarding structured credit products, strengthening risk management practices, enhancing prudential regulatory policies, and enhancing the infrastructure for the OTC derivatives market. The PWG's recommendations cover the practices of a broad array of market participants, as well as supervisors, addressing all links in the securitization chain: mortgage brokers, mortgage originators, mortgage underwriters, securitizers, issuers, credit rating agencies, investors, and regulators.

Since March, the PWG has worked to ensure implementation of its recommendations, and issued an update just over two weeks ago on progress to date. We noted that, while no single measure can be expected to place financial markets on a sound footing, implementation of the recommendations is an important step in addressing weaknesses. Substantial progress has occurred, and more progress has been made in some areas than in others as efforts have been prioritized to address the most immediate problems. The pace of implementation must be balanced with a need to avoid exacerbating strains on markets and institutions. Still, further effort is warranted, and the PWG is continuing to carefully monitor markets and implementation and will not hesitate to make recommendations if necessary.

Another PWG effort, which pre-dates the current turmoil, concerns private pools of capital, including hedge funds. Recognizing that private pools of capital bring significant benefits to the financial markets, but also can present challenges for market participants and policymakers, the PWG in February 2007 issued a set of principles and guidelines to address public policy issues associated with the rapid growth of private pools of capital and to serve as a framework for evaluating market developments, including investor protection and systemic risk issues. These principles contained guidelines for all links in the pooled investment chain: pool managers, creditors, counterparties, investors, and supervisors. In September 2007, the PWG facilitated the formation of two private-sector groups to develop voluntary industry best practices: the Asset Managers' Committee and the Investors' Committee. In April of this year, the two groups issued draft best practices for hedge fund managers and for investors in pools, and they expect to issue finalized practices very soon.

Conclusion

We remain vigilant as Americans face strong headwinds in this challenging financial environment. We will focus on addressing or mitigating immediate problems while being mindful that longer term regulatory reform is critical to our continued status as the world's preeminent capital market. Our Blueprint and the PWG's reports clearly outlined some of the changes that need to be addressed. Maintaining the balance between regulatory measures and market discipline is critical to highly efficient markets. Most importantly, such a balance fosters market confidence. There is important work for all of us and I appreciate your efforts and dedication. Thank you.

Treasury's Kashkari Testifies Before Congress

Interim Assistant Secretary for Financial Stability Neel Kashkari
Testimony before the Senate Committee
on Banking, Housing and Urban Affairs

Washington - Chairman Dodd, Senator Shelby, members of the committee, good morning and thank you for the opportunity to appear before you today. I would like to provide an update on the Treasury Department's progress implementing our authorities under the Emergency Economic Stabilization Act of 2008.

Every American depends on the flow of money through our financial system. They depend on it for car loans, home loans, student loans and household needs. Employers rely on credit to pay their employees. In recent months, our credit markets froze up and lending became extremely impaired.

The President asked Congress to move rapidly last month to grant the Treasury Department extraordinary authority to address this unprecedented situation. Congress, led by this Committee and others, recognized the threat frozen credit markets posed to Americans and to our economy as a whole.

The Treasury has moved quickly since enactment of the bill to implement programs that will provide stability to the markets and help enable our financial institutions to support consumers and businesses across the country. We are focused on applying the authorities you provided in ways that are highly effective and protect the taxpayer to the maximum extent possible.

Secretary Paulson is implementing the Department's new authorities with one simple goal - to restore capital flows to the consumers and businesses that form the core of our economy. To achieve this goal, Treasury is pursuing steps that are intended to help financial institutions remove illiquid assets from their balance sheets and to attract both private and public capital. Our programs are being designed to help financial institutions of all sizes so they can grow stronger and provide crucial funding to our economy.

Since the announcement of our capital purchase program, we have seen numerous signs of improvement in our markets and in the confidence in our financial institutions. While there have been recent positive developments, the markets remain fragile.

Implementation

I'd like to spend a few minutes outlining the steps we have taken to implement the EESA. In the three weeks since Congress passed the new law, we have accomplished a great deal on many fronts. We are moving quickly - but methodically - and I am confident we are building the foundation for a strong, decisive and effective program.

As I have previously described, we have seven policy teams driving forward. They are making rapid progress:

1) Mortgage-backed securities purchase program: This team has made tremendous progress. We have announced that the Bank of New York-Mellon has been selected to serve as our master custodian. A Treasury team has been working with the Bank of New York to design the auction, identify which mortgage-backed securities to purchase and determine how best to reach thousands of potential bidders, quickly and effectively. This team is completing its review of more than 100 securities asset manager solicitations and expects to hire asset managers in the coming days.

2) Whole loan purchase program: This team is working with bank regulators to identify which types of loans to purchase first, how to value them, and which purchase mechanism will best meet our policy objectives. They also have made tremendous progress in reviewing over 100 whole loan asset manager proposals and expect to hire asset managers very soon.

3) Insurance program: We are establishing a program to insure troubled assets. On Friday, October 10 we submitted a request for comment to the Federal Register seeking the best ideas on structuring options for the insurance program. That request posted on Thursday, October 16 and responses are due by Tuesday, October 28. We already have received responses and expect to receive many more before the comment period closes. We will begin designing and establishing the program immediately.

4) Equity purchase program: On Tuesday, October 14, Treasury announced a voluntary Capital Purchase Program to encourage U.S. financial institutions to build capital to increase the flow of financing to U.S. businesses and consumers and to support the U.S. economy. Throughout the process of developing this comprehensive and effective program, we worked very closely with the four banking regulatory agencies.

Under the program, Treasury will purchase up to $250 billion of senior preferred shares on standardized terms. The program is available to qualifying U.S. controlled banks, savings associations, and certain bank and savings and loan holding companies engaged solely or predominantly in financial activities permitted under the relevant law.

The minimum subscription amount available to a participating institution is 1 percent of risk-weighted assets. The maximum subscription amount is the lesser of $25 billion or 3 percent of risk-weighted assets. Treasury intends to fund the senior preferred shares purchased under the program by the end of this year.

As Secretary Paulson noted on Monday, this is an investment. The government will not only own shares that we expect will result in a reasonable return, but also will receive warrants for common shares in participating institutions. And we expect all participating banks to continue to strengthen their efforts to help struggling homeowners avoid preventable foreclosures.

On Monday, October 20, Treasury announced a streamlined, systematic process for all banks wishing to access this program. We worked with the four banking regulatory agencies to finalize the application process. Qualified and interested publicly-held financial institutions will use a single application form to submit to their primary regulator – the Federal Reserve, the FDIC, the OCC or the OTS. These regulators have posted this common application form on their websites. We are working hard to finalize and publish the required legal documents so private banks can participate as well on the same economic terms as public banks.

The terms for this program are the same for all institutions that apply before the capital purchase program deadline of November 14, 2008. We have allocated sufficient capital, $250 billion, so that all qualifying banks can participate. Therefore, it is important to note that Treasury will not implement this program on a first-come-first-served basis.

I would like to walk you through the application process, which we made very simple so that all banks can apply. To apply for the capital program, banks should review the program information on the Treasury website and consult with their primary federal regulator. They can go to the regional office of their primary federal regulator anywhere in the country, be it California, Kansas or Texas. After this consultation, the institution should submit an application to that same regulator. Treasury worked with the regulators to establish an evaluation process; this means that all regulators will use a standardized process to review all applications to ensure consistency.

Once a regulator has reviewed an application, it will send the application and its recommendation to the Office of Financial Stability at the Treasury Department. Treasury will give considerable weight to the regulators' recommendations and decide whether or not to make the capital purchase. All completed transactions will be publicly announced within 48 hours of execution, as per the requirements of the law. We will not, however, announce any applications that are withdrawn or denied.

5) Homeownership preservation: We have begun working with the Department of Housing and Urban Development and HOPE NOW to maximize the opportunities to help as many homeowners as possible, while also protecting taxpayers. We have hired Donna Gambrell, Director of the Community Development Financial Institutions Fund and former Deputy Director of Consumer Protection and Community Affairs of the FDIC, to oversee this effort and to serve as interim Chief of Homeownership Preservation. When we purchase mortgages and mortgage-backed securities, we will look for every opportunity possible to help homeowners.

6) Executive compensation: Companies participating in Treasury's programs must adopt the Treasury Department's standards for executive compensation and corporate governance, for the period during which we hold equity issued under this program. These standards generally apply to the chief executive officer, chief financial officer, plus the next three most highly compensated executive officers. We do not believe senior officers should be rewarded for failure. Treasury issued executive compensation guidelines on Tuesday, October 14, for three TARP programs:

A.Troubled Asset Auction Program- As prescribed by the Act, any financial institution that sells more than $300 million of troubled assets to the Treasury via an auction would be prohibited from entering into new executive employment contracts that include golden parachutes for the term of the program. Treasury released Treasury Notice 2008-TAAP regarding this restriction. Furthermore, under the Act, (1) the financial institution may not deduct for tax purposes executive compensation in excess of $500,000 for each senior executive, (2) the financial institution may not deduct certain golden parachute payments to its senior executives and (3) a 20-percent excise tax will be imposed on the senior executive for these golden parachute payments. Treasury released I.R.S. Notice 2008-94 regarding these new tax rules.

B.Capital Purchase Program- Any financial institution participating in the Capital Purchase Program will be subject to more stringent executive compensation rules for the period during which Treasury holds equity issued under this program. The financial institution must meet certain standards, including: (1) ensuring that incentive compensation for senior executives does not encourage unnecessary and excessive risks that threaten the value of the financial institution; (2) required clawback of any bonus or incentive compensation paid to a senior executive based on statements of earnings, gains, or other criteria that are later proven to be materially inaccurate; (3) prohibition on the financial institution from making any golden parachute payment to a senior executive based on the Internal Revenue Code provision; and (4) agreement not to deduct for tax purposes executive compensation in excess of $500,000 for each senior executive.

C.Programs for Systemically Significant Failing Institutions- The Treasury Department may have to provide direct assistance to certain failing firms on terms negotiated on a case-by-case basis. Treasury issued guidance for the executive compensation standards that will apply to the firms participating in such programs and their senior executives (Treasury Notice 2008-PSSFI). These standards are similar in all respects to the Capital Purchase Programs executive compensation standards described above, with one significant difference. In situations where Treasury provides assistance under the systemically significant failing institutions programs, golden parachutes will be defined more strictly to prohibit any payments at all to departing senior executives.

7) Compliance: Treasury is committed to transparency and oversight in all aspects of the program and has taken several important steps to meet the letter and spirit of our important compliance requirements.

A.Government Accountability Office: We have been meeting regularly with the Government Accountability Office to monitor the program. In addition, GAO is establishing an office at Treasury.

B.Financial Stability Oversight Board: The Financial Stability Oversight Board was established and the group selected the Chairman of the Federal Reserve Board to chair the group. While the law requires the Oversight Board to meet once a month, the Board had its second board meeting only six days later, on Monday, October 13 to review the Capital Purchase Program. The Board met again on Wednesday, October 22 to review progress of the TARP work-streams, as well as to appoint staff to the Board, including William Treacy as Executive Director, Kieran J. Fallon as General Counsel, and Jason A. Gonzalez as Secretary.

C.Special Inspector General: The Administration is working to identify and interview potential candidates to serve as Special Inspector General for potential nomination and confirmation in November. In the interim, Treasury's Inspector General has been monitoring our progress.

Recruitment

Recruiting the right people is essential to the success of this program and we continue to move quickly. It will obviously take time to bring on board permanent members of the team that will manage this program over the long term and provide stability during the transition. While the permanent team is being identified for tomorrow, we are tapping the very best, seasoned, financial veterans from across the government to help launch the program today. We have been successful in recruiting outstanding interim leaders for key positions in the Office of Financial Stability and the team continues to grow daily.

Procurement

Now, let me turn to procurement.

Our approach to procurement is based on the following strategy. First, in order to protect the taxpayers, we will seek the very best in private sector expertise to help execute this program. Second, to the extent possible, opportunities to compete for contracts and provide services should be available to small businesses, veteran-owned businesses, and minority and women-owned businesses. Third, we are taking appropriate steps to mitigate and manage conflicts of interest.

We have established formal procurement processes, to ensure that selections are fair and in the best interest of the taxpayers. In many cases, we have established expert review panels, comprised of Treasury employees, employees of other federal agencies and expert consultants who review submissions and make recommendations regarding the quality of the proposals. The review committees make recommendations for a final decision to a senior career officer in the Treasury.

As announced, Treasury has retained: The Bank of New York Mellon as our lead custodian; EnnisKnupp as our investment adviser; Simpson, Thacher and Bartlett as our legal adviser for the equity program; Pricewaterhouse Coopers and Ernst & Young for internal control and accounting services. In the coming weeks we expect to issue additional procurement requests.

Taking aggressive steps to manage conflicts of interest is essential because firms with the relevant financial expertise may also hold assets that become eligible for sale into the TARP or represent other clients who hold troubled assets. Firms competing to provide services must disclose their potential conflicts of interest and recommend specific steps to manage those conflicts. Treasury's review team evaluates firms' conflicts and their plans and ability to impose procedures to manage them. Treasury will only hire firms when we are confident in our and their ability to successfully mitigate any conflicts. Furthermore, the Office of Financial Stability has a Chief Compliance Officer who will be responsible for making certain that firms comply with agreed upon mitigation procedures.

Secretary Paulson and I believe that it is essential that the TARP be structured in a manner that encourages participation of small businesses, veteran-owned businesses, and minority and women-owned businesses. We asked vendors to demonstrate their ability and commitment to working with small, veteran, minority and women-owned businesses as sub-contractors. And we are evaluating their submissions in part on their capability to do this. In addition, we announced on Friday, October 17 subsequent guidelines for solicitations with specific opportunities for these businesses.

As you can see, we have accomplished a great deal in a short time. But our work is only beginning. A program as large and complex as this would normally take months - or even years - to establish. We don't have months or years. Hence, we are moving to implement the TARP as quickly as possible while working to ensure high quality execution.

Treasury Names Interim Chief Investment Officer for TARP

Catching up on press releases . . .

Washington -- The Treasury Department named James H. Lambright this week to serve as the interim Chief Investment Officer for the Troubled Asset Relief Program authorized by Congress earlier this month.

Lambright will serve on an interim basis until the position is filled permanently. He will provide counsel to Secretary Henry M. Paulson, Jr. and Interim Assistant Secretary for the Office of Financial Stability Neel Kashkari as they develop and implement the program.

Lambright brings a strong private and public sector financial background to the Treasury team:

• Head of the Export-Import Bank since July of 2005, where he managed 400 employees and a $60 billion credit portfolio with $100 billion in financing capacity.
• Successfully converted the Export-Import Bank to a self-financing agency, returning positive net income to the Treasury while taking no appropriated funds from Congress in FY 2008.
• Came to the Export-Import Bank in 2001 from Credit Suisse First Boston Corp. There he worked in private equity and specialized in the underwriting and negotiation of real estate and venture capital transactions.

Given the upcoming Leaders' meeting on global financial markets, Secretaries Paulson and Rice determined that Under Secretary Reuben Jeffery, previously slated to be named interim Chief Investment Officer, should remain at the State Department.

Treasury Hires Accounting Firms Under the EESA

Catching up on press releases . . .

Washington- The U.S. Treasury Department today announced that PricewaterhouseCoopers LLP and Ernst & Young will assist the Department in the implementation of the Troubled Asset Relief Program authorized under the Emergency Economic Stabilization Act. Treasury hired PricewaterhouseCoopers on Thursday and hired Ernst & Young on Saturday.

The firms will help the Department with accounting and internal controls services needed to administer the complex portfolio of troubled assets the Department will purchase, including whole loans and mortgage backed securities. PricewaterhouseCoopers will help the Department establish a sound internal control posture and Ernst & Young will provide general accounting support and expert accounting advice.

The two agreements last until September 30, 2011. Treasury issued two requests for quotes from 12 firms on the General Services Administration's Federal Supply Schedules on October 8. The Department received six responses for each request and awarded contracts to PricewaterhouseCoopers and Ernst & Young. The initial orders are worth $191,469.27 and $492,006.95, respectively.

Secretary Henry M. Paulson, Jr. on Capital Purchase Program

Catching up on news releases . . .

Washington, DC-- Good morning. As you know, over the last few weeks we have worked aggressively to implement the authorities provided by Congress in the financial rescue package enacted earlier this month. This morning, I will provide a short update on the capital purchase program that is a key component of that package.

As we have designed the program, Treasury will make $250 billion in capital available to U.S. financial institutions in the form of preferred stock. Institutions that sell shares to the government will accept restrictions on executive compensation, including a clawback provision and a ban on golden parachutes during the period that Treasury holds equity issued through this program. This is an investment, not an expenditure, and there is no reason to expect this program will cost taxpayers anything. They will not only own shares that should be paid back with a reasonable return, but also will receive warrants for common shares in participating institutions. We expect all participating banks to continue to strengthen their efforts to help struggling homeowners who can afford their homes avoid foreclosure. Foreclosures not only hurt the families who lose their homes, they hurt neighborhoods, communities and our economy as a whole.

While many banks have suffered significant losses during this period of market turmoil, many others have plenty of capital to get through this period, but are not positioned to lend as widely as is necessary to support our economy. This program is designed to attract broad participation by healthy institutions and to do so in a way that attracts private capital to them as well. Our purpose is to increase confidence in our banks and increase the confidence of our banks, so that they will deploy, not hoard, their capital. And we expect them to do so, as increased confidence will lead to increased lending. This increased lending will benefit the U.S. economy and the American people.

In addition to the nine banks who announced their participation last week, we have received indications of interest from a broad group of banks of all sizes. Today we are laying out a streamlined, systematic process for all banks wishing to access this program.

First, we have worked with financial regulators to finalize the application process. There is now a single application form that qualified and interested publicly-held financial institutions will use to submit to their primary regulator – the Federal Reserve, the FDIC, the OCC or the OTS. These regulators will post this application form on their websites before the end of the day.

The terms for this program are the same for all institutions that apply before the capital purchase program deadline of November 14, 2008. Sufficient capital has been allocated so that all qualifying banks can participate. Let me be clear that this program is not being implemented on a first-come-first-served basis.

Second, to apply for the capital program, banks should review the program information on the Treasury website and then consult with their primary federal regulator. After this consultation, institutions should submit an application to that same primary federal regulator. Treasury has worked with the regulators to establish streamlined evaluations; this means that all regulators will use a standardized process to review all applications to ensure consistency.

Third, once a regulator has reviewed an application, it will send the application along with its recommendation to the Office of Financial Stability at the Treasury Department.

Once Treasury receives the application with the regulator's recommendation, we will review it and decide whether or not to make the capital purchase. Treasury welcomes the expertise of the financial regulators, and will give considerable weight to their recommendations.

Finally, all transactions will be publicly announced within 48 hours of execution. We will not, however, announce any applications that are withdrawn or denied.

This efficient process – with standardized forms and standardized review – will encourage banks and thrifts of all sizes to participate in the program. By so doing, they will increase their capital base so that they can provide the lending necessary to support the U.S. economy as we work through this difficult period. Thank you.

Treasury, Regulators Issues Guidance on Capital Purchase Program

Catching up on the news releases . . .

Washington, DC-- Treasury, the Federal Reserve, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation today issued application guidelines and other documents for the Capital Purchase Program announced last week. Attached are application guidelines, an application form and a Frequently Asked Questions document to provide additional details.

Treasury Hires Legal Adviser Under EESA

Catching up on the news releases . . .

Treasury Hires Legal Adviser Under the Emergency Economic Stabilization Act

Washington- The U.S. Treasury Department this week announced that Simpson, Thacher and Bartlett will serve as a legal adviser for the implementation of the Emergency Economic Stabilization Act. Treasury hired the New York City-based firm Sunday and work began immediately to help the Department with its equity program structuring.

Treasury contracted with Simpson, Thacher and Bartlett using a procurement contract under the Federal Acquisition Regulation. Treasury competitively solicited offers from six firms under compelling urgency to quickly establish the Troubled Asset Relief Program. Two firms made offers.

The contract will last for six months. More information on this contract will be posted at www.fedbizopps.gov (Federal Business Opportunities website) and at https://www.fpds.gov (Federal Procurement Data System).

U.S. Government Actions to Strengthen Market Stability

Catching up on the news releases . . .

Washington, DC--Today we are taking decisive actions to protect the U.S. economy, to strengthen public confidence in our financial institutions, and to foster the robust functioning of our credit markets. These steps will ensure that the U.S. financial system performs its vital role of providing credit to households and businesses and protecting savings and investments in a manner that promotes strong economic growth in the U.S. and around the world. These actions are consistent with the strategy announced by the President's Working Group on October 6 and the action plan announced by the G7 Finance Ministers on October 10.

Purchasing Capital in Financial Institutions

We must restore confidence in our financial system. The first step in that effort is a plan to make capital available on attractive terms to a broad array of banks and thrifts, so they can provide credit to our economy. – Treasury Secretary Henry M. Paulson, Jr., October 14, 2008

Under the authority of the Emergency Economic Stabilization Act of 2008, the U.S. Treasury will make available $250 billion of capital to U.S. financial institutions. This facility will allow banking organizations to apply for a preferred stock investment by the U.S. Treasury. Nine large financial organizations have already indicated their intention to subscribe to the facility in an aggregate amount of $125 billion.

The Senior Preferred will pay cumulative dividends at a rate of 5 percent per year for the first five years, and thereafter at a rate of 9 percent per year. The shares are non-voting, other than with respect to market standard terms that protect the taxpayer's rights as an investor. Institutions selling preferred shares to the Treasury agree that the following executive compensation limitations will apply while the Treasury owns shares in the company: 1) the Board will certify that that contracts of the top five executives do not encourage or reward excessive risk taking; 2) compensation payments made based on earnings, gains, or other criteria that are later proven to be materially inaccurate must be repaid, and 3) no golden parachute payments will be made. In addition, the taxpayers will also receive warrants to purchase common stock with an aggregate market price equal to 15 percent of the senior preferred investment.

Guaranteeing Certain Obligations of Financial Institutions

The overwhelming majority of banks are strong, safe and sound. But a lack of confidence is driving the current turmoil. And it is a lack of confidence that these guarantees are designed to address. – FDIC Chairman Sheila C. Bair, October 14, 2008

After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and after consulting with the President, Secretary Paulson triggered the systemic risk exception to the FDIC Act, enabling the FDIC to temporarily guarantee the senior debt of all FDIC-insured institutions and their holding companies, as well as deposits in non-interest bearing deposit transaction accounts. Regulators will implement an enhanced supervisory framework to assure appropriate use of this new guarantee. The ability to issue guaranteed debt under the program would expire on June 30, 2009 and the full protection for deposits in noninterest bearing transaction deposit accounts would revert back to the statutory limits on December 31, 2009.

Purchasing Commercial Paper

Over the past year, the Federal Reserve has actively used all its powers and authorities to try to help our economy through this difficult time…. The actions today are aimed at restoring confidence in our institutions and markets and repairing their capacity to meet the credit needs of American households and businesses. – Federal Reserve Chairman Ben Bernanke, October 14, 2008

To further increase access to funding for businesses in all sectors of our economy, the Federal Reserve has announced further details of its Commercial Paper Funding Facility (CPFF) program, which provides a broad backstop for the commercial paper market. Beginning October 27, the CPFF will be able to purchase commercial paper of 3 month maturity from high-quality issuers.

Coordinated, Comprehensive Plan to Address Financial Market Turmoil

President Bush has made clear that we are committed to using all necessary tools to support our financial markets and institutions, so they can finance the U.S. economy. Given the interconnected nature of the global capital markets, we continue to work closely with our colleagues in the international regulatory community.

Together these three steps significantly strengthen the capital position and funding ability of U.S. financial institutions, enabling them to perform their role of underpinning overall economic growth. These actions demonstrate to market participants here and around the world the strength of the U.S. government's commitment to take all necessary steps to unlock our credit markets and minimize the impact of the current instability on the overall U.S. economy. The actions taken today are a powerful step toward restoring the health of the global financial system.

Treasury Announces Executive Compensation EESA Rules

Catching up on the news releases . . .

Washington- The U.S. Treasury Department today announced the development of three programs under the Emergency Economic Stabilization Act and corresponding executive compensation and corporate governance standards. These standards generally apply to the chief executive officer, chief financial officer, plus the next three most highly compensated executive officers. Any firm participating in the following three programs will be required to adopt these standards.

Troubled Asset Auction Program- Treasury continues to develop a program to purchase troubled mortgage-related assets through an auction format, and will be issuing program guidance for this program in the coming weeks. Treasury is issuing guidance for the executive compensation requirements that will apply to firms participating in this program. As prescribed by the Act, any financial institution that sells more than $300 million of troubled assets to the Treasury via an auction would be prohibited from entering into new executive employment contracts that include golden parachutes for the term of the program. Treasury is releasing Treasury Notice 2008-TAAP regarding this restriction. Furthermore, under the Act, (1) the financial institution may not deduct for tax purposes executive compensation in excess of $500,000 for each senior executive, (2) the financial institution may not deduct certain golden parachute payments to its senior executives and (3) a 20-percent excise tax will be imposed on the senior executive for these golden parachute payments. Treasury is releasing I.R.S. Notice 2008-94 regarding these new tax rules.

Capital Purchase Program- The Treasury is issuing guidance for this program designed to provide equity capital under standardized terms directly to certain financial institutions, further strengthening their capital structures to facilitate their continued lending in the capital markets. Any financial institution participating in the Capital Purchase Program will be subject to more stringent executive compensation rules for the period during which Treasury holds equity issued under this program. The financial institution must meet certain standards, including: (1) ensuring that incentive compensation for senior executives does not encourage unnecessary and excessive risks that threaten the value of the financial institution; (2) required clawback of any bonus or incentive compensation paid to a senior executive based on statements of earnings, gains, or other criteria that are later proven to be materially inaccurate; (3) prohibition on the financial institution from making any golden parachute payment to a senior executive based on the Internal Revenue Code provision; and (4) agreement not to deduct for tax purposes executive compensation in excess of $500,000 for each senior executive. Treasury is issuing interim final rules for these executive compensation standards.

Programs for Systemically Significant Failing Institutions- The Treasury Department is currently developing a third program to potentially provide direct assistance to certain failing firms on terms negotiated on a case-by-case basis. Treasury is issuing guidance for the executive compensation standards that will apply to the firms participating in such programs and their senior executives (Treasury Notice 2008-PSSFI). These standards are similar in all respects to the Capital Purchase Programs executive compensation standards described above, with one significant difference. In situations where Treasury provides assistance under the systemically significant failing institutions programs, golden parachutes will be defined more strictly to prohibit any payments to departing senior executives.

Treasury Announces TARP Capital Purchase Program Description

Catching up on the news releases . . .

Treasury Announces TARP Capital Purchase Program Description

Washington- Treasury today announced a voluntary Capital Purchase Program to encourage U.S. financial institutions to build capital to increase the flow of financing to U.S. businesses and consumers and to support the U.S. economy.

Under the program, Treasury will purchase up to $250 billion of senior preferred shares on standardized terms as described in the program's term sheet. The program will be available to qualifying U.S. controlled banks, savings associations, and certain bank and savings and loan holding companies engaged only in financial activities that elect to participate before 5:00 pm (EDT) on November 14, 2008. Treasury will determine eligibility and allocations for interested parties after consultation with the appropriate federal banking agency.

The minimum subscription amount available to a participating institution is 1 percent of risk-weighted assets. The maximum subscription amount is the lesser of $25 billion or 3 percent of risk-weighted assets. Treasury will fund the senior preferred shares purchased under the program by year-end 2008. Institutions interested in participating in the program should contact their primary federal regulator for specific enrollment details.

The senior preferred shares will qualify as Tier 1 capital and will rank senior to common stock and pari passu, which is at an equal level in the capital structure, with existing preferred shares, other than preferred shares which by their terms rank junior to any other existing preferred shares. The senior preferred shares will pay a cumulative dividend rate of 5 percent per annum for the first five years and will reset to a rate of 9 percent per annum after year five. The senior preferred shares will be non-voting, other than class voting rights on matters that could adversely affect the shares. The senior preferred shares will be callable at par after three years. Prior to the end of three years, the senior preferred may be redeemed with the proceeds from a qualifying equity offering of any Tier 1 perpetual preferred or common stock. Treasury may also transfer the senior preferred shares to a third party at any time. In conjunction with the purchase of senior preferred shares, Treasury will receive warrants to purchase common stock with an aggregate market price equal to 15 percent of the senior preferred investment. The exercise price on the warrants will be the market price of the participating institution's common stock at the time of issuance, calculated on a 20-trading day trailing average.

Companies participating in the program must adopt the Treasury Department's standards for executive compensation and corporate governance, for the period during which Treasury holds equity issued under this program. These standards generally apply to the chief executive officer, chief financial officer, plus the next three most highly compensated executive officers.

The financial institution must meet certain standards, including: (1) ensuring that incentive compensation for senior executives does not encourage unnecessary and excessive risks that threaten the value of the financial institution; (2) required clawback of any bonus or incentive compensation paid to a senior executive based on statements of earnings, gains or other criteria that are later proven to be materially inaccurate; (3) prohibition on the financial institution from making any golden parachute payment to a senior executive based on the Internal Revenue Code provision; and (4) agreement not to deduct for tax purposes executive compensation in excess of $500,000 for each senior executive. Treasury has issued interim final rules for these executive compensation standards.

Nine large financial institutions already have agreed to participate in this program, moving quickly and collectively to signal the importance of the program for the system. These healthy institutions have voluntarily agreed to participate on the same terms that will be available to small and medium-sized banks and thrifts across the nation.

Joint Statement by Treasury, Federal Reserve and FDIC

Catching up on the news releases . . .

Washington, DC-- The following statement was made by Treasury Secretary Henry M. Paulson, Jr, Federal Reserve Chairman Ben Bernanke and FDIC Chairman Sheila C. Bair:

Today we are taking decisive actions to protect the U.S. economy, to strengthen public confidence in our financial institutions, and to foster the robust functioning of our credit markets. These steps will ensure that the U.S. financial system performs its vital role of providing credit to households and businesses and protecting savings and investments in a manner that promotes strong economic growth in the U.S. and around the world. The overwhelming majority of banks in the United States are strong and well-capitalized. These actions will bolster public confidence in our system to restore and stabilize liquidity necessary to support economic growth.

Last week, the President's Working Group on Financial Markets announced that the U.S. government would deploy all of our tools in a strategic and collaborative manner to address the current instability in our financial markets and mitigate the risks that instability poses for broader economic growth. This past weekend, we and our G7 colleagues committed to a comprehensive global strategy to provide liquidity to markets, to strengthen financial institutions, to prevent failures that pose systemic risk, to protect savers, and to enforce investor protections.

We welcomed the steps announced by our European colleagues this weekend to implement the action plan, and ensure financial institutions in Europe can finance economic growth. Today we are implementing our strategy with three important actions.

First, Treasury is announcing a voluntary capital purchase program. A broad array of financial institutions is eligible to participate in this program by selling preferred shares to the U.S. government on attractive terms that protect the taxpayer.

Second, after receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Paulson signed the systemic risk exception to the FDIC Act, enabling the FDIC to temporarily guarantee the senior debt of all FDIC-insured institutions and certain holding companies, as well as deposits in non-interest bearing deposit transaction accounts. Regulators will implement an enhanced supervisory framework to assure appropriate use of this new guarantee.

We are pleased to announce that nine major financial institutions have already agreed to participate in both the capital purchase program and the FDIC guarantee program. We appreciate that these healthy institutions are taking these steps to strengthen their own positions and to enhance the overall performance of the U.S. economy. By participating in these programs, these institutions, along with thousands of others to come, will have enhanced capacity to perform their vital function of lending to U.S. consumers and businesses and promoting economic growth. They have also committed to continued aggressive actions to prevent unnecessary foreclosures and preserve homeownership.

Third, to further increase access to funding for businesses in all sectors of our economy, the Federal Reserve has announced further details of its Commercial Paper Funding Facility (CPFF) program, which provides a broad backstop for the commercial paper market. Beginning October 27, the CPFF will fund purchases of commercial paper of 3 month maturity from high-quality issuers.

Together these three steps significantly strengthen the capital position and funding ability of U.S. financial institutions, enabling them to perform their role of underpinning overall economic growth. These actions demonstrate to market participants here and around the world the strength of the U.S. government's commitment to take all necessary steps to unlock our credit markets and minimize the impact of the current instability on the overall U.S. economy. The actions taken today are a powerful step toward restoring the health of the global financial system.

Bailing, Lending, Borrowing, Printing And Such . . .

This was to be the tax payer money give away "grand total" mentioned a few posts back. Fat chance . . . no one knows that. However, I did find some scary info . . .

Everyone on Main Street is asking, "Who will bailout the Federal Reserve". What . . . You haven't asked that? With all the spot lights on the U.S. Congress, the Treasury Department, the Greed Meisters, the election there is little attention to the goings on at the Federal Reserve which has $1.5 Trillion on the books. This is a one third increase over a year ago and most of it occurred in the last 30 days. The Federal Reserve is passing out citizen money faster than the U.S. Treasury right now. And, without getting into the details the Federal Reserve and U.S. Treasury are cooking the books in a way Wall Street can only envy.

The big deal for me is what the net effect of the government's activities as listed in the title of this post. Everyone is getting hit hard and, one would think, would like to make their net worth numbers go up rather then spiraling down. Yes, I am concerned for our country's future . . . I vote . . . I obey the law . . . I take care of my family and friends. So, the only thing I know to do is think about winning somehow so me and mine can keep going. Either McCain or Obama will be in the White House by next January and, regardless, the financial mess will take years hence to clear up.

The aspect I am 99.44% sure about is serious inflation is, in fact, here now and will get much worse. The present inflation is running approximately 10% to 12%. If they haven't already, once the U.S. Treasury and Federal Reserve, the U.S. Government really, lose all control, inflation will be at least 18% to 24% . . . it could go completely off the chart if one or some of our not so friendly holders of our debt decide to make it so. We could face hyper-inflation; the kind like post World War One Germany faced. Quite literally, it took a wheel barrel of cash to buy a loaf of bread. Employees were paid once or more PER DAY so their wife could pick it up and spend it before its value went down more. The fact is Hilter did not take over. The people and their crippled government willing handed him power. History over and again tells the story of societies surrendering to economic desperation in return for a much worse fate. Most occasions involve the government taking and having control of The Money and The Wealth of its citizens.

The common person knows the cost of living has sored over the past decade. My favorite treat, a thick Ribeye Steak, is more than $10; it was only half that just a few years ago. But, why is there no sudden and perceivable surge on inflation? Just last month the Federal Reserve created $600 billion with the click of a computer button. At present the U.S. Government and Wall Street are playing a game of hid and seek with the money. That $600 billion is tucked away by the banks because they are hard pressed to have their books in line. Once things start improving even just a little, the flood gates will unleash all that, the $750 billion from the Government Bailout Plan plus whatever money there is squirreled away in money market accounts, etc., etc., etc.

It is a only a matter of time . . . forget "investing" and protect your wealth.

Big Welfare Goes To Big Healthy Banks

The "Bush Lied" thing always seemed a bit over the top. But, this one has the thought creeping up on me. In theory, the Government Bailout Plan is consolidating the financial institutions and fortifying them with more (of the tax payer's) money. In reality, a monopoly . . . monopoly because the U.S. Government has the all power . . . has formed consisting of just a few super banks. As is always the case, this concentration of power will be abused and we the people will suffer for and from it. The U.S. Government is now in complete control of our financial system. This with all the other absolute powers government has over the citizenry is how democratic government falls and tyranny rises.

Statement by Secretary Henry M. Paulson, Jr. on Actions to Protect the U.S. Economy

Washington, DC-- Treasury today issued the following statement by Secretary Henry M. Paulson, Jr. on actions to protect the economy and restore confidence and stability to our financial markets:

America is a strong nation. We are a confident and optimistic people. Our confidence is born out of our long history of meeting every challenge we face. Time and time again our nation has faced adversity and time and time again we have overcome it and risen to new heights. This time will be no different.

Today, there is a lack of confidence in our financial system – a lack of confidence that must be conquered because it poses an enormous threat to our economy. Investors are unwilling to lend to banks, and healthy banks are unwilling to lend to each other and to consumers and businesses.

In recent weeks, the American people have felt the effects of a frozen financial system. They have seen reduced values in their retirement and investment accounts. They have worried about meeting payrolls and they have worried about losing their jobs. Families all across our Nation have gone through long days and long nights of concern about their financial situations today, and their financial situations tomorrow. Without confidence that their most basic financial needs will be met, Americans lose confidence in our economy, and this is unacceptable.

President Bush has directed me to consider all necessary steps to restore confidence and stability to our financial markets and get credit flowing again. Ten days ago Congress gave important new tools to the Treasury, the Federal Reserve and the FDIC to meet the challenges posed to our economy. My colleagues and I are working creatively and collaboratively to deploy these tools and direct our powers at this disruption to our economy.

Today we are taking decisive actions to protect the US economy. We regret having to take these actions. Today's actions are not what we ever wanted to do – but today's actions are what we must do to restore confidence to our financial system.

Today I am announcing that the Treasury will purchase equity stakes in a wide array of banks and thrifts. Government owning a stake in any private U.S. company is objectionable to most Americans – me included. Yet the alternative of leaving businesses and consumers without access to financing is totally unacceptable. When financing isn't available, consumers and businesses shrink their spending, which leads to businesses cutting jobs and even closing up shop.

To avoid that outcome, we must restore confidence in our financial system. The first step in that effort is a plan to make capital available on attractive terms to a broad array of banks and thrifts, so they can provide credit to our economy. From the $700 billion financial rescue package, Treasury will make $250 billion in capital available to U.S. financial institutions in the form of preferred stock. Institutions that sell shares to the government will accept restrictions on executive compensation, including a clawback provision and a ban on golden parachutes during the period that Treasury holds equity issued through this program. In addition, taxpayers will not only own shares that should be paid back with a reasonable return, but also will receive warrants for common shares in participating institutions. We expect all participating banks to continue and to strengthen their efforts to help struggling homeowners who can afford their homes avoid foreclosure. Foreclosures not only hurt the families who lose their homes, they hurt neighborhoods, communities and our economy as a whole.

While many banks have suffered significant losses during this period of market turmoil, many others have plenty of capital to get through this period, but are not positioned to lend as widely as is necessary to support our economy. Our goal is to see a wide array of healthy institutions sell preferred shares to the Treasury, and raise additional private capital, so that they can make more loans to businesses and consumers across the nation. At a time when events naturally make even the most daring investors more risk-averse, the needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it.

Nine large financial institutions have already agreed to participate in this program. They have agreed to sell preferred shares to the US government, on the same terms that will be available to a broad array of small and medium-sized banks and thrifts across the nation. These are healthy institutions, and they have taken this step for the good of the U.S. economy. As these healthy institutions increase their capital base, they will be able to increase their funding to U.S. consumers and businesses.

I am joined here this morning by Chairman Bernanke and Chairman Bair, who have also taken extraordinary actions to support investor confidence in our financial system, so that funds will again flow through our banks to the U.S. economy. Each of them will describe their actions.

Combined, our actions are extensive, powerful and transformative. They demonstrate that the government will do what is necessary to restore the flow of funds on which our economy depends and will act to avoid, where possible, the failure of any systemically important institution.

These three steps significantly strengthen financial institutions and improve their access to funding, enabling them to increase financing of the consumption and business investment that drive U.S. economic growth. Market participants here and around the world can take confidence from the powerful actions taken today and our broad commitment to the health of the global financial system.

We are acting with unprecedented speed taking unprecedented measures that we never thought would be necessary. But they are necessary to get our economy back on an even keel, and secure the confidence and future of our markets, our economy and the economic well-being of all Americans.

Government Awards $700 Billion Contract . . .

Unbelievable! There's no mistake; the Government Bailout Plan was sold to citizens and the rest of world as a U.S. Treasury run program. There was much (constitutional) debate about vesting such power to the U.S. Government in general and the Executive Branch in particular. Should not we be even more alarmed at the delegation of this power to "Contractors". I congratulate the Financial Industry for such a coup . . . they are getting it coming and going.

Treasury Hires Investment Adviser Under the Emergency Economic Stabilization Act

Washington- The U.S. Treasury Department today announced that EnnisKnupp and Associates will serve as its investment adviser for the implementation of the Troubled Asset Relief Program authorized under the Emergency Economic Stabilization Act. Treasury hired the Chicago-based firm Saturday and the firm began work immediately to help the Department administer the complex portfolio of troubled assets the Department will purchase.

Treasury hired the investment consultant for assistance as it evaluates potential asset managers and other vendors. The firms' duties also will include developing and maintaining investment policies and guidelines and assisting with the oversight of the portfolio's multiple asset managers. This oversight will include helping Treasury to determine asset allocations for each manager, evaluating the performance and costs, identifying conflicts of interest and identifying strategic investment and market issues impacting the overall portfolio.

The investment adviser also will conduct research on mortgage whole loan asset managers and on servicing organizations. Additionally, the firm will identify qualified minority- and women-owned businesses to provide services for the portfolio.

Treasury hired EnnisKnupp using a procurement contract under the Federal Acquisition Regulation. Treasury competitively solicited offers from six firms under compelling urgency to quickly establish the Troubled Asset Relief Program. Three firms made offers.

EnnisKnupp is one of the largest investment consulting firms in the world with aggregate assets of more than $835 billion under advisement for over 155 retainer clients, as well as approximately $1 trillion in project-related engagements. Accustomed to working with large, complex institutional investors, particularly those that operate in highly visible and transparent environments, they serve a diverse client base. Their clients include public, corporate, and jointly-trusteed retirement funds, as well as not-for-profit organizations, foundations, and other endowed institutions. EnnisKnupp has grown to 121 employees, of which 93 are consulting professionals, and as a result the firm has extensively deep bench strength and resources that are devoted to providing world class service to clients. EnnisKnupp comprehensive advisory services encompass traditional investment consulting combined with complete coverage of all alternatives consulting needs for private equity, real estate, and opportunistic strategies. In addition, they are leading experts in fiduciary services, which includes fiduciary audits and operational reviews, investment program structure and monitoring, board/committee governance, strategic planning and organizational design, and trustee education. EnnisKnupp remains dedicated to maintaining its strict independence from financial service providers, which ensures that the advice clients receive is unconflicted and always in their best interest.

Please Vote . . . And Think As You Do.

Mr. "Cash and Carry" Kashkari is ... getting-ready-to-fixing-gonna-about ... to spend our tax money. The financial system was about to completely collapse and imminent economic ruin upon us at the time the Government Bailout Plan was passed, so said our elected officials in Washington D.C. Notwithstanding a virtual unanimous "NO" outcry by the citizens of this country, Congress passed the bailout bill. Now, as expected, we see the financial system has not imploded and, true to form, the U.S. Government does as usual . . . begins unprepared, forms a de facto commitee, and changes the story as soon as the money is appropreated.

Folks the Government Bailout Plan is a big corporation welfare program. The financial system problems are a direct result of government medeling. The solution was more government incompetence. And now, congress discusses and proposed more government give aways and waste of tax payer money. Is this what we really want?

Let be no mistake. If the citizenry could not stop its government, with the current party and polictical make up, from sending the nation to bankruptcy with the Bailout Bill, what will a political party with firm control of all three branches of government be able to do?

Here is "The Grand Government Plan" as it now stands.

Interim Assistant Secretary for Financial Stability Neel Kashkari Remarks before the Institute of International Bankers

Washington- Good morning and thank you for that kind welcome.

I am here today to provide a comprehensive update on the Treasury Department's progress in implementing the Troubled Asset Relief Program (TARP).

As you know, our credit markets are frozen and lending has become extremely impaired. In recent months our government has taken strong and decisive actions, but a more systemic approach was needed. Secretary Paulson and Chairman Bernanke asked Congress for extraordinary authorities to address the extraordinary challenges in our financial markets. Every American depends on the flow of money through our financial system. They depend on it for car loans, home loans, student loans and their individual family needs. Congress recognized the threat frozen credit markets posed to Americans and to our economy as a whole. On Friday October 3, Congress passed and President Bush signed into law the bipartisan Emergency Economic Stabilization Act of 2008.

The law gives the Treasury Secretary broad and flexible authority to purchase and insure mortgage assets, and to purchase any other financial instrument that the Secretary, in consultation with the Federal Reserve Chairman, deems necessary to stabilize our financial markets -- including equity securities. Treasury worked hard with Congress to build in this flexibility because the one constant throughout the credit crisis has been its unpredictability.

The law empowers Treasury to design and deploy numerous tools to attack the root cause of the current turmoil: the capital hole created by illiquid troubled assets. Addressing this problem should enable our banks to begin lending again. Our nation has successfully worked through every economic challenge we have faced and we are confident this new program will help us overcome these challenges as well.

Today, I will brief you about three areas. First, I will discuss Treasury's strategy to develop multiple tools under the Troubled Asset Relief Program. Second, I will give you a detailed update on the many steps we have already taken to begin to implement the program. And finally, I will briefly discuss our next steps.

Strategy

Let me begin with our strategy, which is clear and focused.

Treasury is implementing its new authorities with one simple goal - to restore capital flows to the consumers and businesses that form the core of our economy. Achieving this goal will require multiple tools to help financial institutions remove illiquid assets from their balance sheets, and attract both private and public capital. Our toolkit is being designed to help financial institutions of all sizes so they can grow stronger and provide crucial funding to our economy.

Implementation

Next, let me turn to implementation. Congress passed the new law just 10 days ago, but in that time, we have accomplished a great deal on many fronts. We are moving quickly - but methodically - and I am confident we are building the foundation for a strong, decisive and effective program.

First, Treasury is working very closely with both domestic and international regulators to understand how best to design tools that will be most effective in dealing with the challenges in our financial system. For example, regulators are helping us to identify the quickest and most efficient method to purchase equity in financial institutions so they can resume lending. Throughout this process, we have kept in mind one clear priority: to protect the taxpayers by making the best use of their money.

Second, we are using the full resources of the Treasury Department to ensure this program's success. As soon as the legislation was signed, we immediately created seven policy teams to develop several tools and other important elements that are required under the TARP. In each case, we designated team leaders to drive the work-streams and take responsibility for their success. We've broken the teams down as follows:

1) Mortgage-backed securities purchase program: This team is identifying which troubled assets to purchase, from whom to buy them and which purchase mechanism will best meet our policy objectives. Here, we are designing the detailed auction protocols and will work with vendors to implement the program.

2) Whole loan purchase program: Regional banks are particularly clogged with whole residential mortgage loans. This team is working with bank regulators to identify which types of loans to purchase first, how to value them, and which purchase mechanism will best meet our policy objectives.

3) Insurance program: We are establishing a program to insure troubled assets. We have several innovative ideas on how to structure this program, including how to insure mortgage-backed securities as well as whole loans. At the same time, we recognize that there are likely other good ideas out there that we could benefit from. Accordingly, on Friday we submitted to the Federal Register a public Request for Comment to solicit the best ideas on structuring options. We are requiring responses within fourteen days so we can consider them quickly, and begin designing the program.

4) Equity purchase program: We are designing a standardized program to purchase equity in a broad array of financial institutions. As with the other programs, the equity purchase program will be voluntary and designed with attractive terms to encourage participation from healthy institutions. It will also encourage firms to raise new private capital to complement public capital.

5) Homeownership preservation: When we purchase mortgages and mortgage-backed securities, we will look for every opportunity possible to help homeowners. This goal is consistent with other programs - such as HOPE NOW - aimed at working with borrowers, counselors and servicers to keep people in their homes. In this case, we are working with the Department of Housing and Urban Development to maximize these opportunities to help as many homeowners as possible, while also protecting taxpayers.

6) Executive compensation: The law sets out important requirements regarding executive compensation for firms that participate in the TARP. This team is working hard to define the requirements for financial institutions to participate in three possible scenarios: One, an auction purchase of troubled assets; two, a broad equity or direct purchase program; and three, a case of an intervention to prevent the impending failure of a systemically significant institution.

7) Compliance: The law establishes important oversight and compliance structures, including establishing an Oversight Board, on-site participation of the General Accounting Office and the creation of a Special Inspector General, with thorough reporting requirements. We welcome this oversight and have a team focused on making sure we get it right.

Recruitment

Recruiting the right people is essential to the success of this program and we are moving quickly on several fronts.

It will obviously take time to bring on board permanent members of the team that will manage this program over the long term and provide stability during the transition. While the permanent team is being identified for tomorrow, we are tapping the very best, seasoned, financial veterans from across the government to help launch the program today. We have been successful in recruiting outstanding interim leaders for key positions in the Office of Financial Stability. In each case, the interim official is charged with: One, setting up the office; two, hiring permanent staff; three, operationalizing our programs; and, four, identifying their permanent successor.

The team continues to grow daily and the team members are too numerous to name individually. However, I want to highlight a few of our key interim leaders. In the 10 days since the President signed the law, we have already recruited:

1) Tom Bloom, CFO of the Office of the Comptroller of the Currency and former CFO of the Commerce Department to serve as the interim Chief Financial Officer. Tom brings 30 years of financial management and reporting experience in both the public and private sectors.

2) Jonathan Fiechter, Deputy Director of the IMF Monetary and Capital Markets Department in charge of financial supervision and crisis management, formerly Board member of the Resolution Trust Corporation and the FDIC, to serve as interim Chief Risk Officer. Jonathan has more than 30 years experience that spans Treasury, the OCC, OTS and the World Bank.

3) Donna Gambrell, Director of the Community Development Financial Institutions Fund and former Deputy Director of Consumer Protection and Community Affairs of the FDIC to serve as interim Chief of Homeownership Preservation. Donna brings 17 years of experience at the FDIC, preceded by invaluable experience at the Resolution Trust Corporation.

4) Don Hammond, Deputy Director of the Division of Federal Reserve Bank Operations and Payment Systems and former Treasury Fiscal Assistant Secretary to serve as interim Chief Compliance Officer. Don brings 23 years of experience at the Treasury in fiscal operations, including developing policy for and overseeing operations for the Federal government's financial infrastructure.

5) Reuben Jeffrey, Under Secretary of State for Economic Affairs and former Chairman of the Commodity Futures Trading Commission (CFTC) to serve as interim Chief Investment Officer. His public sector experience includes serving on the President's Working Group on Financial Markets and as a Special Advisor to the President for Lower Manhattan Development. He brings 18 years of private sector experience in financial services.

Our ability to quickly attract outstanding talent illustrates the importance of this program and this is only the beginning. These leaders are actively building out their operations and contributing to all phases of the TARP.

Procurement

Now, let me turn to procurement.

Our approach to procurement is based on the following strategy. First, in order to protect the taxpayers, we will seek the very best in private sector expertise to help execute this program. Second, we believe, to the extent possible, everyone should have a right to compete for these contracts, especially small businesses, veteran-owned businesses, and minority and women-owned businesses. Third, we are taking appropriate steps to mitigate potential conflicts of interest.

To begin, last Monday, we published three procurement documents:

Procurement authorities and procedures.

Conflict of interest mitigation procedures.

Asset manager selection procedures.

We have established a formal procurement process, to ensure that selections are fair and in the best interest of the taxpayers. We have established expert review committees, made up of Treasury employees and outside experts who review submissions and make recommendations regarding the quality of the proposals. The review committees make recommendations for a final decision to a senior career officer in the Treasury.

Taking aggressive steps to manage potential conflicts of interest is essential because firms with the relevant financial expertise may also hold assets that become eligible for sale into the TARP. We have asked firms that wish to compete for contracts to disclose their potential conflicts of interest and recommend specific steps to manage those conflicts. Firms are evaluated in part on the extent of those conflicts and their ability to design processes and procedures to manage them that are satisfactory to Treasury. Treasury then conducts its own independent examination to determine the firms' potential conflicts of interest, and to help ensure that the firms have fully disclosed any potential concerns. Treasury will only hire firms when we are confident in our and their ability to manage any conflicts.

Secretary Paulson and I believe that it is essential that the TARP be structured in a manner that encourages participation of small businesses, veteran-owned businesses, and minority and women-owned businesses. Our initial procurements set high capability standards; for example, securities asset managers had to have at least $100 billion of dollar denominated fixed income assets under management.

This is critical given the magnitude of the program - up to $700 billion. Treasury believes that it would not be fiscally prudent to ask a firm that only had experience managing only a few billion to manage $100 billion. It could put the taxpayers at unnecessary risk.

However - and this is very important - we asked vendors to demonstrate their ability and commitment to working with small, veteran, minority and women-owned businesses as sub-contractors. And we are evaluating their submissions in part on their capability to do this. In addition, we plan to go out with subsequent solicitations with specific opportunities for these businesses.

Last Monday, we put out four notices and requests for proposals, each requiring responses within 48 hours. We solicited proposals for:

1) Investment management consultant – This is an expert firm to help us review asset manager proposals. Our request went out to six firms, we received three proposals and selected Ennis Knupp as the winning vendor on Saturday. They began working immediately.

2) Master custodian firm – This is the firm which will hold and track the assets we purchase as well as run and report on the auctions we use to buy the assets. Think of this as the prime contractor of the purchase program. We received seventy submissions of which 10 met the eligibility requirements and minimum qualifications. We invited three firms in for presentations and, in the next twenty-four hours, we will announce the winner, which will begin working immediately.

3) Securities asset manager – This is a firm which will hold, manage and ultimately sell the mortgage-backed securities we purchase. We received over 100 submissions and are working with the investment management consultant to review them. We expect to make a selection in the next few days.

4) Whole loan asset manager – This is a firm which holds, manages and ultimately sells the whole mortgage loans we purchase, including working with servicers. We received over 100 submissions and are working with the consultant to review them. We expect to make a selection in the next few days.

In addition, on Thursday we reached out to six specialist law firms to advise us on the equity program structuring. We received two proposals, and selected Simpson Thatcher on Friday. They began working immediately.

These solicitations were just the first wave as Treasury establishes the foundations of the program. In the coming weeks we expect to select two accounting firms to provide auditing servicers and to help us design and implement our internal control systems.

Operations

On the operational front, Treasury's management and operations team is working around the clock to establish the institutional and logistical framework. The team is led by Treasury Assistant Secretary for Management and Chief Financial Officer Pete McCarthy, a seasoned official who served 27 years in the banking industry. Not only is his team integral to the procurement process, but they have identified temporary space in the Treasury building to house the TARP staff. As the TARP staff grows and the program is established, we'll move to more permanent space.

Compliance

Let me now turn to compliance. Consistent with Congress' intent, we are committed to transparency and oversight in all aspects of the program and have already taken several important steps in this area:

First, we moved quickly 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. Again, we moved very quickly, and the new 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. In addition, the Board adopted its bylaws and reviewed the work-streams I described earlier.

The new law also requires appointment of a Senate-confirmed Special Inspector General to oversee the program. We are working with the White House to identify candidates for possible nomination and confirmation in November. In the interim, we are coordinating closely with Treasury's Inspector General and we had our first meeting on Monday, October 6, where we walked him through our work-streams, procurement and operational plans.

Additionally, the law calls for the General Accounting Office to establish a physical presence at Treasury to monitor the program. Secretary Paulson had his first call with the Acting Comptroller General, Gene Dodaro, on Monday, October 6. The Acting Comptroller General and his team met with our team on Thursday, October 9. And yesterday, the GAO staff came to Treasury to review the contracts we signed over the weekend.

Treasury is committed to an open and transparent program with appropriate oversight. We look forward to continuing to work with the Oversight Board, the Inspector General, the Comptroller General, and the Congress as we set up and execute this program. Transparency will not only give the American people comfort in our execution, it will give the markets confidence in what form our action will take.

Next steps

As you can see, we have accomplished a great deal in just 10 days. But our work is only beginning. A program as large and complex as this would normally take months - or even years - to establish. We don't have months or years. Hence, we are moving to implement the TARP as quickly as possible while working to ensure high quality execution.

Our goal is to use the multiple tools enabled by the TARP to attack the capital and troubled asset problem from multiple directions, so American families and businesses can get the credit they need. We will complete the design of these tools and deploy them as soon as they are ready. This is Secretary Paulson's highest priority and we are working around the clock to make it happen. We are committed to helping homeowners and to using the taxpayers' money efficiently.

We will provide you with regular updates on our progress. Thank you.

The Bailout Borg . . .

Events a moving so fast it is hard to keep up with everything. The financial markets are crashing. The Federal Reserve is now taking just about ANYTHING as collateral in return for handing out short term loans, a.k.a. cash. Similarly, The Bailout Plan now apparently is going to expand to make what is for all intents and purposes signature loans to big corporations. And, the rest of the world, which just so happens to be in worse shape than the U.S., is following along. The European Central Bank just cut interest rates like the Federal Reserve did a few days ago. Here's the ECB announcement . . . warning: dry material. Asian and other regions have done the same. Sooner or later all this "liquidity" will over heat the world economy.

"Hot Money" refers to ultra short term investing. Big money moves in and out quickly causing bubbles and crashes. The Bailout Plan, as expanded daily, is putting cash in the hands of the financial world, and so they will "invest" it. Relatively little of this money, yours and mine, will be used for small business, mom and pop business loans. The trillions of dollars will turn white hot as the financial big boys seek to make the most of it. Short of true fascism, the U.S. Government will have little chance of controlling these trillions of dollars. The end result will be a huge swing back to bubble investing and crippling inflation as all that cash competes for fewer goods produced by a weakened world economy.

For us U.S. citizen folk let there be no doubt, we are "all in" to use a poker phrase. The metaphor is perfect. Every bit of wealth in this country, down to the last penny, is on the line . . . and the U.S. Government is playing our hand and is out of hand.