Remarks by the President on Wall Street Reform

Cooper Union, New York, New York

11:50 A.M. EDT

THE PRESIDENT:  Thank you very much.  Everybody, please have a seat.  Thank you very much.  Well, thank you.  It is good to be back.  (Applause.)  It is good to be back in New York, it is good to be back in the Great Hall at Cooper Union.  (Applause.) 

We’ve got some special guests here that I want to acknowledge.  Congresswoman Carolyn Maloney is here in the house.  (Applause.)  Governor David Paterson is here.  (Applause.)  Attorney General Andrew Cuomo.  (Applause.)  State Comptroller Thomas DiNapoli is here.  (Applause.)  The Mayor of New York City, Michael Bloomberg.  (Applause.)  Dr. George Campbell, Jr., president of Cooper Union.  (Applause.)  And all the citywide elected officials who are here.  Thank you very much for your attendance.

It is wonderful to be back in Cooper Union, where generations of leaders and citizens have come to defend their ideas and contest their differences.  It’s also good to be back in Lower Manhattan, a few blocks from Wall Street.  (Laughter.)  It really is good to be back, because Wall Street is the heart of our nation’s financial sector.

Now, since I last spoke here two years ago, our country has been through a terrible trial.  More than 8 million people have lost their jobs.  Countless small businesses have had to shut their doors.  Trillions of dollars in savings have been lost — forcing seniors to put off retirement, young people to postpone college, entrepreneurs to give up on the dream of starting a company.  And as a nation we were forced to take unprecedented steps to rescue the financial system and the broader economy.

And as a result of the decisions we made — some of which, let’s face it, were very unpopular — we are seeing hopeful signs.  A little more than one year ago we were losing an average of 750,000 jobs each month.  Today, America is adding jobs again.  One year ago the economy was shrinking rapidly.  Today the economy is growing.  In fact, we’ve seen the fastest turnaround in growth in nearly three decades.

But you’re here and I’m here because we’ve got more work to do.  Until this progress is felt not just on Wall Street but on Main Street we cannot be satisfied.  Until the millions of our neighbors who are looking for work can find a job, and wages are growing at a meaningful pace, we may be able to claim a technical recovery — but we will not have truly recovered.  And even as we seek to revive this economy, it’s also incumbent on us to rebuild it stronger than before.  We don’t want an economy that has the same weaknesses that led to this crisis.  And that means addressing some of the underlying problems that led to this turmoil and devastation in the first place.
Now, one of the most significant contributors to this recession was a financial crisis as dire as any we’ve known in generations — at least since the ’30s.  And that crisis was born of a failure of responsibility — from Wall Street all the way to Washington — that brought down many of the world’s largest financial firms and nearly dragged our economy into a second Great Depression.

It was that failure of responsibility that I spoke about when I came to New York more than two years ago — before the worst of the crisis had unfolded.  It was back in 2007.  And I take no satisfaction in noting that my comments then have largely been borne out by the events that followed.  But I repeat what I said then because it is essential that we learn the lessons from this crisis so we don’t doom ourselves to repeat it.  And make no mistake, that is exactly what will happen if we allow this moment to pass — and that’s an outcome that is unacceptable to me and it’s unacceptable to you, the American people.  (Applause.)

As I said on this stage two years ago, I believe in the power of the free market.  I believe in a strong financial sector that helps people to raise capital and get loans and invest their savings.  That’s part of what has made America what it is.  But a free market was never meant to be a free license to take whatever you can get, however you can get it.  That’s what happened too often in the years leading up to this crisis.  Some — and let me be clear, not all — but some on Wall Street forgot that behind every dollar traded or leveraged there’s family looking to buy a house, or pay for an education, open a business, save for retirement.  What happens on Wall Street has real consequences across the country, across our economy.

I’ve spoken before about the need to build a new foundation for economic growth in the 21st century.  And given the importance of the financial sector, Wall Street reform is an absolutely essential part of that foundation.  Without it, our house will continue to sit on shifting sands, and our families, businesses, and the global economy will be vulnerable to future crises.  That’s why I feel so strongly that we need to enact a set of updated, commonsense rules to ensure accountability on Wall Street and to protect consumers in our financial system.  (Applause.)

Now, here’s the good news:  A comprehensive plan to achieve these reforms has already passed the House of Representatives.  (Applause.)  A Senate version is currently being debated, drawing on ideas from Democrats and Republicans.  Both bills represent significant improvement on the flawed rules that we have in place today, despite the furious effort of industry lobbyists to shape this legislation to their special interests.

And for those of you in the financial sector I’m sure that some of these lobbyists work for you and they’re doing what they are being paid to do.  But I’m here today specifically — when I speak to the titans of industry here — because I want to urge you to join us, instead of fighting us in this effort.  (Applause.)  I’m here because I believe that these reforms are, in the end, not only in the best interest of our country, but in the best interest of the financial sector.  And I’m here to explain what reform will look like, and why it matters.

Now, first, the bill being considered in the Senate would create what we did not have before, and that is a way to protect the financial system and the broader economy and American taxpayers in the event that a large financial firm begins to fail.  If there’s a Lehmans or an AIG, how can we respond in a way that doesn’t force taxpayers to pick up the tab or, alternatively, could bring down the whole system.

In an ordinary local bank when it approaches insolvency, we’ve got a process, an orderly process through the FDIC, that ensures that depositors are protected, maintains confidence in the banking system, and it works.  Customers and taxpayers are protected and owners and management lose their equity.  But we don’t have that kind of process designed to contain the failure of a Lehman Brothers or any of the largest and most interconnected financial firms in our country.

     That’s why, when this crisis began, crucial decisions about what would happen to some of the world’s biggest companies — companies employing tens of thousands of people and holding hundreds of billions of dollars in assets — had to take place in hurried discussions in the middle of the night.  And that’s why, to save the entire economy from an even worse catastrophe, we had to deploy taxpayer dollars.  Now, much of that money has now been paid back and my administration has proposed a fee to be paid by large financial firms to recover all the money, every dime, because the American people should never have been put in that position in the first place.  (Applause.)

But this is why we need a system to shut these firms down with the least amount of collateral damage to innocent people and innocent businesses.  And from the start, I’ve insisted that the financial industry, not taxpayers, shoulder the costs in the event that a large financial company should falter.  The goal is to make certain that taxpayers are never again on the hook because a firm is deemed “too big to fail.”

Now, there’s a legitimate debate taking place about how best to ensure taxpayers are held harmless in this process.  And that’s a legitimate debate, and I encourage that debate.  But what’s not legitimate is to suggest that somehow the legislation being proposed is going to encourage future taxpayer bailouts, as some have claimed.  That makes for a good sound bite, but it’s not factually accurate.  It is not true.  (Applause.)  In fact, the system as it stands — the system as it stands is what led to a series of massive, costly taxpayer bailouts.  And it’s only with reform that we can avoid a similar outcome in the future.  In other words, a vote for reform is a vote to put a stop to taxpayer-funded bailouts.  That’s the truth.  End of story.  And nobody should be fooled in this debate.  (Applause.)

By the way, these changes have the added benefit of creating incentives within the industry to ensure that no one company can ever threaten to bring down the whole economy.

To that end, the bill would also enact what’s known as the Volcker Rule — and there’s a tall guy sitting in the front row here, Paul Volcker — (applause) — who we named it after.  And it does something very simple:  It places some limits on the size of banks and the kinds of risks that banking institutions can take.  This will not only safeguard our system against crises, this will also make our system stronger and more competitive by instilling confidence here at home and across the globe.  Markets depend on that confidence.  Part of what led to the turmoil of the past two years was that in the absence of clear rules and sound practices, people didn’t trust that our system was one in which it was safe to invest or lend.  As we’ve seen, that harms all of us.

So by enacting these reforms, we’ll help ensure that our financial system — and our economy — continues to be the envy of the world.  That’s the first thing, making sure that we can wind down one firm if it gets into trouble without bringing the whole system down or forcing taxpayers to fund a bailout.

Number two, reform would bring new transparency to many financial markets.  As you know, part of what led to this crisis was firms like AIG and others who were making huge and risky bets, using derivatives and other complicated financial instruments, in ways that defied accountability, or even common sense.  In fact, many practices were so opaque, so confusing, so complex that the people inside the firms didn’t understand them,  much less those who were charged with overseeing them.  They weren’t fully aware of the massive bets that were being placed.  That’s what led Warren Buffett to describe derivatives that were bought and sold with little oversight as “financial weapons of mass destruction.”  That’s what he called them.  And that’s why reform will rein in excess and help ensure that these kinds of transactions take place in the light of day.

     Now, there’s been a great deal of concern about these changes.  So I want to reiterate:  There is a legitimate role for these financial instruments in our economy.  They can help allay risk and spur investment.  And there are a lot of companies that use these instruments to that legitimate end — they are managing exposure to fluctuating prices or currencies, fluctuating markets.  For example, a business might hedge against rising oil prices by buying a financial product to secure stable fuel costs, so an airlines might have an interest in locking in a decent price.  That’s how markets are supposed to work.  The problem is these markets operated in the shadows of our economy, invisible to regulators, invisible to the public.  So reckless practices were rampant.  Risks accrued until they threatened our entire financial system.

And that’s why these reforms are designed to respect legitimate activities but prevent reckless risk taking.  That’s why we want to ensure that financial products like standardized derivatives are traded out in the open, in the full view of businesses, investors, and those charged with oversight.

And I was encouraged to see a Republican senator join with Democrats this week in moving forward on this issue.  That’s a good sign.  (Applause.)  That’s a good sign.  For without action, we’ll continue to see what amounts to highly-leveraged, loosely-monitored gambling in our financial system, putting taxpayers and the economy in jeopardy.  And the only people who ought to fear the kind of oversight and transparency that we’re proposing are those whose conduct will fail this scrutiny.

Third, this plan would enact the strongest consumer financial protections ever.  (Applause.) And that’s absolutely necessary because this financial crisis wasn’t just the result of decisions made in the executive suites on Wall Street; it was also the result of decisions made around kitchen tables across America, by folks who took on mortgages and credit cards and auto loans.  And while it’s true that many Americans took on financial obligations that they knew or should have known they could not have afforded, millions of others were, frankly, duped.  They were misled by deceptive terms and conditions, buried deep in the fine print.

And while a few companies made out like bandits by exploiting their customers, our entire economy was made more vulnerable.  Millions of people have now lost their homes.  Tens of millions more have lost value in their homes.  Just about every sector of our economy has felt the pain, whether you’re paving driveways in Arizona, or selling houses in Ohio, or you’re doing home repairs in California, or you’re using your home equity to start a small business in Florida. Read the rest of this entry »

So whenever you hear a Republican politician or tea partier say that the stimulus failed point them to this article where conservative think tank AEI admitted that the stimulus boosted the economy by 4%.

The real economy also responded to the massive stimulus but remained heavily dependent on it. In the United States, growth during the second half of 2009 probably averaged about 3 percent. Absent temporary fiscal stimulus and inventory rebuilding, which taken together added about 4 percentage points to U.S. growth, the economy would have contracted at about a 1 percent annual rate during the second half of 2009.

Caterpillar, Sprint, Home Depot, IBM, United Airlines, Texas Instruments, General Motors, Pfizer, cut over 43,000 jobs yesterday.  Yet the GOP is playing politics with respect to the latest stimulus package.  The GOP has not presented any better ideas besides the Bush tax cuts that helped put us in this situation in the first place.  This is an American problem and we need to address it as Americans.  The economy is in a downward spiral and something needs to be done and done quickly.  The Obama administration appears to be very open to GOOD ideas as long as they are not the same ideas that were implemented throughout the last eight years.  This past election was a referendum on the GOP agenda….not wanted.  The GOP not voting for Obama’s redevelopment and reinvestment in America plan is an attempt to make the Democrats take the fall for any backlash that may come from it yet they have not offered up anything better.

In 1992 George Bush Sr. ran against William Jefferson Clinton when it was “the economy stupid.”  The last market crash was during the Reagan administration in 1987 when market indexes dropped 43% in seven days.  George Bush 41 also left the nation in a recession when he left office in 1992.  It took democrat Bill Clinton to bring us out of  that recession.  Like father, like son, Bush 43 has twice upped his father by leaving the country in dire straights while he leaves office with his tail between his legs.  It was Republican control of all three branches of government that got us into this mess, now it’s time for the Democrats to come in and clean up. Putting a Republican in charge is like

Since 1929, Republicans and Democrats have each controlled the presidency for nearly 40 years. So which party has been better for American pocketbooks and capitalism as a whole? Well, here’s an experiment: imagine that during these years you had to invest exclusively under either Democratic or Republican administrations. How would you have fared?  SEE results

As of Friday, a $10,000 investment in the S.& P. stock market index* would have grown to $11,733 if invested under Republican presidents only, although that would be $51,211 if we exclude Herbert Hoover’s presidency during the Great Depression. Invested under Democratic presidents only, $10,000 would have grown to $300,671 at a compound rate of 8.9 percent over nearly 40 years.

First, the continued meme of the Right that it was the democrats support of Freddie Mac and Fannie Mae that caused this economic meltdown is bogus.  What Republicans conveniently forget is that George W. Bush warned and pushed for more oversight of Freddie and Fannie back in 2001.  Did I mention that the Republicans were in control of Congress at the time and for five whole years after Bush’s clarion call.  Oh, and by Republican control, I include Sen. John McCain in that group.  Yes, McCain sat in Congress for five years after the leader of his party sounded the alarm about Freddie and Fannie and did absolutely nothing.  Did I further mention that the Republican party controlled Congress for 12 years prior to the Democrats winning the majority just two years ago in 2006.  And, five months after Democrats took control of Congress, Democrats passed a bill regulating Fannie Mae and Freddie Mac.  Nuff said.

It was the private sector, not the government backed entities that caused the subprime meltdown.  Freddie and Fannie were not at fault for this disaster 

Federal Reserve Board data show that:

• More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
• Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
• Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that’s being lambasted by conservative critics.

The topic of tonight’s debate is the economy, the economy, the economy.  Not exactly Sen. McCain’s strong point.  Thus Sen. Obama should be prepared for Sen. McCain to raise several distractions.  This is McCain’s last stand and he is desperate to change the subject.  Therefore, as far as the McCain campaign is concerned, nothing is off the table. Obama should expect McCain to employ the politics of hate and whatever else he comes up with in an attempt to change the subject and appeal to the worse part of the human spirit.  McCain has already said that he plans to bring up the William Ayers thing to Obama’s face tonight.  Unlike prior debates, the candidates will be sitting at a table facing each other with Bob Schieffer moderating.  Both candidates should be on their toes because Schieffer plans to get specifics. 

Heaven forbid McCain should have a real plan for the economy…way to much to ask for.

Our economy is in horrendous shape and Sen. John McCain thinks that the American people haven’t noticed?  Yesterday, the dow plunged almost 700 points, the NASDAQ dropped 95 points, ands the S&P dropped 75 points, but what is the McCain campaign focused on?  Baseless inflammatory accusations against Sen. Barack Obama.  Where is your plan Sen. McCain?  Where is your plan to fix the economy?  Inciting right-wing lunatics into making violent threats against your opponent is not a plan. I t is however, a desperate, pathetic attempt to win at any cost.  People are worried about their job, their home, their retirement account, their savings account, and the fact that McCain thinks that he can distract voters with insidious nonsense rather than offering real solutions, is insulting to the average voter’s intelligence. 

I guess that we should not be surprised by McCain or the Republican party when it comes to the level of distraction in which they will engage in order to steal this election.  The swift boatee has now become the swift boater.   The fact that the McCain is banking on a not so silent whisper campaign of racism as it’s primary campaign strategy is dishonorable and pathetic.  It also speaks to the erratic, ridiculous, and spasmodic  nature of the Arizona senator’s managing style.  For example, lets discuss the transition plans of both candidates shall we?  McCain’s transition team is nonexistent…McCain has decided not to worry about such things now because he doesn’t want to jinx it.  Yes, that is actually his true reason and spoken like a true gambler I might add.  This is unprecedented.  No primary candidate in history has ever not had an elaborate and intricate plan of transition into the White House for when the current occupant exit.  Why…because the new occupant has to hit the ground running and will not have time to engage in the very detailed vetting process of making appointments, staffing key positions, developing policy positions, etc.  Obama on the other hand has developed an elaborate network that is staffed with dozens of key people with very impressive resumes to help prepare for his possible move to the White House in January 2009.   It has never been more critical that the transition from one administration to the next is as seamless as possible given the current state of our nation’s affairs.  I guess McCain’s plan is to just wing it.

Finally, this is a time that we as a people need to come together and unify the country to try and navigate our way out of our current economic adversity.  However, McCain and his campaign has decided that divisiveness and winning at all cost is much more important.  Apparently, the current state of our nation in crisis is a distant last when it comes to the unbridled desires of John McCain.  And that, ladies and gentlemen, is offensive. 

As much as the McCain campaign is trying to change the subject by personally attacking Sen. Barack Obama’s character the economy issue is not going away.   At one point yesterday the market dropped 800 points.  People do not care about William Ayers, they care about their sinking 401K.  When the McCain campaign announced last weekend that they are going to change the subject from the economy to disparaging Obama’s character, the economy responded with…not so fast.  This is typical of this campaign, let’s try and trick the American public, again, into returning a Republican to the Executive Office.  And when I say “this campaign,” I mean a continuation of the Bush campaign of 2000 because the majority of McCain’s advisers and other senior campaign officials came from that group.  Honestly, I really do not understand how anyone could vote to entrust John Sydney McCain III with the office of President of the United States.  I say that in light of McCain’s recent history of erratic reactions to crisis’ and his past judgment at critical moments in the last eight years.   McCain has admitted that he does not understand the economy and is relying on Phil Gramm (Mr. deregulator himself) for economic advice.  How any person, given the current state of our country and after suffering through the last eight years of Republican rule, can vote for the McCain-Palin ticket who is interested in advancing America’s interest abroad is beyond this writer.  McCain cannot even run his campaign.  By business standards, McCain has bankrupted his campaign twice.  Is that the person you want running the biggest corporation in the world in this economic crisis?  This writer has not seen or heard a plausible plan from the McCain campaign on how they would address the meltdown of the financial markets, reduce the deficit, or end the war in Iraq.  For those voters voting for McCain in this election…I just don’t get it.  It’s like one pundit said lasty weekend, the McCain campaign is a series of tactics with no short or long term strategy.  McCain’s plan for America is exactly the same, a series of bad tactical reactions with no long term vision.  As conservative republican columnist Peggy Noonan of the Wall Street Journal said “[McCain and Palin] are just not big enough for the moment.”

It is former Senator and McCain economic advisor Phil Gramm who is primarily responsible for the law that caused this economic meltdown.  Chair of the Senate Banking Committee at the time and acting under cover of darkness, then Sen. Phil Gramm pushed through a bill titled the Commodity Futures Modernization Act (CFMA).  Gramm did so right after the Bush v. Gore decision in 2000 when only financial industry lobbyists were paying attention in Washington.  Then Senator Gramm and the REPUBLICAN CONTROLLED CONGRESS secretly slid through the CFMA.  The bill deregulated swaps which is the primary reason for the biggest financial meltdown since the Depression.  Yes, it is the deregulated swaps and lack of oversight that are “at the heart of the subprime meltdown” according to Michael Greenberger, former director of the Commodities Futures Traders Commission division of trading and markets in the late 1990s.  Sen. McCain is a strong proponent of deregulation of the nation’s financial markets and it was that deregulation and “the smartest person [McCain] knows,” Phil Gramm, that is primarily responsible for this crisis.  Gramm, then Chairman of the Senate banking committee, routinely turned down SEC Chairman Arthur Levitt’s request for more funds to police the financial industry.  McCain now claims that he plans to clean up Wall Street but until yesterday the Arizona senator stood firmly behind the policies, (deregulation) that put Wall Street in its current state.  Gramm’s recklessness in the financial industry has not dulled his glow in McCain’s eyes.  Dubbed an “economic guru” by Sen. McCain, Gramm is still closely connected to the campaign. If McCain gets in the White House, you can bet that Phil Gramm policies will be the driving force in the financial industry.  The two senators have been close friends since they served together in the House in the 1980s.  McCain chaired Gramm’s failure of a presidential campaign and Gramm was McCain’s formal senior economic advisor until six weeks ago when he called America and its people “a nation of whiners.”  McCain’s entire presidential campaign staff is comprised of people like Gramm.  How can someone who admits to “not understand the economy” and surrounds himself with the very people who caused this problem in the first place possibly represent reform or bring reform for that matter?

Rupert Murdoch owned Wall Street Journal columnist Daniel Henninger evaluates John McCain’s tax policy and responds, “This isn’t a flip-flop. It’s a sex-change operation.” The columnist goes on to ask the question of whether McCain is losing his way. Henninger writes :

What I’m asking is, does John McCain have the mental focus, the intellectual discipline, to avoid being out-slicked by Barack Obama, if he isn’t abandoned by his own voters?
 

It’s not just taxes. Recently the subject came up of Al Gore’s assertion that the U.S. could get its energy solely from renewables in 10 years. Sen. McCain said: “If the vice president says it’s doable, I believe it’s doable.” What!!?? In a later interview, Mr. McCain said he hadn’t read “all the specifics” of the Gore plan and now, “I don’t think it’s doable without nuclear power.” It just sounds loopy.

Why as well shouldn’t the Obama camp exploit all of this? If Sen. Obama’s “inexperience” is Mr. McCain’s ace in the hole, why not trump that by asking, “Does Sen. McCain know his own mind?”

…

Yes, Sen. McCain has honor and country. Another month of illogical, impolitic remarks and Sen. McCain will erase even that. Absent a coherent message for voters, he will be one-on-one with Barack Obama in the fall. He will lose.

Looks like the McCain campaign has received its wish for more media attention and being given the scrutiny that the Obama campaign has received throughout this election process.  Like we said last week, be carefule what you wish for.

Highlights of Obama’s economic plan:

– A $50B stimulus package

–Tax cut for the 90 percent of Americans making less than $250,000 a year

– A $1K tax rebate for 95 percent of workers and their families

– Eliminate income taxes entirely for seniors making less than $50K

– A $4K college tax credit

– Eliminate capital gains taxes for small businesses and start-up companies

– And a promise to “cut health care costs by $2,500 annually for the typical family” 

Barack Obama Economic Plan

An Agenda for Middle-Class Success

Press Avail

Monday, July 7th, 2008

St. Louis, Missouri
As prepared for delivery
Since we had to change venues this morning, I just want to speak briefly about the economy for a few minutes and then I’ll take your questions.

This is going to be a defining issue in this campaign, because Senator McCain and I have very different views of where our economy is today, and where we need to go.

Senator McCain said earlier this year that America has made “great progress economically” over the past eight years. He believes we’re on the right track, and he’s launching a new economic tour today with policies that are very much the same as those we have seen from the Bush Administration.

In fact, the central component of Senator McCain’s economic plan is $300 billion more in tax cuts for big corporations and multimillionaires – less than a quarter of which will benefit the 80% of American families that make up the bulk of our middle-class. Less than a quarter.

Under Senator McCain’s economic plan, Exxon Mobil – a company that recently reported the biggest profit in history – would get $1.2 billion in tax breaks, while less than a quarter of the benefits would go to the middle-class. What’s worse – he has no concrete plan to pay for these tax breaks, so his policies would actually add more than $2 or $3 trillion to the national debt over the next decade and weaken our economy even further. If this sounds familiar, it’s because it’s exactly what George Bush has done for the last eight years

Now, I won’t stand here and pretend that we can or should undo the economic transformations that have taken place over the last few decades. There are jobs that aren’t coming back and this world will always be more competitive. But I do believe that if all of us are willing to share the burdens and benefits of this new economy, then all of us will prosper – not just because government makes it so, but because we’re willing to take responsibility as individuals to work harder and think more and innovate further.

Last week I outlined an agenda to keep America competitive by providing all Americans with a world-class education, investing in researching and innovation, devising an energy policy that creates job and reduces our oil dependence, and making sure that our trade policies work for American workers.

But today I want to talk about my plan to not only ensure the economic security of middle-class families in the short-term, but to give them the chance to achieve economic success in the long-term; to make sure that Americans aren’t just getting by, but getting ahead – that they’re able to get a world-class education, build a nest egg and provide a better life for their children.

The first step is to offer immediate relief to families who are struggling right now while helping to jumpstart economic growth and create jobs. Between a sluggish economy and gas prices rising above $4 a gallon, the American people cannot wait another six months for help. Instead of Washington gimmicks like a three-month gas tax holiday that will only pad oil company profits, we need to do what I called for months ago and pass a second stimulus package that provides energy rebate checks for working families, a fund to help families avoid foreclosure, and increased assistance for states that have been hard-hit by the economic downturn. A few days ago I called on Senator McCain and all members of Congress to come together – Republicans and Democrats – in support of this $50 billion stimulus package. There are many policies we’ll disagree on, but immediate relief for families who are struggling shouldn’t be one of them. And so while I haven’t received a response from Senator McCain yet, I look forward to hearing one soon.

The second step in my agenda is to help provide economic security for families who’ve been dealing with skyrocketing costs and stagnant wages for years. I believe it’s time to reform our tax code so that it rewards work and not just wealth. So when I’m President, I’ll shut down the corporate loopholes and tax havens, and I’ll use the money to help pay for a middle-class tax cut that will provide $1,000 of relief to 95% of workers and their families. We’ll also eliminate income taxes for every retiree making less than $50,000 per year, because every senior deserves to live out their life in dignity and respect.

And if Senator McCain wants a debate about taxes in this campaign, that’s a debate I’m happy to have. Because if you’re a family making less than $250,000, my plan will not raise your taxes – not your income taxes, not your payroll taxes, not your capital gains taxes, not any of your taxes. In fact, what Senator McCain should explain is why his tax cut for the middle class would leave out 101 million households, and why, for families that are lucky enough to get the tax cut, it would be worth only about $125 in the first year. The difference is – he trusts that prosperity will trickle down from corporations and the wealthiest few to everyone else. I believe that it’s the hard work of middle-class Americans that fuels this nation’s prosperity.

I’ll also help families who are struggling under the crushing burden of health care costs by passing a plan that brings the typical family’s premiums down by $2500 and guarantees coverage to everyone who wants it. Senator McCain’s health care plan not only fails to cover every American and holds out less hope of cutting health care costs, it would actually tax your health care benefits for the first time ever. Over time this tax would grow and after just a few years it would be so large that middle-class families would face an overall tax increase from his plans. So that is a real choice in this election.

As we help families deal with rising costs, we also have to help those families who find themselves mired in credit card debt. That’s why I’ll establish a Credit Card Bill of Rights that will ban unilateral changes to credit card agreements; ban rate hikes on debt people already had; and ban interest charges on late fees. I’ll also reform our bankruptcy laws to make sure that if you can demonstrate that you went bankrupt because of medical expenses, you can relieve that debt and get back on your feet.

But even as we take these steps, we also know that it’s not enough to just get families back on their feet. We need to help hardworking families get ahead. That’s why the third step in my agenda is to give families the help they need to build that nest egg and provide a better life for their children.

To make saving easier, we’ll automatically enroll every worker in a workplace pension plan that stays with you from job to job. And for working families who earn under $75,000, we will start that nest egg by matching 50 percent of the first $1,000 you save and depositing it directly into their account.

To make a college education affordable for every American family, we’ll provide $4,000 of tuition if students will provide community or national service when they graduate. To make it easier for families to own their own home and stay in that home, we’ll crack down on predatory lenders, help more Americans refinance their mortgages, and provide ten million homeowners a mortgage tax credit that will take ten percent off their interest rate.

To help those mothers and fathers who are juggling work and family, I’ll expand the Child Care Tax Credit, extend the Family Medical Leave Act, and make sure that every worker in America has access to seven days of paid sick leave. I’ll make sure that women get equal pay for an equal day’s work. And to help those families who own small businesses that are the engine of prosperity in America, I will eliminate all capital gains taxes on start-ups and small businesses to encourage more innovation and job creation.

There is no doubt that this agenda is ambitious. It will take resources in the wake of policies our debt like a war in Iraq that’s costing us $10 billion a month. But the answer to our fiscal problems is not to short-change investments that will help our families get ahead – investments that are vital to our long-term growth as a nation. The answer is to make sure that we are finding a way to pay for these investments but cutting where we can. My plan is detailed and specific when it comes to cutting spending. In fact, all my new spending proposals would be more than paid for by spending reductions. I have a plan to responsibly end the war in Iraq and reduce overpayments for private plans in Medicare, something John McCain has no specific plan to do. I would also curb subsidies to banks making student loans, return earmarks to their 2001 levels and reform no-bid contracts. I do this because I believe we can have a smarter government that pays its way while investing in our country’s future.

John McCain Speech on the Economy 

Thank you very much. I appreciate the hospitality of the National Federation of Independent Business. And I am honored to be in the company of so many men and women who represent the best of American enterprise.

I have never run a small, struggling enterprise — unless you count my presidential campaign last year. But I do know that more than anything else, small businesses are what make the American economy run. You’re the ones who take the risks, often with little start-up money and nothing to fall back on. You are the ones who do most of the innovating in this country, and most of the hiring, too. For women, for immigrants and for people of every background, small businesses are the path to success and to the American dream.

In this very tough time for our economy and for workers and families across our country, job creation among small businesses is crucial. The African-American and the Hispanic-American small business communities are one of the fastest growing segments of our economy. That is a credit to the entrepreneurs of America, and America’s prosperity depends on your success.

Job creation is just one reason why the government should never take the hard work, sacrifices, and earnings of small businesses for granted. As president, my goal will to get our economy running at full strength again. And that starts by supporting small businesses across America.

Now that we know who I will be facing in the general election, the real debate over economic policy can begin. And as you may have heard, Senator Obama and I might well be meeting soon in a series of town hall discussions. Just the two of us, in direct conversation with voters. No need to turn it into a big media-run production with process questions from reporters, a spin room, and all the rest of it. To keep things friendly, I also suggested that my opponent and I travel to these town hall meetings together in the same plane.

Our disagreements in these town hall meetings will be civil and friendly, but they will also be clear for all to see. On tax policy, health-care reform, trade, government spending, and a long list of other issues, we offer very different choices to the American people. And those choices will have very different consequences for American workers and small business owners.

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March 22, 2007

The Honorable Ben Bernanke
Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, D.C. 20551

The Honorable Henry Paulson
Secretary
U.S. Department of Treasury
1500 Pennsylvania Ave, NW
Washington, D.C. 20220

Dear Chairman Bernanke and Secretary Paulson,

There is grave concern in low-income communities about a potential coming wave of foreclosures. Because regulators are partly responsible for creating the environment that is leading to rising rates of home foreclosure in the subprime mortgage market, I urge you immediately to convene a homeownership preservation summit with leading mortgage lenders, investors, loan servicing organizations, consumer advocates, federal regulators and housing-related agencies to assess options for private sector responses to the challenge.

We cannot sit on the sidelines while increasing numbers of American families face the risk of losing their homes. And while neither the government nor the private sector acting alone is capable of quickly balancing the important interests in widespread access to credit and responsible lending, both must act and act quickly.

Working together, the relevant private sector entities and regulators may be best positioned for quick and targeted responses to mitigate the danger. Rampant foreclosures are in nobody’s interest, and I believe this is a case where all responsible industry players can share the objective of eliminating deceptive or abusive practices, preserving homeownership, and stabilizing housing markets.

The summit should consider best practice loan marketing, underwriting, and origination practices consistent with the recent (and overdue) regulators’ Proposed Statement on Subprime Mortgage Lending. The summit participants should also evaluate options for independent loan counseling, voluntary loan restructuring, limited forbearance, and other possible workout strategies. I would also urge you to facilitate a serious conversation about the following:

* What standards investors should require of lenders, particularly with regard to verification of income and assets and the underwriting of borrowers based on fully indexed and fully amortized rates.

* How to facilitate and encourage appropriate intervention by loan servicing companies at the earliest signs of borrower difficulty.

* How to support independent community-based-organizations to provide counseling and work-out services to prevent foreclosure and preserve homeownership where practical.

* How to provide more effective information disclosure and financial education to ensure that borrowers are treated fairly and that deception is never a source of competitive advantage.

* How to adopt principles of fair competition that promote affordability, transparency, non-discrimination, genuine consumer value, and competitive returns.

* How to ensure adequate liquidity across all mortgage markets without exacerbating consumer and housing market vulnerability.

Of course, the adoption of voluntary industry reforms will not preempt government action to crack down on predatory lending practices, or to style new restrictions on subprime lending or short-term post-purchase interventions in certain cases. My colleagues on the Senate Committee on Banking, Housing and Urban Affairs have held important hearings on mortgage market turmoil and I expect the Committee will develop legislation.

Nevertheless, a consortium of industry-related service providers and public interest advocates may be able to bring quick and efficient relief to millions of at-risk homeowners and neighborhoods, even before Congress has had an opportunity to act. There is an opportunity here to bring different interests together in the best interests of American homeowners and the American economy. Please don’t let this opportunity pass us by.

Sincerely,

Barack Obama
United States Senator