Vice President Joe Biden talks to Chrysler Dealer Ed Bonneville at Bonneville & Son Chrysler Jeep Dodge Ram during a visit to applaud Chrysler's repayment of U.S. Government loans ahead of schedule, in Manchester, NH, May 25, 2011. (Official White House Photo by David Lienemann)

On Tuesday, the U.S. Department of Treasury announced that Chrysler repaid $5.9 billion in U.S. government loans more than six years ahead of schedule, bringing the total amount of money Chrysler has returned to taxpayers to $10.6 billion. The announcement “marks a significant milestone for the turnaround of Chrysler and the countless communities and families who rely on the American auto industry,” President Obama said in a statement. Next Friday, the President will visit a Chrysler plant in Toledo, Ohio where he will highlight that incredible turnaround.

Just two years ago, the American auto industry was on the brink of collapse. The President made a difficult decision to provide support to Chrysler and General Motors on the condition that all stakeholders make the sacrifices necessary to fundamentally restructure those companies and put them on a path to viability.

“Supporting the American auto industry required making some tough decisions, but I was not willing to walk away from the workers at Chrysler and the communities that rely on this iconic American company,” President Obama said. “If Chrysler and all its stakeholders were willing to take the difficult steps necessary to become more competitive, America would stand by them, and we did.”

Earlier this week, Assistant to the President for Manufacturing Policy Ron Bloom and Deputy Director of the National Economic Council Brian Deese joined Chrysler CEO Sergio Marchionne to mark the historic day at the company’s Sterling Heights assembly plant.  The factory, once slated to be shuttered, has not only retained its 1,270 jobs, but also added another 900 jobs to keep up with sales.

“Best of all, we’re seeing success stories like the one here at Sterling Heights play out all across the country,” Bloom told workers.  “In Michigan, as well as in Indiana, Pennsylvania, and Missouri, and across the country, since GM and Chrysler emerged from bankruptcy, the auto industry has added 115,000 jobs – the fastest pace of job growth in the auto industry since the 1990s.”

In addition to congratulatory phone calls to Chrysler CEO Sergio Marchionne and United Auto Workers President Bob King, Vice President Biden called to thank Frances Soehartono, a worker from Chrysler’s Jefferson North Plant in Michigan. After being out of work for over two years, Frances was hired by Chrysler a year ago. Chrysler’s historic turnaround, the Vice President told Frances, is due in large part to the high quality of American workmanship and the dedication of workers like her.

On Wednesday, Vice President Biden paid a visit to a local Chrysler dealership in Manchester, New Hampshire. Bonneville and Son Chrysler is an example of the company’s resurgence at the local level – having faced tough years in 2009 and 2010, the dealership is now on a clear path to its best year since before the recession.  During a tour of the lot led by second-generation dealer Ed Bonneville Jr., Vice President Biden told a group of employees and potential customers that there isn’t any reason why the American auto industry cannot be the best in the world.

Chrysler’s benchmark achievement wasn’t the only piece of evidence of the American auto industry’s resurgence. This week GM also fleshed out its recent announcement that it will add 4,200 jobs around the country with news of 2,500 new jobs at its Hamtramck plant – which builds, among other things, the Chevy Volt.

Last month, the Administration released a new report showing that – after giving effect to a proposed restructuring and based on current market prices – Treasury’s overall investment in AIG is expected to break even or turn a profit.  This valuation reflects AIG’s recently announced exit strategy to pay back taxpayers, including the conversion of Treasury’s illiquid preferred stock stake in that company to 1.7 billion shares of publicly traded common stock.

Unlike the preferred stock we currently hold, AIG’s common stock has a readily identifiable value on the New York Stock Exchange. Under federal accounting rules, we are required to value that common stock at the current market price. And based on current market prices, the sale of that AIG common stock would provide a substantial profit for taxpayers.

The math isn’t that complicated. It’s simple multiplication. Our calculations on AIG are straightforward, and we have published our methodology for all of the American people to see. 

SIGTARP, however, incorrectly claims that our report is inconsistent with TARP’s audited financial results from March 2010. And in doing so, SIGTARP seems to be arguing that when Treasury conducts any evaluation of the cost of its investment in AIG, it should pretend that the company’s exit strategy was never announced.

SIGTARP’s analysis seems to be stuck in a time warp if they believe that we should ignore AIG’s exit strategy in evaluating our investment in that company. Moreover, they demonstrate a fundamental misunderstanding of the difference between audited financial results – which are backward looking and represent a snapshot in time – and forward-looking valuations of future profits, such as Treasury’s recent report.

Additionally, invaluing our expected common stock holdings in AIG, Treasury employed the exact same methodology we use for valuing the common stock we own in other publicly traded companies. And we made it clear that the valuation was based on giving effect to the restructuring and subject to certain conditions, which AIG is moving to fulfill. The fact that AIG will raise at least $18 billion in its offering of AIA – announced in the last few days – brings us one big step closer to completing the restructuring and ensuring that taxpayers are paid back.

All of this financial talk can get complicated, but here’s the bottom line: Any truly independent observer would say that Treasury’s stake in AIG will be worth more than taxpayers originally invested in that company. Of course, as with any investment, prices could rise or fall in the future. That’s the nature of any financial transaction. But Treasury is confident that we are in a much stronger position today to recoup our investment in AIG than two years ago – or even a few short months ago. And that’s very good news for taxpayers.

Jen Psaki is Deputy Communications Director

The same Republicans in Congress who mentioned small businesses eighteen times in their “Pledge to America” voted against the Small Business Jobs Bill in the House on the same day...that’s right..they voted against a bill that would potentially benefit the very small business where they rolled out their agenda.

The potential benefits to Tart Lumber in the Small Business Jobs Bill, signed into law by President Obama just yesterday, include:

1. Businesses like Tart will be able to immediately write off its first $500,000 in equipment investment next year.
2. Investors in firms like Tart would receive zero capital gains on their investments.   
3. A new Small Business Lending Fund will make capital more available to firms like Tart
4. By expanding successful SBA lending programs, firms like Tart will have expanded opportunities to get the loans they need to grow.

And let’s not forget….

In addition to hiking taxes for 110 million middle-class families and millions of businesses, the Congressional Republicans have also consistently opposed the 8 small business tax cuts that the President had already signed into law:

1. A New Small Business Health Care Tax Credit
2. A New Tax Credit for Hiring Unemployed Workers
3. Bonus Depreciation Tax Incentives to Support New Investment
4. 75% Exclusion of Small Business Capital Gains
5. Expansion of Limits on Small Business Expensing
6. Five-Year Carryback of Net Operating Losses
7. Reduction of the Built-In Gains Holding Period for Small Businesses from 10 to 7 Years to Allow Small Business Greater Flexibility in Their Investments
8. Temporary Small Business Estimated Tax Payment Relief to Allow Small Businesses to Keep Needed Cash on Hand

10:00: Unveil agenda mentioning small business 18 times.
2:30: Return to Capitol to vote against help for small business.

Congressional Republicans visited Tart Lumber Company, a small business in Sterling, Virginia where they laid out their “Pledge to America,” which will do nothing more than take America back to the same failed economic policies that caused this recession and hurt the very small business where they are holding their event.

The “Pledge to America”  mentions small businesses not once, but eighteen times.  But what it fails to mention is the impact the Republican  agenda actually  would have on small businesses.

In addition to hiking taxes for 110 million middle-class families and millions of businesses, the Congressional Republican have consistently opposed the 8 small business tax cuts that the President has already signed into law including:

1. A New Small Business Health Care Tax Credit
2. A New Tax Credit for Hiring Unemployed Workers
3. Bonus Depreciation Tax Incentives to Support New Investment
4. 75% Exclusion of Small Business Capital Gains
5. Expansion of Limits on Small Business Expensing
6. Five-Year Carryback of Net Operating Losses
7. Reduction of the Built-In Gains Holding Period for Small Businesses from 10 to 7 Years to Allow Small Business Greater Flexibility in Their Investments
8. Temporary Small Business Estimated Tax Payment Relief to Allow Small Businesses to Keep Needed Cash on Hand

And it doesn’t end there, the same Republicans in Congress are expected to vote against another Small Business Jobs Bill in the House TODAY….that’s right…they are expected to vote against a bill that would potentially benefit the very small business where they are rolling out their agenda.

The potential benefits to Tart Lumber in the Small Business Jobs Bill include:

1. Businesses like Tart will be able to immediately write off its first $500,000 in equipment investment next year.
2. Investors in firms like Tart would receive zero capital gains on their investments.   
3. A new Small Business Lending Fund will make capital more available to firms like Tart
4. By expanding successful SBA lending programs, firms like Tart will have expanded opportunities to get the loans they need to grow.

As a recap, Republicans in Congress were not always against assistance for small businesses.  In fact,  the same Small Business Jobs Bill they are expected to vote against today is made up of Republican ideas including zero capital gains on investments and business expensing write offs.  Unfortunately Republicans in Congress are once again putting partisan obstruction ahead of essential assistance for small businesses, even those they use as backdrops.  

Jen Psaki is Deputy Communications Director

Senator Shelby wants to go back to a time when there was no such thing as a Consumer Financial Protection Bureau and when consumers were left without a voice at the table. This is an agency whose mission is to look out for American consumers and empower them with the clear and concise information they need to make the financial decisions that are best for them. Its existence is enormously important, because one cause of the financial crisis and the Lost Decade for the middle class was the unscrupulous practices of credit card companies and mortgage lenders, who reaped billions at the expense of consumers from hidden fees and penalties.

That's why the President fought so hard for the new CFPB and new rules to outlaw the tricks and traps that have punished the American people. That hard-won victory came over the fierce opposition of Wall Street and the financial industry. But now the man who would be chair of the Senate Banking Committee says that if Republicans win control of the Senate, he will work to gut these new consumer protections.

We hope Senator Shelby is prepared to explain why he feels that way to the millions of Americans who have been misled with pages and pages of fine print on applications for credit cards, mortgages or student loans, and now find themselves in untenable financial situations.

It’s important to understand that when Congressional Republicans talk about re-opening this legislation, they’re talking about standing up for the interests of big banks and their lobbyists and leaving middle class families to fend for themselves.

The Wall Street reform legislation is a clear victory for the American people. It will bring greater economic security to families and businesses across our country by enacting the toughest financial reforms since the ones created in the aftermath of the Great Depression, and by making Wall Street more accountable. And yet Senator Shelby wants to get rid of the progress we made and go back to a system that helped cause the financial crisis.

It’s become very clear that Congressional Republicans do not have any viable solutions to fix our nation’s problems. And the solutions they do offer, like repealing Wall Street reform legislation, will do absolutely nothing to grow our economy, put people back to work and strengthen America’s middle class. Instead, they would take us back to the same exact failed economic policies that created the mess we’re in: cutting rules for the special interests and big corporations and cutting the middle class loose.

Jen Psaki is Deputy Communications Director

Here’s what Cantor and the Republicans are holding hostage: a tax cut for all Americans on the first $250,000 of their income. Under the Obama plan, every middle class family would receive the immediate certainty and comfort of knowing their tax cuts were permanently extended. Every American making more than $250,000 per year they would receive a tax cut on the first $250,000 of their income. And for income above that amount, this change would leave their tax rates at or below the rates that existed when President Clinton was in office and when the economy created 23 million jobs. 

And here’s what they’re holding middle class tax relief hostage for: having our nation borrow $700 billion that we can’t afford to provide an average tax cut of $100,000 to millionaires and billionaires. This tax cut would be, according to the non-partisan Congressional Budget Office, just about the worst way to jumpstart our economy and help create jobs. That is why the President remains focused on strengthening the middle class to help grow the economy.

Because these realities are pretty hard to defend, Mr. Cantor is forced to make tired claims about the impact on small businesses that are simply not based in fact. This isn’t about small businesses the way most Americans think about small businesses. By Eric Cantor’s definition half of the wealthiest 400 people in America would qualify as small businessmen.

Let’s be clear—even Eric Cantor’s colleague, John Boehner acknowledged that more than 97% of small businesses will get a permanent tax cut under the Obama plan, and beyond that many of the “businesses” that fall into the top 3% are not small businesses at all. In fact, the individuals the Congressional Republicans are referencing as small businesses include virtually every partner at major corporate law firms and billionaire hedge fund managers -- not exactly mom and pop stores or startup businesses.

If Eric Cantor was really focused on small businesses he would push his Republican colleagues in the House to support the Small Business Jobs Bill that would give eight new tax cuts to small businesses. The bill finally that passed the Senate last week would give essential assistance to small businesses and the President is looking forward to signing it into law as soon as the House passes it.

And let’s just be straight: time after time for the last 20 years that well-funded special interests and Congressional Republicans have fought together to ignore the deficit and keep lower taxes for the very most-well off Americans, they have always disguised their argument as concern for small business and small business jobs.

It’s time for Mr. Cantor and the Congressional Republicans to stop letting partisan games get in the way of giving middle class families the long-term relief they need.

Jen Psaki is Deputy Communications Director

Even as the Republican Party has tried to shed its dismal record on fiscal discipline, they have been consistent and unwavering in their attempts to borrow more than $700 billion to support permanent tax cuts for millionaires and billionaires. But giving an average $100,000 tax break to those making over $1,000,000 a year when we can’t afford them and they don’t need them is not sound economic policy.

The latest trick from Republican Minority Leader John Boehner says a lot about Republican priorities and strategy – and seems like an obvious recognition of just how irresponsible their position is. 

In an interview this morning he issued a half-hearted call for a two year extension of these tax cuts for the wealthiest Americans. This is nothing more than a throwback to Bush-era budget gimmicks that helped get us into the fiscal mess we're in today, an attempt to mask the true budget-busting cost of the Republican agenda. If there was any doubt about that, it was eliminated when immediately after the interview he issued a press release making clear the Party’s continuing desire to borrow more than $700 billion to make these tax cuts permanent (“House Republicans will continue to fight to permanently stop job-killing tax hikes.”)

It is also ironic that Mr. Boehner would suggest a two year extension of all tax cuts while preaching about uncertainty for businesses.  President Obama believes that the working families who have been hardest hit over the last decade deserve the certainty of knowing that their taxes are not at risk of being raised only one or two years from now.  That is why the President is proposing to make all middle class tax cuts permanent, and why he is calling on Republicans to stop holding this relief hostage and pass a permanent extension of middle class tax cuts without delay.

Make no mistake, we simply cannot afford to follow Mr. Boehner and the Republican’s strategy of adding to our deficit for the sake of high-income tax cuts that the Congressional Budget Office determined were the least effective of all the measures it analyzed for creating jobs and supporting economic growth. And to hold middle class tax relief hostage to such an irresponsible proposal is beyond the pale.

Jen Psaki is Deputy Communications Director

The study found that “taxpayers with income of more than $1 million for 2011 would still receive on average a tax cut of about $6,300” from those in effect during the Clinton Administration, while those “with taxable income of $500,000 to $1 million would still get on average a tax cut of $6,700.”  

You would think that rolling the Bush tax cuts back to these levels would be universally accepted---especially given the long term fiscal challenges our country is facing.

Not so fast…

Republicans in Congress are arguing that we have no choice but to extend the Bush tax cuts for the wealthiest, despite the fact that extension would cost upwards of 700 billion for ten years and the nonpartisan Congressional Budget Office makes clear that tax cuts for the wealthiest rank at the bottom of the list of best ways to stimulate the economy. 

Let’s not forget that this same group of Republicans blocked the extension of unemployment insurance for Americans who needed it most and voted against the Making Work Pay tax cut—that gave a tax break to 95% of working Americans.

And just last week the same group blocked a bill that would provide essential assistance to small businesses, the drivers of Main Street economies across the country.

Let me get this straight.

Republicans are arguing that for the wealthiest Americans—those making more than $250,000 per year— it is not enough that they receive a $6,300 tax cut relative to what they paid in the 1990s, they need to maintain the entire Bush tax cut. But at a pivotal time in economic recovery, they are refusing to provide necessary assistance to small  businesses including zero capital gains, bonus depreciation and a small business lending facility that will help small businesses get the access to credit they need.

Talk about out of whack priorities.

Jen Psaki is Deputy Communications Director

The Recovery Act gets a lot of attention as a centerpiece of the President’s economic agenda -- justifiably so given that it’s been responsible for about 3 million jobs -- but the legislation the House passed today is only the latest example of the President’s ongoing efforts to boost our economy.  Despite the fact that most of these efforts were on issues that have had broad and bipartisan support, the use of parliamentary maneuvers from the Republican Leadership in the Senate has made it a difficult fight for every inch.  Many of the President’s initiatives have still ultimately passed over this obstruction as the legislation today did, and he will continue fighting to ensure everything possible is being done to strengthen our recovery and get Americans back to work.

Working with Congress, we have made crucial progress on jobs legislation over the past months.  For example:

Tax cuts to encourage hiring: In March, the President signed the bipartisan HIRE Act, which provides payroll tax credit – designed by Senators Hatch and Schumer – for companies that hire employees who have been looking for work for 60 days or more. The Treasury Department reports that businesses have hired over 5.6 million workers through this program in just five months. The HIRE Act also allows firms to write off more of their investments in new equipment, encouraging capital spending. In addition, the President has worked to limit costs for small businesses. The recent health reform package made 4 million small business owners eligible for a health care tax credit that covers up to 35 percent of premiums.

• Just  last week, BusinessWeek reported on how the HIRE Act can impact individual employers: “Two months ago, we wrote about Blinds.com, a Houston blinds e-tailer that was struggling to determine whether to hire additional workers. The boss, Jay Steinfeld, told us his business was profitable and had “plenty of cash,” so he could afford to take on new staff. But he was worried about the state of the housing market, crucial for any home furnishings retailer. Government initiatives weren’t top of mind.  Still, as we talked, he did acknowledge that his team was taking into consideration some of the Obama Administration’s incentives to hire. His CFO, Marilynne Franks, said that the Hiring Incentives to Restore Employment Act’s tax credit for hiring unemployed workers, which took effect in March, would soon be paying off for the company. She figured Blinds.com would be eligible for tax credits for 8 or 10 of the 35 employees it had brought in since the beginning of the year.”

Promoting exports: The President also set a goal to double exports in the next five years. In March the President signed an Executive Order establishing an export promotion cabinet chaired by the CEOs of Boeing and Xerox to guide the government toward this goal. Federal agencies are also coming together to set up one-stop-shops across the country, and in our 250 embassies and consulates abroad, to help American businesses gain a foothold in the fastest-growing foreign markets with the most demand. In addition, the President has proposed increasing funding to the International Trade Administration and to USDA programs that connect farmers with new markets. Finally, the President signed the Travel Promotion Act into law to encourage foreign tourists to visit American destinations and support local businesses.

• A Brookings Institution report out a couple weeks ago explained the immense opportunity here, profiling 100 metropolitan areas: “The growth rate of exports shows how dynamic and vibrant the export economy has been over recent years—specifically 2003 to 2008. Although the recession saw a large drop in exports from 2008 to 2009, the most recent U.S. data show that export growth is once again much faster than GDP growth, meaning that foreign demand for U.S. products is growing faster than domestic demand. The fastest growing metropolitan areas have been especially successful at taking advantage of this demand.”

Supporting our Workforce: Last month, Congress passed and the President signed HR 4213, which extended the eligibility period for extended unemployment insurance benefits from June 2^nd to November 30^th. This extension will provide some 3.2 million Americans with much needed help making ends meet while they search for employment. The CBO has said that aid to the unemployed is one of the two most cost-effective policy options for increasing economic production and employment.

• The Detroit News gave just a snapshot of how this would benefit Americans looking for work: “Tens of thousands of unemployed Michiganians whose jobless benefits were cut off during a seven-week stalemate in Congress will have access to their money as early as Tuesday.  ‘It's just fabulous news,’ said Melissa Burke of Farmington Hills, who nearly emptied out her bank account during an impasse in the Senate that resulted in the federal benefits program expiring June 2.  ‘I'll be able to pay some bills,’ said Burke, a laid-off graphic designer. ‘I've cut spending down to the bare minimum -- no cell phone, no satellite TV, and 33 cents a day to feed the dog.’”

But there remains much work to do to overcome efforts by Republicans in the Senate to block additional job-creating measures.  Two areas in particular that the Senate should move immediately are:

Creating construction jobs while promoting energy efficiency: The President has also advocated a “Homestar” program of rebates for consumers that undertake energy efficiency investments in their home. This bipartisan legislation would help create jobs in the hard hit construction and manufacturing industries while saving consumers money and helping reduce our economy’s dependence on oil.

Further support for small business: In total, the President has enacted seven tax cuts for small businesses since taking office. And the President has advocated additional measures: eliminating capital gains taxes for key investments in small firms, extending “bonus depreciation” provisions in the Recovery Act, and increases deductions that small businesses can take for new equipment and other expenses. His plan would also make more credit available: it establishes a $30 billion lending fund, provides over $2 billion in grants to state-run innovative small business programs, extends the 90% SBA loan guarantee on 7(a) loans, and eliminates all fees for both 7(a) and 504 loan programs.

Jen Psaki is Deputy Communications Director 

And that’s why President Obama has called on the Senate to swiftly approve the Small Business Jobs Act – a set of tax breaks and lending incentives designed to spur hiring and growth at small businesses.

As we continue to fight for essential assistance to small businesses we know there will be a lot of misinformation and given what is at stake we want to provide the real facts.

Below is a point by point fact check of a story about the small business legislation the AP ran this weekend:

FICTION: “Congress is at work on a new program that would send $30 billion to struggling community banks”

FACT: To participate, a bank’s Federal regulator must deem it viable – helping to protect taxpayer investments and ensure that they can increase lending. Indeed, Treasury and the Administration have opposed any program that has a focus on “bailing out” struggling banks rather than supporting viable institutions that will extend more credit.

When banking groups or Members of Congress have proposed legislation that requires Treasury to allow weaker banks to participate, the Administration strongly and successfully opposed these measures. For example, when an amendment was added to the House bill to allow small banks to be able to put off recognizing losses in impaired real estate loans, the Secretary of the Treasury publicly and strongly opposed it, and worked so that this measure was not included in the Senate bill. In fact, the Administration supported in the House and Senate language that explicitly prohibits banks on the FDIC’s problem list from participating. 

FICTION: “Yet under the new program, the 775 banks on the government's ’problem’ list could qualify for bailouts for the first time.”

FACT: The legislation explicitly states that “an eligible institution may not receive any capital investment under the Program, if (i) such institution is on the FDIC problem bank list; or (ii) such institution has been removed from the FDIC problem bank list for less than 90 days.” 

FICTION: “For banks in the hardest-hit areas, it can be nearly impossible to recover once too many loans sour. Yet the bill would require that banks be protected against "discrimination based on geography." It says the money must be available to lenders in areas with high unemployment.”

FACT: The legislation requires that regulators or Treasury not “discriminate” on the basis of a bank’s location.  It does not remotely suggest that a weak bank can get capital simply because it is in a high unemployment area or distressed location. Not even close. To the contrary, the legislation is crystal clear that every bank must stand on its own and pass the same consistent, uniform viability test administered by its regulator – no matter where it is located. In addition, Treasury anticipates that the application process would allow for other Federal regulators to confirm the primary regulator’s decision where necessary. 

FICTION: “Many community banks are overseen by state regulators struggling under budget cuts and limited expertise. Many are ill-equipped to monitor banks during a crisis”

FACT: The legislation makes clear that every bank’s primary Federal regulator would play the key role in determining whether or not an institution was eligible for the program – not state regulators. In addition, the legislation provides for strong oversight by the Treasury Inspector General and the Government Accountability Office – institutions with extensive experience in overseeing programs that require similar expertise as the SBLF. 

FICTION: “This time, money is more likely to disappear as a result of bank failures or fraud”

FACT: The independent Congressional Budget Office – which initially projected significant losses under TARP’s Capital Purchase Program (even though it now forecasts taxpayer savings for the program) has estimated that the Small Business Lending Fund would provide taxpayers with $1.1 billion in savings over 10 years.  While CBO acknowledged there were other ways to do such scoring, the way the CBO chose and – by which Congress must abide – found that this program would not cost the taxpayer a penny. 

FICTION: “It's supposedly reserved for banks deemed ‘viable.’ But regulators won't consider whether banks are viable now.”

FACT: The only way a community bank (under $1 billion in assets) can get access to the full 5 percent of Risk-Weighted Assets in the program is to be found to be viable before it receives any government capital.

The Senate Legislation provides one narrow exception to this rule: in cases where a bank’s Federal regulator determines that the bank has sufficiently strong management and solid long-term prospects – but nevertheless has a small capital shortfall – the legislation allows the bank to get government capital equal 3% of risk-weighted assets provided that private investors will invest the same amount, dollar-for-dollar.  So not only must the government determine that the bank is otherwise viable, but private sector investors must be willing to contemporaneously put in at least as much of their own private sector capital at risk as the government for the bank to be eligible.  Furthermore, the new private capital must be junior to the government’s investment – meaning that Treasury gets repaid in full before any other new investors.  Indeed, when the Congressional Budget Office reviewed this new proposal, because of these protections, they did not think this narrow exception would add any costs to the program at all. None. 

FICTION: “But Federal Reserve Chairman Ben Bernanke and others have questioned whether the problem is lack of capital, or if there simply aren't enough creditworthy borrowers.”  

FACT: As Chairman Bernanke himself stated last month: “it seems clear that some creditworthy businesses--including some whose collateral has lost value but whose cash flows remain strong--have had difficulty obtaining the credit that they need to expand, and in some cases, even to continue operating.”

Indeed, the National Federation of Independent Business – which reported in a survey earlier this year that 45 percent of small businesses found that their borrowing needs were not being satisfied – stated recently that “the lending fund has the potential to help credit-worthy small businesses that have had difficulties obtaining credit, which is a good thing.” At the same time, the Small Business Jobs Act is designed specifically to address the range of problems facing small businesses – which is why it includes a series of targeted tax incentives for new investments, enhancements to SBA programs, and a new State Small Business Credit Initiative in addition to the SBLF. 

FICTION: “The administration's haziness about whom the program benefits has fueled comparisons to the $700 billion bailout known as the Troubled Asset Relief Program, or TARP.”

FACT: The Administration has been very clear about the intent of this program: it is to stimulate lending to small businesses by providing capital and incentives to the community banks on Main Street that make these loans. Indeed, the design of the program has been very explicit in addressing this goal – the program is directed only at small banks, which do the overwhelming amount of their commercial lending to small businesses, and the benefits banks receive are linked directly to their lending to small businesses. Loans over $10 million or to businesses with revenues over $50 million would not be counted. 

FICTION: One source quoted in AP story stated, "What we lack here is oversight and true accountability."

FACT: There is no doubt that the legislation establishing the Small Business Lending Fund would provide for strong oversight and accountability. As a new program established through new legislation separate from TARP, the Small Business Lending Fund – in addition to requiring a small business lending plan from participants and regular reports on the impact of SBLF capital – would be subject to robust oversight from the Treasury Inspector General and the Government Accountability Office. These two bodies have a strong record of expertise and experience suited to the task of overseeing this program. For example, Treasury Inspector General Eric Thorson – nominated by President Bush in 2007 – has substantial experience and existing responsibilities relevant to monitoring a program like the SBLF: overseeing the Office of the Comptroller of the Currency, conducting material loss reviews of Treasury-regulated financial institutions that cause losses over $25 million to the FDIC’s deposit insurance fund, and ensuring accountability for Recovery Act programs overseen by Treasury, to name a few.

Jen Psaki is Deputy Communications Director

With the hard-fought passage of Wall Street Reform last week, the President ensured that Wall Street will be held accountable, and that the American taxpayer will never again be on the hook for their actions.  As the President had said repeatedly, he was just as angry with having to take steps to shore up our financial system as all Americans were.  But when the President came into office, the economy was falling off a cliff, and this report demonstrates just how deep and disastrous the valley below truly was had he not done everything possible to pull it back.  The report particularly emphasizes the effectiveness of financial stability measures including the bank stress tests, the actions of the Fed and the TARP program and it highlights the potential cost to the taxpayers had policy makers not acted at all.

• Read the full story.

The depth of the crisis required decisive and historic action.  While the steps we took were not always politically popular the results become more indisputable each day.  We went from losing 3.7 million jobs in the first six months of 2009 to gaining more than 600,000 jobs in the first six months of this year, and as this report demonstrates, it could have been much, much worse.

But the President needs no reminder that there is far more work to be done.  That’s why he was in Edison, New Jersey this afternoon meeting with local small business owners about the importance of lending assistance for small businesses.  The Senate is expected to move forward in the coming days on a vote on the small business bill that strengthen the capacity of small businesses to create jobs and lead  economic recovery.  The legislation includes several key Administration initiatives – including the Small Business Lending Fund (SBLF), the State Small Business Credit Initiative (SSBCI), extension and expansion of key SBA loan programs, and small business tax cuts including zero capital gains for key small business investments.

In addition, we can’t let the recovery of the financial sector distract from what led to this crisis which is why we are focused on protecting consumers, reining in Wall Street, ending bailouts and too big to fail through the implementation of the Wall Street reform bill the President signed into law last week.

Jen Psaki is Deputy Communications Director

Let’s set the record straight with a  few facts:

1. There are 400 seats in the auditorium where the President is signing the bill today.
2. There are thousands of hardworking Americans including consumer advocates, members of Congress, Attorney Generals who have been working for eighteen months to pass Wall Street reform into law.
3. That means thousands of people who worked toward passing the bill into law will not be able to attend the signing today.
4. Bill signings have always been a celebration and our priority was to invite a diverse group of stakeholders including members of the financial industry, consumer advocates, members of Congress and Americans impacted by the financial crisis—who were instrumental in making today possible. 
5. This is a fake controversy. The CEO’s who opposed reform never expected to be invited to the bill signing and not a single one has complained to the Administration.  In fact Administration officials have been in touch with many of the same CEOs about a number of issues over the last few days and this issue has not even registered.  Many of the same CEOs are meeting with Prime Minister David Cameron in New York City this morning.

Given the bill signing, Republican attempts to block the extension of UI benefits and the small business bill on the Senate floor—you would think there is plenty of substantive news to cover.

But instead some are focusing  today on who made the cut on the invitation list----let’s focus on what this bill means for millions of Americans.

Jen Psaki is Deputy Communications Director

1. Stronger protections for consumers against unfair credit card practices like rate hikes for existing credit card balances.
2. Mortgage brokers will be prohibited from making higher commissions by selling mortgages they know consumers can’t afford.
3. Free annual credit scores so people can stay on top of their finances. [Clarification: free credit scores are available if you receive worse terms on a loan because of something on your credit report, or if you are rejected.]
4. No more taxpayer-funded bailouts. If a company can’t make it, it will have to liquidate. 
5. Greater input by company shareholders over how much a CEO gets paid.  And companies’ compensation boards are now required to be truly independent.
6. Brokers who offer investment advice will have to act in the best interests of their customers, not their own financial interests.
7. Financial firms won't be allowed to grow so large that if one fails, it will affect the entire financial system. 
8. There will be one agency whose sole job is to make sure that consumers get the protections they deserve and to set clear rules to hold banks, mortgage companies, payday lenders, and credit card lenders accountable.
9. Businesses can't be charged extra fees for debit card “swipe fees” that exceed the cost of processing transactions.
10. You can learn plenty more here at WhiteHouse,gov or at financialstability.gov
     
11. Updated: To tack on #11, here's a new animated video we've released to further explain Wall Street Reform.

Jen Psaki is Deputy Communications Director

In his conversation with NewsHour host Jim Lehrer, Secretary Geithner expressed confidence that the Congress will soon deliver a strong bill to President Obama’s desk:

LEHRER: The financial reform legislation: Is there any question in your mind this could eventually pass the Senate and be signed by the president?

GEITHNER: No, it looks like it's going to pass. And it should pass, again, because all Americans have a stake in this financial reforms. Remember, think what it was like 18 months ago. You know, people saw worst financial crisis in generations, the value of their savings fall by 40 percent, on average. Millions of people lost their jobs, lost their homes, saw businesses fail. This crisis touched everybody, and it demonstrates why all Americans have a stake in reforms that are going to give better protections for Americans and make sure that the financial system goes back to the business of helping Main Street businesses get access to credit so they can borrow to invest and expand.

The Secretary also stressed that the bill will make the financial system safer for all Americans, create the strongest consumer protections that the United States has ever had, and limit risk-taking by large financial institutions:

LEHRER: It's a very complicated bill, and we don't have time to go through the whole thing, but one of the things that caused the financial crisis was this "too big to fail idea," particularly among the banks. And most of the analysis of the current situation is, these banks are not only as big as they were; some of them are even bigger, now, than they were when the financial crisis hit. So how's anything going to change?

GEITHNER: Two most important causes of this crisis, Jim, were that we allowed a bunch of financial activity to operate in the shadows. Firms take on enormous amounts of risk without the financial cushion and capital to back those investment moves they made, and we let millions of Americans be taken advantage of, vulnerable to fraud and abuse. That's what caused the subprime crisis.

Now, what this bill does, though, is extend to all Americans - consumers and investors - much better protections against fraud and abuse and predation, and will limit risk-taking by these large institutions so they can never again put the economy in a position where the mistakes they make put the economy at risk as a whole.

Additionally, Secretary Geithner explained why the financial reform bill will help avert and limit the damage caused by future financial crises:

LEHRER: If this bill becomes law, does that mean we are no longer at risk of a similar financial crisis?

GEITHNER: We will have a much better chance to prevent future crises and limit their damage -- act much more effectively and much earlier and limit the damage and not leave the taxpayer exposed to bearing the burden of these crises. These are very tough reforms, very strong reforms, and they will help restore trust and confidence in the system.

Think back, Jim, to the Great Depression. It took this government four years after the great crash of 1929 to put in place basic protections for banks, and the securities laws, and those reforms laid the foundation for decades of the most-impressive record of investment, innovation, growth any major economy had ever seen.

But we allowed the moss to grow, risks to operate in the shadows. The market outgrew these protections, and the damage caused by that failure was catastrophic. But what these reforms do is prevent that from happening again, because it will extend this set of protections across the economy and make sure, again, banks can't take risks on the scale that they could damage the economy as a whole.

As Secretary Geithner noted, Congress is close to passing the most sweeping set of reforms to our financial system in more than a generation.  It is impossible to deny that this will truly be a historic achievement for the Administration, for Congress, and, most importantly, for our country.

Jen Psaki is Deputy Communications Director

The President has been clear on this issue, repeatedly urging members of the Senate to fight efforts of the special interests and their lobbyists to weaken consumer protections.  The fact is, auto dealer-lending is an $850 billion industry, which is larger than the entire credit card industry and they make nearly 80 percent of the automobile loans in our country. 

Is there any question that these lenders should be subject to the same standards as any local or community bank that provides loans?

Auto dealer-lenders sell auto loans to working families every single day, and while most dealers are no doubt above board, some cannot resist the bigger profits that come from inflating rates, hiding fees, and tacking on over-priced add-ons.

These profits can lead some dealers to treat their customers unfairly. There are countless stories of hard-working people who are never even contacted when they are hit with a higher interest rate or who are forced to swallow the cost already paid toward the purchase of their car while giving up the vehicle.

People like Lacie Riso and Jarred Whited, a sailor on the aircraft carrier USS Ronald Reagan, as NPR reported: 

Riso, 18, and Whited, 20, an aviation ordnance man, needed a car because their old one was breaking down. They went to a dealer near their base in San Diego and found a used Hyundai Sonata they  liked. Then, Riso says, the salesman contacted a finance company. 

"And they say, you know, 'We'll approve them. They need to pay $394 a month.' So we are like, you know, we can do that; that's fine," she says. 

Riso and Whited got the keys. They left Riso's old Ford Focus as a trade-in. The next day, they went back to the dealer to set up an automatic payment to the finance company from Whited's military  paycheck. 

But after several weeks, the finance company said the loan wasn't approved after all. The couple then asked the dealer for new payment information. 

"So we say, you know, 'What bank do we pay this to? What's the account number? What's the loan number that you have?' And he told us, 'No, I don't have anything like that. You can pay me cash or  personal check to me at the dealership.'" 

 Riso and Whited turned that offer down and the dealer repossessed the Sonata. They told him to give back the more than $500 they had made in payments, along with Riso's Focus. 

"And he said, 'Oh no, you're never going to see your Focus again. Your car was repossessed for nonpayment and you can pay me $800 to get back in this contract,' " Riso says.

In a letter to the Treasury Department last February, Clifford Stanley, the Undersecretary of Defense also raised concerns about the impact the “unscrupulous practices” of auto dealer-lenders on military families. Army Secretary John McHugh recently sent a letter to Senate Banking Committee Chairman Christopher Dodd, D-Conn., “voicing his objection to Brownback's amendment."  As that same story notes, "Holly Petraeus, wife of U.S. Central Command chief Gen. David Petraeus, also joined the fight. As director of the Council of Better Business Bureau's Military Line Program, she reiterated assertions that many service members are in financial trouble with their auto payments, locked into loans with interest rates of 15 percent or higher.”

The dealer-lenders who engage in such deceptive behavior are struggling to hold on to the unfair advantage that they have over hardworking Americans and responsible dealer-lenders. According to recent news reports, lobbyists and allies of Wall Street are not letting up and they plan to throw millions of dollars toward efforts to weaken provisions including an auto dealer carve out in the bill as it moves to conference.
While the Senate passage last week was a significant step forward for the bill, the President will not rest as attempts are made to weaken the bill.

Jen Psaki is Deputy Communications Director

Jen Psaki is the White House Deputy Communications Director

We owe it to the American people to give them an advocate and we won't stand by while defenders of Wall Street attempt to weaken protections for consumers.

Jen Psaki is Deputy Communications Director

Military families have been a target of unscrupulous lenders because of their demographic characteristics.  Often, for recently enlisted soldiers and sailors, their steady paycheck means the chance for deceptive lenders to lure them into easy credit offers.  And many experienced military families struggling with daily expenses such as child care in the face of deployments and frequent moves have become targets for deceptive lenders. 
 
Undersecretary of Defense Clifford Stanley recently sent a letter to Michael Barr, Assistant Treasury Secretary for Financial Institutions, that states the “personal financial readiness of our troops and families equates to mission readiness.”  He reports that 72 percent of military financial counselors surveyed had counseled Service members on auto lending abuses in the past six months.

How can this possibly be happening?

Wall Street buys and packages auto loans made by dealers into securities.  Wall Street pays dealers more for loans that have higher interest rates than borrowers qualify for.    This gives dealers selling to Wall Street a perverse incentive to charge higher rates.  This is the exact same dynamic that encourages abuses in the mortgage market and hurts community banks.  Like auto dealer-lenders, mortgage brokers are paid to sell loans at higher rates than borrowers qualify for.  Looking to get the highest commissions possible, mortgage brokers and some dealer-lenders steer families toward these Wall Street loans instead of towards the community banks and credit unions that often offer better loans.

This incentive leads some dealer-lenders to devise other ways to charge higher rates too.  Sometimes a dealer-lender sends the buyer home with a "purchased" car and calls a few days later to say that the financing “fell through.”  The dealer-lender gives the borrower the choice of giving up the car or paying a higher interest rate.

Dealer-lenders can also receive commissions to sell expensive add-ons to the loans, such as extended warranties.  Dealer-lenders can obscure the cost of add-ons, which can be thousands of dollars, by emphasizing that they only moderately increase the monthly loan payment.

At a time when thousands of servicemen and women are overseas, it is unthinkable that we are not taking the steps to shield their families from financial ruin and ensure they are not targeted and victimized by predatory and abusive lenders.

Those who argue that rules of the road will somehow make auto loans more expensive have it backwards.  The consumer financial protection agency will set strong, consistent rules of the road that will bring more transparency for consumers about what they're getting and what they're paying for it.  That means lower prices, higher quality, or both.

The consumer financial protection agency will put in place strong protections for consumers, including:

• For Mortgages.  The piles of forms needed for a mortgage can be overwhelming, and many lenders and brokers have taken advantage of that confusion to sell borrowers loans they couldn’t afford.  The consumer financial protection agency will be required to consolidate and simplify two overlapping and sometimes inconsistent federal mortgage forms. 
• For Credit Cards.  The consumer agency will enforce the new credit card law that bans rate hikes on existing balances and other unfair practices.  Military families who sometimes use credit cards to get by when times are tight will benefit from strong protections.
• For Overdrafts.  The consumer agency would help enforce new rules that give consumers a real choice as to whether to join expensive overdraft programs and make sure banks don’t find ways to unfairly manipulate consumers and to take away their choice.
• For Payday Loans, Credit Bureaus, Debt Collectors, and Other Nonbanks.  For the first time, a federal agency whose mission is to protect consumers for financial products and services would establish fair rules of the road for financial providers such as check cashers, payday lenders, credit bureaus, debt collectors, and mortgage brokers.

Jen Psaki is Deputy Communications Director

Let’s be crystal clear on the substance regarding the GSEs. We agree that Fannie and Freddie are long overdue for reform.  That is why the Treasury Department and the Department of Housing and Urban Development initiated a process a few weeks ago to look not just at reforming the GSEs, but our entire system of housing finance.

During the housing bubble and financial collapse a broad set of failures from Wall Street to Main Street to Washington affected the entire housing market. The Administration responded with a vigorous set of housing policies to restore stability in the housing market in which the GSEs played a crucial role.  Today, the housing market is still in the process of stabilizing.  Because private capital has not yet returned to the housing finance market, Americans today would still face great difficulty in getting a mortgage to buy a new home or refinancing their existing home if the GSEs were not playing the role they are playing.  

We are committed to comprehensive reform of the housing finance system.  There should be no confusion about the goal of these reforms: The GSEs will not exist as they did in the past.  The Administration is committed to working closely with Congress and the American people to reform Fannie and Freddie and the broader system of housing finance in a way that keeps the housing market stable and helps responsible homeowners.

Make no mistake: Those who are attacking the current bill before the Senate on financial reform are playing a game of distraction from the real choice in this debate – standing with the American families on Main Street or the status quo on Wall Street.  The bill before the Senate is a strong piece of legislation that will bring rules of the road for Wall Street to protect families and help prevent another crisis that cost more than 8 million American jobs from happening again. 

Jen Psaki is Deputy Communications Director

Just today, we learned that payday lenders have spent over $2 million on lobbying efforts in an attempt to exclude themselves and their practices from some of the reforms contained within this bill. This is an industry where some companies offer struggling families a loan to get through to their next paycheck, only to charge enormous interest rates over 400 percent.  And they do this without any oversight for American consumers.

We cannot accept loopholes or carve outs for payday lenders.  The President will not allow for these kinds of loopholes. Passing this legislation means enacting the strongest consumer financial protections ever and forcing payday lenders--just like credit card companies and banks with overdraft plans--to provide clear, understandable information so that Americans can make financial decisions that work best for them. At the end of the day, every American consumer should have the peace of mind of knowing that they are going to be treated fairly and that they’re not going to be hit with surprise terms, fees or charges by companies that extend them credit.   The President is willing to have this fight, because he believes there's a clear choice in this debate, and that's whether to be on the side of the American people or on the side of the status quo.

If some in this industry want to spend their money trying to preserve deceptive and predatory lending practices, that’s their choice.  But the President will not accept these efforts to water down this legislation, and he will continue to do everything he can to hold these industries accountable and empower and protect American consumers.

Jen Psaki is Deputy Communications Director

Larry Lindsey, a former Bush appointee and a former Enron consultant, put out a memo this weekend in conjunction with House Republicans that may sound familiar because it reads from the same Wall Street drafted talking points that we have heard for the last week.  He even goes so far as to claim that the bill is being “rushed to the floor.”  If more than a year of discussion, meetings and public debate about the best way for Wall Street reform to happen isn’t enough for Larry Lindsey, we may be waiting long enough for another crisis to hit before he is satisfied with the timeline.  As Republican Senator Bob Corker said in lamenting the fact that his party had not supported bipartisan efforts to address Wall Street Reform, "this is an issue that almost every American wants to see passed."

For the meantime, so long as Republicans prefer to work with Wall Street to block reform rather than work with the President to pass it, we will need to continue to correct the record.  So let’s take a quick look through their memo to debunk it piece by piece:

FICTION:

Lindsey Memo: “To date, public attention has focused on whether the bill is a “bailout” bill that will keep “too big to fail” alive.  You be the judge.  First, the bill contains a $50 billion fund for resolution of systemically risky institutions. “

FACT:
Nobody made that argument until Wall Street lobbyists decided that it was the best way to kill financial reform.  The most important principle is that large financial firms – not the taxpayers – bear any costs associated with the failure of another large financial firm.  Chairman Dodd’s bill meets that test.  If a big financial firm fails, it is put into receivership, its shareholders are wiped out, its creditors are allowed to suffer losses, its management is fired.  Taxpayers are completely protected.

FICTION:

Lindsey Memo: “The bill allows a 2/3 vote of the Financial Stability Oversight Council to deem any firm (financial or non-financial) as coming under its rubric and then authorizes the FDIC and Treasury Secretary to treat each of the firm’s shareholders and creditors as they choose, without regard to bankruptcy law.”

FACT:
Wrong on all the facts.  First, only large financial firms whose failure could pose a serious threat to the U.S. economy would be subject to the bill’s enhanced bankruptcy-like process.  Second, similar to a standard bankruptcy, creditors' rights will be respected in accordance with their statutory priorities.  But make no mistake, under the bill, failed financial firms will be sold off, broken apart, or otherwise liquidated; culpable management will be fired, creditors will be allowed to suffer losses, and shareholders will be wiped out.  This is no bailout.

FICTION:

Lindsey Memo: “Second, the bill gives the Treasury and the FDIC authority to grant an unlimited number of loan guarantees to systemically risky institutions.  No Congressional authorization or appropriation is required.”

FACT:
Completely false.  The bill restricts, not expands, the FDIC’s emergency guarantee authorities. The FDIC’s emergency authorities are restricted only to solvent firms and they are designed to keep the economy as a whole from collapsing in a financial panic.  Those authorities can only be used during a financial crisis and after Congress has been given an opportunity to disapprove the use of the authority.

FICTION:

Lindsey Memo: “Third, the bill gives the Fed the authority to fund any “program” to assist these institutions accepting as collateral anything it deems appropriate.“

FACT:
Just not true.   The bill would restrict the Federal Reserve’s emergency lending authority, requiring prior written approval by the Treasury Secretary and robust Congressional reporting requirements. Second, the bill, in unequivocal terms, states that the Federal Reserve may not use its 13(3) lending authorities to “aid a failing financial company” and requires that the collateral received for any such emergency loans be of “sufficient quality to protect taxpayers from losses.”

FICTION:

Lindsey Memo: “Needless to say, the large Wall Street firms aren’t complaining; they will permanently benefit from having lower borrowing costs thanks to these provisions, the same way Fannie Mae and Freddie Mac enjoyed implicit guarantees.”

FACT:
This criticism has it backward.  Today, large financial firms benefit from the perception that they are “Too Big to Fail.”  Because we lack the tools to shut down big, complex financial firms without putting the financial system at risk, the market assumes that the government will prop them up.  And as a result, they have lower borrowing costs.  This bill will put an end to that.  Under this bill, the “implicit guarantee” that comes with being a large, complex financial firm goes away forever.  And you don’t have to take our word for it: a recent Moody’s report acknowledged that the “greatest threat” to too-big-to-fail is “from pending legislative proposals that would allow the government to resolve failing but systemically important financial institutions.”  This is serious reform.

FICTION:

Lindsey Memo: “The soon-to-be-released Derivatives section requires virtually all derivatives trading to be channeled through exchanges.  While appropriate for some contracts, a lot of Derivative contracts are fairly esoteric, and like highly specialized corporate bond issues, unlikely to face a liquid market.  That is why they are traded over the counter.  It is important to note that some over the counter derivatives transactions, like corporate bond transactions, can be cleared safely while others are appropriately done bilaterally.”

FACT: 
This bill brings derivatives trading out of the dark.  The unregulated OTC derivatives markets were at the center of the recent financial crisis.  The Wall Street banks that dominate this market want to keep it unregulated so they can make money off regular firms.  This bill will bring transparency to that market and reduce the risk to the larger financial system by requiring tough standards for all derivatives dealers and major market participants, requiring trading and clearing for standardized and liquid contracts, and giving full authority to prevent market manipulation, fraud, and abuse.  At the same time, the bill protects the ability of commercial companies to manage the risks that naturally arise in their businesses through customized contracts. 

FICTION:

Lindsey Memo: ”The legislation mandates a six-month study of the Volcker rule by the Financial Stability Oversight Council followed by a nine-month period for the regulatory agencies to implement the results of the study.  No Congressional review – the regulatory agencies’ interpretation of the committee findings are implemented directly through the Administrative Law process.”

FACT:
The bill will separate proprietary trading and hedge funds from deposit insurance and other services that are provided to banks to protect the important role of banking firms in the economy as providers of credit to businesses and consumers and to protect American families’ savings.   The purpose of the study is to make sure the rule is implemented well. That's common sense.

FICTION:

Lindsey Memo: “The Financial Regulation reform bill is being rushed to the Senate floor, possibly as early as next week.  Formal bipartisan negotiations on a number of issues were ended, reportedly at the request of the White House, although informal conversations are still proceeding.”

FACT:
For more than a year the Administration and members of Congress has been involved in a bipartisan discussion and public debate about the best way to reform Wall Street.  The Administration released a comprehensive policy proposal and detailed legislation in the spring and summer of 2009. The White House has been unwavering in its desire to move forward on a bipartisan basis to common sense reform that will restore accountability on Wall Street, end taxpayer bailouts, and place the financial system back on a sound foundation for growth and prosperity for all Americans.  Only in Washington could people still argue for delay more than two years after the start of the worst financial crisis in generations.

FICTION:

Lindsey Memo: “Labor gets ‘Proxy Access’ to bring its agenda items before shareholders as well as annual “say on pay” for executives.”

FACT:
These reforms would benefit every American whose savings, retirement account or pension fund is invested in the stock market. After a decade that began with Enron and Tyco, and closed with Lehman Brothers and AIG, it is difficult to believe that anyone would argue against giving shareholders a voice with respect to executive pay – or say that the SEC should not have the authority to let shareholders meeting reasonable ownership thresholds propose alternative board candidates.  Shareholders are the owners. A basic principle is that they should have the ability to hold management and boards accountable. Giving shareholders a "say on pay" will help to ensure that compensation practices are aligned with the long-term interests of shareholders, not based on short-term profits that lead to irresponsible risk taking.

FICTION:

Lindsey Memo: “Consumer activists get a brand new agency funded directly out of the seignorage the Fed earns.  No oversight by the Federal Reserve Board or by the Congress on how the money is spent.  This is the first known Congressional raid on Fed cash flow to fund projects without oversight.”

FACT:
The consumer financial protection agency would put consumers back in the driver’s seat by forcing big banks and credit card companies to provide clear, understandable information so that Americans can make financial decisions that work best for them.  We already tried putting the bank regulators in charge of preventing unfair bank practices.  That system failed, allowing the big banks, credit card companies, and auto lenders to take advantage of millions of consumers.  We need an agency that is independent, with the sole job of protecting American families from abusive financial practices and writing and enforcing clear rules of the road.  In addition to supervising financial firms, the agency will have a critical role in improving financial literacy, running a single consumer complaint center, and monitoring the marketplace for new consumer protection problems.

The consumer agency will be subject to significant oversight, including annual audits and regular reports and testimony to Congress on its budget, rulewriting, and other activities.  Its maximum budget will be capped, and the agency will be required to submit financial operating plans, quarterly financial statements, and forecasts to OMB.

Learn more about the Dodd-Frank Wall Street Reform and Consumer Protection Act.
 

Jen Psaki is Deputy Communications Director

On Tuesday, Mitch McConnell, the Senate minority leader, called for the abolition of municipal fire departments.

Firefighters, he declared, “won’t solve the problems that led to recent fires. They will make them worse.” The existence of fire departments, he went on, “not only allows for taxpayer-funded bailouts of burning buildings; it institutionalizes them.” He concluded, “The way to solve this problem is to let the people who make the mistakes that lead to fires pay for them. We won’t solve this problem until the biggest buildings are allowed to burn.”

O.K., I fibbed a bit. Mr. McConnell said almost everything I attributed to him, but he was talking about financial reform, not fire reform. In particular, he was objecting not to the existence of fire departments, but to legislation that would give the government the power to seize and restructure failing financial institutions.

But it amounts to the same thing.

If there is a position that supports perpetual bailouts, it is protecting the status quo, where without reform government will be forced to make the awful choice between helping banks and letting the economy collapse over and over again.  That's what led financial reporter John Harwood to say that "Senator McConnell’s argument is a little silly when you look at the text of the bill."  So let's do exactly that and leave no doubt about who is really fighting to prevent the need for any more bailouts:

1) “This bill not only allows for taxpayer-funded bailouts of Wall Street banks; it institutionalizes them.”

Incorrect:  Under Chairman Dodd’s bill major failed financial firms will be sold off, broken apart, or otherwise liquidated; management will be fired, creditors will suffer losses, and shareholders will be wiped out.  Wall Street, not taxpayers, will pay for any losses.

Chairman Dodd’s bill specifically prohibits the use of any funds for “bailing out” financial institutions.  Under Chairman Dodd’s proposed resolution authority, large, interconnected financial firms facing insolvency would be sold off, broken apart, or otherwise liquidated over a limited time period.  In that process, culpable management would be replaced, shareholders would suffer losses, and there will be clear authority to impose losses on unsecured creditors in accordance with the priority of claim provisions in the bill. .  In addition, by requiring post-resolution assessments on the financial industry to recoup any losses, Chairman Dodd’s bill makes it absolutely clear that large financial firms – not taxpayers – would bear any costs associated with the resolution of a failed financial firm.

• Must liquidate. Section 210(a)(1)(D) of the bill passed by the Senate Banking Committee (page 145, as modified by the Manager’s Amendment on page 54, line 16).

  The Corporation shall, as receiver for a covered financial company, and subject to all legally enforceable and perfected security interests and all legally enforceable security entitlements in respect of assets held by the covered financial company, liquidate, and wind-up the affairs of a covered financial company, including taking steps to realize upon the assets of the covered financial company, in such manner as the Corporation deems appropriate, including through the sale of assets, the transfer of assets to a bridge financial company established under subsection (h), or the exercise of any other rights or privileges granted to the receiver under this section.

• Mandatory terms and conditions--wipe out shareholders, fire management, creditors suffer losses; Section 206; Page 140, lines 3-19.

  “In taking action under this title, the Corporation shall—

  (1) determine that such action is necessary for purposes of the financial stability of the United States, and not for the purpose of preserving the covered financial company;

  (2) ensure that the shareholders of a covered financial company do not receive payment until after all other claims and the Fund are fully paid;

  (3) ensure that unsecured creditors bear losses in accordance with the priority of claim provisions in section 210; and

  (4) ensure that management responsible for the failed condition of the covered financial company is removed (if such management has not already been removed at the time at which the Corporation is appointed receiver).”

• Financial industry held responsible for any losses; subparagraph (C) of Section 210(o)(1); Page 280, line 8 to Page 281, line 2.

  “(C) Additional Assessments. The Corporation shall charge one or more risk-based assessments in accordance with the provisions of subparagraph (E), if—

  (i) the Fund falls below the target size after the initial capitalization period, in order to restore the Fund to the target size over a period of time determined by  the Corporation;

  (ii) the Corporation is appointed receiver for a covered financial company and the Fund incurs a loss during the initial capitalization period with respect to that covered financial company; or

  (iii) such assessments are necessary to pay in full the obligations issued by the Corporation to the Secretary within 60 months of the date of issuance of such obligations.

2) “The bill gives the Federal Reserve enhanced emergency lending authority that is far too open to abuse.”

Incorrect: The Federal Reserve’s emergency lending authorities are restricted, not expanded, under Chairman Dodd’s bill. 

Chairman Dodd’s bill eliminates the ability of the Federal Reserve to provide firm-specific assistance, requires prior approval from Treasury of any emergency lending program, and imposes strict congressional reporting requirements.  Under Chairman Dodd’s bill, the Federal Reserve may not use its emergency authorities to aid failing financial firms, and those authorities will be subject to new approvals and significant reporting to Congress.

Chairman Dodd’s bill, in unequivocal terms, states that the Federal Reserve may not use its 13(3) lending authorities to “aid a failing financial company” and requires that the collateral received for any such emergency loans be of “sufficient quality to protect taxpayers from losses.”  Failing firms will receive no protection from the emergency lending authorities of the Federal Reserve.

• No aid to a failing financial firm; Section 1151; Page 1304, lines 1-8. “Such policies and procedures shall be designed to ensure that any emergency lending program or facility is for the purpose of providing liquidity to the financial system, and not to aid a failing financial company, and that the collateral for emergency loans is of sufficient quality to protect taxpayers from losses.”

• Treasury approval prior to using emergency authorities; Section 1151; Page 1304, line 9-12.  “The Board may not establish any program or facility under this paragraph without the prior approval of the Secretary of the Treasury.”

• Enhanced congressional reporting requirements; Section 1151; Pages 1304, line 12 to 1308, line 17.

  “The Board shall provide to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives—

  (i) not later than 7 days after providing any loan or other financial assistance under this paragraph, a report that includes—

  (I) the justification for the exercise of authority to provide such assistance;
  (II) the identity of the recipients of such assistance, subject to subparagraph (D);
  (III) the date and amount of the assistance, and form in which the assistance was provided; and
  (IV) the material terms of the assistance, including—

  (aa) duration;
  (bb) collateral pledged and the value thereof;
  (cc) all interest, fees, and other revenue or items of value to be received in exchange for the assistance;
  (dd) any requirements imposed on the recipient with respect to employee compensation,
  19 distribution of dividends, or any other corporate decision in exchange for the assistance; and
  (ee) the expected costs to the taxpayers of such assistance; and

  (ii) once every 30 days, with respect to any outstanding loan or other financial assistance under this paragraph, written updates on—

  (I) the value of collateral;
  (II) the amount of interest, fees, and other revenue or items of value received in exchange for the assistance; and
  (III) the expected or final cost to the taxpayers of such assistance.

  (D)(i) The Board shall disclose, not later than 1 year after the date on which assistance was first received under the facility, unless the Board determines that such disclosure likely would reduce the effectiveness of the program or facility in addressing or mitigating the financial market disruptions, financial market conditions, or other unusual and exigent circumstances sought to be addressed or mitigated by the program or facility, or would otherwise have a significant effect on the economic or financial market conditions—

  (I) the identity of the participants in an emergency lending program or facility commenced under this paragraph after the date of enactment of the Restoring American Financial Stability Act of 2010;
  (II) the amounts borrowed by each participant in any such program or facility  and
  (III) identifying details concerning the assets or collateral held by, under, or in connection with such a program or facility within 1 year of the date on which assistance was first received under the program or facility.

  (ii) If the Board determines not to make the disclosures required in clause (i) within 1 year of the date on which a participant first received under a program or facility, then the Board shall—

  ‘‘(I) provide to the Committee on Banking, Housing and Urban Affairs and the Committee on Financial Services a written report explaining the reasons for delaying the disclosures about such program or facility within 30 days of making such a determination; and
   ‘(II) provide to the Committee on Banking, Housing and Urban Affairs and the Committee on Financial Services each year thereafter a written report explaining the reasons for continuing to delay disclosure, until the disclosures are complete.

  (iii) The disclosures required in clause (i) shall be made not later than 12 months after the effective date of the termination of the facility by the Board.
  (iv) If the Board determines not to make the disclosures required in clause (i), then the Comptroller General shall issue a report to the Committee on Banking, Housing and Urban Affairs and the Committee on Financial Services evaluating whether that determination is reasonable.’’

3.   “…the mere existence of this fund will ensure that it gets used.  And one it’s used up, taxpayers will be asked to cover the balance.  This is precisely the wrong approach.”

Incorrect.  Under Chairman Dodd’s bill, FDIC and Treasury may only use the resolution authorities to protect the U.S. taxpayer from a financial crisis in connection with the failure of a major financial firm; and they have no authority to use the Orderly Liquidation Fund for any other purpose.

First, the bill provides no authority whatsoever for Treasury or the FDIC to expend funds from the Orderly Liquidation Fund, other than in exercising the resolution authority established in Title II of the bill – that is, only in connection with the resolution of a failed financial firm. There would be no reason and no authority to “use” the funds other than for their intended purpose.

Second, the bill mandates that financial firms be assessed fees to establish a $50 billion resolution fund.  And the bill mandates that, if the costs of resolving a financial firm exceed that amount, the additional costs will be paid by additional fees assessed on the largest financial institutions so that Wall Street, not taxpayers, will pay the price of financial failure.

• Use of Orderly Liquidation Fund is limited to winding down failed firms; Section 210(n)(1); Page 272, line 21 to Page 273, line 6.

  “There is established in the Treasury of the United States a separate fund to be known as the ‘‘Orderly Liquidation Fund’’, which shall be available to the Corporation to carry out the authorities contained in this title, for the cost of actions authorized by this title, including the orderly liquidation of covered financial companies, payment of administrative expenses, the payment of principal and interest by the Corporation on obligations issued under paragraph (9), and the exercise of the authorities of the Corporation under this title.”

• Fund amounts not needed for resolution can only be invested in U.S. Government securities; Section 210(n)(8); Page 274, line 21 to Page 275, line 4.

  “(8) Investments.—At the request of the Corporation, the Secretary may invest such portion of amounts held in the Fund that are not, in the judgment of the Corporation, required to meet the current needs of the Corporation, in obligations of the United States having suitable maturities, as determined by the Corporation. The interest on and the proceeds from the sale or redemption of such obligations shall be credited to the Fund.”

• Financial industry held responsible for the initial fund and any losses; subparagraphs (C) and (D) of Section 210(o)(1); Page 280, line 8 to page 281, line 2.

  “(C) Additional Assessments. The Corporation shall charge one or more risk-based assessments in accordance with the provisions of subparagraph (E), if—

  (i) the Fund falls below the target size after the initial capitalization period, in order to restore the Fund to the target size over a period of time determined by  the Corporation;
  (ii) the Corporation is appointed receiver for a covered financial company and  the Fund incurs a loss during the initial capitalization period with respect to that covered financial company; or
  (iii) such assessments are necessary to pay in full the obligations issued by the Corporation to the Secretary within 60 months of the date of issuance of such obligations.
   

Jen Psaki is Deputy Communications Director

These same opponents of reform are pushing for loopholes and carve-outs in the bill large enough to drive a truck through.

The reality is that there’s a clear choice in this debate: to stand with American families or stand on the side of the big Wall Street banks and their lobbyists who are defending the status quo. Opponents of reform are protecting the big banks at the expense of American families -- so they’re going to do whatever they can to keep the present system in place and leave the American taxpayer with the bill.

One false criticism we’re hearing is this: that the Senate bill will allow endless taxpayer-funded bailouts of financial firms.  What they won’t tell you is that they are taking their marching orders from a partisan political consultant who has told them that the best way to oppose real reform is to link it to the bank bailouts.  In fact, the polling memo they’re working from explicitly states that “the best way to kill any legislation is to link it to the Big Bank Bailout.”  No matter what the bill actually does, they’re going to call it a bailout because that’s what the polls tell them to do.

Here are the facts: this bill does the exact opposite of what these critics say it does.  The Senate bill explicitly mandates that a large financial firm that faces failure will be allowed to fail, and it explicitly prohibits the use of any funds to “bail out” a failing firm.  Under the Senate bill, large financial firms facing insolvency in times of crisis will be shut down or broken apart.  Management will be replaced.  Creditors will suffer losses.  Equity holders will be wiped out.  And large financial firms, not taxpayers, will be required to bear the costs.  Under the Senate bill, the taxpayers will never be asked to foot the bill for Wall Street’s irresponsibility.

President Obama has been committed to enacting real Wall Street reform since well before taking office, and he believes that momentum is on the side of greater accountability for Wall Street and strong protections for consumers. The idea that we would walk away learning no lessons from this financial crisis – after over 8 million Americans lost their jobs and trillions in household wealth disappeared – is simply unacceptable. It’s time to set new rules of the road to fix the behavior that led to this crisis, because the American people have suffered too much to enact reform that does too little. Inaction is simply not an option.

Jen Psaki is Deputy Communications Director

• These fifteen nominees have been waiting a total of 3,204 days or almost nine years to start their respective jobs.
• Even the most recently nominated of these fifteen individuals has been waiting 144 days or nearly five months.
• Jeffrey Goldstein was nominated to serve as the top domestic finance official at Treasury, a crucial position for fixing the economy and preventing another financial crisis. Goldstein has been waiting 248 days or over 8 months.
• Jacqueline Berrien was nominated to serve as Chair of the Equal Employment Opportunity Commission (EEOC). The EEOC currently lacks a quorum and cannot fulfill its mandate to protect American workers from discrimination. Berrien has been waiting 254 days or over 8 months.
• Craig Becker and Mark Pearce were nominated to serve on the National Labor Relations Board (NLRB), which protects American workers from unfair labor practices. The five member board has been trying to operate with only two members. Becker and Pearce have been waiting for 261 days or over 8 months. 

The roadblocks we’ve seen in the Senate have left some government agencies like the National Labor Relations Board and the Equal Employment Opportunity Commission impaired in fulfilling their mission. These agencies can now get back to working for the American people.
 
These nominees will remain pending before the Senate for what we hope will be the expeditious confirmation  that candidates of their caliber deserve. But we also hope that this politically motivated gridlock comes to an end, because each day we dedicate to a strategy aimed at gumming up the works of our government is another day we aren’t doing right by the American people.

Jen Psaki is the White House's Deputy Communications Director

Just yesterday we learned that the U.S. Chamber of Commerce, no stranger to fighting for the status quo, plans to launch a $3 million ad campaign aimed at bringing down the much needed reforms of our financial system. That’s $3 million to fight a bill that will protect American families by establishing a consumer financial protection agency that will bring transparency, stronger supervision and clear rules of the road to our financial system.

The recession and the aftermath of the financial crisis saw over 8 million Americans lose their jobs, trillions in household wealth disappear and small businesses denied the credit they need to grow. And this was all brought about by a system that failed to monitor or constrict the risk-taking of firms that were too big to break apart in a way that would protect taxpayers. The U.S. Chamber of Commerce doesn’t think that’s a problem worth fixing, but the President does.

The American people deserve a strong and independent consumer financial protection agency that enforces clear rules across the financial marketplace, and the President will fight against the Chamber’s or anyone else’s efforts to undermine the agency’s independence.

If the U.S. Chamber of Commerce wants to come to the aid of the financial institutions that helped bring about this crisis, that’s their choice. But the President will work to ensure that we bring long overdue reforms to our financial system, because doing so will benefit the American people by laying a foundation for long-term growth and stability in our economy.

Jen Psaki is Deputy Communications Director

The President has said countless times as he did in the interview that he doesn’t ‘begrudge’ the success of Americans, but he also expressed ‘shock’ at the size of bonuses and made clear that there are a number of steps that need to be taken to change the culture of Wall Street. A sentiment he has consistently expressed since long before he took office.

He also made clear, as he has said many times before, that he believes bonuses should take the form of stock so that the compensation is tied to long term performance. His focus from day one has been on signing into law a comprehensive financial reform package that reins in the abuses on Wall Street, addresses Too Big to Fail,  imposes real oversight and strict accountability on financial companies, prevents predatory lending practices,  ensures that consumers get clear information and imposes a fee on the biggest banks to ensure they pay back every dollar of money owed to the taxpayers.

So let’s break this down:

What did the President actually say during the interview?

“I, like most of the American people, don't begrudge people success or wealth.  That's part of the free market system.  I do think that the compensation packages that we've seen over the last decade at least have not matched up always to performance.  I think that shareholders oftentimes have not had any significant say in the pay structures for CEOs.”

When asked whether seventeen million dollars is a lot for Main Street to stomach, he expressed shock at the size of the compensation and called for the same actions that are a part of the comprehensive financial reform proposal that has been working its way through Congress:

“Listen, $17 million is an extraordinary amount of money.  Of course, there are some baseball players who are making more than that who don't get to the World Series either.  So I'm shocked by that as well.  I guess the main principle we want to promote is a simple principle of "say on pay," that shareholders have a chance to actually scrutinize what CEOs are getting paid.  And I think that serves as a restraint and helps align performance with pay.  The other thing we do think is the more that pay comes in the form of stock that requires proven performance over a certain period of time as opposed to quarterly earnings is a fairer way of measuring CEOs' success and ultimately will make the performance of American businesses better.”

And what has the President said about this same topic over the course of the last year?

• ONE YEAR AGO-In February 2009, Pres. Obama Said, This is America. We dont disparage wealth. We dont begrudge anybody for achieving success. And we believe that success should be rewarded. But what gets people upset and rightfully so are executives being rewarded for failure. Especially when those rewards are subsidized by U.S. taxpayers. [Remarks by Pres. Barack Obama on Executive Compensation, 2/4/09]
• ELEVEN MONTHS AGO- In March 2009, Pres. Obama Said, I’ve Always Been a Strong Believer in the Power of the Free Market. Our Role as Lawmakers is Not to Disparage Wealth, But to Expand Its Reach. I've always been a strong believer in the power of the free market. It has been and will remain the very engine of America's progress -- the source of a prosperity that has gone unmatched in human history. I believe that jobs are best created not by government, but by businesses and entrepreneurs like you who are willing to take risks on a good idea. And I believe that our role as lawmakers is not to disparage wealth, but to expand its reach; not to stifle the market, but to strengthen its ability to unleash the creativity and innovation that still makes this nation the envy of the world. [Remarks by Pres. Barack Obama at the Business Roundtable, 3/12/09]
• EIGHT MONTHS AGO- In June 2009, Pres. Obama Said, I Believe Our Role is Not to Disparage Wealth, But to Expand Its Reach. In these efforts, we seek a careful balance. I've always been a strong believer in the power of the free market. It has been and will remain the engine of America's progress -- the source of prosperity that's unrivaled in history. I believe that jobs are best created not by government, but by businesses and entrepreneurs who are willing to take a risk on a good idea. I believe that our role is not to disparage wealth, but to expand its reach; not to stifle the market, but to strengthen its ability to unleash the creativity and innovation that still make this nation the envy of the world. [Remarks by Pres. Barack Obama on Regulatory Reform, 6/17/09]
• FIVE MONTHS AGO-In September 2009, Pres. Obama Said, I Believe the Role of the Government is Not to Disparage Wealth, But to Expand Its Reach. I have always been a strong believer in the power of the free market. I believe that jobs are best created not by government, but by businesses and entrepreneurs willing to take a risk on a good idea. I believe that the role of the government is not to disparage wealth, but to expand its reach; not to stifle markets, but to provide the ground rules and level playing field that helps to make those markets more vibrant -- and that will allow us to better tap the creative and innovative potential of our people. For we know that it is the dynamism of our people that has been the source of America's progress and prosperity. [Remarks by Pres. Barack Obama on Financial Rescue and Reform, 9/14/09]

Jen Psaki is Deputy Communications Director